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[1992] ZASCA 56
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Sonap Petroleum (South Africa) (Pty) Ltd v Pappadogianis (483/90) [1992] ZASCA 56; 1992 (3) SA 234 (AD); [1992] 2 All SA 114 (A) (30 March 1992)
IN THE SUPREME COURT OF SOUTH AFRICA
(
APPELLATE
DIVISION
)
Case no: 483/90 In the appeal of:
SONAP PETROLEUM (SOUTH AFRICA) (PTY) LTD APPELLANT (Formerly known as SONAREP
(SOUTH AFRICA) (PTY) LTD).
and
HARALABOS PAPPADOGIANIS RESPONDENT
Coram
: JOUBERT, BOTHA JJA et HARMS AJA. Date heard: 12 March 1992 Date
delivered: 30 March 1992
2 JUDGMENT
HARMS AJA
:
The appellant (the plaintiff in the court
a quo
)
is a supplier of petroleum products, As part of its marketing effort it finances
property owners to enable them to erect garages
and petrol filling and service
stations on a particular property; it then leases from the owner the completed
garage in terms of
a long lease; it sublets it to an operator who,
inter
alia
, sells its products; and it registers a mortgage bond over the property
to secure the loan to the owner.
The respondent is the owner of a property situate in
3 Randfontein. On 18
February 1975 he, in terms of a notarial deed of principal lease, leased the
property to the appellant (then
known as Sonarep) for a period of 20 years. The
lease was duly registered on 21 May 1975. The preamble recorded that the
respondent
was the registered owner of the property, that a garage building was
about to be erected thereon and that the appellant had agreed
to lease the
property from the respondent. The lease then provided that the respondent would
erect the garage out of monies which
the appellant undertook to lend to the
respondent; the premises leased would be used as a garage and related services;
a fixed rent
of R770.00 per month would be payable; the tenant had the right to
sub-let and had, during the subsistence of the agreement, the
right of first
refusal to purchase the premises.
Of particular importance is clause 4 which reads as follows:
4
"This lease shall, subject to the provisions of paragraphs 16,17 and 19 hereof,
be for a fixed period of 20 (TWENTY) years certain,
commencing on a date to be
specified in terms of a certificate to be issued by SONAREP, that the LEASED
PREMISES are substantially
ready and complete in all respects and that
beneficial occupation can be given by the owner to SONAREP, the date in such
certificate
being deemed to be the commencing date of this
Lease."
As far as the clauses referred to are concerned, clause
16 gave the appellant the right to cancel the lease in the event of a total
destruction of the leased premises. Should it not exercise this right, the
period during which it is deprived of beneficial occupation
was to be added to
the fixed period of 20 years of the lease. Clause 17 granted it a right to
terminate the lease in the event of
a prohibition of or a restriction in the
sale of its products as well as in the event of an expropriation. Clause 19
provided a right
to terminate upon 60 days' notice in the event of
vis
maior
.
5 The mortgage bond which secured the loan was registered on 14
May 1975. It recorded that R185 000.00 was lent and advanced by the
appellant to
the respondent at a rate of 5% interest per annum. Capital and interest had to
be repaid in 240 consecutive instalments
as from the date of completion as
reflected in the certificate of completion. In conclusion it provided for the
repayment of the
full balance of capital if the lease was cancelled in terms of
clauses 3, 16, 17 and 19 thereof or if it were to be cancelled or
terminated
otherwise than by effluxion of the fixed period as defined in clause 4 of the
notarial deed of principal lease. (For purposes
of this judgment the provisions
of clause 3 of the notarial deed are of no consequence.)
It is clear from the aforegoing that the respective provisions of the
notarial lease and of the mortgage bond were interrelated and
interdependent.
6
The appellant failed to issue a certificate relating to the inception date of
the lease. This fact came to the notice of one of its
employees, Mr Cronje,
during 1986. The available correspondence on file enabled him to determine the
date as being 1 December 1974
and he then gave instructions that steps be taken
to have the date of commencement fixed for purposes of the lease. For some
reason
or other, the attorney instructed decided, rather than having a
certificate issued, to prepare a notarial addendum to the lease.
