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[2011] ZAWCHC 569
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Class A Trading 689 (Pty) Ltd v Paton and Another (1937/2007) [2011] ZAWCHC 569 (9 September 2011)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE HIGH
COURT, CAPE TOWN)
Case No. 1937/2007
In
the matter between:
CLASS
A TRADING 689 (PTY) LTD
Plaintiff
and
LEONARD
MARTIN
PATON
Defendant
and
HANS
JACOB
GILDENHUYS
Third
Party
JUDGMENT
ROGERS
AJ
Introduction
1.
On 8 April 2006 the plaintiff (“CAT”)
concluded an agreement of sale with the defendant (“Paton”)
in terms
whereof CAT bought from Paton for R1.7 million a piece of
vacant land in Mossel Bay described as Remainder Erf 790 Tergniet
(“Erf
790” or “the property”). CAT,
represented at the trial by Mr Steenkamp, claims R425 000 from
Paton
on the basis of the alleged breach of a term, alternatively a
misrepresentation, relating to the extent of the property and its
suitability for development. Paton, represented at the trial by
Mr Badenhorst, opposes the claim. Paton joined as a
third party
one Gildenhuys, a land surveyor, on the basis that if Paton was held
liable to CAT, Paton had a claim in a like amount
against Gildenhuys
because of the latter’s alleged negligent performance of work
Paton engaged him to do prior to the sale.
However, during the
course of the trial Mr Badenhorst informed me that Paton was
withdrawing his claim against Gildenhuys whereupon
Mr De Bruyn, who
represented Gildenhuys, was excused.
2.
It is now common cause that Erf 790 is 6
311m
2
in extent, inclusive of Impala Road which runs across the northern
part of the property. Impala Road is a tarred municipal
road.
Inclusive of a road reserve of 10 metres on each side measured from
its centre line, Impala Road occupies 2 550m
2
of the property. (All references hereafter to Impala Road
include the full road reserve.) Of the balance of 3 761m
2
,
2 989m
2
lies to the south of Impala Road and 772m
2
to the north. The precise position regarding the formal
ownership of the land on which Impala Road is situated is not
altogether
clear but the parties were agreed that for practical
purposes it had not belonged to Paton and was not part of the land
sold to
CAT.
3.
At the time of the sale, however, the
parties were under a misapprehension as to the extent and layout of
the property. There
was annexed to the deed of sale as annexure
“A” a sketch plan, prepared by Gildenhuys in late January
2006, which reflected
that the full extent of Erf 790 was 6 030m
2
,
that the road reserve tracked the northern boundary of the property
(i.e. that the northern boundary of the road reserve coincided
with
the northern boundary of the property) and that the area south of the
road reserve was 3 464m
2
.
4.
Although the said sketch plan reflected the
full extent of the property as being 6 030m
2
,
the parties were aware at the time of concluding their contract that
the title deed stated the area of the property to be 7 371
m
2
.
5.
Clause 18 of the deed of sale provided as
follows under the heading “
Special
Conditions”
:
‘
18.1
The PURCHASER hereby acknowledges that he is aware of the fact that
the actual size of the PROPERTY is less than the surface
area of
7 371m
2
as stated by the Municipality of Mossel Bay and the SELLER’s
Title Deed. This awareness is as such reflected in the
purchase
price which would have been greater if the actual size of the
PROPERTY was in fact 7 371m
2
.
The purchaser furthermore acknowledges that he is aware of the fact
that the actual size of the PROPERTY is 3 464m
2
as is indicated by the Surveyor’s Sketch Plan, marked ‘A’,
attached hereto and dated 27/01/06.
18.2
It is furthermore hereby recorded that the area in which the PROPERTY
is located has been earmarked by the Municipality of
Mossel Bay for
residential establishment, but that the PURCHASER will have to embark
on the necessary application process in order
to obtain the required
approvals for a cluster housing development similar to the attached
draft plan, marked ‘B’,
if the PURCHASER should wish to
develop the PROPERTY as such.’
6.
I have already referred to the sketch plan
attached as “A” to the sale agreement. The draft
plan attached as “B”
again reflected Impala Road as
tracking the northern boundary of the property. The plan
depicted, on the land south of the
road, eight subdivided erven
ranging in size from 306 m
2
to 460 m
2
.
Five of these subdivided erven were shown as bordering on the
southern boundary of Impala Road while the other three were
on the
southern boundary of the property. The plan also depicted a
cul-de-sac on the property which would provide access
to the eight
subdivided erven off a side road running down the western boundary of
the property.
7.
