Cairns (Pty) Ltd v Playdon & Co, Ltd

• Jurisdiction: South Africa
• Citation: 1948 (3) SA 99 (A)

Cairns (Pty) Ltd v Playdon & Co, Ltd
1948 (3) SA 99 (A)

1948 (3) SA p99

Citation	1948 (3) SA 99 (A)
Court	Appellate Division
Judge	Tindall ACJ, Centlivres JA, Greenberg JA, Schreiner JA and Davis AJA
Heard	March 9, 1948
Judgment	May 12, 1948

Flynote : Sleutelwoorde

Contract — Option — Granting of by limited liability company — Whether memorandum empowers grant — Interpretation — Document granting option obscure — Intention of parties not clear — Evidence of surrounding circumstances admissible — Evidence — Contra proferentem rule — Meaning of — When to be applied — Costs.

Headnote : Kopnota

Clause (m) of the objectes clause of the defendant's memorandum of association read as follows: 'To sell, improve, manage, develop, exchange, lease, mortgage, dispose of, turn to account or otherwise deal with all or any part of the rights and property of the company. Also to advertise the business, goods, wares, and products of the company in the Press or by circular or by other means.' On the 10th July, 1944, the defendant, a limited liability company, granted plaintiff an option which provided inter alia: '(1) The purchase price shall be the sum of £15,000. (2) The period of the option shall extend from date hereof to ten days after having received from grantors notification in writing that: (a) They are prepared to evacuate and give possession upon a definite date, or (b) that they have received from some other party and offer to puchase on the same terms and considerations as those applying to this option. (5) Date of possession shall be that date upon which sellers agree to evacuate the hereinbeforementioned premises in terms of clause 2 (a) hereof.' On 6th May, 1947, the plaintiff exercised the option. In a declaration claiming specific performance, the plaintiff alleged inter alia that it had

1948 (3) SA p100

duly exercised the said option and had tendered the purchase price and was entitled to transfer of the property. The defendant excepted to the declaration as disclosing no cause of action, the grounds being (a) that the alleged option set out in the declaration was invalid and of no force and effect in that it had no proper time limit within which it had to be exercised; (b) if it did reveal a time limit, there was no allegation in the declaration that it had been exercised within that time limit. It also filed a special plea that even if the allegations in the declaration were correct it was not within the powers contained in its memorandum of association to grant an option as alleged. A Local Division dismissed the exception but upheld the special plea. At the hearing of an appeal by the plaintiff against this decision the defendant, who had noted a cross-appeal, applied for leave to file a third ground to his exception. The terms of this exception were: '(c) The option alleged to be given in Annexure 'A' consisted merely of a right of first refusal or right of pre-emption, exercisable only in certain eventualities (set out in paragraph 2 (a) and (b) of the Annexure), and there is no allegation in the declaration that the said conditions upon which the right depended had occurred or been fulfilled or the date or dates of such fulfilment.'

Held, that the appeal should be allowed in that paragraph (m) gave defendant power to enter into the option in question.

Held, as to the cross-appeal (per CENTLIVRES, J.A., GREENBERG, J.A., and DAVIS, A.J.A.), that the rule 'in contrahenda venditione ambiguum pactum contra venditorem interpretandum est' was no more than an enunciation of the well-known rule, 'verba fortius accipiuntur contra proferentem'.

Held, further (per CENTLIVRES, J.A., GREENBERG, J.A., and DAVIS, A.J.A.), that it was essential at this stage to rely on the contra proferentem rule, and provisionally to adopt the meaning given to the document by the plaintiff, i.e., that the document in express language granted an option to buy for £15,000 and that the words 'the period of the option shall extend from date hereof to 10 days after, etc.', in clause 2 fixed beyond the possibility of dispute the starting-point of the period during which it was entitled to purchase the property.

Held, further (per TINDALL, A.C.J., CENTLIVRES, J.A., GREENBERG, J.A., and DAVIS, A.J.A.,), that at the trial stage the evidence of surrounding circumstances would be admissible to assist the Court in arriving at the true intention of the parties.

Semble: (per CENTLIVRES, J.A., GREENBERG, J.A., and DAVIS, A.J.A.) That at the trial stage a rectification of the document might be sought to conform with the true intention of the parties,

Held (per TINDALL, A.C.J.), regard being had to the obscurity of the document and the difficulty of interpreting it standing alone, that this was a case where evidence of the surrounding circumstances may assist the interpretation.

Held (per SCHREINER, J.A.), that the meaning of the document as given to it by the plaintiff should be adopted.

Held, accordingly, that the cross-appeal failed and the defendant should be ordered to pay the costs of the appeal.

The decision in the Eastern Districts Local Division in Cairns (Pty.) Ltd v Playdon & Co. (Pty.) Ltd. (1947 (3) S.A.L.R. 145) confirmed in part and reversed in part.

