Sewpersadh and Another v Dookie (6090/2006) [2007] ZAKZHC 31; [2008] 1 All SA 286 (D); 2008 (4) SA 127 (D); 2008 (2) SA 526 (D) (8 November 2007)

REPORTABLE

IN

THE HIGH COURT OF SOUTH AFRICA

DURBAN AND COAST LOCAL

DIVISION

CASE NO. 6090/2006

In the matter between:

GOPAUL SEWPERSADH FIRST

APPLICANT

ROSHNI

DEVI SEWPERSADH SECOND APPLICANT

and

SURIAPRAKASH

DOOKIE RESPONDENT

________________

JUDGMENT delivered on 08 November 2007

SWAIN, J

[1] The applicants apply on notice of motion for the ejectment of the respondent from an immovable property owned by them, on the ground that an agreement of sale concluded by the parties in respect of such property, has been cancelled. The respondent resists his ejectment, denying that he was in breach of the agreement and that the applicants validly cancelled the agreement. The respondent also alleges that the applicants continued to receive payments from the respondent after the purported cancellation and thereby impliedly waived any right they may have had to cancel the agreement.

[2] The issues that therefore arise for determination are as follows:

(a) Whether the applicants lawfully cancelled the agreement. This involves a consideration not only of whether the respondent was in breach of his obligations at the time, but also whether the applicants waived any accrued right to cancel the agreement, before purporting to do so.

(b) In the event that the agreement was lawfully cancelled, whether the applicants, by their conduct, are precluded from relying on their prior cancellation of the agreement, i.e. whether the cancelled agreement was “revived”.

(c) Whether any such “revival” is precluded as a consequence of a failure to comply with the formalities required by the Alienation of Land Act No. 68 of 1981 (the Act).

(d) Regard being had to the answers to these questions, whether it is necessary to refer the application for the hearing of oral evidence and if so, on what issues?

[3] As regards the first issue, the respondent denied that he was in breach of the agreement and took issue with the amounts which the applicants alleged were in arrears in their letter dated 20 March 2006, calling upon the respondent to rectify the breach within seven days. The respondent alleged that he had requested the applicants on numerous occasions to supply him with statements indicating the amount outstanding, which the applicants had failed to do. This was denied by the applicants.

[4] It is however clear from the agreement that the purchase price of R500,000.00, was payable within twenty four months of the date of the agreement, being 07 October 2003. On the respondent’s own version, as at the date of the drafting of his answering affidavit, being 22 March 2007, he had paid approximately R428,912.00 towards the purchase price. It is therefore clear that the respondent had not paid the full purchase price within the requisite twenty four month period.

[5] Although the failure on the part of the respondent to make payment within this period was not expressly relied upon by the applicants in the letter of demand placing the respondent in mora, it was relied upon by the applicants in their founding affidavit. In their replying affidavit the applicants pointed out that the respondent, on his own version, was in breach of the agreement.

[6] In

Beck v du Toit 1975 (1) (SA) 366 (O) at 369 F

it was held that where an applicant in a claim for ejectment based upon the cancellation of an agreement of sale concluded with the respondent/occupier, had consistently manifested the attitude that the deed of sale had been cancelled, by her, and as she had a valid and undisputed ground for cancellation at the time she instituted motion proceedings for cancellation, she was entitled to rely on such ground, even though she had not stated in her affidavit that she was cancelling on that ground.

[7] The respondent cannot dispute that when the present proceedings were launched, he was in breach of the agreement in this respect. The applicants relied upon such ground in their founding affidavit and the respondent effectively admitted his breach in this regard. I am therefore satisfied that the applicants have established that the respondent was in breach of the agreement, entitling them to cancel the agreement.

[8] Whether they lawfully cancelled the agreement however, depends upon a determination of whether they waived any accrued right to cancel, before purporting to do so. This issue arises from a submission made by Mr. Dheoduth, who appeared for the respondent at the hearing, that “the applicants continued to receive payment from the respondent, therein implying a waiver of the applicants’ intention to cancel”. He added that “the applicants in receiving payment in December 2006 acquiesced to the existence of and therefore subsequent enforceability of the purchase and sale agreement”.

[9] It was common cause that in December 2006, i.e. after the letter of cancellation and the institution of the present proceedings, the respondent paid to the first applicant directly, at his request, the sum of R30,000.00. In addition, the first applicant in reply revealed that the respondent had made the following payments after the institution of the present proceedings; R5,000.00 on 04 July 2006, R50,000.00 on 12 August 2006 and R20,000.00 on 25 October 2006. It is not clear when the first applicant became aware of these payments, as he states that these payments appear in a recent statement from Standard Bank, which is dated 29 March 2007.

