South Africa: Western Cape High Court, Cape Town

Demuneth Invsetments 15 (Pty) Ltd t/a Amazing Estates Appellant v Fineprop 1130 CC (A156/2010) [2011] ZAWCHC 241 (26 May 2011)

limited only to the immediate context of the words used within the four corners of the contract, but also involves regard being had to the apparent nature and purpose of the contract; all of this to be judged against the relevant factual matrix in which the contract was concluded.³ Within the limits of the language used by the parties, read in its context in the sense aforementioned, it is also necessary to approach the construction of the contract with sensible regard to the business or practical result which the parties apparently sought to achieve thereby.⁴ Sophisticated semantic analysis' should not be permitted to negate an evident commercial or practical object that was clearly sought to be achieved by the contractual provision which is being construed.⁵ The relevant factual matrix in the current case would include the provisions of the pro forma deeds of sale in existence in respect of the types of property for sale in the Village, the Home Owners' Association ('HOA') constitution and rules and the indications in that documentation of the business interrelationship between Whale Rock Gardens (Pty) Ltd and Whale Rock Gardens Management Services (Pty) Ltd. respectively, in respect of the development.

[7] The contract in issue concerned the appointment by the appellant of the respondent as subcontractors to market and manage the marketing of property within the Whale Rock Resort Village". The appellant contends that in terms of the contract the respondent was appointed only in respect of the marketing and sale of freestanding erven owned by Whale Rock Gardens (Pty) Ltd in the Village (At the date on which the contract was concluded. Erf 9674, on which the sectional title units which were the subject of the respondent's claim were erected, had been sold by

Whale Rock Gardens (Pty) Ltd to Whale Rock Gardens Management Services (Pty) Ltd, but transfer pursuant to that sale had not yet been effected The provisions of the contract contained no reference to the aforementioned sale.) The respondent, on the other hand, contended that the contract did not discriminate, in the manner alleged by the appellant, between the property within the Village which it had been thereby appointed to market.

[8] The contract is a relatively lengthy document. It is convenient therefore to set out only what I consider to be parts thereof that are material to the issue between the parties Those parts provided as follows:

MEMORANDUM OF MARKETING AGREEMENT

MADE AND ENTERED INTO BY AND BETWEEN [The Appellant]

(hereinafter called "Amazing Estates") AND

[The Respondent]

(hereinafter called "the Agency")

WHEREAS Amazing Estates has been granted the sole and excusive sale mandate to market and manage the marketing of Whale Rock Gardens (Pty) Limited's development known as Whale Rock Resort Village (hereinafter referred to as "Whale Rock Resort Village');

AND WHEREAS Amazing estates has appointed the Agency, as sub-contractors to market and manage the marketing of property within the Whale Rock Resort Village;

AND WHEREAS the Agency has accepted such appointment;

NOW THEREFORE this Agreement serves to confirm the appointment of the Agency as a totally independent agent and sub-contractor of Amazing Estates with effect from 1 October 2004 which appointment shall endure for an indefinite period and shall be terminated as is hereinafter provided, subject to the following terms and conditions, namely, that:

1. The Agency hereby warrants that it and its members are and will at all times be registered as Estate Agents with the Estate Agency Affairs Board and will operate in accordance with the said Board's code of conduct and be responsible for all fees owing to the said Board;

2. The Agency as totally independent agents and sub-contractors of Amazing Estates will market and manage the marketing, directly and through other accredited estate agents, property situate in Whate Rock Resort Village

3. The requirements and duties of the Agency shall be to:

(a) represent Amazing Estates, not only in Plettenberg Bay but also through the entire country for the purposes set out herein

(b) ensure that it retains the services of Ernest Jacobus Marais for the full duration of its appointment in terms hereof;

(c) undertake all such duties as set out in Annexure 'A" annexed hereto;

(d) endeavour to increase the sale of property in Whale Rock Resort Village and for this purpose shall maintain a visible presence at the marketing site and shall implement a show roster for participating accredited agents m its own discretion when it cannot man the marketing office itself and also regularly visit agents to ensure that they possess the necessary marketing material and the latest prices and sales updates.

