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1984
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[1984] ZASCA 124
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Schoemaker v Lochner and Another (158/84) [1984] ZASCA 124 (1 November 1984)
GERHARDUS JOHANNES SCHOEMAKER
Appellant
and
PIETER LUDO
LF
LOCHNER
1st Respondent
ELEANOR MARGARET LOCHNER
2nd Respondent
IN THE SUPREME CO
U
RT OF SOUTH AFRICA
(
APPELLATE DIVISION
)
In the matter between:
GERHARDUS
JOHANNES SCHOEMAKER
Appellant
and
PIETER LUDOLF LOCHNER
1st
Respondent
ELEANOR MARGARET LOCHNER
2nd Respondent
Coram
: KOTZE, MILLER, VAN HEERDEN, JJ A , GALGUT
et
SMALBERGER,
A JJ A
Heard
: 12 November 1984
Delivered
:
JUDGMEN
T
KOTZE, J A
:
On the 19th February 1976 the appellant
(as /2
-2-
(as purchaser) submitted to the respondents (as sellers) an
offer in writing to purchase all the issued shares and loan accounts in
the
company Stephanibyz Praedium (Pty) Ltd (the company) for a purchase price of R35
000,00. The offer was submitted through an estate
agent on a printed form used
by the estate agent for transactions of that kind. The offer was accepted by the
respondents on the
same day "at 19.30 pm" (presumably 7.30 p m ). As is normal
with this type of form certain standard provisions are printed in full
and
names, descriptions, amounts and one or two provisions of particular application
are filled in with pen and ink in certain blank
spaces specially provided for
the purpose. Furthermore, as will hereafter
appear /3
-3-
appear, and as is also sometimes encountered in contracts of
this kind one blank space was left in the offer form.
It is necessary, for present purposes, to quote only four out of twelve
paragraphs containing the terms and conditions of the accepted
offer (the
standard provisions are cited without emphasis and the particular or filled in
provisions are cited with emphasis).
1.
THAT the COMPANY is and will
be on the transfer of the shares, the registered owner of certain property being
certain piece of ground
or Lot No./S
2 41
in the
TOWNSHIP of CHARTWELL
AG: HOLDING
.
2.
THAT the aggregate
purchase consideration payable by me in respect of the sale of all the issued
shares and in respect of the loan
accounts shall be the sum of R
35,000-00
(THIRTY FIVE THOUSAND RAND.
) payable as
follows:-
(a) The sum of R1000-00
ONE THOUSAND
RAND
shall
be /4
-4-
be paid upon acceptance hereof to BRIAN COLLIS ESTATES (PROPRIETARY) LIMITED,
who shall hold such sum in trust, pending transfer of
the shares into the name
of the Purchaser or his nominee and cession of the loan accounts into the name
of the Purchaser or his nominee;
(b) The balance of the purchase price, namely
the
sum of R 34
,000-00
(
THIRTY FOUR THOUSAND RAN
D.) shall be
secured by a Banker's or other approved Guarantee/s expressed to be payable
against transfer of the said shares and cession
of the loan accounts shall be
delivered within 90 days of acceptance of this offer. 6. (a) IT is recorded that
the COMPANY has passed
a
Mortgage Bond over the property referred to in paragraph "1" hereof in favour
of:-
S.A
.
PERMANENT SOCIETY
for the sum of R
10,000-00 TEN THOUSAND RAND and 2nd bond for R 4,000-00 FOUR
THOUSAND RAND in favour of Bloch which latter bond will be cancelled
prior to
transfer of shares
and that the balance owing thereunder as at date
hereof
is R
In the event of the said balance owing under
the /5
-5-
the said Mortgage Bond as at the date hereof
being more than the aforesaid amount, the purchase consideration referred to in
Paragraph
"2" shall be reduced by the amount of such excess. In the event of the
said amount being less then the purchase consideration will
be increased by the
difference in the said amount. 12.