[10] The legal consequences of conduct on the part of an innocent party which is inconsistent with an intention to cancel a contract, or to persist in a prior expressed intention to do so, are dependant in any factual situation in part upon a consideration of the following factors:

(a) Whether the conduct in question occurred prior to any election to cancel?

(b) If not, whether such prior election resulted in the valid cancellation of the contract?

[11] The significance of this distinction is clearly illustrated by the words of Miller, J. in

Desai v Mohamed 1976 (2) SA 709 (N) at 712 H

“Waiver by a lessor of a right to cancel is a defence most commonly raised with reference to the lessor’s conduct between the date of breach and the date of his purported cancellation of the lease. Conduct during that period which clearly manifests an election not to cancel, may appropriately be said to constitute a waiver of the right to do so. That situation differs from the case with which we are now concerned, where the conduct relied on occurred subsequent to valid cancellation of the lease by reason of the breach. In such a case, if the conduct is said to constitute a waiver, the word is used not with its ordinary connotation but in the sense that the cancellation has been undone, for there is something incongruous in the notion that one may waive a right to do that which one has already done.”

[12] As further pointed out by Miller, J. (at page 713 A – E) in reliance upon dicta appearing in

United Bioscope Cafes Ltd. v Moseley Buildings Ltd.

1924 AD 60 at 67 – 68

Neethling v Klopper en Andere 1967 (4) SA 459 (A) at 466 – 467

it may be possible for one who has lawfully cancelled an agreement to “go back upon his election” provided he does so with the concurrence of the party affected thereby. Although both of these authorities referred to the revival (“herlewing”) of the previously cancelled agreement by reason of conduct subsequent to cancellation, it was clear that a fresh meeting and concurrence of the minds of the parties was necessary to restore the status quo ante.

[13] Although a clear distinction may be drawn between the consequences of such conduct upon the rights of the innocent party, pre and post a valid cancellation of the agreement, a more difficult situation arises where it is found that the innocent party’s conduct

“…… was therefore irreconcilable with a continuous intention to cancel the sale or, put somewhat differently, with an intention to rely on the cancellation”

per Van Heerden, J.A. in

Thomas v Henry & Another 1985 (3) 889 (A) at 895 I

referring to the finding of the Court a quo.

[14] In Thomas’ case the appellant had elected to cancel an agreement of sale in respect of a business on the grounds of intentional and material misrepresentations made by the respondent, the seller. The respondent brought a successful application in the Court a quo to compel payment of the purchase price, alleging that the appellant had continued to operate the business, notwithstanding the “purported” cancellation. The respondent did not deal specifically with the alleged misrepresentations, submitting it was not necessary to do so, as the purported cancellation was of no force and effect because the appellant had, by his conduct, approbated and reprobated. The appellant denied this allegation alleging that he had never intended to run the business for his own account after cancellation, but was entitled to operate it for the benefit of the respondent, for the purpose of preserving it. The appellant re-iterated his allegations concerning the alleged misrepresentations.

[15] The appeal succeeded, the Appellate Division at page 899 F holding that the

“respondent had failed to establish a waiver by the appellant of his right to rely on the cancellation of the sale”.

(at page 899 F)

It was pointed out that the term “waiver” was an imprecise one which could be used in different senses, but that the word was used for the sake of convenience

“……with reference to conduct of the innocent party which precludes him from relying on his prior cancellation of a contract (if, of course, the other party is prepared to accept the volte face)”

(at page 896 G).

[16] The approach of the respondent as outlined by the Appellate

Division at page 898 D was that

“…. the appellant had manifested an intention to abide by the sale and that as a matter of law he was precluded from relying on his (purported) cancellation of the sale”.

[17] It is clear from the a foregoing that the Appellate Division, with respect, was not called upon to decide whether the appellant had lawfully cancelled the agreement. This would have required a determination of the validity of the appellant’s allegations as to the misrepresentations made by the respondent, which was not capable of resolution on the papers before it. The issue requiring resolution was whether the appellant had “waived” the election he had made to cancel the agreement, without finding that such election had resulted in a valid cancellation of the agreement.

[18] This must be so, for if it was found that the contract had been validly cancelled, there could be no question of a “waiver” by the appellant, even in the sense “that the cancellation has been undone” (per Miller, J. in Desai’s case supra at 712 H) because a “revival” of the cancelled agreement would be required. This would require an inference to be drawn from the conduct of the parties that in fact a fresh meeting and concurrence of the minds of the parties had occurred, to restore the status quo ante.

