Molyneux v Wicks and Others (496/2007) [2007] ZAECHC 66 (31 August 2007)

FORM A

FILING SHEET FOR EASTERN CAPE

JUDGMENTS

ECJ no : 188

PARTIES: R.J.C. MOLYNEUX vs L.N. WICKS AND OTHERS

REFERENCE NUMBERS -

Registrar: 496/2006

Magistrate: N/A

Supreme Court of appeal/Constitutional Court: HIGH COURT, GRAHAMTOWN

DATE HEARD: 10 AUGUST 2007

DATE DELIVERED: 30 AUGUST 2007

JUDGE: A.R.

ERASMUS

LEGAL REPRESENTATIVES -

Appearances:

for the applicant(s): T.J.M.

PATERSON SC

for the respondent(s): R.

BROOKS

Instructing attorneys:

Applicant(s):

NEVILLE

BORMAN AND BOTHA

Respondent(s):

NETTLETONS

CASE INFORMATION -

Nature of proceedings : Application

Topic: Interim interdict

Key words:

Civil Procedure – Interim interdict pending action - Requisites for – Available to first purchaser in double sale – Contract – Suspensive Condition – Term – Distinction between – Characteristics – Interpretation of contract – Essentialia suspended – One party to contract does not have complete control – Time clause – Modus – Cancellation procedure i.t.o. contract – Breach – Intention of parties – Grammatical and contextual considerations – Self-interest – Commercial good sense

IN

THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE DIVISION)

CASE NO: 496/2006

In the matter between:

RHETT JUSTIN CHRISTOPHER MOLYNEUX Applicant

and

LIONEL NEWTON WICKS N.O. First respondent

GARY BRIAN KLINKRADT N.O. Second respondent

WALTER SCOTT LOWRIE N.O. Third respondent

(in their capacities as trustees for the

time being of the taxi city chicken trust,

no. IT 280/95)

THYNK RETAIL ONE (PTY) LIMITED Fourth respondent

REGISTRAR OF DEEDS Fifth respondent

JUDGMENT

A.R. ERASMUS J:

INTRODUCTION

[1] On 11 April 2005 the applicant as purchaser and a trust as seller (represented in these proceedings by first, second and third respondents) entered into a deed of sale in respect of a portion of a farm (‘the property’). Clause 23 of the contract reads:

‘SUSPENSIVE

CONDITIONS

This transaction is subject to:

23.1 The re-zoning of the within property from agricultural land to residential.

23.2 Subdivisional approval being granted by the Local Authority allowing for residential development of the land.

The application for re-zoning as well as for the subdivision of the within property shall be submitted to the relevant authorities by the purchaser within 30 (thirty) days from date of last signature of this agreement.

Provided all reasonable bona fide attempts have been made by the purchaser to ensure fulfilment of the above suspensive conditions, the purchaser shall be entitled to withdraw from this transaction if the above suspensive conditions have not been fulfilled within 15 (fifteen) months from date of last signature of this agreement.’

I have emphasized the second paragraph of the clause as it is of central importance.

[2] During August 2005 the trust through its attorneys put the applicant on terms to submit the applications for rezoning and subdivision of the property in compliance with the 30 days deadline in clause 23. Upon the applicant’s continued non-compliance, the attorneys advised him that their client was withdrawing from the transaction with immediate effect. The applicant denies having received the attorneys’ communications. (The dispute thereby engendered is not now relevant.) On 23 November 2005 the attorneys advised the applicant that, the sale having been cancelled, the property had since been resold. On 17 February 2006 the applicant instituted action against first, second and third respondents in their capacities as trustees for an order declaring that the agreement between the parties was ‘in existence and binding upon the parties’, alternatively payment of R6 000 000.00 in damages. The pleadings have been closed and the case set down for trial on 26 September 2007. On 28 June 2007 the trust’s attorneys advised the applicant that ‘the subsequent purchaser’ of the property was demanding transfer and that their client would comply unless prevented by order of court.

In response thereto, on 31 July 2007, the applicant lodged the present application for an order interdicting and restraining the first, second and third respondents from transferring the property to fourth respondent or any one other than the applicant, pending the final determination of the main action. The application is opposed by first, second and third respondents. (Where convenient and appropriate, I refer to the applicant also as ‘the purchaser’ and to the first, second and third respondents collectively as ‘the trust’ or ‘the seller’.)

