Joel Melamed and Hurwitz v Cleveland Estates (Pty) Ltd; Joel Melamed and Hurwitz v Vorner Investments (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Corbett JA, Kotze JA, Trengove JA, Smuts AJA and Grosskopf AJA
• Judgment Date: 28 February 1984
• Citation: 1984 (3) SA 155 (A)
• Hearing Date: 21 November 1983
• Court: Appellate Division

Corbett JA:

The appellant in each of these appeals is the Johannesburg firm of attorneys, Messrs Joel Melamed and Hurwitz ("Melamed and Hurwitz"). At all material times the senior G partner in the firm was Mr Joel Melamed. As at the time of the trial (ie August 1981) he had been practising as an attorney in Johannesburg for some 34 years. For some time prior to the events with which these appeals are concerned Melamed and his partner, Mr S Hurwitz, had been interested in township H development. They held financial interests in certain townships which were in the process of being established and exploited; and in addition they, together with one Simmons, formed and operated a company, Township Management Consultants (Pty) Ltd ("TMC"), which, as its name indicates, was incorporated to carry on the business of establishing and managing townships I and marketing the erven therein on behalf of the township owners. Melamed, Hurwitz and Simmons had equal shareholdings in TMC and Melamed was its managing director.

Corbett JA

A In approximately 1961 Melamed met Mr Harry Galaun. Galaun became a client of Melamed's. Together, they went into a small business venture, the details of which are unimportant. In due course they became personal friends. Through two companies, Cleveland Estates (Pty) Ltd ("Cleveland"), respondent in the first appeal, and Vorner Investments (Pty) Ltd ("Vorner"), B respondent in the second appeal, Galaun was interested in certain land, which in Melamed's opinion was suitable for township development. Cleveland had owned a property near Halfway House for many years. Galaun had tried to establish an agricultural holdings township on the property, but without success. Galaun sought Melamed's advice as to what could be done with the land. After investigating the position, Melamed C advised Galaun that the property would make an excellent residential dormitory township. Melamed suggested that a township, to be known as Vorna Valley Township, be established and that TMC be appointed the township manager. This was agreed to and in December 1968 Cleveland and TMC entered into a written agreement in terms whereof TMC undertook, for a fee, to D establish and manage the township on Cleveland's behalf. In the meanwhile a similar arrangement had been reached between Vorner and TMC in regard to a property at Vereeniging, owned by Vorner and known as Unitas Park, and a written agreement had been entered into by the parties in August 1968. Save for the E differences in contracting parties and subject-matter, this agreement and the Cleveland/TMC agreement are in identical terms. For convenience, I shall speak, for the most part, as if there were only one such contract and I shall refer to it as "the management contract".

In terms of the management contract TMC (referred to therein as "the management company") undertakes to do all such things as may be necessary to procure the establishment of a township on F the property owned by Cleveland (or Vorner, as the case may be), which is called "the township owner"; and, to this end, the management company further undertakes to engage surveyors, to submit all necessary applications to the appropriate local authority, to collect all monies in respect of sales, to draw G up endowment schedules, to call for necessary tenders and to make all necessary arrangements for the reticulation of the township. The township owner, on the other hand, undertakes to sign all documents needed for the establishment of the township and authorises the management company to act as its agent to enter into contracts necessary for the reticulation of the township. The contract further provides that the township owner H appoints the management company as its sole agent for the sale of all stands in the township. In return for its services the management company is to be paid a commission of six per centum on gross sales in respect of all sales effected and a management fee of five per centum of the gross amount received I from the sales of all stands in the township. Clause 8 (a) of the contract reads as follows:

"The township owner agrees that the management company shall have the right to appoint attorneys, auditors, surveyors, agents and auctioneers to act on behalf of the township owner in all matters relating to the establishment of the township, transfer of stands in the township, any application to Court, or any matters in connection with or appertaining to the establishment of the township;... "

Corbett JA

Thereafter TMC proceeded to take the necessary steps to have A the two townships established. At that time erven in a township could be sold to the public before the proclamation of the township, provided that the township owner had furnished certain guarantees. This was done, and an advertising and selling programme was prepared. In May 1971 the stage had been reached when the erven in the two townships were ready for B sale. TMC arranged for the printing of the necessary pro forma deeds of sale. Several thousand such pro forma deeds were printed. The deeds for the two townships differ somewhat in form, but each contains, in the relative clause governing the passing of transfer, a provision to the effect that transfer shall be passed to the purchaser by the seller's conveyancers, C who in the one instance (the Cleveland contract) are stated to be Joel Melamed and Hurwitz and in the other (the Vorner contract) as Joel Melamed, Hurwitz and Seligson. It is common cause that, despite the difference in the name, the appellant is the conveyancer nominated in each of the contracts.

