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1991
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[1991] ZASCA 182
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Ford v Evaton Mathlo Projects (Pty) Ltd. (140/90) [1991] ZASCA 182 (28 November 1991)
Case no. 140/90
E du P
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE
DIVISION)
In the matter between:
THAN (TAN) WAN FORD
Appellant
and
EVATON MATHLO
PROJECTS (PTY) LIMITED.
Respondent
Coram
: JOUBERT, HEFER, F H GROSSKOPF JJA, NICHOLAS et VAN COLLER
AJJA
Heard:
Delivered:
19 September 1991
2
JUDGMENT F H GROSSKOPF JA
:
Evaton Development Company (Pty) Limited
("Evaton Development") entered into a written deed of sale dated 2 October 1987
("the deed
of sale") in terms whereof it sold a portion of the farm Rietfontein
measuring 428,2660 hectares ("the property") to one Barnard
in his capacity as
agent for a company or close corporation to be formed. The appellant was the
beneficial holder of all the shares
in Evaton Development. The respondent was
subsequently incorporated and it duiy adopted the deed of sale.
The deed of sale contained certain stipulations for the benefit of the
appellant, who was not a party to the deed of sale. It is common
cause that the
appellant accepted the rights and benefits stipulated in his favour. Clause 15
was one of the provisions in the deed
of sale which conferred certain benefits
on the appellant. It provided for a right of first refusal in his favour. Clause
15 reads
as follows:
3
"The Purchaser hereby grant to Tan Wan Ford a right of first refusal on any
number of Residential Erven, as [he] may want at market
value."
The appellant, applicant in the Court
a
guo
, sought a declaratory order that the respondent had failed to comply
properly with the provisions of clause 15. The Court a quo (
M J Strydom J
sitting in the Witwatersrand Local Division) dismissed the application with
costs, but granted the appellant leave to appeal to this
Court.
This appeal concerns the proper interpretation of
clause 15. A contractual provision such as clause 15 should
be interpreted in its contextual setting. In
Swart en 'n
Ander v Cape Fabrix (Pty) Ltd
1979(1) SA 195(A) at 202C
Rumpff CJ
remarked:
"Dit is vir my vanself sprekend dat 'n mens na die betrokke woorde moet kyk
met inagneming van die aard en opset van die kontrak,
en ook na die samehang van
die woorde in die kontrak as geheel."
(See also:
Cinema City (Pty) Ltd v Morgenstern Family
4
Estates (Pty) Ltd and Others
1980(1) SA 796(A) at 804A-806A.)
The
following is common cause or not in dispute. The appellant is a butcher by
trade, carrying on business in Evaton. The respondent
is a property development
company. The property is situated near Evaton. The respondent acquired it with
the intention of developing
it into a black residential township comprising a
large number of residential stands and some stands with business rights. In
terms
of clause 12 of the deed of sale the appellant also acquired a right of
first refusal in respect of the erven with business rights.
I shall later return
to the provisions of clause 12.
Mr
Heher
, for the appellant, submitted that clause 15 gave the
appellant a right of first refusal in respect of all the residential erven
in
each phase of the development, and that the respondent was accordingly obliged
to offer each and every residential erf to the
appellant before disposing of it
to a third party. It is common cause that the respondent did not follow such a
procedure; on the
5
appellant's interpretation, therefore, the respondent failed to comply with
the provisions of clause 15.
Mr
Myburgh
, for the respondent, submitted
on the other hand that clause 15 provided for a two-stage procedure whereby the
respondent was first
obliged to give the appellant an opportunity to select a
number of residential erven which he "may want". He contended that the appellant
had complied with that initial obligation in letters dated respectively 20
January, 7 and 8 March and 30 May 1989. It was further
submitted that the
appellant's right of first refusal only came into operation once he had made a
selection of erven in response
to the respondent's invitation to do so. The
respondent would then be obliged to offer such selected residential erven to the
appellant
at their market value, whereupon the appellant would enjoy his right
of first refusal.
