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[1994] ZASCA 137
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Kragga Kamma Estates CC and Another v Flanagan (720/93) [1994] ZASCA 137; 1995 (2) SA 367 (AD); [1995] 1 All SA 486 (A) (29 September 1994)
Case no 720/93
IN THE SUPREME COURT OF SOUTH AFRICA
(APPELLATE DIVISION)
In the matter between:
KRAGGA KAMMA ESTATES CC
First appellant
LESTER DENNIS BILLSON
Second appellant
and
JESSIE JOHANNA FLANAGAN
Respondent
CORAM
: E M GROSSKOPF, NESTADT, KUMLEBEN, HOWIE JJA et NICHOLAS
AJA
DATE HEARD
: 19 AUGUST
1994
DATE DELIVERED
: 29 SEPTEMBER 1994
J U D G M E N T
NESTADT JA
:
The respondent sold and caused to be transferred certain fixed property
to the first appellant. She instituted an action in the
2
South Eastern Cape Local Division claiming retransfer. The court a
quo
(Jansen J) upheld her claim on the ground that she subsequently
cancelled the sale. An order that the property be reregistered in
the
respondent's name was granted. This appeal is against such order.
The main issue which arises is whether the respondent (to whom I refer as
the plaintiff) validly cancelled the sale. In order to determine
this, it is
necessary to trace the nature and history of the dispute between the parties in
some detail. As will be seen, the dispute
is an unfortunate one. And it has
taken a somewhat singular course. The plaintiff is an elderly widow. The
property in question is
a small farm. It has been her home for many years. The
first appellant (I call it the first defendant) is a close corporation, one
of
3
whose members is the second appellant (the second defendant). He is the
son-in-law of the plaintiff. So we are concerned with a family
quarrel involving
an asset of some importance to the litigants.
The agreement of sale was entered into on 12 April 1991. Clause 2 thereof
provides for a purchase price of R120 000 payable as to
R70 000 "on signature
hereof" and as to the balance of R50 000 at the rate of R500 per month. There is
a lex
commissoria
entitling the seller, in the event of the purchaser
breaching any of its obligations, to forthwith cancel the agreement.
Summons was issued on 1 April 1992. The plaintiff although alleging in
her initial cause of action that the first defendant had failed
to pay the R70
000, did not rely on this as constituting a breach of the agreement. Indeed
there was no reference to the
4
agreement having been cancelled (on any ground). The plaintiffs claim was
instead that she had never intended to sell the property;
that the second
defendant had represented the transaction to be one of lease; that induced by
such misrepresentation she had entered
into the agreement and caused the
property to be registered in the first defendant's name in error; and that
having discovered the
true nature of the document she was entitled to retransfer
of the property. The defendants denied these allegations. In particular,
it was
pleaded that the R70 000 had been paid. This, it was alleged, took place by way
of an agreed set-off of an equivalent amount
which it was said the plaintiff
owed in respect of services rendered and loans made to her over the years by the
second defendant
and his wife. The matter went to trial on the basis of these
pleadings. This was on 2
5
November 1992. The plaintiff gave evidence in support of her case. While
she was still under cross-examination the matter was adjourned.
By the time the hearing was resumed on 11 October 1993, two events had
occurred which materially altered the issues between the parties
and the course
of the trial itself. In the first place the plaintiff, perhaps having second
thoughts about the cogency of her evidence,
had amended her particulars of
claim. The effect of the amendment was to claim transfer of the property on an
alternative ground,
viz that by reason of the non-payment of the R70 000. the
plaintiff had cancelled the contract. This new cause of action was put
on two
bases. The one was that by refusing to pay the amount in question, the first
defendant had repudiated the contract and that
6
the plaintiff had accepted such repudiation. This amendment,
which
was effected in terms of a notice to amend dated 6 May 1993
("the
first amendment"), reads:
"7.7 The Defendant has refused to make payment of the said sum of R70 000.00
which sum has never been paid to the Plaintiff, and has
consequently repudiated
the contract between the Plaintiff and the First Defendant, the Plaintiff
accordingly accepts such repudiation
and demands retransfer of the property to
her."