For the next ten years the establishment and management of the townships and the sale of erven therein proceeded in accordance D with the management contract. After the townships had been proclaimed (in the case of Unitas Park this was in 1973 and 1977 in the case of Vorna Valley) the erven which had been sold and paid for were transferred to the purchasers thereof. Galaun, on behalf of either Cleveland or Vorner, as the case E may be, signed each deed of sale. His practice was to visit TMC's offices four days a week in order to attend to this business. According to Melamed, he and Galaun would discuss each sale and the business of the townships in general on the occasion of these visits. When the time came for an erf to be transferred, TMC would instruct Melamed and Hurwitz to pass transfer.

F Suddenly, in mid-1979, both Cleveland and Vorner terminated TMC's appointment as management company. Melamed attributed this to "progressive senility" on the part of Galaun, who in May 1979

"suddenly decided that he didn't like me (Melamed) because he said I was doing too much work for another client by the name of Hymie Tucker and I was not attending to his work".

Early in June a dispute arose between Cleveland and Vorner, on G the one hand, and TMC, on the other, in regard to the latter's claims in respect of management fees and commissions; and on 29 June 1979 the auditors to Cleveland and Vorner, Messrs Goldstuck, Herscovitz and Co ("the auditors"), addressed a letter to TMC, the concluding paragraphs of which read as H follows:

"Our clients, in any event, wish to terminate your appointment as management company with effect from 31 July 1979, and on that date we shall be pleased if you will kindly have all books, records and documents available for collection by our clients or their representatives.

Our clients similarly terminate your employment as the sole selling agent with effect from the same date."

This letter came as something of a bombshell. It elicited I replies from both Melamed and Hurwitz and TMC. On 4 July 1979, Melamed and Hurwitz addressed to the auditors two letters, one in respect of the management contract with Cleveland and one in respect of the management contract with Vorner. They are substantially in identical terms. The one to Cleveland reads as follows:

Corbett JA

A "In terms of a management contract entered into by Cleveland Estates (Pty) Ltd and Township Management Consultants (Pty) Ltd we were appointed as the attorneys to attend to all transfers in the township of Vorner Valley. The benefits flowing from the said contract were accepted by us and we have been attending to the transfers of erven under this contract."

The auditors responded to these letters by a letter dated 10 July 1979 asking for information in regard to Melamed and B Hurwitz's appointment as attorneys: whether it was in writing and, if so, a copy thereof; if verbal, then various details of the appointment. Melamed and Hurwitz replied on 24 July 1979 stating:

"Our appointment was in terms of clause 8 of the management contract. The appointment was confirmed on numerous occasions by Mr H Galaun acting on behalf of Cleveland Estates (Pty) Ltd C and Vorner Investments (Pty) Ltd"

and refusing further details.

Melamed and Hurwitz addressed a further letter to the auditors on 23 July 1979, but here they were evidently acting on behalf of TMC. The letter recounts the history of the management D contracts and states, inter alia, that

"in regard to the purported cancellation of the management contracts we would point out that our appointment is an irrevocable appointment...".

The letter also purports to terminate the appointment of Goldstuck, Herscovitz & Co as auditors to the companies.

E On 29 August 1979 attorneys acting on behalf of Cleveland and Vorner addressed a long letter to Melamed and Hurwitz dealing with the management fees and sales commissions claimed by TMC and "the appointment of yourselves as the conveyancers to attend to the transfer of the stands". In the letter the view is expressed that TMC's appointment under the management contract is not irrevocable and that, if the companies acted F incorrectly in cancelling the appointment, the only remedy is one in damages. In regard to the appointment of Melamed...