CONTRACT

Facts: The Western Cape Government (second respondent) and Imvula (first applicant) concluded a written contract in terms of which the respondent appointed the applicant to provide road rehabilitation services to it for a stretch of road. The contract price was R96,200,000. The parties also concluded a separate contract which contract price was R183,962,187. Hollard Insurance issued a performance guarantee in favour of the respondent for R4,810,000 and another for R9,198,109.40. The terms of both guarantees are that once the respondent had complied with its relevant terms as set in the guarantee, Hollard was contractually obliged to pay under the guarantees. The applicants contend that the guarantees are conditional, rather than on- demand. It was argued that on a proper construction of the guarantees and the context in which they were issued, there were underlying conditions that were to exist prior to demand thereupon being made. The applicants contend these conditions were absent and that the demands were bad. As a result, Hollard did not need to honour them.

Application: This is an urgent application in terms of the provisions of Uniform Rule 6(12)(c), whereby the applicants seek interdictory relief, restraining the respondent, who is the beneficiary of two performance guarantees, from claiming these guarantees from Hollard, pending the hearing of part B. The grounds of opposition to the application are that the guarantees in question are on-demand guarantees, the requirements for payment set by these guarantees have been met.

Discussion: All the respondent needed to do in terms of clause 5.1 of the guarantee was to issue the written demand and state that the contract was terminated due to Imvula’s default. There was no need to prove the validity of the contract. Clause 8 of the guarantee also states that "payment by the guarantor in terms of this clause 5 shall be made within seven calendar days upon receipt of the first written demand to the guarantor". Clause 8 does not mention that the respondent must first prove a valid cancelation. The purpose of a guarantee is to evade all these issues pertaining to the validity of the contract itself. There would be no purpose to have a guarantee if the defaulting party could raise issues such as that it was not their fault due to the weather, etc. The guarantees are on-demand guarantees, and the requirements set out in the guarantees themselves have been met by the respondent. An on-demand guarantee, such as in the matter in casu, ensures the quality of construction or building projects. A call on an on-demand guarantee can only be interdicted where the contractor is able to clearly show fraud. Any contractual disputes under a construction contract or agreement are irrelevant to a guarantor in deciding whether or not to make payment. Therefore, an on-demand guarantee must be honoured in accordance with its terms, without reference to the underlying contract.

Findings: There is no fraud proven by the applicants. The respondent cancelled the contract and demanded performance from Hollard. If there had been no cancellation and no letter of cancelation in support of this and the respondent claimed from Hollard, then in that event, there would have been room for arguing the fraud exception. However, that is not the case in the matter in casu. Fraud is not likely presumed, fraud needs to be proven and there needs to be clear facts of fraud. There needs to be relevant fraud and there needs to be dishonesty which is mala fides with the intention to defraud. The applicants cannot identify the party who is supposed to have committed the alleged fraud. The dispute is irrelevant to the claim under the guarantees, unless the applicant can prove that the respondent did not cancel the contracts and untruthfully claimed that it had. This is not the applicants’ case. The court has serious doubt as regards the fraud exception or the unconscionability exception and if the court has serious doubt with the applicants’ prima facie right, then all the other requirements become irrelevant. Given that the applicants are seeking an interim interdict pending the determination of certain issues under part B, when it is clear that they have no prospects of succeeding with their claim under Part B, then logically, they are not entitled to the relief sought under Part A.

Order: The application is dismissed.

DOSIO J

Facts: Goldfields and Flaming Silver concluded a written sale of shares agreement (the principal agreement) in terms of which the shareholding of Goldfields in two of its subsidiary companies, and Goldfields’ claims in those companies and another, was purchased by Flaming Silver for R310 million. Clause 3.1 of the principal agreement provided that it was subject to the fulfilment of the "conditions precedent" set out in subclauses 3.1.1, 3.1.2 and 3.1.3. These conditions are referred to in the principal agreement as "conditions precedent". Clause 3.2 of the principal agreement specifically provided that should the condition precedent referred to in clause 3.1.1 not be fulfilled on or before 31 January 2018 or any other condition precedent not having been met by the due date thereof and the period for fulfilment thereof not be extended by the parties in writing prior to the expiry thereof, then this agreement shall lapse and be of no force and effect.