The other basis of the new cause of
action was that the first defendant had been called upon to pay the R70 000
within a reasonable
time; that it had failed to do so: and that the plaintiff
had accordingly notified it of the cancellation of the agreement. The manner
in
which this amendment was effected is less straightforward. In the first
amendment the following is averred as an alternative to
7
paragraph 7.7:
"7.8 The Plaintiff hereby demands payment of the said sum of R70 000.00
(Seventy Thousand Rand), which sum has never been paid to
the Plaintiff, and
reserves the right to cancel the said contract in the event of the (first)
Defendant refusing or neglecting to
pay such sum within a reasonable period of
time."
In a notice of intention to amend
filed on 30 September 1993 ("the
second amendment") the following paragraph was proposed to be
substituted for the one I have just quoted:
"7.8 The Plaintiff hereby cancels the agreement of sale as a consequence of
the failure of the First Defendant to pay the said sum
of R70 000.00, despite
demand having been made upon the First Defendant by way of the Plaintiffs Notice
of Intention to Amend dated
6 May 1993, and despite the lapse of a reasonable
time."
When on 11 October 1993 the second
amendment was moved, the
defendants objected to it on the ground that it did not contain
a
8
tender to repay to the first defendant what it had paid to the
plaintiff
under the agreement. (As will be seen, this related to the
monthly
payments of R500.) Consequently, the second amendment was
not
granted. The matter was then adjourned to enable the plaintiff
to
redraft her proposed amendment so as to incorporate such a
tender.
Later the same day and by way of a third amendment the plaintiff
was granted leave to substitute the following new paragraph 7.8:
"The Plaintiff has cancelled the agreement of sale as a consequence of
the failure of the First Defendant to pay the said sum of R70
000.00, such
cancellation having been effected by a Notice of Intention to Amend filed of
record on 30 September 1993 and by way
of a letter addressed to the First
Defendant's attorneys dated 5 October 1993, a copy whereof is annexed hereto,
and despite demand
having been made upon the First Defendant by way of the
Plaintiffs Notice of Intention to Amend dated 6 May 1993, and despite the
lapse
of a reasonable time. The Plaintiff tenders to repay to the First Defendant such
monies as the Plaintiff has received from
the First Defendant pursuant to the
said deed of sale."
9
Also on 11 October 1993 the defendants amended
their
plea in consequence of the plaintiffs
amendments. Though
maintaining their earlier denial that the R70,000
had not been paid,
it was denied that the first defendant had
repudiated the agreement
or that the plaintiff had validly cancelled it. A number of
defences
were raised in this regard. In addition, the following was
pleaded
to paragraph 7.8:
"First and Second Defendants have made tender to Plaintiff to fulfil all
First Defendant's obligations in terms of the said agreement
prior to Plaintiffs
tender referred to in this paragraph, which tender was made to her on 11 October
1993, by tendering payment of
R70 000.00 to Plaintiff on 11 October 1993 and in
addition tendering to make further payments to her in terms of the said
agreement
which tender was refused by Plaintiff."
It was
not in dispute that the tender referred to and its refusal took
place after the second amendment was objected to but before the
10
grant of the third amendment (on 11 October 1993).
Thus it was that the issue of cancellation
arose.
However, the allegation that the
plaintiff was entitled to avoid the
contract on the grounds of mistake remained as the plaintiffs
main
cause of action. As I have indicated, the amendments to which 1
have referred were put forward as alternative causes of action.
Prefacing both paragraphs 7.7 and 7.8 was the following
statement
(in the first amendment):
"
Alternatively
, and in the event that the above Honourable Court
should find that the Plaintiff intended to sell the property to the First
Defendant
(which is denied) then the Plaintiff alleges as follows:"
And (in relation to the cause of action advanced in paragraph 7.8)
the
letter of 5 October 1993 (cited in the third amendment) confirms
this
stance. It reads:
11
"We wish to point out however that the amendment is only of relevance
should the trial court find that the plaintiff and the defendant
indeed entered
into a deed of sale (which is still denied). Furthermore we wish to point out
that the cancellation of the said deed
of sale, on the aforementioned basis, is
with immediate effect as a consequence of the first defendant's failure to make
payment
of the sum of R70,000.00 referred to in the deed of sale."