[19] I am fortified in my view that the Appellate Division was not concerned with a possible “revival” of the original agreement, because in leaving open the question of whether the innocent party’s conduct should be judged subjectively or objectively, to determine whether a waiver of the “right to rely on the prior cancellation of the agreement” had occurred, reference was made to the decisions in

Mahabeer v Sharma N.O. & another

1983 (4) SA 42 (D) at 423 – 4

Palmer v Poulter 1983 (4) SA 11 (T) at 20 D

Thomas’ case supra at 898 E

[20] In both Mahabeer’s and Palmer’s case, the Court was concerned with the issue of whether the innocent party had waived an accrued right to cancel the agreement, prior to the purported exercise of such a right. In Palmer’s case, Ackermann, J. (as he then was) had the following to say at page 20 D

“If the appellant, with full knowledge of the facts has so conducted herself that a reasonable person would conclude that she had waived her accrued right to cancel the agreement, or had affirmed the agreement, a mental reservation to the contrary will not avail her”.

[21] Commenting on this passage in Thomas’ case at page 897 I, van Heerden, J.A. said the following:

“Ackermann, J. said (at 20) that, if such a party, with full knowledge of the facts, so conducted himself that a reasonable person would conclude that he had waived his accrued right to cancel the agreement (or had decided not to enforce a prior cancellation) a mental reservation to the contrary will not avail him”.

[22] Ackermann, J. in referring to a decision by the innocent party to “affirm” the agreement, did so in the context of conduct of such party, which indicated a choice had been made to stand by the agreement before a purported cancellation had been made. The words of van Heerden, J.A. namely, “or had decided not to enforce a prior cancellation” in the above passage must therefore, with respect, be aimed at a purported cancellation and not a valid and lawful one.

I therefore, with respect, disagree with the views of the learned author Christie, that Thomas’ case was concerned with the situation where a party had elected to cancel but thereafter, by his conduct, had arguably revived the contract

Christie – The Law of Contract in South Africa

5th Edition Page 445

[23] The issue of whether an innocent party has waived an accrued right to cancel an agreement, or waived a purported cancellation of an agreement, and whether such conduct is to be adjudged subjectively or objectively, can only be of application where such conduct has not resulted in a valid and lawful cancellation of the agreement. For if it has, there cannot be any talk of a waiver of rights by one of the parties; what is required is a new agreement between the parties to “revive” the cancelled agreement.

[24] In the present case, the conduct relied upon by the respondent occurred subsequent to what I have found to be a valid cancellation of the sale agreement by the applicants, as a consequence of its breach by the respondent. The issue of whether there has been a waiver of the right to cancel, or a purported cancellation, and the test to be applied to determine this, therefore does not arise in the present case. What has to be decided is whether the parties, by their conduct, concluded an agreement to revive the cancelled sale agreement. The conduct, being the request for payment of the sum of R30,000.00 by the first applicant and the respondent’s acquiescence thereto. The additional payments made by the respondent also have to be considered, particularly in the light of the fact that their repayment was never tendered by the applicants, when their existence was revealed by the applicants in reply.

[25] Although the issue of waiver does not arise, the applicants’ conduct in accepting payment and the effect this had upon the respondent’s belief as to the continued existence of the sale agreement, or put differently, its “revival”, is of significance in the context of the conclusion of an agreement by quasi-mutual assent. As stated by Christie (supra at page 82)

“an enquiry into whether a contract has been concluded by conduct differs from an enquiry into whether a contract has been concluded by quasi-mutual assent. In the quasi-mutual assent situation it is accepted that there is no true consensus ad idem. The one party says ‘but I never agreed’, to which the Court replies ‘quite so, but your conduct led the other party reasonably to believe you agreed, so you will be treated as if you had agreed.’ The enquiry is concerned with the effect of the one party’s conduct upon the other as a reasonable person. In the tacit agreement situation, the one party says ‘but we truly agreed; our (or my, or his) conduct proves it’, and the enquiry is concerned with the proper inference to be drawn from the proved facts”.

[26] As regards the nature of the test to be applied to determine whether an inference may be drawn on the particular facts, that a tacit contract has been concluded, I respectfully agree with the dictum of Comrie, J. in

Muller v Pam Snyman Eiendomskonsultante (Edms) Bpk

[2000] 4 All SA 412 (C) at 419 b – c

where he stated the following:

“the idea of a compelling inference appeals to me; a compelling inference derived from proof on a balance of probabilities of unequivocal conduct usually in a business setting”.

[27] Taking this dictum into account, as well as other authorities which are discussed by the learned author, Christie (supra at page 85) formulates the test as to whether a tacit agreement has been concluded, as follows, with which I respectfully agree

“in order to establish a tacit contract, it is necessary to prove, by the preponderance of probabilities, conduct in circumstances which are so unequivocal that the parties must have been satisfied that they were in agreement. If the Court concludes on a preponderance of probabilities that the parties reached agreement in that manner, it may find the tacit contract established”.

