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

• Jurisdiction: South Africa

Crispette and Candy Co Ltd v Oscar Michaelis, NO and Leopold Alexander Michaelis, NO
1947 (4) SA 521 (A)

1947 (4) SA p521

Citation	1947 (4) SA 521 (A)
Court	Appellate Division
Judge	Watermeyer CJ, Greenberg JA and Davis AJA
Heard	March 27, 1947; June 13, 1947
Judgment	June 20, 1947

Flynote : Sleutelwoorde

Practice — Pleading — Exception — Declaration must contain tender of performance of reciprocal obligation — Nothing in agreement making plaintiff's right to receive payment conditional an return of pledged shares — Declaration without tender of shares not excipiable.

Contract — Loan — Advances of sums of money by appellant — Obligation of repayment — No express provision for repayment in agreement — Drawing sums 'in anticipation of dividends' — Merely indicating fund not limiting recourse to that fund — Person making payment in advance and in expectation that dividends will cover them — Advances made to wife after death of husband — Contract by husband with appellant for benefit of wife — Nothing in agreement indicating husband's estate liable for payments to wife nor negativing wife's liability — Liability for repayment arising from receipt by wife of advances with knowledge of terms of contract — Ubi emolumentum, ibi onus — Interpretation — Lord Wensleydale's Golden Rule; grammatical and ordinary sense of words, unless leading to absurdity or repugnancy — Applies to any instrument — Onus on party alleging words do not mean what they say.

Company — Section 86bis (1) (b) of the Companies Act, 1926, as amended by sections 52 and 119 of Act 23 of 1939 — Prohibition under criminal sanction of loans on security of shares of company — As loans not made to respondent unnecessary to decide whether recoverable.

Headnote : Kopnota

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

1947 (4) SA p522

of sale in which the term of payment is cash against delivery, the plaintiff is the vendor and claims payment of the purchase price. Where, however, there was nothing in the agreement between the parties making the appellant's right to receive payment conditional on the return by it of the pledged shares to the deceased or his estate (the respondent) there was accordingly no obligation on the appellant to have tendered such return of the shares in the declaration.

Nulliah v Harpur (1930 AD 141), Caccia v Muller (1929 CPD 77), distinguished.

The appellant had entered into an agreement, during his lifetime, with the late Herman Michaelis in terms of which inter alia he was to have the right to 'draw and receive' from the appellant company forty pounds per month 'in anticipation of dividends accruing to him in respect of his shareholdings' in the company, and in the event of his predeceasing his wife, she was to be entitled to draw and receive from the appellant company during her lifetime the sum of thirty pounds per month, 'in anticipation of dividends in respect of the shares formerly held by her husband'. Herman Michaelis had died in November, 1937, and his wife in October, 1945. Under the agreement the appellant had advanced to the late Herman Michaelis the sum of one thousand four hundred and eighty pounds, and the balance in respect of payments to his wife under the agreement was one thousand five hundred and fifty-five pounds twelve shillings and ninepence, both of which amounts it was alleged in the declaration were still outstanding and owing to the plaintiff (appellant) and which amounts had been claimed from the defendants (respondents).

In argument in the Court a quo on exception to plaintiff's (appellant's) declaration it was contended on behalf of the estate of the late Herman Michaelis that the whole claim was bad because under the agreement appellant was not entitled to any repayment whatever of the advances made either to Herman Michaelis, or to his wife, except out of the dividends of certain shares which had been pledged as security for the advances; it was also submitted that the words 'in anticipation of dividends' in clause seven of the agreement indicated the sole source from which appellant was to recoup itself for these payments to Herman Michaelis.

Held, that it was clear from clause ten of the agreement that the monthly payments were regarded as creating a debt, and there was no reason to depart from the view that there was the obligation on Herman Michaelis of repayment to the appellant, even though the agreement nowhere expressly bound him to repay the amount.