This offer is conditional upon the
Purchaser or the Agent or the Seller on behalf of the Purchaser
,
being
able to increase the existing bond referred to in Clause 6(A) to R 20,000-00
TWENTY THOUSAND RAND, or alternatively, (b) to
arrange a First
m
ortgage
bond on security of the property for the sum of 20,000-00 Rand at the prevailing
rate of interest for a fresh Mortgage Building
Society Bond in Johannesburg, in
time FOR THE PURCHASER TO COMPLY WITH CL
A
USE 2(b). The purchaser hereby
undertake
s
and agrees to do all things necessary to enable the agent
and/or THE SELLER TO FULFIL THESE CONDITIONS ON THE PURCHASER'S BEHALF
.
It is common cause that the suspensive
condition
contained in paragraph 12 was duly
fulfilled. The appellant
failed /6
-6-failed to furnish the guarantee referred to in (b) of
paragraph 2 within 90 days of 19th February 1976 or at all. This failure
led to
litigation: the respondents issued summons against the appellant in the
Witwatersrand Local Division for an order directing
the appellant to deliver a
banker's guarantee payable against transfer of all the issued shares and cession
of the loan accounts
in the company together with interest and costs.
The action was tried by NICHOLAS, J who found that there was no substance in
either of two defences relied on by the appellant and
entered judgment in favour
of the respondents. The appellant now appeals against the said judgment.
The /7
-7-
The first of the two defences was pleaded as follows:
"2. (c) (i) The balance owing under the mortage bonds referred to in clause
6(a) of the said written agreement was left blank in that
clause.
(ii) The amount left blank as a-foresaid constituted a material term of the
said written agreement and without it the purchase consideration
payable by the
Defendant in terms of the said written agreement was not capable of
computation.
(iii) The parties intended that such amount should be inserted in the said
written agreement. ,
(iv) In the premises the said
written agreement is void and of no force or effect."
The second of the two defences was summarised by the
learned /8
-8-
learned Judge in the Court
a quo
as follows:
"The second defence was that the agreement was void and of no force or effect
by virtue of the provisions of section 38 (1) of the
Compani
es
Act
No. 61 of 1973 which provides that no company shall give any financial
assistance for the purpose of or in connection with a purchase
made or to be
made by any person of or for any shares in the company ... It was alleged in the
plea ... that -
'5(a) The parties to the said written
agreement intended at all material times, and more particularly on the date
of signature of the said written agreement, that the proceeds
of the bond or
bonds referred to in Clause 12 of the said written agreement
would ../9
-9-
would be used for the purchase of the shares and
loan accounts sold in terms of the said written agreement, and more particularly
for the payment of portion of the purchase price payable by the Defendant to the
Plaintiffs in terms of the said written agreement.'"
No evidence was led in regard to either defence. Nor does the record disclose
surrounding circumstances which bear on the issue..
The first defence
.
Since the surrounding
circumstances are of no assistance and no extrinsic evidence has been adduced to
throw light on the reason why
the blank was left in paragraph 6(a) the
answer,
if /10
-10-
if at all possible, must be gathered from the
document it-self. Although the process resorted to in this connection falls
under "the
general umbrella of construction" it does involve the drawing of
inferences as to the intention of the parties. (See the remarks
of CORBETT, J A
, in
Johnston v Leal
, 1980(3) S A 927 at 940 i f - 941A). NICHOLAS, J ,
based his conclusion that the first defence was without substance on
construction
(i) referred to by CORBETT, J A , in
Johnston v Leal
, supra,
at 940. NICHOLAS, J reasoned as follows:
"In my opinion the second and third sentences in clause 6(a) were intended to
provide for an adjustment of the purchase consideration
up or down, depending
upon whether the actual '
balance ./ll
-11-
balance owing under the mortgage bond referred to in the first sentence is
lower or higher than the balance recorded in that paragraph.
