Hodes v Broadacres Investments Ltd. and Another (622/88) [1990] ZASCA 83 (6 September 1990)

Hodes v Broadacres Investments Ltd. and Another (622/88) [1990] ZASCA 83 (6 September 1990)

The court held that clause 11.2 of the agreement provides an indemnity to each company individually, not to the group as a whole. The language of the clause, read in context, makes clear that the indemnity is for the benefit of the purchaser, Broadacres, and each company in the Strykpunt Group as listed, not a notional entity. The doctrine of subrogation does not apply because the indemnity is not given to the group as an entity. Hodes is liable to pay De Punt the full amount of its additional tax liability, without deduction for any benefit accruing to Strandfontein. The appeal was dismissed and the order of the court a quo was amended to reflect judgment in favour of De Punt.

Citation
[1990] ZASCA 83
Parties
Appellant: Herbert Bertram Hodes; Respondent: Broadacres Investments Limited; Respondent: De Punt Plase Diamantmaatskappy (Edms) Beperk
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
6 September 1990
Case Number
622/88
Procedural Posture
Civil Appeal / Appeal From Judgment of Witwatersrand Local Division
Outcome
Appeal dismissed. Judgment amended to reflect that the order is in favour of the second plaintiff, De Punt.
Judges
Smalberger, Milne, Eksteen
Legal Topics
Contractual Indemnity, Interpretation of Contracts, Tax Liability, Corporate Group Structure
Commercial and Corporate Tax Law Contractual Indemnity Interpretation of Contracts Tax Liability Corporate Group Structure

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Parties

Herbert Bertram Hodes

Appellant

Broadacres Investments Limited

Respondent

De Punt Plase Diamantmaatskappy (Edms) Beperk

Respondent

Procedural Posture

Civil Appeal / Appeal From Judgment of Witwatersrand Local Division

Legal Issues

  1. 1 What is the proper interpretation of clause 11.2 of the agreement regarding indemnity for tax claims?
  2. 2 Is the indemnity in clause 11.2 to be construed as applying to the group of companies as a whole or to each company individually?
  3. 3 Does the doctrine of subrogation apply to reduce the appellant's liability under the indemnity?

Ratio Decidendi

The court held that clause 11.2 of the agreement provides an indemnity to each company individually, not to the group as a whole. The language of the clause, read in context, makes clear that the indemnity is for the benefit of the purchaser, Broadacres, and each company in the Strykpunt Group as listed, not a notional entity. The doctrine of subrogation does not apply because the indemnity is not given to the group as an entity. Hodes is liable to pay De Punt the full amount of its additional tax liability, without deduction for any benefit accruing to Strandfontein. The appeal was dismissed and the order of the court a quo was amended to reflect judgment in favour of De Punt.

Court Disposition

Appeal dismissed. Judgment amended to reflect that the order is in favour of the second plaintiff, De Punt.

Orders

  • The appeal is dismissed with costs.
  • The order of the court a quo is amended to reflect that judgment is granted in favour of the second plaintiff, De Punt.