During the course of the trial CAT was
granted leave to amend its particulars of claim so as to seek
rectification of clause 18.1
by inserting the word “
developable”
between the words “
actual”
and “
size”
in the third sentence of that clause.
8.
CAT’s complaint in essence is that it
bought the property on the basis that the area south of Impala Road
was 3 464m
2
whereas it was only 2 989m
2
.
The property was bought for development purposes and this deficiency
in area adversely affected the property’s
true value.
While CAT’s particulars of claim as amended are perhaps not a
model of clarity, Mr Steenkamp submitted
(without objection from Mr
Badenhorst) that they covered three alternative causes of action,
each of which would allegedly result
in CAT being entitled to payment
of R425 000, being the difference between what CAT paid for the
property (R1.7 million) and
the property’s alleged actual value
(R1.275 million). The three causes of action were:
(a)
that clause 18.1 was a term that the
property south of Impala Road would be 3 464m
2
,
for the breach of which CAT is entitled to claim damages;
(b)
that clause 18 embodied
dicta
et promissa
entitling CAT to claim a
reduction in price on the basis of the Aedilitian remedies;
(c)
that clause 18 together with
representations made to CAT’s representatives prior to the
conclusion of the sale were wrongful
and culpable misrepresentations
for which CAT is entitled to claim delictual damages.
The
factual matrix
9.
I do not intend to relate the evidence in
great detail. For the main it is uncontentious. Paton
bought the property
in 2003. He did so in the belief that the
land he was acquiring was the land south of Impala Road.
10.
In late 2005 or early 2006 he decided to
put the property on the market though he was not under any pressure
to sell. For
this purpose he engaged an estate agency,
Mosscape
Coastal Properties in the person of its controller
Mr Henri Mostert (“Mostert”). On 27 January 2006 a
deed of
sale was signed in terms whereof Paton sold the property to
Hoofmark Investments (Pty) Ltd (“Hoofmark”) for R1.5
million.
Clause 1 of the Hoofmark sale describe the property as
Remainder Erf 790, 7 371m
2
in extent. However, clause 14.2 recorded Hoofmark’s
acknowledgment that the “
actual
size”
of the property was less
than 7 371m
2
and the parties’ agreement that the actual size of the property
was more likely to be between 3 400m
2
and 4 000m
2
,
and that the price of R1.5 million was based on this smaller extent.
Clause 18.1 provided that the property would be surveyed
within seven
days of the signing of the agreement at an estimated cost of between
R4 000 to R7 000, such cost to be shared by the
parties equally.
Clause 14.2 stipulated that if this survey revealed that the actual
size of the property was less than 3 400m
2
Hoofmark would have the right to cancel the agreement.
11.
Pursuant to these provisions Mostert
arranged for Gildenhuys to determine the actual size of the
property. Although clause
18.1 contemplated a survey,
Gildenhuys did not carry out a survey. Instead he determined
the size of the property by using
data available from general plans
of the area, an exercise for which he charged only R1 000. The
product of this exercise
was the sketch plan which later featured as
annexure “A” to the agreement between CAT and Paton.
Both Paton and
Mostert knew that Gildenhuys had not done a survey and
that his fee of R1 000 was below what he would have charged for a
survey.
It is apparent from the sketch plan itself that its
dimensions are not based on a survey. The probabilities are
that Paton
and/or Mostert agreed that in order to save expense a full
survey would not be done.
12.
Gildenhuys’ sketch plan reflected
that the area south of Impala Road was 3 464m
2
.
Since this was (in the understanding of Paton and Hoofmark) the
“
actual size”
of the property for purposes of clause 14.2, Hoofmark was not
entitled on that basis to resile from the agreement. However,
the conveyancers reported at about the same time that there was a
land claim registered against the property. Since neither
Paton
nor Hoofmark had been aware thereof, Paton agreed to allow Hoofmark
to withdraw from the sale, and a consensual agreement
of cancellation
to that effect was concluded. (Paton subsequently established
that the land claim had lapsed, and it did
not feature in the case
before me.)
13.
Paton testified that he had been surprised
at the ease with which the property had been sold to Hoofmark and he
wondered whether
his price had been too low. Following the
consensual cancellation of the Hoofmark sale, he performed a more
careful exercise
to determine the value of the property, which
resulted in his raising his asking price to R1.7 million.
He told Mostert
that he was not prepared to sell for less. (It
should be mentioned here that after many years in municipal service
Paton
had qualified as a valuator in 2000 and has practised as such
since then. However, no rule 36(9) notice was given in respect
of his evidence. His evidence thus does not qualify as expert
evidence adverse to CAT’s case.)
14.
