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[1995] ZASCA 154
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Philmatt (Pty) Ltd. v Mosselbank Developments CC (323/94) [1995] ZASCA 154; 1996 (2) SA 15 (SCA); [1996] 1 All SA 296 (A); [1996] 1 All SA 296 (A) (29 November 1995)
Case no: 323/94
IN THE SUPREME COURT OF SOUTH AFRICA
(APPELLATE DIVISION)
In the matter between:
PHILMATT (PTY) LIMITED
Appellant
MOSSELBANK DEVELOP
MENTS CC Respondent
Coram:
HEFER, F H GROSSKOPF JJA et VAN COLLER AJA
Heard
: 21 August 1995
Delivered:
29 November 1995
2
JUDGMENT F H GROSSKOPF JA:
The appellant launched an application in
the Cape of Good Hope Provincial Division, seeking an order for the provisional
winding-up
of the respondent, a close corporation, on the grounds that it was
unable to pay its debts, as provided in s 68(c) of the Close Corporation
Act 69
of 1984, or alternatively, that it was just and equitable in terms of s 68(d)
that the respondent be wound up. The court a
quo (Hodes AJ) dismissed the
application with costs, but granted the appellant leave to appeal to this
court.
During 1991 the respondent purchased certain erf 184, Paternoster, situated
in the municipality of Vredenburg - Saldanha ("the Paternoster
property") with a
view to develop it into a township comprising 72 erven. On 8 April 1992 the
respondent entered into a written deed
of sale ("the deed of sale") with Wale
Street Industrial Finance Limited ("Wale Street"), or its nominee, in terms
whereof the respondent
sold to Wale Street, or its nominee,
3
23 of the proposed erven ("the 23 erven") for R18 639 per erf.
A certain Esaias
Frederick Snyman ("Snyman"), who was the sole member of the
respondent at
the time, concluded the sale and signed the deed of sale on
behalf of the
respondent. Snyman, acting on behalf of the respondent and
others, entered into
a further agreement with Wale Street ("the finance
agreement"). The finance
agreement was signed by Snyman on 8 May 1992. It
provided inter alia for the
appointment of Wale Street as the "sole agent" to
raise finance in the sum of
R2,8 million during the period 1 April to 31
December 1992 to pay for the
purchase price of the Paternoster property and
the development of the proposed
township. It is common cause that Wale Street
raised a sum of R135 000 on
8 April 1992, which is incidentally the date upon
which the deed of sale was
signed. Wale Street also provided other financial
assistance before the finance
agreement was eventually signed on 8 May 1992,
but the total amount raised
never came near R2,8 million.
On 29 October 1993 Wale Street nominated the appellant in writing as the
purchaser in terms of the deed of sale, and the appellant
accepted
4
such nomination ("the nomination agreement"). The appellant thereupon
tendered performance of its obligations in terms of the deed
of sale and
demanded transfer of the 23 erven into its name. The respondent's reaction was
that neither Wale Street nor its nominee
was entitled to claim transfer of the
23 erven inasmuch as Wale Street had failed to honour its obligations in terms
of the finance
agreement.
The appellant then launched an urgent application in December 1993 seeking an
interim interdict restraining the respondent from alienating_any
of the 23
erven. The respondent consented to the granting of such order, pending the
determination of an action which the appellant
had to institute on or before 31
January 1994. The appellant duly instituted the action, but before the
respondent's plea could be
filed the appellant applied on 23 March 1994 by way
of an urgent application for the provisional winding-up of the respondent.
It is common cause that if the respondent were obliged to transfer the 23
erven into the appellant's name at a price of R18 639,00
each (which according
to the respondent represented the cost price of each erf, without
5
making provision for any development costs), the respondent would indeed be
unable to pay its debts, as provided in s 68(c) of Act
69 of 1984.