1948 (3) SA p101

Case Information

Appeal from a decision in the Eastern Districts Local Division (HOEXTER, J., and LEWIS, J.) dismissing an exception to a declaration and upholding a special plea. The nature of the pleadings appears from the judgment of SCHREINER, J.A.

N. E. Rosenberg, K.C. (with him C. J. M. Nathan), for the appellant. Apart from the specific objects stated in clauses (K) and (M) of its memorandum of association, respondent would have an implied power to deal with its property for the purposes of its business. Cf. In re Patent File Co., Ex parte Birmingham Banking Co. (L.R., 6 Ch. App. 83); In re Kingsbury Collieries Ltd. and Moore's Contract (1907, 2 Ch.D. 259 at pp. 263, 267, 268); Palmer's Company Precedents (5th ed., Vol. 1, p. 424). A power to 'sell and dispose of' authorises the grant of an option, which is merely a stage in the conclusion of a contract of sale. See Bal v van Staden (1902, T.S. 128 at pp. 130 - 1); van Pletsen v Henning (1913 AD 82 at p. 98); MacKeurtan, Sale of Goods in South Africa (2nd ed., p. 30). An option is merely a standing offer that is an offer to sell coupled with an undertaking that it cannot be withdrawn. There is no juristic distinction in the application of the 'objects' clause of respondent's memorandum, between an offer to sell and an option. That the option in the present case is linked with a contract of sale as being the offer giving rise to the sale, if the option is exercised. is shown by the provision that the £105 paid for the option shall, in such event, be considered as part payment of the purchase price. Alternatively to the foregoing, the grant of an option is incidental or conducive to the power to sell within the scope of the object mentioned in clause (W) of respondent's memorandum, or is reasonably implied in the power of sale. See Palmer (supra, pp. 438 - 440, and 422). A company, as a body corporate, can, in furtherance of its objects, deal with its property as freely as an individual; see Buckley (11th ed., p. 167). As to powers of alienation in general, see Street, The Doctrine of Ultra Vires (pp. 141, 143, 144). This doctrine is to be applied reasonably, so that whatever is fairly incidental to what has been authorised ought not, unless expressly prohibited, to be held ultra vires; cf. Attorney-General v Great Eastern Rly. Co. (5 A.C. 473); Street (supra, pp. 58 - 9); Simpson v Westminster Palace Hotel (8 H.L. Cas. 712). The judgment of the Court a quo is erroneous in, (a) it applies the test of the effect of the option and draws a distinction between short and long term options; but the resulting benefit to the company cannot be the test as to ultra vires; see

1948 (3) SA p102

Southport Corp v Birkdale Dist. Electric Supply Co. (1925, Ch.D. 794 at pp. 812, 819, 824); Municipal Mutual Ins. Co., Ltd v Pontefract Corp. (116 L.T. 671 - 2); Mayor of New Windsor v Pontefract Corp. (116 L.T. 671 - 2); Mayor of New Windsor v Stovell (27 Ch.D. 665); and cf. Pothier Vente (sec. 484); (b) it indicates that the power to grant an option is inconsistent with the free right to sell, but a company can deprive itself of the right to sell; (c) Clay v Rufford (5 de G. & Sm. 768; 64 E.R. 1337) and the cases following it, quoted by the Court a quo are decisions on the limited powers in English Law, of trustees to sell; a 'power of sale' in English law is a technical term distinct from the dominium which a man has over his own property; see Halsbury's Laws of England (2nd ed., Vol. 25, pp. 509, 602). The cases referred to no longer, since 1925 express the English Law; see 15 Geo. V, Ch. 18, sec. 51 and 15 Geo. V, Ch. 20, sec. 28. The question is not whether the grant of an option was ultra vires the trustees or directors, but whether it was ultra vires the company itself; (d) as to Oceanic Steam Navigation Co v Sutherberry (16 Ch.D. 236) quoted by the Court a quo, see Re Kemnal & Still's Contract (1923, 1 Ch.D. 293 at p. 296); Re Chaplin & Staffordshire Pottery Waterworks Co.'s Contract (1922, 2 Ch.D. 824 at p. 845); Hohnson v Clarke (1928, 1 Ch.D. 847) is distinguishable on the facts; Sandground v Eloff (1903, T.S. 787) is simply a decision on the extent of an agent's limited powers; cf. de Wilde v New Transvaal Co., Ltd. (1902, T.S. 56).

F. G. Reynolds, K.C. (with him A. W. Back), for the respondent and cross-appellant: Annexure 'A' to appellant's declaration is ultra vires on appellant's own construction that without the happening of either of the events set out in paras. 2 (a) and (b) of the annexure, it could close the sale at any time from the 10th July, 1944, and that the paragraphs referred to merely set out terminal...