On the respondent's interpretation of clause 15 the respondent duly complied
with its initial obligation to give
6
the appellant an opportunity to make his selection of erven. The respondent's
letters of 7 and 8 March 1989, read with its prior letter
of 20 January 1989,
clearly called upon the appellant to make his selection of erven in the first
phase of the development. In its
letter of 30 May 1989 the respondent requested
the appellant to select erven in the second phase of the development. It is
common
cause that the appellant failed to make a selection of erven in response
to either of these invitations, and according to the respondent's
interpretation
of clause 15 the appeiiant's right of first refusal therefore never became
effective.
Mr
Heher
referred us to a number of cases dealing with the nature and
meaning of a right of first refusal (or right of pre-emption as it is
usually
termed in the context of a sale). The respondent conceded that the phrase "right
of first refusal" bore its ordinary meaning,
but contended that the appellant's
right of first refusal never came into operation. The legal principles involved
are clear and
do
7
not present any difficulty. It was held by this Court in
Soteriou v
Retco Poyntons (Pty) Ltd
1985(2) SA 922(A) at
932B-D,
per Nicholas JA
:
"A right of first refusal is well known in our law. In the context of sale it
is usually called a right of pre-emption. The grantor
of such a right cannot be
compelled to sell the property concerned. But if he does sell, he is obliged to
give the grantee the preference
of purchasing, and consequently he is prevented
from selling to a third person without giving the first refusal. (See
Van
Pletsen v Henning
1913 AD 82
at 95;
Owsianick v African Consolidated
Theatres (Pty) Ltd
1967(3) SA 310(A) at 321F.) So, a right of pre-emption
involves a negative contract not to sell the property to a third person without
giving the grantee the first refusal; and the grantee has the correlative legal
right against the grantor that he should not sell.
This is a right which is
enforceable by appropriate remedies."
(See also:
Van Pletsen v Henninq
1913 AD 82
at 95;
Sher v
Allan
1929 OPD 137
at 142-143;
Owsianick v African
Consolidated Theatres (Pty) Ltd
1967(3) SA 310(A) at 318H-
320H;
Hirschowitz v Moolman and Others
1983(4) SA 1(T) at
5F-6E;
Dithaba Platinum (Pty) Ltd v Erconovaal Ltd and
Another
1985(4) SA 615(T) at 622G-623B, 623D-H).
8
Pursuant to clause 15 the appellant acguired a right of first refusai "on any
number of residential erven, as [he] may want". In my
judgment the appellant's
right of first refusal did not relate to all the residential erven; it was to
operate in respect only of
those erven which he indicated that he wanted. The
appellant was the only person entitled in terms of clause 15 to select those
erven.
It is conceivable that the appellant may have wanted all the residential
erven in a particular phase of development, but until he
gave such indication,
or made his selection, the right of first refusal could not operate. The
appellant had to determine the
merx
which would be subject to his right
of first refusai; until the
merx
had been so defined the appellant's
right of first refusal could not be exercised. Since the residential erven
differed in size and
locality, it would not have sufficed for the appellant
merely to indicate a number of residential erven ; he was obliged to identify
the particular erven which he wanted. Only then would the
9
respondent have been in a position to give the appellant the
pre-emptive
right of purchasing the particular erven "at
market value".
Clause 12 of the deed of sale provides further
support for the conclusion that clause 15 did not simply give
the appellant a right of first refusal on all residential
erven. Clause 12 granted the appellant a right of first
refusal to buy erven zoned for business use. It provided:
"Should the Purchaser obtain any Business Rights on some of the Erven, the
Purchaser hereby grant to Tan Wan Ford a right of first
refusal to buy such Erf
or Erven."
Clause 12 is clear; the appellant acquired a right of
first refusal to buy all erven with business rights. If the
language in clause 12 is contrasted with the language in
clause 15, it is equally clear that clause 15 did not grant
the appellant a right of first refusal on all residential
erven. In clause 12 the
merx
was defined, while in clause 15
the
merx
still had to be determined. Until such time as the
10
appellant had selected the residential erven which he wanted, as provided for
in clause 15, the respondent was not in a position to
offer him any residential
erven. The appellant ignored the respondent's letters and so failed to identify
the erven he wanted. In
my judgment the respondent duly complied with its
initial obligations under clause 15, and the appellant's inaction meant that the
respondent was unable to give him the first refusal in terms of clause 15.
The appeal is accordingly dismissed with costs.
F H GROSSKOPF JA
JOUBERT JA
HEFER JA Concur
NICHOLAS AJA
VAN COLLER AJA