That was done,
the respondent's signature was obtained, so too the appellant's managing
director's, and the addendum was thereafter
notarially executed and registered
at the beginning of 1987. The addendum reads, as far as is relevant, as
follows:
" (1) The Owner and Sonarep have agreed that with immediate effect clause 4 of
the Main Lease is deleted and the following is substituted
therefor:
7
'(4) This lease shall, subject to the provisions
of
paragraphs 16, 17 and 19 hereof, be for a
fixed period of 15 (FIFTEEN) years
certain,
commencing on 1st December 1974.'
(2) In all other respects, the
terms and conditions
of the Main Lease shall remain unaltered and of
full
force and effect."
Not only was the commencement date fixed but, as a result of an unexplained
mistake by the firm of attorneys, the term of the lease
was reduced from 20 to
15 years. This mistake was not detected by any of the appellant's executives or
officers until approximately
September 1987. The respondent's insistence that no
mistake had occurred led to litigation in the Witwatersrand Local Division in
which the appellant claimed rectification of the addendum by replacing the 15
year term with a 20 year term, and, in the alternative,
an order declaring the
addendum in the light of the mistake to be void.
The court
a quo
(coram J H Coetzee J) dismissed the claim
8 with
costs and subsequently granted leave to appeal to this Court. Although the
evidence tendered on behalf of the respondent was
rejected and that on behalf of
the appellant accepted, the learned judge concluded that:
(i) the claim for rectification could not succeed since
the appellant had failed to prove a common continuing
intention to retain the period of 20 years mentioned in the
principal
lease;
(ii) the appellant's mistake was not
iustus
because it was due to its
fault, i e the carelessness and inattention of its employees in not reading the
proposed amendment to clause
4 properly before executing it;
(iii) the appellant did not prove that the respondent knew or ought to have
known of the appellant's unilateral mistake.
9 Before proceeding to deal with
the legal issues involved, it is necessary to consider the respondent's case and
the trial judge's
findings thereanent. The respondent relied in his plea on an
oral agreement reached with one Potgieter (on behalf of the appellant)
during
1986 in terms of which it had been agreed to amend the lease by reducing the
period to 15 years. That defence was demonstrated
in the evidence to have been
based upon a patent falsehood. The same falsehood was contained in a letter that
preceded the litigation.
The respondent's evidence, on the other hand, was that
the amending documents had been delivered to him by a messenger who informed
him
that the documents represented a new lease; he then read the documents; he
noticed the reduction in term; he telephoned his attorney
to discuss the date of
inception but not the reduction in term; and his impression was that the
reduction had been inserted intentionally.
The trial judge stated in his
judgment that he had gained the impression that the respondent was deliberately
lying when he testified
that
10 he had noticed the reduction of the period to
15 years. No reasons were proffered in respect of the impression, nor was any
finding
made in accordance therewith. I am of the view that it must be accepted
as overwhelmingly probable that the respondent did in fact
read the document,
and that he thereafter telephoned his attorney and read the document to him over
the telephone. This must be so
in the light of the importance to the respondent
of the lease (especially its term of duration). Both he and his attorney were
fully
aware that the original lease provided for a term of 20 years and that the
bond repayments were linked thereto. It is, therefore,
in spite of their
denials, more than probable that they did discuss the change in term. At the
trial, the appellant's counsel, in
cross-examination, valiantly attempted to get
the respondent to concede that, on reading the document, he did in fact realise
that
a mistake had occurred. The answers given indicated that that possibility
did occur to him but, before counsel could
11
drive the point home, respondent's counsel intervened and that gave the
respondent the opportunity to reconsider and deny. Further
reference will, in
due course, be made to this issue.
Rectification and unilateral mistake are mutually exclusive concepts.
Rectification presupposes a common intention and unilateral
mistake the absence
thereof. Logically speaking, the claim for rectification must first be
considered.
The appellant alleged in its pleadings that the addendum was executed with
the intention to f ix the commencement date of the lease,
that the parties had
no intention, nor did they agree, to amend the original period of the lease and
that it was their common continuing
intention to retain the original period. It
follows from my finding that the respondent had read the addendum and had
realized that
the
12 term had been amended, that, in signing the document, he
had the intention to "agree" to the reduction. If that is so, rectification
cannot follow because there was no common intention not to amend. It is
therefore unnecessary to consider the reasoning of the trial
judge which was
based on a different understanding of the underlying facts. Attention must now
be focused on the alternative claim
based upon mistake.