[3] An interim interdict is a court order preserving or restoring the status quo pending the final determination of the rights of the parties (Joubert, editor in chief, The Law of South Africa vol 2 para 314). It is an extraordinary remedy and is not granted unless all the legal requisites for the relief are met. They are:

a prima facie right;

a well-grounded apprehension of irreparable harm if the interim relief is not granted and the ultimate relief is eventually granted;

that the balance of convenience favours the granting of the interdict; and

that the applicant has no other satisfactory remedy.

(LAWSA supra para 316).

[4] The requirement of a prima facie right involves the proof of facts that establish the existence of such right in terms of substantive law. The applicant relies on the rights acquired by him under the deed of sale. The facts upon which he bases that right are those set out in paras [1] and [2] above and are common cause.

[5] It is common cause, further, that the application referred to in the second paragraph of clause 23 was not submitted by applicant within 30 days of the last signature of the agreement (and has apparently not as yet been submitted). The decisive issue is the effect of such failure: if it resulted in the failure of the agreement of sale, the application fails; if the agreement nevertheless stood, the applicant succeeds in establishing a right justifying the granting of the interim interdict. Counsel for the respondents identifies the single determinative question to be whether the purchaser’s obligation to submit the applications timeously constitutes a suspensive condition or a term of the contract.

[6] A suspensive condition is one which suspends the operation of the essential obligations under a contract until the condition is fulfilled. If the condition is fulfilled, the obligations become retrospectively enforceable. If the condition is not fulfilled, the entire contract automatically falls away (Dirk Fourie Trust vs Gerber 1986 (1) SA 763 (A) 773E-G; Jurgens Eiendomsagente vs Share [1990] ZASCA 81; 1990 (4) SA 664 (A); Basson vs Remini and another 1992 (2) SA 322 (N) 327 C). Nullity flows from the non-fulfilment of a suspensive condition for the logical reason that the terminating non-fulfilment of a positive condition renders the agreement impossible to perfect and therefore devoid of force or effect. A term of a contract, on the other hand, imposes a contractual obligation on a party to act in a particular manner. A contractual obligation flowing from a term can be enforced, but no action will lie to compel the performance of a condition (Design and Planning Service vs Kruger 1974 (1) SA 689 (T) 695C-F).

[7] Counsel contends – correctly – that the prescript should be read within the context of clause 23 as a whole. I would add: also within the framework of the whole agreement viewed in the light of the relevant surrounding circumstances. In performing that exercise it is useful to compare the second and first paragraphs of clause 23.

THE LEGAL NATURE AND EFFECT OF THE FIRST PARAGRAPH OF CLAUSE 23

[8] Clause 23 commences with the words, ‘The agreement is subject to …’, followed immediately by subclauses 23.1 and 23.2 which relate, respectively, to the rezoning and the subdivision of the property.

At that point the sentence is complete. Its formulation is strongly indicative of a suspensive condition. This construction is strengthened when considering the provision in the context of the agreement as a whole.

[9] The two essential obligations of the agreement of purchase and sale are explicitly suspended in close conjunction with the operation of the first paragraph of clause 23. The purchase price (of R4 000 000.00) is made payable by means of a deposit of five percent, the balance within seven days from the date on which ‘the conveyancing attorneys request same’ (clause 1(a)(i)), but guarantees cannot however be called for until ‘all suspensive conditions have been fulfilled’ (clause 1(a)(ii)). Registration of transfer has to be effected as soon as possible ‘once the suspensive conditions have been fulfilled’ (clause 4). This ties in with the first paragraph of clause 23 and adds weight to the identification of that provision as a suspensive condition.

[10] It is clear that the rezoning and subdivision of the property is of critical importance to the perfection of the parties’ contract. The cardinal obligations of payment and transfer remain suspended until (a) the rezoning and subdivision are effected, whereupon the agreement is perfected and the obligations thereunder become operative, or (b) the rezoning and subdivision come to nothing, whereupon the agreement automatically lapses into voidness. This reflects the essential characteristics of a true suspensive condition.

