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1985
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[1985] ZASCA 56
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Thomas v Henry and Another (74/85) [1985] ZASCA 56; [1985] 2 All SA 416 (A) (30 May 1985)
LL
Case No. 16/1984
IN THE SUPREME COURT OF SOUTH AFRICA
APPELLA
TE DIVISION
In the matter between:
WILLIAM DESMOND THOMAS
Appellant
and
PETER MICHAEL
HENRY
First Respondent
GROBLER, VAN VUUREN AND ASSOCIATES
Second Respondent
CORAM
: RABIE, CJ, CORBETT, CILLIé, BOTHA
et VAN HEERDEN, JJA
HEARD
: 3 MAY 1985
DELIVERED
: 30 MAY 1985
JUDGMENT
/
VAN HEERDEN, JA
...
2.
VAN HEERDEN, JA
:
During August 1982 the appellant and the first respondent (hereinafter
referred to as the respondent) concluded a written agreement
whereby the latter
sold to the appellant a business known as the Glass Menagerie. The purchase
price, excluding stock-in-trade, was
R37 000. At a later stage the parties
agreed that a further amount of R22 291,24 was payable for the
stock.
Pursuant to the sale the appellant took possession of the business on
1 November 1982 and then started trading for his own account.
Some ten days
later, however, his attorneys wrote to the respondent that he had been induced
to conclude the agreement on the strength
of certain intentional and material
misrepresentations made by the respondent. The latter was advised that the
appellant had cancelled
the sale and that he was tendering to restore the
business with all its assets.
In a reply, dated 17 November 1982, the
/respondent's ...
3.
respondent's attorneys rejected the appellant's allegations.
It was admitted that prior to the conclusion of the agreement certain
representations had been made by the respondent, but it was denied that they
were untrue. Although no specific reference was made
to the appellant's tender
it was clearly not accepted.
During February 1983 the respondent brought an application against the
appellant and the second respondent in the Witwatersrand Local
Division. As
against the appellant he claimed payment of the amount alleged to be due in
terms of the agreement. The second respondent
did not oppose the application and
it is unnecessary to explain why it was joined as a party.
In the founding affidavit the respondent did not deal specifically with the
alleged misrepresentations. He submitted that it was not
necessary to do so. He
went on to allege that, notwithstanding the "purported"
/cancellation ....
4.
cancellation, the appellant had continued to operate and was still operating
the business. The crux of the application was that the
appellant was obliged to
pay the purchase price since his "purported cancellation is of no force and
effect as he has approbated
and reprobated".
In so far as the opposing affidavit is relevant for the purposes of this
appeal, the appellant reiterated his allegations concerning
the
misrepresentations made by the respondent. In particular he alleged that the
turnover of the business was not nearly the average
sum of R10 000 per month as
represented by the respondent. He admitted that he had continued to trade and
was still carrying on business
but stated:
"Had I simply closed the business and withdrawn therefrom the following would
have resulted:
(i) The goodwill would have been lost forever. Such goodwill in the business
as does exist must constitute an asset to the Applicant
[the present respondent]
and I
/believe ...
5.
believe it was my duty to preserve this.
(ii) Paragraph 6 of the lease agreement makes it quite clear and in
peremptory terms that the business must remain open for trading
during normal
hours on breach of which the Lessor is entitled to cancel the lease. The loss of
the lease to the premises would have
resulted in very substantial damage and
prejudice to the Applicant."
(As regards (ii) above, it should be explained that the respondent had
conducted the business from leased premises; that in terms
of the sale either a
lease or a sub-lease of the premises had to be granted to the appellant on
inter alia
the terms and conditions of the respondent's tenure, and that,
with the consent of the lessor, the respondent had ceded to the appellant
all
his rights under the existing lease.)
The appellant made it clear that he had never intended to approbate and
reprobate or, subsequent to the notice of cancellation, to
run the business for
his own account.. And he submitted that for the purpose of
/preserving ...
6.
preserving the business he was entitled to operate it for the benefit of the
respondent.
The court a.
quo
allowed the application with costs and ordered the
appellant to pay the amount claimed by the respondent, but granted leave to the
appellant to appeal to this Court. At the hearing of the appeal the appellant
applied for condonation of his late noting and prosecution
of the appeal. It was
common cause that the application should be granted and that the appellant
should pay the costs occasioned
thereby, and it will be so ordered. It is to be
noted, however, that the delay was caused solely by the negligence of the
appellant's
attorneys and that as against the appellant they are personally
liable for such costs. Nor will they be entitled to debit the appellant
with
fees, or costs incurred by them, in regard to the application. That much was
conceded by counsel for the appellant who was instructed
by the said
attorneys.