The mistake relied upon by the appellant was one committed during the
expression of its intention ("Erklarungsirrtum" in German: Fevrier-Breedt
A
Critical Analysis of Mistake in SA Law of Contract
, LLD dissertation, UP
[1991] p142): it mistakenly believed that its declared intention conformed to
its actual intention. The respondent's
declared intention, cm the other hand,
did not differ from his actual intention. The
dissensus
13
is, therefore, in a sense the result of the appellant's so-called unilateral
mistake. Cf Asser
Verbinternissenrecht
, part II (1985) p144-5. I use the
term "mistake" and not "error", because, although they may be used
interchangeably, "mistake" rather
"implies misundertanding, misinterpretation,
and resultant poor judgment, and is usually weaker than
error
in imputing
blame or censure."(American Heritage Dictionary sv "error".)
The law, as a general rule, concerns itself with the external manifestations,
and not the workings, of the minds of parties to a contract.
South African
Railways and Harbours v National Bank of South Africa Ltd
1924 AD 704
,
715-6. However, in the case of an alleged
dissensus
the law does have
regard to other considerations: it is said that, in order to determine whether a
contract has come into being, resort
must be had to the reliance theory. Cf
Saambou-Nasionale Bouvereniginq v Friedman
1979
14 (3) SA 978
(A)
995-6;
Reinecke and Van der Merwe
1984 TSAR 290.
This Court has, in two
judgments delivered on the same day by differently constituted benches, dealt
authoritatively with the question
of
iustus error
in the context of a
so-called unilateral mistake. The first is
Georqe v Fairmead (Pty) Ltd
1958 (2) SA 465
(A) 471 B - D where Fagan CJ said the following:
"When can an
error
be said to be
justus
for the purpose of
entitling a man to repudiate his apparent assent to a contractual term? As I
read the decisions, our Courts, in
applying the test, have taken into account
the fact that there is another party involved and have considered his position.
They have,
in effect, said: Has the first party - the one who is trying to
resile - been to blame in the sense that by his conduct he has led
the other
party, as a reasonable man, to believe that he was binding himself ? ... If his
mistake is due to a misrepresentation,
whether innocent or fraudulent, by the
other party, then, of course, it is the second party who is to blame, and the
first party
is not bound."
15 The second is Schreiner JA's
statement in
National and Overseas Distributors Corporation (Pty) Ltd v
Potato Board
1958 (2) SA 473
(A) 479 G - H:
"Our law allows a party to set up his own mistake in certain circumstances in
order to escape liability under a contract into which
he has entered. But where
the other party has not made any misrepresentation and has not appreciated at
the time of acceptance that
his offer was being accepted under a
misapprehension, the scope for a defence of unilateral mistake is very narrow,
if it exists
at all. At least the mistake (
error
) would have to be
reasonable (
justus
) and it would have to be
pleaded."
These dicta gave respondent's counsel the cue to argue
that, in the absence of a misrepresentation by the respondent, the appellant
could not succeed in its alternative claim. That is in my view an
over-simplification. If regard is had to the authorities referred
to by the
learned judges, (see
Loqan v Beit
7 SC 197
, 215;
I Pieters and Company
v Salomon
1911 AD 121
, 137;
Hodgson Bros v South African Railways
1928 CPD
16
257,261;
Van Ryn Wine and Spirit Co v Chandos Bar
1928 TPD
417
, 422-4;
Irvin and Johnston (SA) Ltd v Kaplan
1940 CPD 6417
, and one
could add
Collen and Rietfontein Enqineerinq Works
1948 (1) SA 413
; (A)
430-1) I venture to suggest that what they did was to adapt, for the purposes of
the facts in their respective cases, the well-known
dictum
of Blackburn J
in
Smith v Huqhes
(1871) LR 6 QB 597
, 607, namely:
"If, whatever a man's real intention may be, he so conducts himself that a
reasonable man would believe that he was assenting to
the terms proposed by the
other party, and that other party upon that belief enters into the contract with
him, the man thus conducting
himself would be equally bound as if he had
intended to agree to the other party's terms."