Where no balance is
recorded, the inference, in the absence at any rate of evidence to the contrary,
is that the parties did not
intend that there should be such an adjustment and
that the purchase consideration fixed in clause 2 of the . agreement had been
fixed without re- ' ference to the balance owing under the mortgage bond. The
case is therefore one where (i) is the position.
The agreement is otherwise complete and contains the
essentialia
of a
contract of sale. The contract is accordingly valid and the second and third,
sentence of clause 6 (a) must be treated as
pro non scripto
."
I am in agreement with the conclusion arrived at by the learned Judge, but
would follow a different route in reaching it. Construction
(ii) mentioned by
CORBETT, J A (that the blank
was /12
-12-was left open for future agreement because the essential
particulars had not yet been settled) can, it seems to me, be disregarded
in the
present case: the blank relates to an existing, ascertainable fact - the balance
owing under a specific bond on a specific
date and there was nothing to settle
or negotiate about. That leaves only construction (iii) viz that the parties
intended the clause
to form part of their contract, had agreed but for some
reason left the space blank. This, to my mind, is the appropriate inference
to
be drawn in the present case. The parties intended paragraph 6(a) to be part of
their agreement but left the blank for the reason
that follows. Their minds were
clearly directed to paragraph 6(a) - the filling in of particulars in regard to
the S.A. Permanent
and Bloch bonds
demonstates /13
-13-demonstates that. It seems highly probable that if the
parties intended these sentences to be regarded as not having been written
they
would have resorted to the simple expedient of drawing lines through them. Their
failure to strike out the second and third
sentences warrants the drawing of the
said inference. Bearing in mind that the contract in the present case, unlike
the contract
of sale in
Johnston v Leal
,
supra
, is not one which
by law is required to be in writing the drawing of an inference that the two
sentences are to be regarded as pr
o non scripto
is a less compelling one.
Paragraph 6(a) must, therefore, be construed as it stands save in the following
respect. The first sentence
thereof, in its inchoate state, visualises the
insertion of the name of the holder of a single bond, the amount for
which ../14
-14-
which it was passed and the balance owing thereunder as at the contract date
but in its completed state there is a reference to two
bonds. Since, however, it
is specifically recorded that the second bond will be cancelled prior to the
transfer of the shares, the
reference to it may safely be disregarded in
construing paragraph 6(a). The first sentence stripped of the reference to the
Bloch
bond has a clear meaning: it records the existence of a bond passed by the
company over lot 241, Chartwell for R10 000,00 (the "aforesaid
amount" referred
to in the second sentence and the "said amount" referred to in the third
sentence) and it contemplates the insertion
in the blank space provided of the
balance owing under that bond as at the date of
conclusion /15
-15-conclusion of the contract (the "said balance" referred
to in the second sentence). That balance might be more or less than the
capital
amount of the bond: more if readvances and interest exceed payments in reduction
of the bond and less if payments in reduction
exceed readvances and the accrual
of interest. The amount owing under the bond represents a liability of the
company and obviously
is a consideration which affects the purchase price which
presumably was assessed with reference to the sum for which the bond was
passed.
That is why the second and third sentences of paragraph 6(a) respectively
provide for an adjustment of the price down or
up: down if the balance owing
exceeds the capital amount because in that event the liabilities of the
company
are /16
-16-are more onerous and up if the balance owing is less than the
capital amount because in that event the liabilities are less burdensome.
Does
the leaving blank of the balance owing under the bond as at 19th February 1976
render the entire contract void? I think not.
As mentioned above writing is not
required by law for the validity of a contract for the purchase of shares in a
company. It follows,
therefore, that an essential term of the contract cannot be
said not to have been agreed upon. The probable reason for leaving the
blank is
that the balance owing under the bond as at 19th February 1976 was not at hand
at the moment of contracting. The offer after
all, was accepted at 7.30 p m i e
well outside normal office hours. But the parties knew that the omitted
balance
was /17
-17-was readily ascertainable by a mere enquiry directed to the
S.A. Permanent Society and that the purchase consideration could be
easily
calculated after such enquiry. In passing, reference should be made to a
submission originally pressed by counsel for the
appellant but later virtually
abandoned by him. It ran along these lines. Had the blank space in paragraph
6(a) been filled in, and
had the amount so filled in differed from the amount
actually owing under the bond as at 19th February 1976, the purchase price would
have had to be adjusted with reference to the difference between those amounts.