/The ...
7.
The basis of the decision of the court a
quo
appears to have been as
follows: The inference to be drawn from the appellant's continued operation of
the business is that he decided
to stand by the sale and to conduct the business
for his own benefit. The explanations proffered by the appellant do not dispel
that
inference because he was not legally obliged to trade in order to restore
the business and the rights ceded under the lease to the
respondent. The
appellant's conduct was therefore irreconcilable with a continuous intention to
cancel the sale or, put somewhat
differently, with an intention to rely on the
cancellation. That being so, it was in the court's judgment immaterial whether
the
appellant had been entitled to rescind the sale.
The submissions made by the appellant's counsel were confined to the
inference drawn by the court a
quo
from the appellant's continued
operation of the business.
/At ...
8,
At the outset it is necessary, however, to elaborate somewhat on the legal
principles governing a case such as this one. It has often
been said that if an
innocent party is entitled to cancel a contract, whether on the ground of
misrepresentation or breach of contract,
he must exercise an election between
two inconsistent remedies, i e whether to cancel or to abide by the contract;
that the election
of one remedy necessarily involves the abandonment of the
other, and that he therefore cannot both approbate and reprobate. In
Feinste
in v Nig
gli and
Another
1981 (2) SA 684
(A) 698, Trollip,
JA said that election generally involves a waiver in the sense that one right is
waived by choosing to exercise
another right which is inconsistent with the
former, and pointed out that election and waiver have been equated as being
species
of the same general legal concept. Hence the learned judge concluded
that no reason exists why the same rule about the overall
/onus ...
9.
onus of proof applicable in waiver should not also apply to election mutatis
mutandis. Trollip, JA, did, however, mention one possible
qualification, i e
whether in election, as distinguished from waiver, proof merely of the innocent
party's knowledge of the material
facts giving rise to his remedies suffices, or
whether knowledge of his rights must also be proved. Although Trollip, JA,
expressed
a preference for the second possibility, he found it unnecessary to
pronounce a firm view thereon.
Once the innocent party has decided to cancel -and has communicated his
decision to the other party -he has, of course, exercised
his election. He then
no longer has a choice of remedies and may not, without the consent of the other
party, undo his decision.
The concept of election is therefore not appropriate
in regard to conduct which appears to be in conflict with an intention to rely
on the chosen remedy. It is
/perhaps ...
10.
perhaps more accurate to designate such conduct as a waiver
or abandonment of an accrued right, but as was pointed out by Kumleben,
J, in
Mahabeer v Sharma N O and Another
1983 (4) SA 421
(D) 423-4, the term
"waiver" (and, I may add, also "abandonment") is an imprecise one which can be
used in different senses. However,
for the sake of convenience I shall use the
word "waiver" with reference to conduct of the innocent party which precludes
him from
relying on his prior cancellation of a contract (if, of course, the
other party is prepared to accept the
volte
-face).
Whatever the correct terminology may be, the cardinal question is to what
extent, if at all, the innocent party's subjective intent
is relevant in
determining whether such a waiver has been established. In
Van Schalkwyk v
Griesel
1948 (1)SA 460 (A), a lessee of immovable property instituted an
action against the lessor on the ground that he had been induced
to enter
/into ...
11.
into the lease by certain fraudulent misrepresentations of
the lessor. In his declaration the lessee alleged that he had cancelled
the
lease. He tendered occupation of the property to the lessor and claimed an order
declaring the lease to be cancelled and an award
of damages. One of the defences
raised by the plea was a denial that the lessee had cancelled the lease. It was
alleged that he had
continued to occupy, and was still occupying, the property.
The court of first instance found that the lessee had been entitled to
cancel
the lease and that the fact that he had remained on the property for some 4
months after the issue of summons did not debar
him from insisting on
cancellation. On appeal it was submitted that by so retaining occupation of the
property the lessee had elected
to stand by the contract and therefore had
abandoned the remedy of rescission. The submission was rejected by this Court
which quoted
with approval (at p 473) the following
/passage ...
12.
passage from Halsbury's Laws of England, (2nd ed, vol 23, par 155):
"The acts and conduct relied upon as evincing the representee's affirmance
must be such as are more consistent, on a reasonable view
of them, with that
than with any other theory. It is not sufficient to point to acts of a neutral
character, or acts which are equally
consistent with a possible ulti-. mate
intention to disaffirm or with a mere suspension of judgment."