Judging
only by the terms of the deed of sale, read with the nomination agreement, the
respondent appears to be obliged, subject to
due performance by the appellant,
to transfer the 23 erven into its name. In the court a quo the respondent's
opposition to the appellant's
application for a provisional winding-up order
rested mainly on two legs: first, that the respondent was entitled to
rectification
of the deed of sale which, if granted, would have had the effect
of relieving the respondent of its obligation to transfer the 23
erven to the
appellant; secondly, that the deed of sale was of no force or effect in terms of
s 2(1)
of the
Alienation of Land Act 68 of 1981
("the
Act") inasmuch
as a
material term of the agreement between the respondent and Wale Street had not
been reduced to writing.
The court a quo rejected the respondent's claim to rectification on the
strength of certain dicta in
Weinerlein v Goch Buildings Ltd
1925 AD 282
at 291, and
Mever v Merchants' Trust Ltd
1942 AD 244
at 254, to the
6
effect that rectification cannot be raised against an innocent third party
such as
the appellant. The respondent accepted this finding of the court a
quo, and the
question of rectification is accordingly not an issue any more.
The second leg of the respondent's argument was based on
s
2(1)
of the
Act which
provides as follows:
"No alienation of land .... shall .... be of any force or effect unless it is
contained in a deed of alienation signed by the parties
thereto or by their
agents acting on their written authority."
The sale of the 23 erven was clearly an "alienation" of "land" as defined in
the
Act. All
the material terms of such alienation therefore had to be contained
in the signed "deed of alienation" (ie the deed of sale).
It is necessary to refer briefly to the evidence in order to determine
whether there were any alleged material terms of the alienation
which were not
contained in the deed of sale. Seeing that the proceedings in the court a quo
were on notice of motion and that disputes
of fact have arisen on the
affidavits, the general rule, as laid down in
Plascon - Evans Paints Ltd v
Van Riebeeck Paints (Pty) Ltd
1984(3) SA 623(A) at 634 H-I, applies, viz
that the matter
7
should be resolved on the basis of the facts averred in the appellant's
affidavits which have been admitted by the respondent, together
with the facts
alleged by the respondent. In my view this is clearly not a case where the
allegations of the respondent are so far-fetched
or untenable that the court
would be justified in rejecting them merely on the papers.
The only two deponents who have personal knowledge of the negotiations
preceding the conclusion of the deed of sale and the finance
agreement, and who
would know whether any prior or contemporaneous oral terms of the deed of sale
were agreed upon, are Snyman, who
acted throughout on behalf of the respondent,
and one Leon Stefan van der Westhuizen ("van der Westhuizen"), who negotiated on
behalf
of Wale Street. At the time when they deposed to their respective
affidavits Snyman had ceased to be a member of the respondent,
while van der
Westhuizen had no further interest in Wale Street.
Snyman made the following allegations in his affidavit with regard to a
contemporaneous oral term ("the oral term") which formed part
of the agreement
concluded between the respondent and Wale Street:
8
"Ek bevestig spesifiek dat dit deurentyd deur die ooreenkoms tussen myself en
Wale Street Finance Limited was dat hulle 23 erwe teen
kosprys kon kry
onderhewig daaraan dat hulle die nodige finansiering kon kry vir die aankoop van
die grond en vir die finansiering
van die dienste. (Dit wil se die hele projek
in geheel). Hulle kon nie die finansiering bekom nie en die ooreenkoms net
gevolglik
nie tot stand gekom nie."
Snyman further
confirmed the following statement by one Anthony Robert
Murris, who deposed to the answering affidavit on behalf of the
respondent:
"Dit was 'n uitdruklike term van die ooreenkoms dat die koopkontrak slegs
werking sou he indien Wale Street die finansiering sou bekom."
Van der Westhuizen specifically denied that there had been any such oral
agreement. The court a quo pointed out that although the
appellant was well
aware of the serious dispute of fact which arose on the affidavits, it chose to
argue the matter on the papers
and not to apply for the matter to be referred to
oral evidence. In the circumstances the general rule in
Plascon -Evans,
supra
, applies, with the result that the respondent's version has to be
accepted as correct for purposes of this case.
9
The court a quo found that it was clear from the affidavits filed on behalf
of the respondent that the deed of sale was not intended
to be the exclusive
memorial of the whole of the agreement between Wale Street and the respondent,
but that it recorded only part
of a larger and partly oral agreement. It was
held that the evidence showed that it was an express oral term of this larger
contemporaneous
agreement that the deed of sale was subject to a suspensive
condition, namely that the respondent's obligation to perform would only
come
into operation once Wale Street had procured the necessary finance for the
purchase of the Paternoster property and the financing
of the services.
The court a quo referred to certain passages in the judgment of this court in
Johnston v Leal
1980(3) SA 927(A) dealing with the so-called "parol
evidence" or "integration" rule, and concluded that the deed of sale in the
present
case did not constitute an integration of the whole agreement, but only
a partial integration, and that the integration rule therefore
did not prevent
the admission of extrinsic evidence relating to the oral term.
The court a quo further held that the oral term was a material
term
10
of the sale and that failure to incorporate it in the deed of sale resulted
in the sale being void in terms of
s 2(1)
of the
Act. The
court a quo concluded
that the respondent was therefore not bound to transfer the 23 erven into the
appellant's name at the agreed
price, which would otherwise have rendered the
respondent insolvent. The appellant's application for liquidation was
accordingly
dismissed with costs.
In this court the appellant submitted that the respondent is in law precluded
from relying on extrinsic evidence relating to the oral
term for the following
reasons. It was contended in the first place that the admission of such
extrinsic evidence would have the
effect of transgressing the so-called parol
evidence rule; secondly, that it would undermine the policy underlying
s 2(1)
of
the
Act, which
seeks to prevent uncertainty and disputes concerning the contents
of contracts for the alienation of land; thirdly, that the provisions
of clause
9 of the deed of sale, in terms whereof Wale Street acknowledged that the deed
of sale constituted the whole agreement
between the respondent and itself,
precludes the respondent from tendering evidence to contradict or qualify
11
the provisions of the deed of sale; fourthly, that the respondent is
estopped
from proving the oral term which would have the effect of avoiding
the sale.
I shall deal with these submissions seriatim.
The appellant's first argument was that the parol evidence
rule
prevents the admission of extrinsic evidence. This rule was formulated as
follows by Watermeyer JA in
Union Government v Vianini
Ferro-Concrete
Pipes (Pty) Ltd
1941 AD 43
at 47:
"Now this Court has accepted the rule that when a contract has been reduced
to writing, the writing is, in general, regarded as the
exclusive memorial of
the transaction and in a suit between the parties no evidence to prove its terms
may be given save the document
or secondary evidence of its contents, nor may
the contents of such document be contradicted, altered, added to or varied by
parol
evidence."
(See National Board (Pretoria) (Pty) Ltd and Another v Estate Swanepoel
1975(3) SA 16(A) at 26A-D;
Rielly v Seligson and Clare Ltd
1977(1) SA
626(A) at 637C-D.) After pointing out that several writers on the law of
evidence hold the view that these rules are not strictly
rules of evidence
the
12
earned judge proceeded as follows at 47:
"Whatever may be the correct view as to the precise nature of the rules, it is
clear that they do not prevent a party from setting
up the case that the
contract is not a presently enforceable contract inasmuch as it is conditional
upon the happening of some event
which has not occurred."
It follows that the integration rule does not preclude
extrinsic
evidence of a prior or contemporaneous
oral agreement that the written contract
shall not take effect except in a
certain contingency. That much appears from
the second passage from
Union
Government v Vianini Ferro-Concrete Pip
es.
supra
, quoted above,
and from the following remarks of Innes CJ in
Stiglingh
v
Theron
1907 TS 998
at 1003:
"But, again, evidence is admissible of a separate oral agreement constituting a
condition precedent to the attachment of any liability
under the written
instrument. This is an exception to the general principle, more apparent than
real, because such evidence does
not essentially tend to vary the document.
Accepting its terms as they stand, it aims at suspending its operation. If the
suspension
fails or ceases, then admittedly the contract takes effect in
accordance with its ordinary meaning."
13
(See also
Aymard v Webster
1910 TPD 123
at 129;
Johnston v
Leal
,
supra
. at 938H and 946H). It remains problematical, however, to
determine in what circumstances this exception to the parol evidence rule
would
apply, and when extrinsic evidence of a suspensive condition would be
admissible. (See
Thiart v Kraukamp
1967(3) SA 219(T) at 224A-226E;
Hoffmann and Zeffertt
The South African Law of Evidence
4th ed
309-312.)
It is not necessary, however, to decide whether the extrinsic evidence should
be admissible on this basis, inasmuch as there is another
and more compelling
reason for allowing the evidence of the oral term in the present case. The
object of the respondent in seeking
to adduce this extrinsic evidence was not to
incorporate the suspensive condition as a term of the deed of sale, and then to
enforce
such term by relying on Wale Street's failure to comply with the
suspensive condition. Nor did the respondent seek to contradict,
alter, add to
or vary the terms of the deed of sale as such. The respondent merely wished to
introduce the extrinsic evidence in
order to establish the existence of a
material oral term which was not incorporated in the deed of sale, and to
show
14
that the deed of sale therefore did not constitute a valid and enforceable
deed
of alienation in terms of
s 2(1)
of the
Act. See
in this regard
Johnston v Leal,
supra
, at 942H-943G, and more particularly at
943B-C where
Corbett JA
said
that the aim and effect of the
integration rule -
"is to prevent a party to a contract which has been integrated into a single
and complete written memorial from seeking to contradict,
add to or modify the
writing by reference to extrinsic evidence and in that way
to redefine the
terms of the contract
." (Emphasis added.)
The learned judge further concluded at 943F-G:
"To sum up, therefore, the integration rule prevents a party from altering,
by the production of extrinsic evidence, the recorded
terms of an integrated
contract
in order to rely upon the contract as altered
: ...." (Emphasis
added.)
The object of the respondent was certainly not to redefine the terms of the
deed of sale, or to enforce the deed of sale as altered;
on the contrary, the
respondent sought to establish that the deed of sale was invalid and
unenforceable. The admission of the extrinsic
evidence in these
circumstances
15
does not seem to me to be contrary to the parol evidence rule. In fact,
in
Johnston v Leal
,
supra
, at 945E-946E the learned judge
referred to a so-called
qualification of the integration rule which relates
to the validity of the
transaction, and concluded (at 946E) that -
"the parol evidence, or integration, rule does not preclude the court from
enquiring into the true content of the transaction in order
to determine the
validity thereof...."
The learned judge found support for this qualification of the integration
rule
inter alia in the following general statement by Hoffmann
South African
Law
of Evidence
2nd ed at 215 (which statement is repeated and extended in
the 4th
ed of Hoffmann and Zeffertt's
The South African Law of Evidence
at
300):
"The fact that a transaction has been embodied in a document does not
preclude a party from attacking its validity. For example, evidence
may be
adduced to prove that it was induced by fraud, duress or misrepresentation, or
that it is void for mistake, illegality or
failure to comply with the terms
of a statute
." (Emphasis added)
The respondent sought to introduce the extrinsic evidence with exactly that
object in mind, viz to show that the deed of sale was
void for failure to
comply
16
with
s 2(1)
of the
Act, inasmuch
as it did not incorporate a material term of
the sale. (A term "suspending the whole contract pending fulfilment of a
condition"
was held to constitute "a material term of the contract" (see
Johnston v Leal, supra
at 937G-938A, and cases there referred to.))
I am of the view, therefore, that the parol evidence or integration rule does
not prevent the respondent from adducing the extrinsic
evidence.