During March 2006 Mr MH Mellet (“Mellet”),
a director of CAT, contacted Mostert in connection with another
property
in Mossel Bay. Mostert then introduced Mellet to Erf
790. Mostert knew that CAT was looking for development
opportunities.
CAT was already engaged in another property
project in Mossel Bay. With a view to marketing the property
Mostert had prepared
a plan showing a subdivision of the land south
of Impala Road into eight erven. He testified that the plan was
based on other
developments of which he was aware in the broader
Mossel Bay area and that in discussion with the municipality’s
chief town
planner, Mr Kruger, the latter had indicated that in
principle the municipality would not have an objection to such a
development.
This is the plan that later became annexure “B”
to the sale agreement. Mostert showed this plan and Gildenhuys’
sketch plan to Mellet. The land pointed out to Mellet as being
the property for sale was the land south of Impala Road.
He
explained that the actual size of this land was 3 464m
2
,
even though the title deed would record the size of the erf as being
greater. Although the boundaries were not marked by pegs,
Mostert
pointed out the approximate position of the western and southern
boundaries of the land (the northern/eastern boundary
being marked by
the road).
15.
Mellet was attracted by the proposition.
A few days later he arranged a further meeting on site with Mostert
where Mellet’s
co-director Mr WJ Flemming (“Flemming”),
an attorney, was present. This meeting was a substantial repeat
of the
previous one.
16.
Mellet advised his co-directors that based
on eight development opportunities (as reflected in Mostert’s
plan) a price of
R1.7 million was acceptable. He informed
Mostert that CAT would offer the full asking price but that the
information about
the actual size of the property should be included
in the written agreement of sale. Mostert forwarded the
proposed sale
agreement to CAT. Flemming examined it and was
satisfied. It was then executed, Mellet signing for CAT, Paton
signing
for himself and Mostert signing as estate agent.
17.
Transfer into CAT’s name was
registered on 7 July 2006.
18.
Mellet had engaged Mr
Delarey
Viljoen (“Viljoen”) of Delplan, a
firm
of urban and regional planners, to assist in the proposed development
of the property along the lines indicated in Mostert’s
plan.
On 19 July 2006 Viljoen wrote to Mellet to advise that he had
overlaid Gildenhuys’ sketch plan on another plan
containing
contours and physical features, from which it appeared that Impala
Road lay further south than indicated on Gildenhuys’
plan.
Viljoen had thus obtained a quote from Gildenhuys to determine the
actual road area.
19.
Gildenhuys thereupon performed an exercise
in which he calculated that the area south of Impala Road, measured
from a wire fence
which appeared to mark the southern boundary of the
road reserve, was 2 661m
2
.
On 26 July 2006 Viljoen advised Mellet of Gildenhuys’ finding
and said that this had considerable implications for
the developable
area of the property.
20.
Flemming, in his capacity as attorney for
CAT, wrote to the municipality’s Mr Kruger, informing him that
the actual location
of Impala Road deviated from the road reserve
reflected on the relevant general plan. He stated that the
road’s actual
location had a negative impact on the developable
area and on the value of the property. He asked the
municipality to make
suggestions for resolving the problem.
21.
This approach to the municipality did not
bear fruit. On 11 September 2006 Flemming wrote to Paton,
advising that in terms
of clause 18 the actual size of the property
should have been 3 646m
2
whereas “
the size of the developed
property is now only 2 651 square meters”
.
(Flemming testified that the word “
developed”
here should have read “
developable”
.
The figure of 2 651 m
2
should have been 2 661 m
2
– he had misread the figure on Gildenhuys’ new sketch
plan.)
22.
Paton through his attorneys denied
responsibility. A letter of demand dated 6 December 2006 was
followed in February 2007
by the issue of summons in the present
case. At that stage the averment was that the actual size of
the property was only
2 651m
2
.
There was a claim for damages of R1 195 994 for loss of profit,
alternatively for a price reduction of R500 000.
23.
It seems that the first actual survey of
Erf 790 was the one performed by the plaintiff’s expert Mr
Blyth and attached to
the rule 36(9) notice filed during May 2011in
respect of his evidence. According to this survey the area
south of the Impala
Road was 3 025 m
2
.
The survey diagram also reflected the existence of land forming part
of Erf 790 lying to the north of the actual road, though
Blythe’s
survey did not state the area thereof. CAT then amended its
particulars of claim by replacing the previous
alleged actual size of
2 651m
2
with 3 025m
2
.
CAT also deleted its claim for loss of profit and reduced its claim
for a price reduction from R500 000 to R425 000.
24.