It is possible that during negotiations preceding
the making of the offer the
amount allegedly owing under the bond was actually mentioned by the
respondents
or /18
-18-or their agent; that both parties intended that it should be
incorporated in paragraph 6(a) and that as a result of a mutual oversight
the
blank was not filled in. If this in fact was the case, the amount concerned -
which might or might not have been the same as
the amount actually owing under
the bond, one does not know whether, and by how much, the purchase price fell to
be adjusted. Assuming
that the construction placed on the relevant part of
paragraph 6(a) is correct - if the blank had been filled in - there is nothing
to indicate that a figure was at any stage mentioned as the amount owing under
the bond. Be that as it may, the possibility put forward
by counsel is certainly
no stronger than the possibility preferred by NICHOLAS, J ,
i e /19
-19-i e that the parties did not intend to fill in the blank
space and consequently also did not intend that any adjustment of the
purchase
price should take place. And in accordance with well known rules of construction
- which apply with equal force to the inferences
to be drawn in the present
case- if a contract is reasonably open to more than one meaning (or inference) a
court will place the
construction on it which upholds it rather than that which
makes it void.
It follows that whichever of the two inferences (i e the one drawn by
NICHOLAS, J or the one which I favour) is the correct one, the
result is that
the contract is valid and that the first defence was correctly held to be
without substance.
The /20
-20-
The second defence
.
Sec 38(1) of Act 61
of 1973 makes it illegal for a company to give, directly or indirectly, any
financial assistance for the purpose
of or in connection with a purchase by any
person of or for any shares of the company. The second defence is based on
paragraph 12
of the contract which is, in its entirety, a filled in provision.
Paragraph
12 /21
-21-12 merely envisages the increase of the existing bond
from R10 000,00 to R20 000,00 or for obtaining in its stead
a different
bond for R20 000,00. And what is further envisaged is that approval for such
increase or substitution be obtained
"in time for the purchaser to comply with clause 2(b)"
i e within 90 days of the acceptance of the offer on the 19th February 1976.
Paragraph 12 contains no stipulation whatsoever that
the new bond should be
registered and the;-proceeds thereof be available to the company within the 90
day period. That could take
place at any time thereafter.
Clearly 22
-22-
Clearly what the purchaser, from whom the offer emanated, desired to
assure was that the proceeds of a bond for R20 000,00 would be
available to the
company. There is no suggestion in the paragraph that the proceeds of the bond
should assist the purchase of the
shares. It would accrue to the company -not to
the purchaser. The sum of Rl 000,00 referred to in paragraph 2(a) and the
guarantee
of R34 000,00 referred to in paragraph 2(b) had to be provided by the
purchaser out of his own resources and not by the company.
The purchaser clearly
desired to obtain control of a company in respect of which he wished to have the
assurance that it could raise
a bond in the sum of R20 000,00 for a purpose not
disclosed in the con-' tract. This purpose may have been the acquisition of
working
capital /23
-23-capital or something else. I see no warrant for inferring that the
proceeds of the bond were destined to provide direct or indirect
assistance for
the purpose of or in connection with the purchase of the shares of the company.
The appellant, who bore the
onus
of establishing the illegality, failed
to discharge it. I am of the view that the second defence also fails
The appellant applied on valid grounds for an order condoning the failure to
lodge the record timeously. The application is granted
but the appeal is
dismissed with costs including the costs occasioned by the application for
condonation.
JUDGE OF APPEAL
MILLER, J A )
VAN HEERDEN, J A )
concur
GALGUT, A J A ) SMALBERGER, A J A )