Crispette and Candy Co Ltd v Oscar Michaelis, NO and Leopold Alexander Michaelis, NO

• Jurisdiction: South Africa
• Judge: Watermeyer CJ, Greenberg JA and Davis AJA
• Judgment Date: 20 June 1947
• Citation: 1947 (4) SA 521 (A)
• Court: Appellate Division

Greenberg, J.A.:

This is an appeal and a cross-appeal against a judgment given by MILLIN, J., in the Witwatersrand Local Division on an exception to a declaration and an application to strike out portions of it. The appellant was the plaintiff in the Court below and claimed from the defendant payment of the sums of £1,480; £1,555 12s. 9d., interest and costs. The claim was based on a written agreement dated the 20th November, 1934, as amended by a verbal agreement entered into in January, 1935. Reference to a number of the clauses of the written agreement, and to this agreement as a whole, was made during argument, and to some extent will also be made in the course of these reasons. So it will be necessary, in any report that may be made of this case, to include in the preface to it a copy of the agreement. The verbal agreement is set out in sec. 6 of the declaration, which reads:

'6 (a) The said Herman Michaelis was unable to obtain delivery and transfer of 30% of the said shareholding and was only able to obtain 2,678 shares representing 19.7% of the shareholding in the said company. Thereafter and in or about the month of January, 1935, a further agreement was come to between the said Herman Michaelis and the plaintiff company in terms whereof the said Herman Michaelis agreed to deliver to the plaintiff company his total shareholding, being 2,678 shares, to the plaintiff company to be held by the plaintiff company as a pledge and as security for the repayment of the total amount of the advances which might thereafter be made either to the said Herman Michaelis or to his wife in terms of the agreement aforesaid.

Greenberg JA

(b) It was further agreed between the said Herman Michaelis, the plaintiff and certain Vera Bernstein and Montague Bernstein who between the two of them held 600 shares in the plaintiff company that any dividend accruing on the said 600 shares should be retained by the plaintiff and should be allocated against any amount owing by the said Herman Michaelis to the plaintiff or against any advances made to Mrs. Rosie Michaelis in terms of and in the manner and on the occasions referred to in para. 4 (b) hereof.

(c) Pursuant to the said arrangement the plaintiff company held and still holds the said shares as security for the repayment of the said advances.'

Paras. 7 and 8 of the declaration read:

'7. The said Herman Michaelis died in the month of November, 1937. The plaintiff under the said agreement advanced to the said Herman Michaelis a sum of £1,480 during the period November, 1934, to November, 1937, inclusive, which said amount is still outstanding and owing to the plaintiff.

8 (a) The said Herman Michaelis was survived by his wife, the said Rosie Michaelis, who died in the month of October, 1945, and plaintiff under the agreement aforesaid paid and advanced to her an amount of £2,850 in respect of the period December, 1937, to October, 1945.

(b) On the 30th day of June, 1941, the plaintiff declared a dividend on the shares held by the estate of the late Herman Michaelis and the said Vera Bernstein and Montague Bernstein, amounting in all to the sum of £1,294 7s. 3d., which amount was allocated by the plaintiff against the payments made to the said Rosie Michaelis, leaving a balance still due and owing in respect of the said payments of £1,555 12s. 9d., which amount is still outstanding and owing to the plaintiff.'

The defendant excepted to the declaration on the ground that it discloses no cause of action, is bad in law and is vague and embarrassing. The details of the application to strike out need not be mentioned.

The exception was originally based in the Court below on three grounds: (1) that the whole claim is bad because the plaintiff does not tender redelivery of the pledged shares against the payments which are claimed; (2) that the whole claim is bad because under the agreement the plaintiff is not entitled to any repayment whatever of the advances made either to Michaelis or his wife except out of the dividends on the pledged shares and the shares of M. and v Bernstein; or alternatievly (3) that the agreement in any event does not make the estate of Michaelis liable for advances to his wife after his death. The exception, based on these grounds, and the application to strike out, were argued and judgment reserved, but before giving a decision, the learned Judge drew the attention of the parties to sec. 86bis (1) (b) of the Companies Act, 1926, as amended, which came into force on the 1st

Greenberg JA

January, 1940. Further argument was then heard on the question whether, by reason of the sub-section, advances made after the 1st January, 1940, were recoverable in law. I shall refer to this ground as the fourth ground of exception.

In the result the learned Judge held that the original grounds of exception were not well-founded, but he upheld the fourth ground and ordered that the exception succeeds as to all claims arising out of advances after the 1st January, 1940. He dismissed the application to strike out with costs and made an apportionment as to costs in regard to the exception which need not be referred to.

The plaintiff appeals against the order allowing the exception to claims arising after the 1st January, 1940, and the defendant cross-appeals against the dismissal of the exception to the whole claim and to the claims arising after the death of Michaelis, and also to the dismissal of the application to strike out. In regard to the exception, as the first and second ground, if well-founded, would give the defendant a greater measure of success than the other grounds, and as the third ground would give greater relief than the fourth, it will be advisable to deal with them in their numerical order, even though this puts the cross-appeal before the appeal.

I agree with the conclusion of the learned Judge on the first ground of the exception. Where a plaintiff sues on a contract between him and the defendant and claims performance of the defendant's obligation to him under the contract and where his right to such performance is conditional on the performance by him of a reciprocal obligation due by him to the defendant, then it is necessary that in his declaration he should tender performance of his obligation to the defendant; he is only entitled to judgment against performance by him of his obligation. A typical case of this kind is where, under a contract of sale in which the term of payment is cash against delivery, the plaintiff is the vendor and claims payment of the purchase price. But in the present case there is nothing in the agreements set out in paras. 3 to 6 inclusive of the declaration which makes the plaintiff's right to receive payment conditional on the return by it of the pledged shares to the deceased or his estate. In the written agreement there was no provision at all that any shares should be delivered to the plaintiff as a pledge for repayment of the amounts to be drawn by

Greenberg JA

the deceased and his wife, and there is nothing in the later verbal agreement which makes repayment conditional on the return of the shares. There was therefore no obligation to tender such return in the declaration.

The cases of Nulliah v Harper (1930 AD 141) and Caccia v Muller (1929 CPD 77) do not assist the defendant on this point. In the former of these cases the plaintiff debtor was suing on the accessory contract of mortgage, i.e., the actio pignoratitia which in that case entitled him to cancellation of the mortgage on payment of the debt. In Caccia v Muller the question was not...