(e) give training to staff of and equip accredited agents to represent Amazing Estates in terms hereof;

(f) remain responsible for all functions set out herein relating to property sold by an accredited agent on the same basis as if it had sold such property;

(g) in the person of ERNEST JACOBUS MARAIS attend meetings at the board room of Amazing Estates on the first and third Mondays of each month at 10:00 for the purpose of receiving instructions and to report to Amazing Estates in respect of it's (sic) activities

(h) not make any representations or give any warranties in respect of any property save such as are set out in the Deeds of sale with annexures or as compiled in any advertising material supplied to the Agency by Amazing Estates or as it is expressly authonsed (in writing) to make or give.

(i) treat the office records and correspondence with utmost confidentiality so as not to prejudice Amazing Estates

(j) Immediately bring all important communication and listings of re-sales to the attention of Amazing Estates and not withhold any listing of re-sales for any period whatsoever.

4.1 The marketing office for property in Whale Rock Resort Village shall be established in the administration building thereof and office hours are to be as follows:

a) Out of season: Monday - Friday each week from 10:00 - 16:30 and Saturdays from 10:00 to 1300:

(b) In season: Monday - Sunday (both days included) each week from 09:00 to 17:00;

(c) In season will mean from 15 December to 15 January and the April. July and September school holiday in the Western Cape of each year. Out of season will mean the remaining days of each year.

4.2 The Agency's members will be entitled to one off weekend per month out of season and to an annual holiday of 21 (Twenty One) working days dunng each year to be arranged 30 days before commencement of the leave in consultation with Amazing estates and to be taken out of season

5.......

6. The Agency shall, in consultation with Amazing Estates, consult with and appoint reputable accredited estate agents in Plettenberg Bay, or where necessary in other areas, and the following commission shall be payable:

6.1. Should the Agency be the effective cause of any sale the Agency will be entitled to 3% (Three percentum) plus VAT on the purchase price excluding VAT thereon and Amazing Estates will be entitled to a commission equal to the commission paid to the Agency,

6.2. Should an accredited agent be the effective cause of any sale the commission is to be split 3-ways. i.e. 2% (Two percentum) plus VAT on any sale of property excluding VAT thereon between Amazing Estates, the Agency and the accredited agent;

6.3. All enquiries and telephone calls relating to sales of property in Whale Rock Resort Village are to be referred to the Agency but should the Agency, for any reason whatsoever, not be able to attend to such enquiries or telephone calls and Amazing Estates be the effective cause of a resulting sale the Amazing Estates shall be entitled to 6% (Six percentum) commission plus VAT on the purchase price excluding VAT thereon;

All commissions All commissions earned in terms of this paragraph will only be payable upon registration of the particular property into the name of the purchaser thereof.

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8. . ....

9. Amazing Estates in liaison with the Agency will be responsible for the conceptualising and design of all marketing material. Amazing Estates will furthermore be the sole judge as to when, where, and how the marketing campaign is to be conducted and be responsible for the cost thereof.

Unless the advertising is specific to a particular other development, Amazing Estates undertakes to include Whale Rock Resort Village in all future advertising.

11. Whale Rock Gardens (Pty) Ltd. herein represented by Frederik Arijs. duly authorised thereto, do ($/c) hereby undertake during the term of his agreement, not to grant a mandate to any other estate agency without the Agencies (sic) written permission.

12. This agreement may be terminated by any one party giving the other party 6 (SIX) calendar months notice in writing of the termination of this Agreement save such notice of termination may not be given prior to 6 (SIX) calendar months from the commencement date of this Agreement and upon termination the Agency will have no other claim of any nature against Amazing Estates save as is herein contained. Upon termination the Agency will be obliged to immediately return all books, maps, papers and records pertaining to its appointment in terms of this Agreement and/or any movables belonging to Amazing Estates to their sales office.