In parenthesis it should be pointed out that the above test was enunciated by
Halsbury with regard to conduct of the innocent party
preceding a cancellation,
or purported cancellation, of an agreement. Hence the use of the phrases "a
possible ultimate intention
to disaffirm" and "a mere suspension of
judgment".
At first blush it would appear that in applying the test only the objective
manifestation of the innocent party's intention is relevant,
and that factors
such as the subjective motivation for acting in the way
/in ...
13.
in which he did are immaterial. But that is not how the test
was applied by this Court. Having pointed out that the burden of proving
affirmance rested on the lessor, Tindall, JA, continued (at pp 473-4):
"Considering all the circumstances of the
present case, I am not satisfied
that the
plaintiff's conduct was more consistent with
affirmance than with
any other theory. In
deed the reverse is the case. The circum
stances were
peculiar and placed the plaintiff
in a difficult position. The situation
was
not as simple as it is when the subject-matter
of the contract
consists of movables. The
plaintiff had to have a roof over his head
and
his wife's and his furniture was on the pre
mises. He stated that he
knew of no place to
which he could move, and there is no reason
for
doubting the correctness of this evidence;
the difficulty of finding
accommodation during
recent years is a matter of common knowledge.
The
matter of the removal of his furniture
also presented a problem; he could get
no
transport on the spot and he was short of money.
It might have been
anticipated when the contract
was entered into that difficulties of this
kind
might arise in the way of the plaintiff if the
contract were
terminated. The negotiations
between the attorneys for a settlement are
also
relevant. No question was put to elucidate
when the negotiations
finally broke down
/All ...
14.
All these circumstances are relevant in deter- . mining whether the
plaintiff, who had repudiated and issued summons for rescission,
thereafter lost
his right to terminate the contract. For the reasons I have stated I find that
this defence was rightly rejected
by the trial Court."
It will be observed that the conduct of the lessee relied upon by the lessor,
i e, the continued occupation of the property, was judged
in the light of the
reasons that influenced the lessee in not vacating the property for some time
after his cancellation of the lease.
At least to this extent the lessee's
subjective intent was held to be material.
In
Palmer v Poulter
1983 (4) SA 11
(T), a full bench of the Transvaal
Provincial Division rejected a submission that it is not sufficient to prove
acts of an innocent
party evincing an intention to waive the right to rely on a
prior cancellation of an agreement if in fact there was no such subjective
intention. Ackermann, J, said (at p 20) that if such a party, with
/full ...
15. full knowledge of the facts, so conducted himself that a
reasonable person would conclude that he had waived his accrued right
to cancel
the agreement (or had decided not to enforce a prior cancellation), a mental
reservation to the contrary will not avail
him.
In
Mahabeer
's case,
supra
, it was held that it is the decision of the innocent party to waive
his right to cancel the agreement which is decisive, and not
what the defaulting
party was entitled to infer in this regard. (On appeal to this Court the point
was left open: Appeal 474/1983.)
It is not clear to me, however, whether the
approach of Kumleben, J, is necessarily in conflict with that of Ackermann, J. I
say
so because Kum-leben, J, did not pertinently decide that the objective
manifestation of the innocent party's decision cannot be decisive,
whilst in
Palmer
's case it was not considered whether regard should be had to the
inferences which the defaulting party was entitled to draw from
the conduct in
question. In particular it was not suggested that
/the ...
16.
the innocent party's explanations for his conduct - of which
the guilty party may have been unaware - are not material.
In
casu
the respondent did not rely on the doctrine of estoppel. Nor
did he allege that he was misled by the appellant's conduct. His approach
was
that the appellant had manifested an intention to abide by the sale and that as
a matter of law he was precluded from relying
on his (purported) cancellation of
the sale. It appears to me that on the case made out by the respondent the
conduct of the appellant
may be either decisive or merely evidential material.
If the test is whether the innocent party subjectively intended to waive his
right to rely on the prior cancellation of the agreement, his conduct might have
been such as to justify a rejection of his protestation
that he nonetheless had
no intention to waive his right. If, on the other hand, only the external
manifestation of his
/intention ...
17.
intention is relevant, there would be no room for a finding
that although his conduct was consistent only with an intention to abide
by the
contract, he nevertheless did not intend to waive - and therefore did not waive
-his right. I find it unnecessary, however,
to decide which is the test to be
applied in this case since, whichever approach is adopted, the appeal must in my
view succeed.
Counsel for the respondent did not submit that the appellant's
conduct, viewed in the light of his explanation thereanent, was such
as to
justify a rejection of his allegation that he did not intend to affirm the sale.
And for the reasons set out hereunder, I do
not think that those explanations
are unreasonable or unworthy of belief.