Held, further, that the phrase 'in anticipation of dividends', when it related to the reimbursement for payments made to the person who was entitled to the dividends, meant that the person who made the payments, although he did not at that time own the dividends, was making payments in advance and in expectation that the dividends would cover them in amount, either shortly or in the future. In themselves the words did not assist in determining whether the advances created or indicated a debt due by the payee

1947 (4) SA p523

to the payer, or whether the dividends were the only source of repayment available to the payer. The words 'in anticipation of dividends' merely indicated a fund from which the appellant could recoup itself, and did not limit its recourse for reimbursement to that fund, for if the payments had been repayable out of dividends only, they would not have been repayable at all in the event of a winding-up without a declaration of a dividend, and it was unlikely that that result was intended. The attack upon the declaration in respect of the claim for one thousand four hundred and eighty pounds accordingly failed.

Pothier, Obligations (section 569) and Rhodesian Railways Ltd v Commisioner of Taxes (

Held, further, that from the language used in clause ten, there was no ground for holding that, in regard to the payments after her husband's death, this was not an agreement made by him for her benefit, under which, after adoption by her, with knowledge of its terms, she could sue or be sued; by this agreement the wife could either be said to make herself a party to the original contract by adopting it, or to be making a new contract by which she bonud herself.

McCullogh v Fernwood Estate Ltd. (1920 AD 204, at p. 206) and Crewe v Commissioner for Inland Revenue (1943 AD 656, at p. 674), applied. Kynochs Ltd v Transvaal Silver and Base Metals Ltd. (1922, W.L.D. 71, at p. 76), distinguished.

Held, further, that the canon of construction to be applied to clause ten was LORD WENSLEYDALE'S Golden Rule for the interpretation of instruments - that the ordinary and grammatical sense of words be adhered to unless leading to some absurdity, repugnancy or inconsistency with the rest of the instrument. The only way in which the wife could become indebted to the appellant in pursuance of the agreement was through the receipt of the advances by her with the knowledge of its terms, and as the words of clause ten were not qualified by the rest of the agreement, they unequivocally imposed the liability to repay on her, for the advances had been made to her - ubi emolumentum, ibi onus.

Grey v Pearson (6 H.L. Cas. 106), cited in Principal Immigration Officer v Hawabu (1936 AD 26, at p. 31), and Richards v McBride (8 Q.B.D. 123), applied.

Held, further, that where A has undertaken to make monthly payments to B over a period, the implication is that repayment cannot be demanded before the expiry of the period. If each advance were repayable on demand, A would in reality be advancing practically nothing to B. As the wife was responsible for repayment of the monthly advances, they could not be reclaimed until after her death, in spite of the absence of any provision in the agreement to that effect.

Held, further, that the relevant portion of clause seven of the agreement amounted to this: that on acceptance by the wife of the benefits, there came into being an agreement between her and the appellant whereby the latter agreed that she was entitled to draw thirty pounds per month in anticipation of dividends on the shares. There was nothing in that state of affairs which indicated

1947 (4) SA p524

a liability on the estate of Michaelis for repayment of those advances, or which negatived such liability on the part of the wife, nor did clause ten, or the agreement as a whole together with the later verbal agreement carry the matter any further, for there was nothing strange in the idea that A should make available to B the fruits of his assets, in connection with a debt due by C.

Held, therefore, that the Court a quo should have upheld the exception and decided that the declaration disclosed no cause of action in respect of the claim for one thousand five hundred and fifty five pounds twelve shillings and ninepence on the ground that the agreement did not make the estate of Herman Michaelis liable for advances to his wife after his death.

Held, further, that since the prohibition under criminal sanction was quite clear it was unnecessary to deal in this case with the effect of section 86bis (1) (b) of the Companies Act, 1926, as amended; whether the sub-section debarred the appellant from recovering from the estate of the wife could be decided when such action were instituted.

The decision of the Witwatersrand Local Division in Crispette and Candy Co., Ltd v Oscar Michaelis, N.O., and Leopold Alexander Michaelis, N.O., varied.

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