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13. It is a special term of this agreement that a unit in Whale Rock Resort Village will be leased to the member/s of the Agency rent free and that the levies of such unit are to be paid by Amazing Estates and the Agency will be responsible for water, electricity, upkeep of the intenor of the aforesaid unit and private telephone calls only. The aforesaid lease will terminate on the date of termination of this Agreement or as agreed by the parties.

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15.

16. • This agreement constitutes the entire Agreement between the parties and no other conditions, amendments, additions or cancellation shall be or any force or effect unless such other conditions, amendments, additions or cancellations or representations have been made in writing and signed be both Amazing Estates and the Agency.

SIGNED AT PLETTENBERG BAY on this 14* day of OCTOBER 2004

For AMAZING ESTATES For WHALE ROCK GARDENS (PTY) LIMITED

SIGNED AT PLETTENBERG BAY on this 14^lh day of OCTOBER 2004

ForFINEPROPS 1130 CC

ERNEST JACOBUS MARAIS

as Surety

[9] A consideration of the currently relevant provisions of the agreement makes it immediately apparent that the contract makes no express discrimination between theappointment of the respondent to market freehold, as distinct from sectional title property, within the development. On the contrary, the provision for the establishment of the respondent as the site agent with not only a physical presence by way of an office in the central facilities, but also by way of someone living on site in a rent free unit (apparently one of the sectional title units) in the Village, points strongly, and without qualification, to the appointment of the respondent to market and manage the marketing of property in the development having pertained, indiscriminately, to all the residential property within the entire Village. The fact that the appointment expressly applied to re-sales of property in the Village (clause 3(j)) is furthermore irreconcilable with the appellant's contention that the contract pertained only to property in the Village owned by Whale Rock Gardens (Pty) Ltd.

[10] The appellant's contention as to the proper construction of the contract is founded on the expression the marketing of Whale Rock Gardens (Pty) Limited's development in the preamble and the effect of the provisions of clause 10 of the contract. The appellant contends that these incidences of the contract make it clear that only property owned at the time by Whale Rock Gardens (Pty) Ltd was the subject of the marketing agreement (For the purpose of deciding the appeal I shall assume in the appellant's favour that the provisions of the preamble fall to be taken into account for the purpose of construing the operative terms of the contract.⁶)

[11] It was common cause that the ownership of the walled subdivision that comprises the Village vested in Whale Rock Gardens (Pty) Ltd and that the concept of the development of the Village was also that of Whale Rock Gardens (Pty) Ltd. It may be inferred that the transfer of erf 9674 to Whale Rock Gardens Management Services (Pty) Ltd for the purpose of developing the sectional title scheme within the Village appears to have occurred as part of the realisation of by Whale Rock Gardens (Pty) Ltd of the development of the Village. It is indeed evident from the prescribed content of the deeds of sale that a continuing role in the management of the Village was contemplated for Whale Rock Gardens Management Services (Pty) Ltd. In the context of the development of the Village, entailing, as it did, the need for an entity to exist to manage on an ongoing basis the administration of the resort and of the facilities to be provided within it, it is, in a business sense, no cause for surprise that a corporate structure should have been put in place to segregate the general development and plot and plan aspects of the development business from those that would entail a degree of residual and long-term involvement. It is equally unsurprising in the circumstances that the personalities involved in the executive management of the two companies overlap Both companies would have an interest in the efficient and maximally beneficial marketing of property within the Village and therefore it is also unsurprising to find that the appellant, as the party appointed by Whale Rock Gardens (Pty) Ltd to market property in the Village, had a marketing role in respect of both the freehold and the sectional title property within the development.