It was only on 12 October 1993 that what had been the
plaintiffs
main cause of action (that the agreement was void for
mistake) was
abandoned. Her claim for retransfer of the property was
then based
entirely on the alleged cancellation of the sale.
This brings me to the second event that I earlier
referred
to. It was the formulation on 12
October 1993 in terms of rule 33 of
a special case for the adjudication of the court. In terms of this
case
the parties agreed that no further
viva voce
evidence would be
led.
In addition each party made a significant concession. The
plaintiff
12
in effect withdrew her allegation that she had been misled as to the
nature of the agreement. She agreed that it was "a valid...sale".
On the other
hand the first defendant admitted that it had failed to pay the R70
000.
In the result, the outcome of the trial depended upon whether the
plaintiff had validly cancelled the sale. If she had (in either
of the two ways
referred to), she was, so the stated case further provided, entitled to
retransfer of the property. This would be
against repayment of the monthly
amounts of R500 which the first defendant had all along paid to the plaintiff on
account of the
balance of the purchase price. As at October 1993 they totalled
R17 000. On the other hand, so the parties also agreed, if the plaintiff
had not
validly cancelled the sale, her claim for retransfer would fail. The
13
issue thus formulated was to be resolved on the basis of the facts which
I have outlined.
Obviously the first defendant's failure to pay the R70 000 constituted a
breach of contract. It was a case of
mora
ex re (seeing that payment had
to be made at a specific time, namely, on signature of the agreement). But on
the plaintiffs cause
of action as framed in paragraph 7.7, there had to be more
than mere nonperformance. The breach had to constitute a repudiation.
I shall
assume that it did. There is much to be said for the conclusion that by
asserting (incorrectly as it turned out) that the
amount had been paid, the
first defendant was refusing to pay. If this be correct (and also bearing in
mind the lex
commissoria
in the agreement) the plaintiff might ordinarily
have been entitled to cancel on this ground.
14
However, as I have indicated, she did not purport to do so until
May
1993. This was over two years subsequent to the conclusion of
the
agreement. In the meantime she had accepted the monthly
payments
of R500 which the first defendant had regularly been making
on
account of the balance of the purchase price. Mr
Buchanan,
for
the
plaintiff, rightly conceded that in these circumstances his client
could
not summarily accept the repudiation and cancel the agreement.
Relevant in this regard is the following passage from an
American
judgment quoted in Williston on Contracts. 3rd ed, vol 6, sec 856
at
232:
"Where time of performance is of the essence of the contract, a party who
does any act inconsistent with the supposition that he continues
to hold the
other party to his part of the agreement will be taken to have waived it
altogether. When a specific time is fixed for
the performance of a contract and
is of the essence of the contract and it is not performed by that
15
time, but the parties proceed with the performance of it after that time,
the right to suddenly insist upon a forfeiture for failure
to perform within the
specified time will be deemed to have been waived and the time for performance
will be deemed to have been
extended for a reasonable
time."
It follows that the first ground on which the
plaintiff relied for her
right to cancel, namely that in May 1993
she accepted the alleged
repudiation of the contract by the first
defendant, is bad.