[28] O n the present facts it matters not whether the enquiry is directed at ascertaining whether an agreement to revive the cancelled sale agreement and restore the status quo ante, was concluded by quasi-mutual assent, or by drawing a “compelling inference” on the facts, for in either event I am satisfied that it may be found that such an agreement was concluded. It is common cause that after cancelling the agreement, the applicants requested and received payment of the sum of R30,000.00 in respect of the purchase price from the respondent.

[29] I am satisfied that these facts prove on a preponderance of probabilities unequivocal conduct on the part of the parties from which a compelling inference may be drawn, that they concluded a tacit contract to revive the original sale agreement. Alternatively, the conduct of the applicants was such as to lead the respondent to reasonably believe that the applicants had so agreed.

[30] I am fortified in this conclusion by the fact that, although the applicants cancelled the agreement by letter dated 05 April 2006 and launched the present proceedings on 29 May 2006, the respondent only filed his answering affidavit on 22 March 2007, i.e. ten months later. In the intervening period the payment of R30,000.00 was made in December 2006, but significantly, this payment was preceded by the three payments referred to above, totalling R75,000.00 made by the respondent to the applicants, in respect of the purchase price during the period July to October 2006. Assuming in favour of the applicants that they only became aware of these payments after receipt of a statement from Standard Bank dated 29 March 2007, and this is the reason these payments were only disclosed in reply, there has been no tender by the applicants to repay these amounts. This is of particular significance in the light of the provision in clause 9 of the sale agreement, that after cancellation, the respondent is obliged to forfeit “any payments already made” as liquidated damages. Retaining these payments, which were made after the alleged date of cancellation, is inconsistent with the continued existence of a valid cancellation of the agreement. This conduct of the applicants is only consistent with a “revival” of the sale agreement. In addition the inordinate delay before the respondent filed his answering affidavit, in the interim making payment of the sum of R105,000.00 towards the purchase price, is also only consistent with such an understanding between the parties.

[31] Turning to the issue of whether the revival of the agreement is precluded as a consequence of a failure to comply with the formalities require by the Act.

[32] That an agreement to which the Act applies may be informally “revived” is clear, provided that this process does not involve the alteration of any of the material terms of the original written agreement.

Neethling’s case supra at 465 H – 466 A

Cronje v Tuckers Land & Development Corporation

1981 (1) SA 256 (W) at 259 F

[33] Mr. Voormolen, who appeared for the applicants, submits that a revival of the contract is not possible because a variation of a material term of the agreement is required, to provide for the manner and time for payment of the outstanding balance of the purchase price. The argument is that the purchase price was payable within twenty four months of signature of the agreement, i.e. October 2005, and consensus would therefore have to be reached between the parties, and a material term of the agreement consequently varied, to provide for the date of payment. This argument however, overlooks the fact that the agreement also provides that the purchase price is to be paid by way of the sum of R25,000.00 on signature, and the balance by way of monthly instalments of not less than R20,000.00 per month. When regard is had to the purchase price of R500,000.00 it is clear that the time for payment of the purchase price of twenty four months, was purely an arithmetical deduction from these other provisions of the agreement. In my view, this provision is consequently not a “material term” for the purposes of the present enquiry, in the sense that no agreement between the parties was required on this issue. The respondent would be obliged to pay the balance of the purchase price at the rate of R20,000.00 per month.

[34] Such a term is not a suspensive one, as in Cronje’s case supra, which would cause the termination of the agreement immediately on its revival. I agree with the submission of Mr. N. Singh, S.C., who submitted written argument on behalf of the respondent, that at most the consequence of a revival of the agreement, including the clause requiring payment within twenty four months of signature, would be that the applicants would be entitled to give the respondents seven days notice to pay the balance of the purchase price, the time for payment having expired in terms of the revived agreement.

[35] I therefore conclude that the revival of the agreement is not precluded by the provisions of the Act.

[36] In the light of the conclusion I have arrived at in regard to the inference to be drawn from the parties’ conduct, which conduct is common cause, there is no need for any issue to be referred for the hearing of oral evidence.

[37] The order I make is the following:

The application is dismissed with costs.

___

SWAIN, J.

Appearances ../

Appearances:

For the Appellants : Adv. Voormolen, A.V.

Instructed by : Kissoonlal & Associates

For the Respondent : Adv. N. Singh, S.C.

Adv. N. Dheoduth

Instructed by : Kirpal Attorneys

Dates of Hearing : 14 September 2007

Date of Judgment : 08 November 2007