[12] The incidence of these considerations is confirmed in the terms of the pro forma deeds of sale for both the freehold and the sectional title properties in the development, which fall to be read with the HOA constitution and regulations (or rules)⁷ It is apparent from the HOA rules put in place by Whale Rock Gardens (Pty) Ltd that sales of property in the Village may occur only through accredited agents. Purchasers of sectional title units undertake, in terms of the pro forma deeds of saleexecuted by them, to subscribe to the constitution and rules of the HOA.⁸ Until and unless the HOA changed the position, the accreditation of agents would be a matter determined by Whale Rock Gardens (Pty) Ltd. qua 'developer', as the founding member and trustee of the HOA.⁹ All of this demonstrates that the sale of erf 9674 by Whale Rock Gardens (Pty) Ltd to Whale Rock Gardens Management Services (Pty) Ltd does not detract from the character of the whole of Whale Rock Resort Village as 'Whale Rock Gardens (Pty) Ltd's development'. Indeed, the deeds of sale made it apparent that Whale Rock Gardens Management Services (Pty) Ltd was in material respects an entity employed by Whale Rock Gardens (Pty) Ltd to realise the concept of the Village's initial development and to undertake its subsequent operation as a resort.

[13] The part of the Village on which the sectional title units are erected is as much part of the development known as Whale Rock Resort Village as is that comprised of the free standing erven. Accordingly, expressions in the contract document like property within the Whale Rock Resort Village', 'property situate in Whale Rock Resort Village' and 'property in Whale Rock Resort Village', being wording which appears in several clauses in the contract, and which clearly pertain to the subject matter that the respondent has been appointed by the appellant to market and, in respect of which, also to manage the marketing by others, denote all the marketable property within the Village without discrimination. The contention by the appellant that only the free standing residential erven are denoted by the expressions is not supported either by the ordinary meaning of the expressions, read in context, or by any other aspect of the factual matrix. The respondent's contention is in fact contradictory of the plain import of the wording of the document.

[14] The only limitation on the ambit of the respondent's appointment that is evident in the deed of contract is that which follows from the nature of the appointment of the respondent as Amazing Estate's 'sub-contractor'. It follows that the respondent has been appointed to market only that property which the appellant itself was appointed as principal contractor to market or property in respect of which the appellant had been appointed to manage the marketing. There is no reason in fact or in law for the appellant not to have been appointed to market all the property in the Village irrespective of in whose name it might have been registered. The evidence suggests that the appellant was indeed engaged in the marketing of all categories of property within the Village That much ts apparent from the marketing brochure which it produced and furnished to the respondent. It is also apparent from the terms of its contract with the respondent, which required the appellant to include Whale Rock Resort Village in all future advertising. That the registered ownership of the property concerned at any particular time was of no significance is evident from the express provision of its interest in property sale re-listings in the Village, mentioned earlier.

[15] Clause 10, understood in the context of the manifest character of the marketing agreement between the appellant and the respondent as a sub-contract, suggests that the antecedent agreement in terms of which the appellant had been appointed as principal contractor would have been one between the appellant and Whale Rock Gardens (Pty) Ltd. The content of clause 10 gives no clue one way or the other as to the ambit of the antecedent agreement. There is no inherent reason, in the context of a resort development, why Whale Rock Gardens (Pty) Ltd's mandate to the appellant to market property in the development should have been limited to property registered in the name of Whale Rock Gardens (Pty) Ltd. On the contrary, the content of the agreement between the appellant and the respondent -to which Whale Rock Gardens (Pty) Ltd was a signatory in order to give effect to the undertaking in favour of the respondent contained in clause 10 - points the other way. The content of the contract suggests a scheme whereby all marketing of property in the Village would entail the employment of accredited agents bound to fulfil their functions using predetermined marketing material and pro forma deeds of sale. The fact that the respondent's appointment was for an undefined period of time, subject to termination on six months' notice, coupled with provisions defining the annual leave and the time of year at which it might be taken by members of the respondent corporation are entirely inconsistent with the notion of a contract limited to the sale of a defined number of unsold free standing erven in the property still registered in the developer's name. They point rather to the creation of an enduring marketing right and obligation in respect of property in the Village, quite irrespective of the ownership of that .property from time to time. The terms of clause 10 suggest that the developer had probably reserved that right for itself in its business scheme, but even were this not the case it would not derogate from the characteristics of the agreement discussed above