The second reason advanced by the appellant why the extrinsic
evidence should be disallowed, is that it would be contrary to
s 2(1)
of the
Act
>and the policy underlying it. Counsel for the appellant relied in this regard
on
the following dicta in
Johnston v Leal
,
supra
, at
946H-947B:
"The other possible obstacle to the admission of extrinsic evidence in this
case is
s 1(1)
itself and the policy underlying it, viz as already indicated,
the prevention of uncertainty and disputes concerning the contents
of contracts
for the sale of land and of possible malpractices in regard thereto. The main
effect of the section is to confine the
parties to the written contract and to
preclude reliance on an oral consensus not reflected therein. It may be that
where a contract
of sale of land is complete and regular on the face of it, the
admission of extrinsic evidence not excluded by the integration rule,
eg
evidence of an oral consensus providing for
17
a suspensive condition not contained in the writing, would be regarded as
being contrary to the section and the
Act, even
though the evidence were
tendered not to contradict or vary the writing but merely in order to show that
the writing failed to record
the whole agreement of the parties and, therefore,
did not comply with the section. Here it might be said that the admission of
extrinsic
evidence would permit a party to the contract to introduce uncertainty
and disputes where, on the face of it, none exists. I express
no positive view
on this question, however, because, in my opinion, it does not arise in the
present case."
S 1(1)
of the Formalities in Respect of Contracts of Sale of Land Act 71 of
1969 referred to in the passage quoted above contained provisions
very similar
to those set forth in s 2(1) of the Act.)
The general object of s 2(1) of the
Act, and similar enactments which preceded it, has been considered in a number
of cases, and it
is generally accepted that the policy underlying this
legislation is to prevent disputes, uncertainties and possible malpractices
in
respect of transactions which, as a rule, are of considerable value and
importance. (See
Wilken v Kohler
1913 AD 135
at 142 and 149;
Neethling
v Klopper en Andere
1967(4) SA 459 (A)
18
at 464E-F;
Clements v Simpson
1971(3) SA 1(A) at 7A-B:
Johnston v
Leal
,
supra
at 939B-D.)
In the present case the extrinsic evidence is tendered - as postulated in the
passage from
Johnston v Leal
quoted above - not to contradict, alter, add
to or vary the deed of sale but merely in order to show that the deed of sale
failed
to record the whole agreement of the parties and, therefore, did not
comply with s 2(1) of the Act. The admission of such extrinsic
evidence may
possibly lead to uncertainty and disputes where, on the face it, none exists,
but in my view the respondent should,
nevertheless, not be precluded from
showing that the deed of sale is in fact of no force or effect. Extrinsic
evidence to procure
rectification of a contract of sale of land, or to prove
that the contract is not binding because it was induced by fraud would,
for
instance, be admissible even though such evidence would introduce uncertainty
and disputes. (See
Weinerlein's
case, supra, at 294; Meyer v Merchants.
Trust,
supra
, at 253 and 254). The respondent tenders the extrinsic
evidence for a similar reason and should in my opinion be allowed to do so.
It
should be pointed out
19
once again that the respondent does not seek to introduce the oral term with
a
view to contradict, alter, add to or vary the terms of the deed of sale.
Such a
course would clearly cause uncertainty and disputes in respect of the
essentialia
or other material terms of the deed of sale (see
Du Plessis v Nel
1952(1) SA
513(A) at 538A-D). I therefore conclude that the admission of the
extrinsic
evidence for the respondent's purposes would not be contrary to s 2(1) of
the
Act, or the policy underlying it.
The appellant relied in the third instance on the provisions of
clause
9 of the deed of sale which reads as follows:
"The Purchaser [Wale Street] acknowledges that save as herein recorded, no
statements and/or representations have been made by or
on behalf of the Seller
[the respondent] to induce the Purchaser to enter into this Agreement, and that
this Deed of Sale constitutes
the whole Agreement between the parties and no
modifications, variation or alteration thereto shall be valid unless in writing
and
signed by both parties thereto."
When interpreting the terms of a written contract -
"[t]he intention of the parties must be gathered from
their
20
language, not from what either of them may have had in mind." (per Solomon J in
Van Pletsen v Kenning
1913 AD 82
at 99).
Greenberg
JA described this rule as follows in
Worman v Hughes and Others
1948(3) SA 495(A) at 505:
"It must be borne in mind that in an action on a contract, the rule of
interpretation is to ascertain, not what the parties' intention
was, but what
the language used in the contract means, i.e. what their intention was as
expressed in the contract."