I turn to the conduct upon which the respondent relied. His counsel submitted
that by the continued operation of the business after
the receipt of the letter
dated 17 November 1982, the appellant evinced
/an ...
18.
an unequivocal intention to abide by the sale. I cannot agree. If a purchaser
of a going concern has cancelled the sale and, subsequent
to a rejection of his
tender to restore the business to the vendor, continues to trade, he may do so
for his own benefit or to preserve
the business for the seller. It is only if he
retains the business as his own that his conduct is irreconcilable with an
intention
to rely on the act of cancellation. It is consequently necessary to
determine the reason(s) why the appellant continued to trade.
It is clear that a substantial part of the purchase price represented the
goodwill of the business. The appellant said - and it stands
to reason - that if
he had simply closed the business the goodwill would have been lost. At the very
least a closure of the business
would have had a detrimental effect on the
goodwill. Moreover, there was a serious risk of the lease being cancelled which
would
have made it difficult,
/if ...
19.
if not impossible, for the respondent to re-open the business
on the same premises at some future date. Assuming, as one must for
the purposes
of this appeal, that the appellant was entitled to cancel the sale, the
continued operation of the business therefore
enured for the benefit of the
respondent. (Whether the preservation of the business as a going concern made it
impossible for the
appellant to restore to the respondent the various components
of the business, such as the stock in trade, does not arise in this
appeal. The
question whether the innocent party waived his prior cancellation and the
further question whether he is precluded from
relying on such cancellation
because he has made It impossible for him to restore the
merx
, should not
be confused with each other.)
Counsel for the respondent contended, however, that since the appellant's
tender to restore the business to the respondent had been
rejected, he was not
legally
/obliged ...
20.
obliged to continue operating the business,and that he would
not have been liable for any loss suffered by the respondent as a result
of a
closure of the business. This submission is not borne out by clear authority
but, assuming that it is sound, I do not think
that it is decisive. The
rejection of his tender placed the appellant in an invidious position. Had he
closed the business, he could
well have been met with a contention-whether sound
or not - that he had made it impossible for himself to restore the business as
a
going concern to the respondent. Hence the decision to carry on trading in order
to preserve the business was not unreasonable.
In any event, a mistaken view of
the appellant that he was obliged to continue trading cannot be equated with an
appropriation of
the business for his own benefit.
For these reasons I hold that it has not been proved that the appellant
unequivocally evinced an intention to abide by the sale. It
follows that the
/respondent ...
21.
respondent failed to establish a waiver by the appellant of
his right to rely on the cancellation of the sale. I may add that this
conclusion accords with the decision of the Supreme Court of Wyoming in
Fryer
v Campbell
43 P (2d) 994.
The respondent elected to proceed on notice of motion knowing that the
dispute as to the alleged misrepresentations could not be resolved
in motion
proceedings. He has failed on the only point which the court a
quo
was
called upon to decide on the papers before it, and it seems clear that, but for
the court's erroneous view of the appellant's
conduct, the application would
have been dismissed with costs. Counsel for the appellant intimated, however,
that in order to obviate
unnecessary delay and costs, he would prefer the matter
to be sent for trial, the notice of motion to stand as summons and the filing
of
the opposing affidavit as the first respondent's entry of appearance.
Counsel for the respondent submitted that, in the event of the appeal
succeeding, the costs in the
/court ...
22.
court a quo and the costs of the appeal should be ordered to be costs in the
trial. In this regard he ' pointed out that at the trial
the appellant may fail
to establish the misrepresentations in question and-thus his right to cancel the
sale. In view of the fact
that the respondent took the calculated risk of motion
proceedings proving to be abortive, the submission is without merit.
In the result the following orders are
made:
1)
The appellant's application for condonation is granted and he is
directed to pay the costs occasioned by the
application.
2)
The appeal is allowed with
costs and the following is substituted for the order made by the court a.
quo
:
(a) The matter is referred to trial. The
notice of motion is to stand as the applicant's summons and the opposing
/affidavit ...
23.
affidavit as the first respondent's entry of appearance. The
applicant's declaration must be filed within a
period of one month.
(b) The respondent is ordered to pay the costs of the motion proceedings,
save for those costs relating to the notice of motion (which
is to stand as
summons), the service thereof and the filing of the opposing affidavit (in lieu
of entry of appearance) which would
have been incurred had a summons been issued
and served and appearance entered in the normal course of the action.;
3) The period of one month is to run from the date of this judgment.
H.J.O. VAN HEERDEN, JA
RABIE, CJ
CORBETT, JA
CILLIé, JA
CONCUR
BOTHA, JA