[11] Further indication that the first paragraph of clause 23 constitutes a suspensive condition is to be found in the guide to interpretation as set out in Christie The Law of Contract in South Africa 5th edition 134-135 where the following appears:

‘This is why a clause making a contract subject to an event over which

one party does not have complete control (for instance the granting of

an application to be made by him) will, in the absence of any indication

to the contrary, be interpreted as a condition not as a term…’

(See also Dirk Fourie Trust vs Gerber, loc cit.

THE LEGAL NATURE AND EFFECT OF THE SECOND PARAGRAPH OF CLAUSE 23

[12] Whereas the provision (in the first paragraph of clause 23) which makes the agreement subject to the rezoning and subdivision of the property, has all the characteristics of a typical suspensive condition, the requirement (in the second paragraph) that the necessary applications be submitted to the local authority within 30 days, has none. Clause 23 provides expressly that the transaction is ‘subject to’ the rezoning and subdivision of the property. There is no such express provision in the case of the submitting of the applications, and the construction and wording of the clause does not allow an inference to that effect. There is, to start with, no syntactic correlation between the introductory words in the first paragraph of the clause viz, ‘This transaction is subject to …’ and the obligation to submit applications in the second paragraph thereof. Had the parties intended that the contract be ‘subject to’ the timeous submitting of the applications, they could have done so clearly and simply. They could, for instance, have numbered the second paragraph ’23.3.’ and worded it slightly differently.

[13] Importantly, the 30 days prescript does not relate to the essentialia of the contract, but to a provision incidental to the fulfilment of the suspensive conditions. It is unlikely, in the absence of clear indication to the contrary, that a consequence as drastic as nullity would flow from the failure to comply with such a relatively minor provision.

[14] Nothing in the prescript suspends anything. It certainly does not suspend the obligations of payment and transfer which are already in overarching suspension in terms of subparas 23.1 and 23.2. It does not suspend for 30 days or at all the purchaser’s obligation to submit the necessary applications, but obliges him to perform that obligation within that period. It has all the appearance of a term of the agreement viz a time clause attaching to a modus relating to the submission of applications.

[15] Failure on the part of the purchaser to submit the applications to the local authority within the prescribed period does not render the contract incapable of perfection, as does the failure to achieve rezoning and subdivision. The purchaser can submit the applications in terms of the still extant contract, even though late under the contract. Should he be in default of performance, the seller could proceed against him in terms of the ‘SANCTIONS CLAUSE’ (clause 11) which provides that should the purchaser –

‘ fail to perform all or any of the above conditions, or commit any breach

of this Deed of Sale and fail to remedy such omission or breach within

ten (10) days of the posting of a letter addressed … to the Purchaser,

the Seller shall have the right to cancel this contract summarily by

directing a letter … to the Purchaser … notifying the Purchaser of such

cancellation …’ .

[16] Clause 11 procedure is available in the case of a breach of a term, but logically cannot apply where the non-fulfilment of a suspensive condition leads to the voidness of the contract, for that clause too will then be void. The wide wording of clause 11 would indicate that the parties favoured cancellation - upon - notice procedure in cases of default. Such procedure is applicable where the relevant provision is a term, but not in the case of a suspensive condition. (The seller probably has the further remedy of specific performance, but I need not decide that question.) In my view, on a proper interpretation of the contract, the parties intended that the procedure be applicable to the purchaser’s obligation in terms of the second paragraph of clause 23, as witnessed also by their subsequent conduct (Kerr op cit 412/3).

[17] Finally, the submission of the required application to the local authority is within the complete control of the purchaser. This position is the corollary to the interpretation for a suspensive condition set out by Professor Christie (para [11] above), indicating thereby that it is a term of the contract rather then a suspensive condition.

[18] Counsel for the respondents points to the fact that clause 23 has the heading ‘SUSPENSIVE CONDITIONS’. Clause 23 does relate to suspensive conditions in the contract, but its constituent three paragraphs have different functions in relation thereto: the first paragraph creates the preconditions; the second paragraph obliges the purchaser to submit the applications for the fulfilment of those conditions within a stated period; and the third provides for the withdrawal of the purchaser from the agreement in certain circumstances relating to the non-fulfilment of the suspensive conditions. The heading to the clause is clearly not an indication that the second paragraph thereof constitutes a substantive suspensive condition.