Paton’s expert, Mr Visagie,
thereafter performed his own survey, the results of which were
reflected in an expert summary
filed on 10 August 2011. This
survey revealed that the area south of the road was 2 989 m
2
(not 3 025m
2
,
as per Blyth’s survey) while the area north of the road was 772
m
2
.
These figures were accepted by all parties as being correct for
purposes of the trial.
25.
CAT is still the owner of Erf 790.
The land remains undeveloped.
The
meaning of clause 18
26.
In my view the phrase “
the
actual size of the Property”
in
the third sentence of clause 18.2 means the actual size of the land
south of Impala Road. Although this meaning may not
be apparent
from the words of clause 18.1 in isolation, the clause refers to and
incorporates the sketch plan, annexure “A”.
From
that plan it is perfectly clear that the area of 3 464m
2
was reflected as being the area south of Impala Road. The same
is also true of annexure “B”, which has been incorporated
into the contract.
27.
I do not think that rectification is
necessary to reach this conclusion. In argument Mr Steenkamp
said that the proposed insertion
(by way of rectification) of the
word “
developable”
(so that the relevant phrase in the third sentence of clause 18.1
would read “
the actual developable
size of the Property”
) was not
inserted to convert the clause into a guarantee that the area south
of the road was actually developable but rather to
identify the land
covered by the clause, namely the land south of the road, which is
the land that had been pointed out to CAT
as being the development
opportunity. I do not think the word “
developable”
is apt to convey this restricted meaning, and as I have said I do not
think that rectification is necessary for that limited purpose.
28.
The next question is to determine the
contractual character of clauses 18.1 and 18.2.
29.
Clause 18.1 incorporates information as to
the size of the land. The recordal of the information as facts
acknowledged by
CAT is not inconsistent with a conclusion that clause
18.1 is a contractual term obliging Paton to deliver land measuring 3
464m
2
south of Impala Road or (to put it differently) that Paton warranted
that this was the extent of such land. For example in
Schmidt
v Dwyer
1959 (3) SA 896
(C) a deed of
sale, in describing the merx, recorded that the property included
“
approximately 120 000 vines
planted thereon”
. The
plaintiff alleged that this was a warranty that the farm would have
approximately 120 000 vines. An exception
to the claim was
dismissed. With reference to
Naude
v Harrison
1925 CPD 84
, Van Wyk J (with
whom De Villiers JP concurred) said the following (at 898H-899B):
‘
The
general rule is that where a vendor makes a representation or an
assertion of a positive and material fact in regard to the
quality or
quantity of the thing sold such conduct on his part amounts to a
definite promise or warranty, for a breach of which
he will be
liable. (See Corbett v Harris
1914 CPD 535
at p543.) The
primary object of a deed of sale is to record the terms of a contract
between the parties, and it follows that
any statement in such a
document prima facie constitutes a term of the contract unless it
appears from the contract itself or other
admissible evidence that
the parties did not so intend. It seems obvious that the number
of vines on the farm sold must have
been one of the important factors
in determining the purchase price of the property, and I fail to see
why the parties should have
included this statement in regard thereto
merely to describe the property.’
30.
The inclusion of clause 18.1 under the
heading “
Special Conditions”
is a
prima facie
indication that the content thereof was intended to have contractual
force. The second sentence of clause 18.1 records an
acknowledgment that the purchase price of the property was affected
by its actual size. It is thus my view that in terms of clause
18.1
Paton would be guilty of a breach if the property delivered by him
had an area south of Impala Road which was smaller than
3 464m
2
.
31.
If the statement of size in the third
sentence of clause 18.1 were not a term of the contract, I would
conclude that it was at very
least a representation by Paton of the
size of the land. Such representation would fall within the
concept of
dicta et promissa
as expounded in
Phame (Pty) Ltd v Paizes
1973 (3) SA 397
(A) at 417H-418C.
The representation was a statement bearing on the quality of the
merx. The representation went beyond
“
mere
praise or commendation”
: the
statement was material to CAT’s known purpose of buying the
land for development, was one of fact and not personal opinion,
and
was self-evidently relevant to the price to be paid for the
property. Even if the representation were innocent the
Aedilitian
remedies (here in the form of the
actio
quanti minoris
) would be available.
(In his written submissions on absolution, which he also relied on at
the end of the case, Mr Badenhorst
said that that to rely on the
actio quanti minoris
the buyer would have to prove that the representation was negligent
but that is incorrect, as appears clearly from
Phame.
)
32.
Clause 5 of the sale agreement provided
that the sale was voetstoots and that no representations had been
made “
other than the
representations contained herein”
.
The representation to the effect that the actual size of the property
was 3 464m
2
is indeed contained in the written agreement, namely in clause 18.1.
CAT would thus be entitled to such relief as is afforded
by the
actio
quanti minoris
.
33.
Accordingly, the question whether the size
of the property as stated in the third sentence of clause 18.1 is to
be regarded as a
term or merely as a representation is relevant only
if the relief afforded in the two cases would differ. CAT
claims the
difference between what it paid for the land as warranted
or represented (R1.7 million) and the value of what was actually
delivered
(allegedly R1.275 million). As will appear hereunder,
this measure of the relief to be afforded is permissible on either
basis.
34.
In addition to the term or representation
regarding the size of the property, CAT pleaded that clause 18.2 was
a representation
that the land could accommodate eight development
opportunities as reflected in annexure “B” to the
agreement.
(Mr Steenkamp during the trial disavowed any
intention to argue that clause 18.2 contained a contractual term or
warranty to this
effect.) The first part of clause 18.2 is a
statement that Erf 790 is located in an area earmarked by the
municipality for
residential development. That statement was
not alleged by CAT to be untrue. The balance of clause 18.2
does not in
my view constitute a representation that the land south
of Impala Road could be developed with eight subdivided erven as
reflected
in Mostert’s plan, annexure “B”. On
the contrary, the clause notified CAT that it would need to obtain
the requisite approvals from the municipality in order to do
something along the lines of annexure “B”. Implicit
in that notification is the possibility that the municipality might
not
give
the required approvals.
35.
At most, the second part of clause 18.2 was
a representation of Paton’s belief (or perhaps Mostert’s
belief) that a
development of that kind had a reasonable prospect of
being approved. A person can, of course, make a
misrepresentation about
his own state of mind (see
Adam
v The Curlews Citrus Farms Ltd
1930 TPD
68
at 82-83) though such a misrepresentation by its nature would be
dishonest (
Ruto Flour Mills (Pty) Ltd v
Adelson
1959 (4) SA 120
(T) at
122H-123A). CAT’s pleaded case is not that Paton and/or
Mostert misrepresented their own belief as to what could
be done on
the property; CAT relied on a misrepresentation of an objective
fact, namely that eight subdivided development
opportunities were
possible. I do not consider that such a representation is
contained in clause 18.2.
36.
Mr Steenkamp also relied on statements made
by Mostert to CAT’s representatives prior to the conclusion of
the sale.
In the light of clause 5.2 of the agreement, CAT is
not (in the absence of fraud) entitled to rely on any representations
other
than those contained in the agreement. Mr Steenkamp
did not argue that any fraudulent misrepresentations had been proved.
37.
I thus find that clause 18.1 contained a
term or representation that the size of the land south of Impala Road
was 3 464m
2
in extent but that no term or actionable representation concerning
the number of development opportunities has been proved.
Relief
and proof of quantum
38.
The
actio
quanti minoris
, based on deficiencies
in the merx as measured against the
dicta
et promissa
made by the seller,
entitles the purchaser to recover the difference between what he paid
and the merx’s actual value (
Labuschagne
Broers v Spring Farm (Pty) Ltd
1976 (2)
SA 824
(T) at 825F-828H;
Gannet
Manufacturing Co (Pty) Ltd v
Postaflex
(Pty) Ltd
1981
(3) SA 216
(C) at 226A-B). The authorities do not require the
purchaser to prove that the price he paid was the market value of the
merx as represented, though I should say that in the present case the
price paid provides strong
prima facie
evidence that the market value of the property as represented was
indeed R1.7 million – both buyer and seller were knowledgeable
parties negotiating at arm’s length (cf
Crawley
v Frank Pepper (Pty) Ltd
1970 (1) SA 29
(N) at 37H-38A).
39.
Where the statement as to quality has been
made a term of the contract, the buyer will have additional
remedies. Under the
actio empti
he
will be entitled by way of damages to his full positive interesse,
i.e. to be placed in the financial position he would have
been in had
the term been made good. In the present case that might have
entitled CAT to recover loss of profits. But
there is authority
that the purchaser is instead entitled to claim a reduction in price
on
quanti minoris
principles
(see, eg,
Maennel
v
Garage Continental Ltd
1910 AD 137
at
146-147;
Evans v McKenzie
1916
NPD 404
at 408;
Wilson v Simon and
Lazarus
1921 OPD 32
at 36; De Wet
& Van Wyk
Die
Suid-Afrikaanse
Kontraktereg en Handelsreg
5de Uitgawe
at 346). This seems sound in principle. The availability
of
the Aedilitian remedies based on
dicta
et promissa
does not require, but also
does not exclude the possibility, that the statement as to quality
was a contractual term. The
very phrase
dicta
et promissa
(things said and promised)
suggests that the Aedilitian remedies are indifferent as to whether
that which was said concerning the
quality of the merx was a
representation or a term. In
Phame
supra
Holmes JA quoted with apparent
approval from Mackeurtan
Sale of Goods
in South Africa
(3rd Ed), where the
learned author said that the
actio
quanti minoris
is available when the
seller has made “
any
representation or warranty”
about
the quality or condition of the merx (415G-H). And at 416H-417C
Holmes JA said that it was unnecessary and confusing
to try to fit a
dictum et promissum
into
a juristic niche like warranty or term. It is not necessary for
a purchaser who invokes the
actio quanti
minoris
to aver and prove a breach of a
term of the contract. This indicates that it does not matter
whether the statement is a representation
or term –
quanti
minoris
relief is available provided
the statement is of the kind summarised by Holmes JA at 417H-418C.
This conclusion accords also
with
SA Oil
and Fat Industries Ltd v Park Rynie Whaling Co Ltd
1916
AD 400
where buyer was held entitled to
quanti
minoris
relief in respect of a
statement of quality which the court found to be a term of the
contract.
40.
The question thus is whether CAT has proved
the value of Erf 790 as actually delivered. As noted, the
pleaded case is that
the actual value was R1.275 million and that the
price reduction to which CAT is entitled is thus R425 000.
41.
In support of this value, CAT adduced,
firstly, the evidence of Mellet in his capacity as an expert quantity
surveyor, project manager
and building contractor. Mellet’s
quantification of the reduction in price was a simple one. He
assumed that
in its represented state the property could accommodate
eight subdivided erven with a land cost per erf of R212 500
(R1.7
million ÷ 8). If only six subdivided erven of
similar dimensions could be developed, the land cost per subdivided
erf would rise to R283 333,33. To a developer the raw land
was thus worth R425 000 less than R1.7 million (R212
500 x 2;
or, which is essentially the same thing, the additional cost per
opportunity of R70 833,33 x 6). Mellet also
did a calculation
which allegedly showed that the total loss of profit in consequence
of there being space for only six subdivided
erven was R1 219
999,96.
42.
Since CAT is not claiming positive
interesse in the form of loss of profit, the second of these
calculations appears to me to be
irrelevant. Mellet did not
attempt to relate the alleged diminution in potential profit to a
reduction of R425 000 in the
value of the raw land.
43.
A problem in the way of both of Mellet’s
calculations is their dependence on the difference between eight and
six development
opportunities. This might have been an
acceptable approach if the claim was based on a term or
representation that eight
development opportunities of the size
indicated on Mostert’s plan would be possible. However I
have found that CAT
has not proved a term or representation to that
effect. Moreover, the expert evidence which CAT adduced from
Viljoen of Delplan
was that it was most unlikely that the
municipality would have permitted eight subdivided erven, even if the
land had been as large
as represented (3 464m
2
).
This was because the size of the subdivided erven shown on Mostert’s
plan would have been considerably below what
the municipality would
have approved in that area. Although the non-expert evidence of
Paton and Mostert casts some doubt
on Viljoen’s view, I do not
think in the circumstances that CAT is entitled to ask the court to
accept a method of valuation
which rests on the premise that if the
land had been 3 464m
2
in extent it could have accommodated eight subdivided erven.
44.
The other evidence offered by CAT in regard
to value was from Ms Chantelle Grard (“Grard”), an estate
agent. There
were data errors in her first two expert summaries
(dated 25 February 2010 and 26 July 2011 respectively) which rendered
her methodology
in those summaries unreliable. In her third
expert summary (dated 23 August 2011) she adopted a different and
fairly simple
approach, and this was the approach she supported in
her oral testimony. She said that Erf 790 was a unique property
in the
area (a reasonably large piece of undeveloped land zoned for
agricultural use but with the likelihood that it could be rezoned and
developed for residential use). She could find no comparable
transactions for similar land in the area.
45.
Ms Grard testified that she had been
engaged by CAT to resell the land. She began during 2007 to
market the property for R1.3
million, based on her understanding that
the property was 2661m
2
in
extent. She showed the property to many potential buyers.
No offers were received in 2007. In February and
March 2008 two
offers were made.
46.
The one offer was made in March 2008 by
Mystic Blue Trading 402 (Pty) Ltd, a buyer that Grard had
introduced. The offered
price was R1.29 million. CAT
accepted this offer, but its acceptance was strictly speaking a
counter-offer, since Flemming
insisted that the offer signed by the
purchaser be amended by adding an express recordal that the buyer was
aware that only 2 651m
2
of the erf was developable, as reflected in Gildenhuys’ revised
sketch plan of July 2006 (which was annexed). Ms Grard
testified that in marketing the property she had informed the buyer
that this was the size of the land but that the buyer had
nevertheless refused to initial Flemming’s insertion. She
thought the buyer had got cold feet about the purchase.