In my view,
therefore, the decisive question in a case like the present is this: did the
party whose actual intention did not conform
to the common intention expressed,
lead the other party, as a reasonable man, to believe that his
17 declared
intention represented his actual intention? Cf Corbin on Contracts (one volume
edition) (1952) p157. To answer this question,
a three-fold enquiry is usually
necessary, namely, first, was there a misrepresentation as to one party's
intention; secondly, who
made that representation, and thirdly, was the other
party misled thereby? See also
Du Toit v Atkinson's Motors Bpk
1985 (2)
SA 893
(A) 906 C - G;
Spindrifter (Pty) Ltd v Lester Donovan (Pty) Ltd
1986 (1) SA 303
(A) 316 I - 317 B. The last question postulates two
possibilities: was he actually misled and would a reasonable man have been
misled?
Spes Bona Bank Ltd v Portals Water Treatment South Africa (Pty)
Ltd
1983 (1) SA 978
(A) 984 D - H; 985 G - H.
In
Horty Investments (Pty) Ltd v Interior Acoustics (Pty) Ltd
1984 (3)
SA 537
(W) G A Coetzee J stated (at 539 G) that the "fault principle looms
large" in determining whether an
error
is
iustus
(excusable).
Apart from a few
18 loose and obiter statements I could not find any
authority for this assertion. He then held that a mistaken party is not "able
to
rely on the lack of true consensus if his mistake was due to his own fault" (at
539 I - 540 A). The learned judge was influenced
by the view expressed by J C de
Wet,
Dwalinq en Bedroq by Kontraksluiting
(1943) whose thesis was that
the principles of estoppel provide the solution to the present problem. With
respect to both the learned
judge and the learned professor, it may be that
estoppel merely bedevils the enquiry and that reliance thereon is not conducive
to
clear thinking. Cf Van Rensburg "Die Grondslag van Kontraktuele Gebondenheid"
1986
THRHR
448.
The learned judge relied heavily upon the use of the word
"blame" by Fagan CJ in the quoted passage. As I read the passage, the learned
Chief Justice did not equate "blame" with negligence but referred to blame
"
in the sense
[my emphasis] that by his conduct he has led the
19
other party as a reasonable man, to believe" that his apparent intention was his
true intention.
The introduction of the fault principle has given rise to some academic
displeasure (see the authors quoted in
Nasionale Behuisinqskommissie v
Greylinq
1986 (4) SA 917
(T) 925 I) and also practical difficulties,
especially in the case of " contributory negligence" (Cf Ellison Kahn,
Contracts through the Cases
2nd ed vol 1, p300: "The tenor of this
approach is that an unreasonable error may be rendered reasonable by the greater
unreasonableness
of an error made by the other party!" Also Carole Lewis
1987
SALJ
371
at 376.) However, apart from anything else, it appears to be
unnecessary. The decision in
Horty
's case would have been the same had
the test formulated above been applied. In that case the one party presented to
the other a proposed
lease which had conflicting provisions relating to the
duration of the lease. As the learned judge
20
himself found, a reasonable man would not have been misled to believe that
the document expressed the true intention of its author
(at 541 H - I). That was
also the basis of the conclusion reached in
Nasionale Behuisingskommissie v
Greylinq
,
supra
, 926 D - F, 927 E - F. It may, in conclusion on this
aspect of the case, be pointed out that this Court in
Du Toit v Atkinson's
Motors Bpk
,
supra
, and
Spendrifter (Pty) Ltd v Lester Donovan
(Pty) Ltd
,
supra
, did not consider whether the representor was
negligent but merely whether a representation had been made; nor was the matter
approached
along the lines of estoppel.