Appeal: The High Court declared that the sale of shares agreement (the principal agreement) between the appellant, Goldfields, and the second respondent, Flaming Silver, was not revived and to be "void and of no force and effect" due to the non-fulfilment of certain of its suspensive conditions. The High Court also ordered Goldfields to repay an amount of R1 million paid to it by the first respondent, Siyakhula, in terms of an addendum to the principal agreement, including the costs of the application. This is an appeal against the whole of that order with the necessary leave having been granted. The only issue is whether the principal agreement, which otherwise would have lapsed due to the non-fulfilment of certain suspensive conditions, was revived by subsequent addenda to that agreement. Goldfields contends that it was revived. Flaming Silver maintains that it was not.

Discussion: Essentially Goldfields submits that parties to an agreement, that lapsed due to the non-fulfilment of a suspensive condition, may revive the lapsed agreement if the relevant conditional term in the original agreement is amended to prevent the agreement from "self-destructing" on account of the non-fulfilment of that same condition. And that the consensus of the parties, as expressed in the second and third addenda, revived the principal agreement by incorporating terms that protected the revived contract from "self-destruction". The argument advanced on behalf of Flaming Silver and Siyakhula is that the extension of the conditions precedent in terms of the first and third addenda are in direct contravention of clause 3.2 of the principal agreement. In terms of that clause any extension of a due date is required to be agreed to in writing prior to the due date of its fulfilment. If the parties intended to revive the principal agreement as contended by Goldfields, they would have been obliged to eliminate the operation of clause 3.2 or amend it. Goldfields has not relied on a tacit term in that regard, and such a term could not be implied while clause 3.2 remained intact. Second, while there is clearly an intention to amend the principal agreement in certain respects there is no intention discernible from the second or third addenda to "revive" the principal agreement. The wording of the principal agreement, and of the addenda, is reasonably clear and unambiguous. It provides, in effect, that if the finance condition (i.e. the condition in clause 3.1.1) is not fulfilled on or before 31 January 2018, or any of the other conditions are not met by the due date stipulated in the principal agreement, the principal agreement will lapse and be of no force and effect, unless dates for the fulfilment of those conditions are extended by the parties in writing, before those expiry dates.

Findings: The payment condition was not fulfilled by the due date. In terms of the second addendum, which was concluded after the expiry date for the fulfilment of the payment condition, the parties purported to put in place a "deeming" provision. In terms of clause 3.3 of that addendum they purported to agree that the finance and the payment conditions had been fulfilled by no later than 31 March 2018. There are certain difficulties with that agreement. In terms of the authorities relied on by Goldfields, a lapsed agreement may be revived by the parties. Assuming they could do so despite clause 3.2 of the principal agreement, there is nothing in the second addendum that evinces an intention on the part of any of the parties to "revive" the principal agreement. They clearly proceeded to conclude the second addendum in ignorance of the fact that the principal agreement had in law lapsed and required specific revival. Even if one assumes that it evinced an intention to revive the principal agreement, a fatal shortfall is the fact that at the very best for Goldfields, and at the very worst for Flaming Silver and Siyakhula, the second addendum "self-destructed" when the consent condition was not fulfilled by or before 30 July 2018, as envisaged in clause 4.3 of the second addendum. The third addendum was only concluded on 2 August 2018 and could not save or bring about the revival of the second addendum, or the principal agreement. Whatever the arguments of Goldfields may be, and even if one assumes that the second and third addenda somehow managed to revive the principal agreement, ultimately, the whole of that agreement (inclusive of the addenda) would have come to an end and be of no force and effect when the consent condition was not fulfilled on its due date, i.e. on 31 October 2018.

Order: The appeal is dismissed with costs.

COPPIN AJA (ZONDI DP, NICHOLLS JA, MEYER JA and BLOEM AJA concurring)

Facts and issue: This is an appeal against the whole judgment and order of the Magistrates’ Court. The sole ground of appeal is that the court a quo erred in rejecting the appellant’s defence that he did not read the agreement before signing it. The respondent (as plaintiff) in the court a quo, issued a summons against the appellant (defendant) for cancellation of an instalment sale agreement concluded between them. The respondent brought an application for summary judgment, alleging that the appellant had no bona fide defence, and had filed the plea solely for purposes of delay. The court a quo agreed with the respondent and granted summary judgment against the appellant.