47.
The other offer had been made in February
2008 by joint buyers (Messrs Gruber and Hopkins). They had
been introduced
by another estate agency, Seeff Properties.
These buyers offered R1.22 million. Again it appears that the
buyers backed
out when they were asked to initial an insertion (made
by Flemming) about the size of the property. Grard was not
involved
in this transaction and there was no evidence as to what the
buyers had been told about the size of the property before submitting
their offer. However, given CAT’s experience in
purchasing the property from Paton and Flemming’s insistence
of
a clear recordal of the actual size of the property, it would be
surprising if CAT had not instructed the agents to tell prospective
buyers about the actual size of the property.
48.
Grard’s opinion was that in the
absence of comparable transactions for other properties, the
unsuccessful attempts to sell
the property for R1.3 million in
2007 and the offers of R1.22 million and R1.29 million in early 2008
provided a reasonable
basis for concluding that the property was
worth no more than the figure of R1.275 million which Mellet had
arrived at. She
testified that the market had not yet weakened
materially in 2007 or the first half of 2008.
49.
Mr Badenhorst criticised the adequacy of
this evidence. Firstly, he submitted that CAT should have
called a sworn valuator,
not an estate agent. I reject that
criticism. Estate agents by the nature of their work are able
to provide expert
views on property values. Secondly, he argued
that Grard was wrong about the absence of comparable transactions.
However,
Mr Badenhorst’s submission in this regard was not that
there were comparable transactions for sales of undeveloped land of
the approximate size of Erf 790 but that there were comparable
transactions for sales of erven of the approximate size of the
subdivided erven that might have been created on Erf 790. It
appears from Grard’s most recent expert summary that the
sales
statistics annexed thereto were in respect of serviced erven. The
type of exercise contemplated by Mr Badenhorst would
entail
determining how many subdivided erven could be created on Erf 790,
what the costs of rezoning, subdividing and servicing
the erven
would be (this would presumably include the cost of constructing the
road giving access to the erven), how long all of
this would take and
what the intervening holding costs would be, what those erven could
then be sold for on completion by identifying
from the statistics
comparable serviced erven, and what an acceptable profit margin for a
developer would be. Only after
an exercise of this kind could
one derive the price a developer might have been willing to pay for
the raw land. Such an
exercise would inevitably involve a
substantial measure of speculation and uncertainty.
50.
In principle, therefore, I think the
evidence afforded by the subsequent attempts to market the very same
land, at a time when it
was known that the land was materially
smaller than 3 464m
2
,
provides a reasonable basis for drawing conclusions as to the land’s
value (cf
Rademan v Whewell
1925
OPD 14
at 15). However, I must assume that not only Grard but
also Seeff Properties informed prospective buyers that the land south
of Impala Road was only 2 661m
2
in extent. This was the position as it was then understood to
be. The premise of CAT’s claim is that a smaller
area of
developable land translates into a lower value. This is an
eminently plausible proposition but one must then assume
that if
prospective buyers in 2007 and 2008 had known that the true area of
the land was 2 989 m
2
rather than 2 661m
2
they would have been prepared to offer more than they did.
51.
Faced with this position, the court must in
my view do the best it can on the available evidence (see
Esso
Standard SA (Pty) Ltd v Katz
1981 (1)
SA 964
(A) at 969H-
970H;
Hushon
SA (Pty) Ltd v Pictech (Pty) Ltd & Others
1997
(4) SA 399
(SCA) at 412G-H;
De Klerk v
Absa Bank
Ltd & Others
2003
(4) SA 315
(SCA) paras 37-39; cf also the
SA
Oil
case
supra
at 413-414 and
Corbett
v Harris supra
at 545-548).
Paton, who is himself a qualified valuator, did not call any expert
evidence on the question of the land’s
true value. I
entertain no doubt that 2 989m
2
of developable land south of Impala Road must be worth less than
3 464m
2
would have been – the land as delivered was 13.7% smaller than
as warranted or represented. Grard’s evidence
placed
reliance on offers made in the belief that the land was 23.2%
smaller. If one takes the highest price offered for
the land in
early 2008, namely R1.29 million, as the value the land would
have had in 2006 had it been only 2 661m
2
in extent, one would arrive at a reduction of R410 000 for a
deficit of 803m
2
,
i.e. R510,59 per m
2
.