In the present case the appellant represented to the respondent that its
intention was to reduce the period of the lease. One has
then to determine
whether the misrepresentation had any effect, i e whether the respondent was
misled thereby. If he realised (or
should have realised as a reasonable man)
that there was a real
21 possibility of a mistake in the offer, he would have
had a duty to speak and to enquire whether the expressed offer was the intended
offer. Only thereafter could he accept. Support for this can be found in
Sherry v Moss
WLD 3 September 1952 (unreported) but quoted by Ellison
Kahn op cit p302 and
Slavin's Packaging Ltd v Anglo African Shippinq Co
Ltd
1989 (1) SA 337
(W) 342 I - 343E. Goudsmit
Pandecten-Systeem I
para 52 p119 states in this context: "Dolus malus kan ook zwijgen zijn, waar
spreken plicht is". De Wet and Yeats
Kontraktereg en Handelsreg
4th ed
plO are of the view that "(v)erder bestaan daar geen gegronde rede waarom iemand
deur 'n verklaring verbind moet wees indien
die ander moes geweet of vermoed het
dat eersgenoemde waarskynlik nie bedoel het wat hy gesê het nie. . ." See
also
Hartog v Colin and Shields
(1939) 3 All ER 566
;
Solle v
Butcher
(1950) 1 KB 671
692-3. Asser, op cit p153, states that a contract is
voidable if "de wederpartij in verband met hetgeen zij omtrent de dwaling wist
of behoorde
22
te weten, de dwalende had behoren in te lichten". The snapping up of a
bargain in the knowledge of such a possibility would not be
bona fide. Whether
there is a duty to speak will obviously depend on the facts of each case. Cf
Diedericks v Minister of Lands
1964 (1) SA 49
(N) 54; 57 G - H.
In view of the trial judge's impression that the respondent had not read the
document presented to him, it followed that, in his view,
the question whether
the respondent actually appreciated the possibility of a mistake, did not arise.
I have already held that there
was no good reason to disbelieve the respondent
on this aspect. The fact that the respondent's evidence was rejected does not
mean
that one is not entitled to have regard to admissions made or to draw
conclusions from his falsehoods.
23
One has then to consider whether the respondent's ultimate allegation that he
had not considered the possibility of a mistake was,
on the probabilities of the
case, true. The respondent is an experienced businessman. He knew that the
garage had been sub-let and
that the appellant was making a profit in excess of
R3500 per month on the sub-lease alone. He also knew that it derived income from
the sale of its products by its tenant, the operator. He was fully aware of the
fact that the addendum specifically provided that
all the other terms of the
lease were to remain unaffected, that the bond and the lease were closely
connected, that the bond instalments
were linked to the payment of rental and
that the addendum did not make any provision for an accelerated payment of the
loan. He
then telephoned his attorney. Their evidence that the inception date
only was discussed must be rejected because, not only was their
evidence that
the addendum was
read
to the attorney but also that they both knew of the
20 year term. The fixing
24
of the inception date was of minor importance whereas the other matter was
material. The question can then justifiably be asked: why
did they lie if they
had not discussed the possibility of a mistake? And the answer has to be:
because they did have such a discussion.
This conclusion is strengthened by the
fact that when asked why he thought the appellant intentionally wished to amend
(as he had
testified) the respondent gave spurious answers. So too, the fact
that in order to justify the addendum, he had, in correspondence
and pleadings,
relied falsely on an antecedent agreement. Lastly, reference can again be made
to his answers in cross-examination,
that it had crossed his mind that the
reduction was done either intentionally or in error. His retraction is not
convincing. All
this leads me to the conclusion that, as a matter of
probabilities, the respondent was not misled by the appellant to believe that
it
was its intention to amend the period, but, on the contrary, that he was
alive
25
to the real possibility of a mistake and that he had, in the circumstances, a
duty to speak and to enquire. He did not but decided
to snatch the bargain. That
he could not do. There was, therefore, no
consensus
, actual or imputed,
on this issue. Counsel agreed that, if that were to be the result, the interests
of the parties would be served
if the addendum were to be declared
pro
tanto
void. This conclusion makes it unnecessary to consider whether the
respondent, objectively speaking, as a reasonable man, should
have appreciated
the real possibility of a unilateral mistake.
In the light of the aforegoing the following order is made:
1. The appeal is upheld with costs including the costs of two
counsel.
26 2. The order of the court
a quo
is set aside
and the following order is substituted:
"(a) It is declared that the Addendum to Notarial Deed of Lease K1335/1975L, is
void and of no effect insofar as it purports to reduce
the period of the Main
Lease from 20 to 15 years." (b) Defendant is ordered to pay the costs of
suit."
HARMS AJA
JOUBERT JA )
BOTHA JA ) CONCUR