The matter turns then on whether the plaintiffs
second
ground, ie her purported
cancellation of the contract some five
months later, is sound. In support of a negative answer, the
defendants pleaded and argued that:
(i) the plaintiffs delay in electing to treat the defendant's
failure to pay the R70 000 as a repudiation and her
acceptance of the monthly payment of R500 amounted
16
to a waiver of her right to cancel:
(ii) having failed initially to tender repayment of what the first defendant
had paid her when she purported to cancel, the plaintiff
was precluded from
thereafter doing so; and
(iii) the plaintiff had, by denying the existence of the sale, herself
repudiated the contract and, applying the principle of
Erasmus vs Pienaar
1984(4) SA 9(T) and
Moodley and Another vs Moodley and Another
1990(1) SA
427(D), the first defendant's obligation to pay the R70,000 was suspended until
the plaintiffs breach was purged; by the
time this occurred (when she
acknowledged the contract as one of sale) the
first
17
defendant had tendered payment of the R70 000. I do not propose to
consider these points. There are others (also advanced on behalf
of the
defendants) which are decisive of the matter. I proceed to deal with
them.
If Williston's statement is applied, the matter must be considered on the
basis that the first defendant was afforded an extended
time, reasonable in the
circumstances, within which to make payment of the R70 000. If this be so, it
was incumbent on the plaintiff
that by way of a demand she place the first
defendant in
mora
(ex
persona
l. And (at the same time if she so
wished) she had, in order to enable her to cancel, to give notice of her
intention so to do in
the event of non-performance. This, I take it, is what the
plaintiff set out to achieve by what is stated in paragraph 7.8 of the
18
particulars of claim (as introduced on 6 May 1993 by the first
amendment).
I am not sure that this is a correct approach. As has
been indicated, the first defendant's
mora
was ex re. It may be that the
time for payment of the R70 000 was not extended; that the plaintiff waived
merely her right to cancel.
However, on the assumption that the first defendant
had to be placed in
mora
(ex
persona
l the question for decision is
whether this was done. If the demand for payment did not have this effect, an
essential prerequisite
to the plaintiffs right to thereafter cancel would be
missing. So we must examine the terms of the demand. There was nothing per
se
impermissible about it being contained in the pleadings. It would be a case of
interpellatio iudicialis
. But whatever its form, the
19
demand had to be unambiguous and indicate a fixed date, reasonable in the
circumstances, for performance (
Nel vs Cloete
1972(2) SA 150(A) at 159
H). And, of course, it had to indicate that the creditor wished to receive his
money (
Douean vs Estment
1910 TPD 998
at 1001); that the debtor was
required to perform
(Alfred McAlpine and Son Pty) Ltd vs Transvaal Provincial
Administration
1977(4) SA 310(T) at 351 H); and he must have been placed on
terms to do so (
Johannesburg City Council vs Norven Investments (Pty) Ltd
1993(1) SA 627(A) at 633 E). Whether this has been done, is a question of fact
for the decision of the court (Wessels' Law of Contract,
2nd ed, Vol II para
2893).
Were these requirements satisfied
in casu
? I do not think so. To
begin with, paragraph 7.8 (as originally framed in the
20
first amendment) specifies merely that payment be made "within a
reasonable period of time". Such period is not defined; no date for
payment is
given. But there is a more basic difficulty with the notice. It must be read in
conjunction with the recital that precedes
and governs it, viz that it only
operates "in the event that the...Court should find that the Plaintiff intended
to sell the property
to the First Defendant". It may have been proper to plead
in this way. Provided no embarrassment or prejudice is caused, inconsistent
claims may be made in the alternative (
United Dominions Corporation
(Rhodesia) Ltd vs van Eyssen
1961(1) SA 53 (SR) at 56 D-E; but compare
Lloyds and Co (South Africa) Ltd vs Aucamp and Another
1961(3) SA
879(0)). But ours is not a problem of pleading. We are concerned with whether
the plaintiff established a proper demand.
21
In my opinion she did not do so. Plainly, the demand was a conditional
one. It was subject to an uncertain future event. This was
the rejection of the
plaintiffs main claim that the transaction was a lease. Such a demand was not
capable of placing the first defendant
in
mora
. Consider how it was
supposed to react. The plaintiff was still unmistakably maintaining that there
was no sale. But on this basis
the R70 000 was not payable. So the very
substratum
of the demand (a finding of a sale) was negated by the
plaintiff herself. Far from being an unambiguous demand, it was a futile,
still-born communication which the first defendant was entitled to ignore. The
agreement was accordingly not validly cancelled. This
being so. the court a.
quo
should have dismissed the plaintiffs claim for retransfer of the
property.