Discussion: The respondent further contends that the defence raised by the appellant is simply that he did not read the agreement, which is not sustainable as he is bound by the terms of the agreement on the basis of the principle of caveat subscriptor which is based on quasi mutual assent. Thus, the conclusion is that the appellant assented to the terms of the agreement. This is also confirmed by the appellant’s conduct in making payments in respect of the agreement. In terms of the principle of caveat subscriptor the responsibility to understand the agreement before signing is on the person signing the agreement. The appellant has conceded this. He however contends that he did not read the agreement because the respondent instructed him not to read the agreement. On the other hand, he states that he is illiterate. The fact that the respondent, as contended by the appellant informed the appellant not to read the agreement does not take the matter much further.

Findings: It is not the appellant’s case that he was forced to sign the agreement. According to him he was merely told that he would drive a fancy car. That cannot amount to inducement. He does not say that he did not want to sign the agreement, or what terms of the agreement would have caused him not to sign the agreement, had he read it. By putting his signature on the agreement, the appellant purported to have understood the terms of the agreement. Further by paying for the motor vehicle in terms of the agreement, he understood the monthly repayment terms of the agreement. He could not comply with something he did not understand. There is no merit to the averments by the appellant. The court a quo correctly rejected the defence raised by the appellant.

Order: The appeal is dismissed with costs.

Facts and issue: The applicant seeks an order against the respondent, the National Department of Public Works, for the payment of the amount of R5,982,785.19, payable in terms of an issued and certified Final Certificate Payment (FCP), which became due and payable, together with the contractual default interest rate applicable as determined by the Minister of Finance. The issue is whether the FCP constitutes a debt in terms of Institution of Legal Proceedings Against Certain State Organs Act 40 of 2002, or a liquid document.

Discussion: To establish whether a claim is a debt in terms of the Act, the court in Director General Department of Public works v Kovac Investments (GNP), held that there are two legs to the enquiry of debt in terms of the Act. One leg requires that a debt must arise from a contractual, delictual or any other liabilities, the other is that it must render the state organ liable for damages. The court further held that if a claim is for specific performance, then it does not constitute debt on the basis that the claim is stemming from a contract entered between the parties, not a claim for damages arising from breach of contract. This application does not constitute a debt in terms of the Act as the respondent argues. The application is based on specific performance, which warrants performance from the respondent under the contractual obligations. Furthermore, since the claim does not constitute debt in terms of the Act, there is no basis or ground to issue a demand or acquire a consent from the respondent before a relief is sought.

Findings: The respondent appointed the principal agent to act on its behalf, it bound itself through the agency of the principal agent to perform under the obligations of the contract and make payments upon the issue of the certificates. The applicant commenced with the project and fulfilled the terms of the obligations, which led to the issue of interim certificates which were paid, except for the FCP issued on the 9 January 2018. The respondent failed to fulfil its contractual obligations in terms of the JBCC Contract, by failing to timeously effect payment of the FCP to the Joint Venture which also attracted contractual default interest. It is therefore just that the respondent fulfil its contractual obligations and effect the payment of the final payment certificate, including the contractual default interest as calculated by the Minister of Finance.

Order: The respondent is to pay the amount of R5,982,785.19 in terms of the issued and certified final payment certificate no 30 dated 9 January 2018, together with the contractual default interest rate applicable, as determined by the Minister of Finance.

Facts: Rhenus Logistics, the first defendant, held the head lease of a property and sublet a portion of the offices to the plaintiff. Both leases were in writing. Rhenus entered into a written service level agreement with Servest (second defendant) for rendering security services to the premises. As sub-lessee, the plaintiff occupied 10% of the space of the second warehouse and offices on the premises. It shared the space with Rhenus. In terms of the service level agreement between Rhenus and Servest, the latter provided security services to the premises shared by the plaintiff and Rhenus. Rhenus refused to permit the plaintiff to arrange for its own security services to the premises in order to protect its own goods. Rhenus appropriated to itself the right to control and implement all security measures in respect of both it and that of the plaintiff. A notice informing all vehicles prior to entry through the first gate, that all vehicles would be searched on entry, was affixed and displayed on the outside of the first gate.