[16] In my judgment the deed of contract is clear and unambiguous in the relevant respects. . Evidence concerning its negotiation was not admissible in the circumstances and the respondent therefore does not stand to be penalised for failing to call evidence to contradict the evidence given by Mr Arijs in respect of the negotiation of the agreement. (It is not necessary to say anything determinative about the estoppel pleaded by the respondent in its replication, but in the circumstances which led to Mr Arijs's evidence being admitted as a consequence of that pleading it should be noted that its soundness in law was. to say the least, doubtful; and therefore, prima facie, open to exception. The meaning of an agreement which - as in the current case - has been entirely integrated in a written deed of contract (see clause 16) is a matter of law and not an issue open to factual representation.¹⁰ The parties furthermore expressly excluded the reliance by either one of them on any representations not set forth in the contract document. The only basis upon which the appellant would have been properly entitled to adduce the evidence of Mr Arijs in respect of the negotiation of the contract would have been in ine context of a defence that the deed of contract c;c not reflect the carries BCtual agreement(and was therefore susceptible to rectification.)

[17] I would accordingly dismiss the appeal with costs.

A.G. BINNS-WARD

Judge of the High Court

I agree. The appeal is dismissed with costs.

V.C. SALDANHA

Judge of the High Court

1It is not apparent to us on what basis the amount claimed by the respondent was computed in terms of the agreement II would appear that the respondent's claim was founded on what it would have been entitled to had there been due compliance by the appellant with the terms of the agreement, as construed by the respondent - in other words, on the basts of fictional fulfillment In that respect we would have expected the claim to have been computed in an amount equalling half of a commission levied at six per cent of the selling price in respect of the transactions involved However, in view the parties' consensus on the quantification of the claim, we do not have to make any determination of that issue.

2The Supreme Court of Appeal most recently expressed the task as follows in Hyprop Investments v Shoprite Checkers [2011] 2ASCA 51 {30 March 2011) at para 12. The process of interpretation of contracts involves a search for the intention of the parties through the words that they used, considered in the context of the agreement as a whole, including the factual background and construed "in accordance with sound commercial principles and good business sense so thai it receives a fair and sensible application".'

3See. amongst other pertinent authority. Joubert v Enslin 1910 AD 6 at 37-8; Swart en 'nAnderv Cape Fabrix (Pty) Ltd at 202; Coopers & Lytxand v Bryant [1995] ZASCA 64; 1995 (3) SA 761 (A) at 768; Van der Westhuizen v Arnold 2002 (6) SA 453 (SCA) at 464J - 465E; Plit v Imperial Bank Ltd 2007 (1) SA 315 (SCA) at para. [10] and KPMG v Securefin Ltd 2009 (4) SA 399 (SCA) at para. [39].

4See Picardi Hotels Lid v Thekwini Properties (Pty) Lid [2008] ZASCA 128; 2009 (1} SA 493 (SCA) at para. [5],

5Cf. Lloyds of London Underwriting Syndicates 969. 48. 1183 and 2183 v Skilya Property Investments (Pty) Ltd (2004] 1 All SA 386 (SCA) at para. [14].

6Cf. RH Christie The Law of Contract in South Africa 5ed at 211-212.

7See. for example clause 11in the deeds of sale tn respect of the freestanding properties and clauses 9.1.6 and 9 1.7 in the deeds in respect of the sectional title units.

8See recordal D and clauses 9.1.6 and 9.1.7.

9"That much Is evident from the constitution of the HOA read with clause 12.1.2 of the pro forma deeds of sale in respect of the sale of freestanding erven in the development.

10See KPMG Chartered Accountants (SA) v Securefin Limited and Another supra, loc cit.