(See further
Leyland
(SA) (Pty) Ltd v Rex Evans Motors (Pty) Ltd
1980(4) SA 271(W), at 273B-H,
where the court adopted a strict construction when interpreting a clause similar
to the present clause
9.)
It should be observed at the outset that clause 9 contains an acknowledgement
by Wale Street only, and not by the respondent as seller.
According to the
language used in clause 9 the respondent never represented or acknowledged, or
intended to represent or acknowledge,
that the deed of sale "constitutes the
whole agreement between the parties". In fact, the respondent neither
represented nor acknowledged
anything in terms of clause 9.
21
It should further be pointed out that the deed of sale was prepared by Wale
Street, and in the event of ambiguity or inability to
arrive at the true
expressed intention of the contracting parties the deed of sale should be
construed against its author, Wale Street,
or its successor in title (see
Cairns (Pty) Ltd v Playdon & Co Ltd
1948(3) SA 99(A) at 121-123).
But even if clause 9 was supposed to apply to the respondent as well, it is
of no assistance to the appellant. The first part of clause
9 is in any event
not relevant inasmuch as the oral term which the respondent seeks to introduce
does not purport to contain any
"statement" or "representation" made by the
respondent "to induce" Wale Street to enter into the deed of sale. As regards
the second
part of clause 9, I can only repeat that the respondent does not seek
to introduce the extrinsic evidence with a view to bring about
any
"modification, variation or alteration" to the deed of sale.
In my opinion, therefore, the provisions of clause 9 of the deed of sale do
not preclude the respondent from tendering the extrinsic
evidence.
Fourthly, the appellant submitted that the respondent is estopped
from
22
proving the oral term with a view to establish that the deed of sale is of no
force or effect. If the appellant's argument in this
respect were to be upheld
it would mean that the appellant could rely on the deed of sale even though it
may be of no force or effect
in terms of s 2(1) of the Act. Generally, where a
statute requires that certain formalities have to be complied with in order to
render a transaction valid, a failure to comply with such formalities cannot be
remedied by estoppel (see Rabie
The Law of Estoppel in South Africa
106,
and authorities there referred to).
Counsel for the appellant however argued that the position is different where
an innocent third party like the appellant steps into
the shoes of one of the
contracting parties. He submitted that the appellant may validly raise an
estoppel against the respondent,
inasmuch as the respondent represented,
particularly in clause 9 of the deed of sale, to any innocent third party whom
Wale Street
might nominate as purchaser in its stead, that the deed of sale
constituted the whole agreement between the parties. I have already
indicated
above that the respondent did not represent anything of the kind in clause 9
of
23
the deed of sale.
Counsel further relied on the judgment of Hoexter AJA in
Trust
Bank van Afrika Bok v Eksteen
1964(3) SA 402(A) at 415 H to 416C,
in
support of his estoppel argument. The approach adopted by Hoexter AJA
in
that case appears from the following passage in the judgment at
415H-416A:
"The doctrine of estoppel is an equitable one, developed in the public
interest, and it seems to me that whenever a representor relies
on a statutory
illegality it is the duty of the Court to determine whether it is in the public
interest that the representee should
be allowed to plead estoppel. The Court
will have regard to the mischief of the statute on the one hand and the conduct
of the parties
and their relationship on the other hand."
It should be observed, firstly, that the judgment of Hoexter AJA was not
concurred in by the other members of the court; and secondly,
that the facts of
that case differ materially from those in the present case. In coming to the
conclusion that the plaintiff in that
case should be allowed to raise estoppel
the learned judge concluded, inter alia, that it was dolus on the part of the
defendant
to deny in the action against him the very fact which he
deliberately
24
represented to the plaintiff as being true. That is clearly not the position
in the present case. In the circumstances of this case
I am of the opinion that
the appellant should not be allowed to raise estoppel. The appeal is dismissed
with costs.
F H Grosskopf
Judge of Appeal.
Hefer JA
Van Coller AJA Concur