Application: The plaintiff instituted an action against the first and second defendants in terms of which it sought to claim damages from the defendants, suffered as a result of an armed robbery perpetrated on the property.

Discussion: A panel van entered the premises where the plaintiff occupied 10% of Rhenus’s Longmeadow Business Estate West. It moved through the main gate and the second gate, without being stopped in the vacuum. Both gates were open at the same time. From the security footage it is clearly observed that the second gate was open and the panel van moved through it. The vehicle was not escorted to the designated parking area. It is then observed that the driver of the vehicle approached the warehouse. A short while later, armed men, approximately 15 in number, were then seen emerging from the panel van and approaching the warehouse hurriedly. About half an hour later, a 10-ton Isuzu truck is seen moving through the open gates, briefly stopping after moving through the second gate. It then turned to the left and approached the warehouse and reversed into an open loading bay. It was further gathered from the security footage that Chubb Security Services arrived at the premises but were then dismissed by the guards. The plaintiff’s goods were loaded into the truck. Mr Naidoo, Mr Pretorius and the plaintiff’s staff, who were present, were locked in a vault. The robbers left. The witnesses on behalf of the plaintiff testified that searches of vehicles were regularly undertaken, contrary to Mr Morton’s evidence that it was not required by the service level agreement.

Findings: In view of Servest’s, although mistaken, belief throughout the period prior to the robbery that the plaintiff was part of Rhenus, it was obliged to afford the plaintiff the same protection as that in respect of Rhenus. Servest could hardly ignore the security measures in place as per the service level agreement in respect of the plaintiff, as it would impact negatively upon Rhenus. It is clear from the evidence recorded that none of the measures were followed on the fateful day. Servest failed dismally in complying with its stipulated obligations. It acted in a gross negligent manner, not only towards the plaintiff, but in particular towards Rhenus as its client. The guards were clearly oblivious to the destination of the vehicles once they moved through the gates. The flippant approach to Chubb’s arrival at the premises clearly shows the security guards’ lack of commitment to their duties. Servest, through the conduct or omissions by its security guards, put Rhenus, as well as the plaintiff, at risk. It had caused or contributed to the damages suffered by the plaintiff. Furthermore, it was in breach of its duties that were owed to Rhenus and by extension the plaintiff. Due to Servest’s breach of its obligations in terms of the service level agreement, it breached its duty of care towards Rhenus and acted in a gross negligent manner. The indemnification clause finds no application.

Order: It is declared that the second defendant (Servest) is liable for the loss suffered by the plaintiff. It is declared that the second defendant is not entitled to an indemnification by the third party.

VAN DER WESTHUIZEN J

Facts and issue: The applicant claimed payment of the sum of R1,635,129.83 arising from the sale and delivery of goods to the respondent. The applicant had agreed to sell valves to the respondent. The respondent did not effect payment into the applicant’s Standard Bank account. What did happen was that the respondent made payment of the invoiced amount into an Absa Bank account which did not belong to the applicant. In so doing, it was the victim of a sophisticated fraud perpetrated by an unknown third party.

Discussion: What appears to have occurred is that this third party was able to intercept or gain access to the email correspondence between representatives of the applicant and the respondent relating to the purchase and sale of the valves, and more particularly the emails that pertained to the extended payment arrangement. It inserted itself and replied to the respondent on the same e-mail thread, writing in the guise of the applicant’s managing director. It appears that even though the original fraudulent email came from what purported to be the correct email address, the follow-up requests and the email containing the bank confirmation letter probably came from a similar, but not identical, address. The respondent proceeded to make payment into the Absa account. Three days later, the applicant sent an email requesting its payment. It was then that it was discovered that the payment had been made to an unauthorised account and that the applicant had not in fact changed its banking details from Standard Bank to Absa Bank. The respondent’s principal contention is that the applicant’s email system must have been hacked by a third party, for which it (the applicant) was to blame. The import of this was that it was negligence on the part of the applicant that allowed the fraud to be perpetrated.

Findings: The applicant did not represent to the respondent that it would receive payment in the fraudulent account (a third party did), and the payment was therefore not made in reliance upon any representation made by the applicant. It was not suggested that the applicant was aware of any of these events and therefore failed to take steps to avoid adverse consequences. On the facts, there are various reasons to criticise the conduct of the respondent. The factors merely serve to accentuate the impression that the respondent failed to take the sorts of steps that a prudent debtor would have taken to ensure that its payment was effected properly. It was this failure, rather than anything that the applicant did, that was the proximate cause of the payment being made. The respondent has not put up a competent defence, either in law or in fact, to the applicant’s claim for payment of the purchase price which remains due. The applicant is entitled to payment in accordance with the agreement of sale.

Order: The respondent is ordered to make payment to the applicant in the amount of R866,726.25, together with interest at the prescribed rate the date of commencement of the application to date of final payment.

Facts: In 2008 Mr Cook (the deceased) secured a contract to perform certain earthworks for a property developer and for this he needed a front-end loader. The deceased obtained finance for a second-hand loader from the respondent (Absa Bank) and to this end he concluded an instalment agreement. The loader was delivered at his business premises at Philippi in Cape Town, but it was immediately apparent that it had certain obvious patent defects and he complained that it was not the loader he had purchased. To meet his pressing contractual obligations to the property developer, the deceased set about effecting certain essential repairs to the loader but this was so expensive that it became uneconomical to do so. The deceased fell into arrears under the agreement and Absa issued summons for payment of the amount then allegedly due, being R575,228.03.

Appeal: The deceased issued summons against Absa for cancellation of the agreement, payment of damages in the sum of R3,220,376.82 and costs on the punitive scale. The damages were allegedly for a loss of profits on the earthmoving contract with the developer. When the deceased passed away, the executor was substituted. The trial court dismissed the claims lodged on behalf of the deceased and upheld Absa’s claim in reconvention. In the result, the executor was ordered to pay Absa the sum of R575,228.03, together with costs on the party and party scale.

Discussion: Absa contended that a settlement agreement had been reached where all disputes arising from the alleged defects in the loader referred to in the plaintiff’s particulars of claim were resolved. It argued that Mr Solomon, who had been involved in procuring the loader, has undertaken to pay the deceased R25,000 for the defects. in order for Absa to be successful in its special plea, it has to show that the settlement agreement of compromise was valid and binding between the parties in the main action. The averment is made that Solomon was Cook’s agent and in that capacity, undertook to pay Cook. But Solomon ostensibly hoodwinked Cook by providing a lemon of a product, which was financed by Absa. Absa failed to do its due diligence. There is no basis in law upon which Solomon, not a party to the main lis, could have been a party to the settlement agreement of compromise, as a third party, without agency or novation, thereby absolving Absa from any remedies that Cook would have had against it.

Findings: Absa also cannot rely on the delivery note that Cook signed to absolve it of its liability. It is common cause that Absa required the delivery note to be signed by Cook prior to them releasing the funds to the auctioneers and weeks before the actual goods were delivered to Cook. The court is not persuaded that Cook was informed that the actio empti and the actio redhibitoria were available to him as remedies in this case, against Absa, where the loader had latent defects. Cook cannot be said to have abandoned his rights consciously and intentionally after careful consideration and unhurried engagement. The court is not persuaded that Cook was bound by the settlement agreement. The deceased had a claim against Absa arising from the latent defects in the loader. The Aedilitian remedies are available to the appellant.

Order: The appeal is upheld. Absa’s claim in reconvention is dismissed. The appellant is entitled to such damages, including consequential damages, as he is able to prove at a later hearing.

KUSEVITSKY J and THULARE J

GAMBLE J dissenting

Facts and issue: This is an appeal against the dismissal of an application for payment brought by the appellant against the respondents in the High Court. The appeal turns on a single issue, whether the suspensive conditions in a contract entered between the appellant (Rio Ridge) and the first respondent (Sydwell Shabangu Projects) were fulfilled or not. The crux of the case between the parties and of the appeal is whether a valid deed of suretyship as contemplated in clause 4.1.1 was signed by Mr. Shabangu in his personal capacity in compliance with this clause.

Discussion: It is the case for the appellant that the subsequent valid suretyship establishes compliance with the suspensive condition in clause 4.1.1 of the agreement. It is the case for the respondents that because clause 4.1.1 of the agreement refers to an “Annexure “A”, there can only be fulfilment of the suspensive condition if the actual document that is marked as “Annexure “A” is in its terms a valid suretyship. The issue to be considered is the intention of the parties and whether or not clause 4.1.1 of the agreement was fulfilled. From the plain wording of clause 4.1.1, it is clear that the parties intended that Mr. Sydwell Shabangu bind himself as surety and co-principal debtor together with Sydwell Shabangu Projects in favour of Rio Ridge. It is equally clear that the document headed “Annexure “A” to the agreement is not the deed of suretyship contemplated in clause 4.1.1. The parties contemplated that before the agreement would come into force, that Mr. Shabangu would bind himself as surety and co-principal debtor in favour of Rio Ridge for the obligations of Sydwell Shabangu Projects.

Findings: The signature of the subsequent suretyship, although not attached to the agreement as “Annexure “A” and notwithstanding that it refers to itself as “Annexure “B” to the agreement, is self-evidently an equivalent and the contemplated act of performance which the parties envisaged when the agreement was signed. The fulfilment of the condition occurred when the valid suretyship was signed and thus, although it was not marked as “Annexure “A”, ‘per specifica’ its subsequent signature although not labelled in accordance with the agreement had the effect of fulfilment of the condition per aequipollens. The suspensive condition in clause 4.1.1 was fulfilled. Accordingly, the agreement is valid and binding.

Order: The appeal is upheld. The first and second respondents are ordered jointly and severally, the one paying the other to be absolved to make payment to the applicant in the sum of R5,000,000 plus interest.

Facts and issue: The parties disagree about the coming into existence of a compromise agreement. The primary issue in this appeal is principally the question when does a legally binding contract come into existence? The parties concluded a written sale agreement. Because of the appellant’s failure to honour the payment terms, the respondent issued combined summons against both appellants. The respondent says that the parties reached a compromise agreement in terms of which their dispute was finally settled. That is disputed by the appellants who argued that there was no agreement that was reached, reasoning that the second appellant was still going to consider the propriety of the proposed payment of R700,000 for purposes of making a final decision.

Discussion: A draft agreement was prepared by the respondent’s legal representatives in which the apparent terms were recorded. The draft was shared with the appellants through their lawyers as well. In the exchange of documents that followed the meeting, the appellants’ legal representatives appear to have applied their minds to the draft agreement before giving an indication that it was to be given to the appellants for signature. The appellants contend that the contractual terms were mere proposals and were never agreed on.   The Magistrate had a proper understanding that, for a contract to come into existence it is necessary that consensus be reached between the parties on all the essentialia of the agreement. The Magistrate concluded that a binding agreement had come into existence. To reach that conclusion he took into consideration that the appellants’ representatives never raised the point that a compromise was not concluded between the parties. He instead noted that the legal representatives had merely indicated, upon receiving a draft of the compromise agreement, that he was going to meet with his client for the purpose of signing the agreement. At no point was there ever indication that there was no agreement reached between the parties yet.

Findings: The parties met and discussed settlement. The settlement was discussed pursuant to the issuance of court papers by the respondent. It was the appellants who had initiated discussions for purposes of settlement. Although the parties could not agree on the originally proposed offer of settlement that was made by the appellants, it is significant that their proposal is what triggered discussions. When the appellants later requested relaxed payment terms, the request was based on the question of affordability and not because they disputed the settlement amount of R700,000 and the payment terms which were recorded in the draft that was produced by the respondent’s lawyers that raised a dispute. Even when the appellants negotiated reduced payment terms, they were always clear that they were negotiating towards making it easy for themselves to pay the compromise amount of R700,000. The court a quo’s judgment cannot be faulted on any of the grounds listed.

Order: The appeal is dismissed with costs.

Facts: Grancy Property is a company incorporated in the British Virgin Islands with its principal place of business in Lichtenstein and is used for investment purposes by Mr Mawji. Montague Goldsmith is a Swiss company which acted on behalf of Grancy in respect of two black economic empowerment (BEE) investments. Mr Gihwala participated with others in certain of the investments. This appeal is the culmination of some 16 years of continuous litigation by Grancy against Mr Gihwala, his associate, Mr Manala and a trust. Mr Gihwala is a former acting judge, attorney, and chairman of a law firm, Hofmeyr Herbstein and Gihwala. He has since been struck from the roll of attorneys. In regard to the investments, this court has found that Mr Gihwala and Mr Manala committed the “most egregious” and “fundamental” breaches of the principles of trust and good faith and paid themselves millions of Rands to which they were not entitled to the prejudice of Grancy. The company’s funds and the entities housing the investments were treated as the “personal piggy banks” of Mr Gihwala and Mr Manala.

Appeal: This appeal and cross-appeals, with the leave of the High Court, concerns the second stage of a two-stage accounting and debatement procedure envisaged in this court’s earlier order. The first stage of the accounting involved an examination of the respondents before the court regarding the adequacy of the accounts that they furnished. In the second stage, the accounts were to be debated, to determine their accuracy and whether any amounts were due to the appellants.

Discussion: The High Court granted most of Grancy’s monetary claims under the Spearhead investment, but dismissed others, notably its claim for the disgorgement of a secret profit of R3 million which Mr Gihwala/the Trust obtained from a property investment, using Grancy’s funds in the Spearhead investment. The High Court also made an order directing the Gihwala defendants to pay Grancy R5,401,908.51 plus interest, being the economic benefit of shares that it failed to pay over to Grancy in respect of the Scharrig investment. Grancy appealed against the order dismissing its claim for the disgorgement of the secret profit of R3 million, and the order made in the Scharrig investment. Grancy claimed that it was entitled to some R82 million for 3,679,754 additional shares in Scharrig that the Gihwala defendants had not allocated to it, and which it would have sold at about R25 per share in October 2007. It also appealed against the High Court’s dismissal of its claim that Messrs Gihwala and Manala be held in contempt of a court order issued in February 2016; and that they should pay costs on an attorney and client scale.

The Scharrig investment: Mr Gihwala and the Trust breached the Scharrig agreement by failing to secure Grancy’s entitlement to one-half of 7,359,508 additional option shares, and that it was entitled to the economic benefit of half of those shares. The additional option shares were allocated to give the empowerment partners in the Scharrig investment, specifically Mr Gihwala/the Trust, in total a 15% stake in Scharrig. Grancy’s argument that it would have sold its additional option shares at the peak market price of R25 per share in October 2007 was not accepted. Grancy would have disposed of the 3,679,754 additional shares, when it sold its initial shares at R5.75 per share in January 2006.

The Spearhead investment: The High Court’s order refusing to disgorge the secret profit of R3 million is set aside and replaced with an order declaring that Mr Gihwala and the Trust were liable, jointly and severally, to pay the sum of R3 million plus interest, to Grancy. In making this profit, Mr Gihwala had breached his fiduciary duty to Grancy. The High Court was correct in dismissing Grancy’s claim that the respondents were guilty of contempt of court: it failed to prove non-compliance with, or wilful disobedience of, the order. The High Court was correct in making the costs orders that it did.

SCHIPPERS JA (HUGHES JA, GOOSEN JA, COPPIN AJA and BLOEM AJA concurring)

Facts and issue: The applicant and the respondent concluded a written agreement of sale in respect of a property. A total purchase price of R15 million was paid by the applicant with R1 million of such funds being held as a deposit by the conveyancers. The interest which would have accrued on the R1 million would be for the benefit of the respondent. The issue is whether the agreement contemplates that interest which would accrue on the balance of the purchase price is to be paid to the applicant or the respondent. The determination to be made is an interpretation of clause 2.2 of the agreement.

Discussion: In its initial incarnation, clause 2.2 of the agreement contemplated that the purchase price would be paid by "either a guarantee" alternatively "cash for the balance of the purchase price". If the purchase price was to be paid in cash clause 2.2 of the agreement expressly provided that "Any such cash paid by the Purchaser shall be held by the conveyancers in accordance with clause 2.1 above." In terms of clause 2.1 of the agreement, monies were to be held in an interest- bearing account "with interest accruing to the seller pending transfer". Whilst the applicant may have always initially contemplated paying the purchase price by bank guarantee, it concluded an agreement in which at the outset contemplated, as an alternative, that the purchase price may be paid by cash and if payment was made in cash then such monies would be held in an interest bearing account for the benefit of the seller. This is the context in which the agreement is to be viewed.

Findings: The first addendum did not delete clause 2.2. In fact, the first addendum merely sought to record that the applicant shall supply an acceptable bank guarantee for R14 million by 25 August 2021. If one has for the moment to consider Ms Brammer's argument of "no benefit to the applicant”, it is abundantly apparent that there was clearly a benefit to be gained by the applicant in that it obtained rent-free occupation of a R15 million home pending transfer. As the respondents allege, that was the basis upon which the interest would accrue to the respondent. Ms Hulett's evidence as to the applicant's intention cannot be admitted. Such is not evidence of context. In terms of clause 2.2 of the agreement, the interest is to be paid to the respondent in accordance with the provisions of clause 2.1 of the agreement. The application cannot succeed.

Order: The application is dismissed. The applicant is directed to pay the respondents' costs of the application.

Facts: The applicant is a specialist obstetrician and gynaecologist. The respondent is a private company which carries on business as a private hospital. The applicant was granted admission privileges at the hospital. The applicant exercised his admission privileges at the hospital until he was suspended from practice for one year by the Health Professions Council of South Africa (HPCSA), after he pleaded guilty to two counts of unprofessional conduct. The applicant’s period of suspension from practice ended, and his suspension was lifted. Towards the end of his suspension, the applicant made it known that he wished to return to the hospital. At a meeting, the respondent’s board of directors resolved not to reinstate the applicant’s admission privileges. It is unclear from the evidence whether the applicant was informed of this decision. The applicant followed up his application with a request for the outcome, but no response was forthcoming.

Application: The applicant seeks a declaration that the purported termination of his contractual rights, referred to as the decision, to be administrative action, and to infringe upon the constitutional rights of his patients to access to health care, to the dignity and freedom of the person, including the freedom to make medical choices. The applicant also seeks a declaration that the decision was made without any consideration of the applicant’s patients and, more particularly, their rights to make representations regarding the decision, and the adverse effect it would have upon them, and that the decision be subject to review, and that it be reviewed and set aside.

Discussion: The applicant’s principal case is that the agreement in respect of his admission privileges has never been lawfully terminated and that he has a contractual right to those privileges. The respondent’s case is that the agreement giving rise to the applicant’s admission privileges contained a term implied by law to the effect that the applicant’s admission privileges would terminate should he no longer be able to practise his profession. The respondent contends the effect thereof was that when he was suspended from practice and his registration was deemed to be cancelled under the HPSCA the admission privileges were terminated by operation of law. Admission privileges may only be exercised by a medical practitioner who is entitled to practice and that once the applicant was suspended and his registration was deemed to be cancelled, he could not exercise admission privileges at the hospital. Admission privileges can only be exercised by medical practitioners who are entitled to practice. The fact that the applicant’s entitlement to practice was temporarily suspended does not mean that his admission privileges were similarly suspended until such time as he again entitled practice.

Findings: There is nothing unjust, unreasonable or unfair in implying the term into the contract concluded between the applicant and the respondent. On the contrary, there is every justification for such a term to be imported into the contract having regard to the provisions of the Health Professions Act 56 of 1974. Similarly, there is nothing unreasonable or unfair in importing the term into the contract. The parties were free to agree that a suspension from practice would not result in the applicant losing his admission privileges and that they would merely be suspended. They did not so agree. They left the circumstances under which the admission privileges would terminate to their unarticulated understanding. There was no suggestion that this unarticulated understanding incorporated a term that that the applicant’s privileges would only be suspended in the event of his suspension from practice. Finally, there is no suggestion that the failure to agree such a term was due to any bad faith on the part of the respondent. The applicant’s admission privileges were terminated by operation of law upon his suspension from practice.

Order: The application is dismissed with costs.

MANCA AJ