If one applies this same rate to the actual deficiency of 475m
2
,
the reduction in price would be R242 530. Put differently, the
derived market value of 2 989m
2
would be R1 457 470.
52.
To test this figure, one could use the rate
per m
2
based on a price of R1.7 million for 3 464m
2
,
namely R490,76 per m
2
.
This would translate into a reduction for the missing 475m
2
of R233 111, or a derived value for 2 989m
2
of R1 466 889.
53.
I appreciate that reduction in value may
not be linear. The figure derived from Grard’s evidence
suggests that the decrease
in value is somewhat higher than would be
obtained by using a rate per m
2
derived from the price of R1.7 million as applied to an area of 3
464m
2
.
Nevertheless, and adopting a conservative approach against CAT (cf
Emslie v African Merchants Ltd
1908
EDC 82
at 95), I do not think a reduction of R230 000 (which is what
I propose to award) would overcompensate CAT or be unfair to Paton.
54.
Mr Badenhorst argued that Ms Grard’s
failure to take any account of the land north of Impala Road (772m
2
)
was a fatal flaw in CAT’s case. The existence of any land
north of Impala Road seems first to have come to light in
Blyth’s
survey, the results of which were furnished in an expert summary
filed in May 2011. The area north of the road
was first stated
in Visagie’s expert summary filed on 10 August 2011. The
sale agreement of April 2006 was concluded
in ignorance of such
land. Any value it might have for CAT would be purely
fortuitous.
55.
Paton testified that the land immediately
to the north of Impala Road is steeply banked. That this is so
appears from the
photographs adduced in evidence. There was
evidence that the municipality would not permit access to the area
south of the
road directly off Impala Road, hence the need to use the
service road running down the western boundary of Erf 790.
Commonsense
dictates that it would be even less likely for access to
be permitted off Impala Road to the north. The area of 772m
2
is a relatively narrow strip, and to my eye it seems most unlikely
that anything could be done with the land. The possibility
that
development of this land might be permitted was not once raised in
evidence. Ms Grard was not asked whether the land
had any
value. I thus do not believe that CAT’s ownership of this
land affects the price reduction to which it is entitled.
Indeed, it is quite possible that ownership of the land north of the
road is a burden, since even though it might be unusable it
will
presumably attract rates.
Concluding
matters
56.
I thus propose to make an award in CAT’s
favour of R230 000 together with interest at the prescribed rate
from 6 December
2006, being the date of demand. (It has not
been necessary for purposes of reaching my conclusion to consider
CAT’s
alternative delictual cause of action based on negligent
misrepresentation.)
57.
The costs of the third party, Gildenhuys,
must be paid by Paton. It seems clear that Gildenhuys was
joined on a misconceived
basis as to what he had been engaged to do.
58.
Mr Steenkamp asked for the qualifying costs
of CAT’s expert witnesses, namely Blythe, Mellet, Grard and
Viljoen:
(a)
Blythe: Although Blythe in the event did
not testify, this was because agreement was reached in the light of a
similar expert report
filed on behalf of Paton. In the
circumstances Blyth’s qualifying expenses should be allowed.
(b)
Mellet: I have rejected the premise
of Mellet’s approach to quantifying the price reduction.
I do not think it
would be just in the circumstances for Paton to
bear these qualifying expenses.
(c)
Grard: Her qualifying expenses should be
allowed, excluding however the costs associated with her first two
expert summaries.
(d)
Viljoen: His expert evidence concerned the
number of units that could be developed on the land south of Impala
Road. This
evidence was relevant to CAT’s claim based on
a representation that eight subdivided erven could be developed on
the land.
Since in my view CAT was not entitled to advance such
a claim, Paton should not have to bear Viljoen’s qualifying
expenses.
59.
The court’s order is as follows:
(a)
The defendant is directed to pay the
plaintiff R230 000 plus interest at the prescribed rate from 6
December 2006.
(b)
The defendant is directed to pay the third
party’s costs, including all costs reserved in prior
interlocutory proceedings
between the defendant and the third party.
(c)
The defendant is directed to pay the
plaintiff’s costs, including the qualifying costs of the
experts Jonathan Blyth and Chantelle
Grard, but excluding in the case
of Ms Grard the costs associated with the rule 36(9)(b) notices dated
25 February 2010 and 26
July 2011.
ROGERS AJ
9 SEPTEMBER 2011
Appearance
for Plaintiff
Mr
M Steenkamp
Instructed
by
Balsillies
Inc
Cape
Town
Appearance
of Defendant
Mr
DJ Badenhorst
Haycock
& Associates
George