22
Even, however, if there was no need for the first defendant to have been
placed in
mora
, the appeal must nevertheless succeed. This is because the
agreement was not validly cancelled for other reasons. The termination
of a
contract has important consequences upon the reciprocal rights and duties of the
parties (
Swart vs Vosloo
1965(1) SA 100(A) at 115 E). Thus in order to be
effective a notice of intention to cancel (to use the terminology suggested by
Kerr:
The Principles of the Law of Contract, 4th ed, 464) must be clear and
unequivocal (
Ponisammy and Another vs Versailles Estates (Pty) Ltd
1973(1) SA 372(A) at 385G). So, too, must the notice of termination itself
(
Putco Ltd vs TV & Radio Guarantee Co (Pty) Ltd
1985(4) SA 809(A) at
830 E). Tn my opinion neither the notice of intention to cancel (contained
in
23
paragraph 7.8 of the first amendment) nor the purported cancellation (by
way of paragraph 7.8 of the second amendment read with the
letter a few days
later of 5 October 1993) qualified as such. They were also framed in the
alternative and made subject to a finding
that the property had been sold. (The
terms of the letter of 5 October 1993 make this point with particular emphasis.)
They therefore
suffered from substantially the same defects as the demand for
payment. And they must share the same fate of being regarded as
ineffectual.
Finally there is the question of costs. Those of appeal must, of course,
be paid by the plaintiff (save that the costs of unnecessarily
including in the
record counsels' arguments on the application for leave to appeal will not be
allowed). And, seeing
24
that her claim in the court below will, in the result, have
failed, she
would normally be liable for the trial costs as well. It
was
submitted, however, that the defendants should be ordered to pay
the
plaintiffs costs (alternatively that they should be deprived of
their
costs) up to 11 October 1993. This was the date when payment
of
the R70 000 was for the first time tendered. Until then, as I
have
said, the defendants had asserted that payment had been made.
The
argument was that this conduct (coupled with the fact that at
the time
of the conclusion of the agreement, the defendants had
procured a
receipt from the plaintiff for payment of the R70 000)
justified a
departure from the normal rule that costs follow the
event. I am
unable to agree. I am not sure that this approach is, on
the wording
of the stated case, open to the plaintiff. It was agreed
that in the
25
event of the plaintiffs claim failing, she would pay such costs "as the
plaintiff may be ordered to pay". Nothing more is said on
the point. But besides
this, there is no warrant for finding that the defendants acted dishonestly or
that their plea that the R70
000 had been paid in any way increased the trial
costs. Despite having now to pay the R70 000, the defendants were the
substantially
successful parties. They are entitled to their costs. The
remaining question is whether these should include the fees of two counsel
(employed by the defendants both in the trial court and before us). The
plaintiffs case was that the value of the property was R420
000. The issues
raised, at least until the special case, were not that simple. Thereafter it was
the defendants as appellants who
were burdened with the task of attacking the
judgment a
quo
. In the circumstances, I consider that
26
the fees of two counsel should be allowed in both courts. The following
order is made -
(1) The appeal is upheld with costs including the costs of two counsel.
However, the costs of including in the record (pages 253-269)
counsel's
arguments on the application for leave to appeal will not be allowed.
(2) The order of the trial court is set aside and the following
substituted:
"1. The plaintiffs action is
dismissed with costs including the costs of two counsel. 2. The first defendant
is ordered: (a) to immediately
pay the plaintiff the sum of R70 000;
27
(b) in accordance with clause 2 of the deed of sale entered into between the
parties on 12 April 1991, to pay the plaintiff the balance
of the purchase price
less the sum of R17 000 already
paid."
H H NESTADT E M
GROSSKOPF JA )
KUMLEBEN, JA ) CONCUR HOWIE, JA ) NICHOLAS, AJA
)