THE

INTENTION OF THE PARTIES

[19] Grammatical and contextual considerations are vital tools in the interpretation of a contract. The use of legal terminilogy such as ‘suspensive condition’ and ‘term’ is a way of conveniently grouping together kindred provisions of similar legal nature and effect. It is useful and appropriate to place a provision into such a category and then to attribute to it the effect and consequences attaching to that category. The overriding rule of interpretation is however to establish the will of the parties. It is therefore necessary here to consider whether the parties indeed intended that the failure to comply with a particular prescript in the contract would result in the automatic voidance of the agreement.

[20] The parties entered into the agreement each presumably acting in self-interest and with commercial good sense. The 30 days deadline in clause 23 for the submitting of the application, to my mind, was clearly for the benefit of the seller. The respondent was, presumably, desirous of obtaining the R4 000 000.00 purchase price. It would therefore not have been it its best interests for the contract to fail automatically through the purchaser’s failure, despite bona fide attempt, to submit the applications timeously. On the other hand, it could hardly have been in the interests of the purchaser to be on risk of summary failure of the contract if through some circumstance he should become unable to lodge the application timeously. Summary and automatic destruction of the contract was in the interests of neither party. It is therefore most unlikely that either of them would have intended the introduction into the contract of a provision with that consequence, especially one involving the non-performance of a relatively minor prescript.

CONCLUSION

[21] I find that the provision constitutes a term of the agreement and not a suspensive condition. It follows that the applicant has a right in relation to the property viz that of the first purchaser in a double sale subject to a suspensive condition. Professor Kerr op cit 672 states that where there have been two sales, namely where A sells to B and then to C, then, in Professor RG McKerron’s words, ‘[w]here transfer has been passed to neither, B, in the absence of special circumstances affecting the balance of equities, can interdict A from passing transfer to C and obtain specific performance of the contract, and in that event, C’s only remedy is an action for damages against A’ (McKerron The Law of Delict 7th ed 182). The applicant is in the position of B in this illustration. In the absence here of special circumstances affecting the balance of equities, the other three requisites for an interim interdict (para [3] above) can be assumed, and the application must therefore succeed.

[22] This is not a proper case for an order that the successful applicant indemnify the respondents against damages resulting from the order of court.

COSTS

[23] Costs shall follow the outcome of the application. The only dispute involves the costs occasioned by a postponement on 2 August 2007. On that day Pillay J postponed the matter by agreement, with an order that the costs of the day be reserved for determination at the hearing of the matter. The immediate cause of the postponement was the fact the applicant’s replying affidavit was served on the respondents’ attorneys on 31 July 2007 and the original was to be handed up at the hearing the next day. The applicant thereby had failed to comply with terms agreed upon by the parties. No heads of argument had been filed by the respondents.

[24] This application was precipitated by the letter (mentioned in para [2] above) sent by facsimile to the applicant’s attorneys on 28 June 2007. It appeared from the letter that transfer of the property to the fourth respondent was imminent. The application was prepared in response thereto. The papers were furnished to the trust’s local attorneys on 13 July 2007 with 2 August 2007 indicated as the date of the hearing. Thereafter both parties, in my view, made honest attempts to have the papers ready for hearing on 2 August 2007.

[25] At that time, the action for the declaratory order had been set down for trial on 26 September 2007. In view of the trust’s intention nevertheless to effect registration of transfer to fourth respondent, the applicant was entitled to bring this application and to do so on the basis of urgency. The time schedule which the applicant imposed on the respondents was tight; but the alternative, as the applicant’s attorneys saw it, was transfer of the property into the name of the fourth respondent. They then acted with sufficient promptitude. In the circumstances, I find that the first, second and third respondents are to pay the disputed costs.

ORDER

The application succeeds and the first, second and third respondents are interdicted and restrained from transferring the property to fourth respondent pending the final determination of the action instituted by the applicant under case number 496/06.

The first, second and third respondents are ordered to pay the costs of the application, which shall include the costs of the day on 2 August 2007.

_____

A.R.

ERASMUS

JUDGE OF THE HIGH COURT

DATED: