Protea Property Holdings (Pty) Ltd v Boundary Financing Ltd (Formerly Known as International Bank of Southern Africa Ltd) and Others
| Jurisdiction | South Africa |
Protea Property Holdings (Pty) Ltd v Boundary Financing Ltd (Formerly Known as International Bank of Southern Africa Ltd) and Others
2008 (3) SA 33 (C)
2008 (3) SA p33
|
Citation |
2008 (3) SA 33 (C) |
|
Case No |
758/05 |
|
Court |
Cape Provincial Division |
|
Judge |
Griesel J |
|
Heard |
May 28, 2007; May 29, 2007; May 31, 2007 |
|
Judgment |
August 8, 2007 |
|
Counsel |
HM Carstens SC and SP Rosenberg SC for the plaintiff. |
Flynote : Sleutelwoorde B
Contract — Terms of — Warranty — Breach of — Remedies for breach of contract C become available, including specific performance.
Prescription — Extinctive prescription — Debt — What constitutes — Not including claim for rectification of contract.
Headnote : Kopnota
A claim for rectification of a contract does not constitute a debt for the purposes of prescription. (Paragraph [30] at 41G - H.) D
Breach of a warranty results in remedies for breach of contract becoming available, including specific performance. (Paragraph [42] at 44G - 45A.)
Cases Considered
Annotations
Reported cases E
Cape Town Municipality v Allie NO 1981 (2) SA 1 (C): dictum at 7D - G applied
Electricity Supply Commission v Stewarts and Lloyds of SA (Pty) Ltd 1981 (3) SA 340 (A): referred to
Evans & Plows v Willis & Co 1923 CPD 496: referred to
Evins v Shield Insurance Co Ltd 1979 (3) SA 1136 (W): referred to F
Gralio (Pty) Ltd v DE Claassen (Pty) Ltd 1980 (1) SA 816 (A): referred to
HMBMP Properties (Pty) Ltd v King 1981 (1) SA 906 (N): referred to
Mainline Carriers (Pty) Ltd v Jaad Investments CC and Another 1998 (2) SA 468 (C): referred to
Masterspice (Pty) Ltd v Broszeit Investments CC 2006 (6) SA 1 (SCA): dictum in para [35] applied G
Prima Toy Holdings (Pty) Ltd v Rosenberg 1974 (2) SA 477 (C): referred to
Primavera Construction SA v Government, North-West Province and Another 2003 (3) SA 579 (B): referred to
Resisto Dairy (Pty) Ltd v Auto Protection Insurance Co Ltd 1963 (1) SA 632 (A): dictum at 644F - H applied
Santos Professional Football Club (Pty) Ltd v Igesund and Another 2003 (5) SA 73 (C) H ((2002) 23 ILJ 2001): dictum at 82A et seq applied
Spiller and Others v Lawrence 1976 (1) SA 307 (N): referred to
Tamarillo (Pty) Ltd v BN Aitken (Pty) Ltd 1982 (1) SA 398 (A): dictum at 441D - 443G applied
The Master v IL Back and Co Ltd 1981 (4) SA 763 (C): referred to
Whitfield v Phillips and Another 1957 (3) SA 318 (A): referred to. I
Case Information
Action for delivery of shares and specific performance of a warranty pursuant to a sale of shares agreement. The facts appear from the reasons for judgment.
HM Carstens SC and SP Rosenberg SC for the plaintiff.
EW Fagan and CF Hugo for the defendants. J
2008 (3) SA p34
Cur adv vult. A
Postea (August 8).
Judgment
Griesel J:
[1] B During March 2001 the plaintiff in this matter, Protea Property Holdings (Pty) Ltd (PPH), together with an associated company, Protea Hotel Group (Pty) Ltd (PHG), concluded a suite of agreements with the first defendant, known at that time as International Bank of Southern Africa Ltd (IBSA). (At a later stage there was a change of corporate C control at the first defendant and it is now known as Boundary Financing Ltd (Boundary). In order to avoid confusion, however, I shall refer herein to 'the first defendant', irrespective of the entity that was in control at any given stage.)
[2] Loosely speaking, the suite of agreements concerned the acquisition D by the plaintiff of the Edward Hotel in Durban. It followed on a similar suite of agreements concluded between the same parties during October 2000 in relation to the Arthur's Seat Hotel in Sea Point. Both the aforementioned hotels were previously owned and managed by different companies in the Karos Group (Karos), which were placed in provisional E liquidation during October 1999. The present action concerns only the set of agreements relating to the acquisition of the Edward Hotel.
[3] The agreements comprising the suite were the following: [1]
A sale of shares agreement between the first defendant, the plaintiff and the second defendant (Swanvest), in terms of which the first F defendant sold to the plaintiff 60% of the share capital of Swanvest for R1. In terms of the agreement, the purchase price was to be paid within 30 days of the effective date, stated to be 2 February 2001. Share certificates were to be delivered within seven days of the payment of the purchase price. In terms of clause 1.24 of G appendix 2 to the agreement, the first defendant warranted and undertook, furthermore, that as at the effective date and the delivery date 'the sole assets of [Swanvest] shall be the immovable property known as Remainder of Erf 948 Sea Point West, in extent 4048 square metres, held by Deed of Transfer No T25566/1997, H commonly described as The Arthur's Seat Hotel'. [2]
A shareholders' agreement between the same three parties, which recorded that the plaintiff had acquired 60% of the equity in Swanvest, and that Swanvest would be the registered owner of the bare dominium in the Edward Hotel property. The parties undertook to procure that the shares in Swanvest would be allotted as to I 60% to the plaintiff and the remaining 40% to the first defendant.
2008 (3) SA p35
Griesel J
An agreement of sale between Swanvest and the plaintiff, in terms A of which the plaintiff acquired the furniture, fixtures and equipment (FFE) in the Edward Hotel for R2 million.
An agreement of cession and pledge between the plaintiff, the first defendant and Swanvest, being a cession and pledge of equity in securitatem debiti by the plaintiff of the share certificates pertaining B to its shareholding in Swanvest to the first defendant, securing the plaintiff's (future) indebtedness to the first defendant.
A lease agreement between the first defendant and PHG, in terms of which the former let to the latter the Edward Hotel for a period of ten years commencing on 1 February 2001 at a monthly rental of R87 500 during the first year, escalating to R94 500 during the C second year and escalating at an annual rate of 8% thereafter.
An addendum to the aforesaid lease agreement, providing for additional rental if the gross annual turnover were to exceed R2 million.
A 'side-letter' between PHG, the plaintiff and the first defendant in D terms of which the latter gave PHG and the plaintiff the right 'to restructure the series of transactions or any one of them' after a due diligence investigation had been performed and with reference to the tax implications of the transactions.
Another 'side-letter' dealing with the payment of municipal charges under the lease agreement. E
[4] According to the plaintiff in its amended particulars of claim, the foregoing agreements 'each formed a necessary part of a series of transactions or scheme, designed and intended by the plaintiff and the defendants to enable the plaintiff to acquire ownership, as to a 60% share, in the immovable property on which the Edward Hotel stands'. F
[5] In addition to the foregoing suite of written agreements, the plaintiff also relies on a subsequent contract, partly written and partly oral, concluded between the plaintiff and the first defendant during the first half of 2002, in terms of which the plaintiff is alleged to have acquired the right to the remaining 40% of the shareholding in Swanvest against G payment to the first defendant of R674 700.
[6] Flowing from the aforementioned agreements, the plaintiff brings a threefold claim against the first defendant:
a claim for delivery of all the shares in Swanvest against payment by the plaintiff of R674 701; H
a claim for rectification of PC1 so as to reflect a warranty by the first defendant that the sole asset of Swanvest on the effective and delivery dates would be the Edward Hotel property, and not the Arthur's Seat property; and
a claim that the first defendant be ordered to 'make good' the said I warranty.
[7] The evidence presented on behalf of the plaintiff in support of its claims consists, firstly, of a substantial body of documentary evidence, arranged chronologically and numbered consecutively. In addition, the plaintiff also presented viva voce evidence by its financial director, Mr J
2008 (3) SA p36
Griesel J
Arnold A Cloete, who was the only witness to testify at the trial.
[8] It is clear from the evidence that, almost immediately after signature of the suite of agreements, attention shifted to the question of a possible restructuring of the Edward Hotel transaction. This was so because Karos, the owner of the Edward Hotel, had an assessed tax loss of some B R40 million, which could potentially be utilised by the plaintiff to its own advantage. While this possibility of restructuring was being explored, the plaintiff and the first defendant did not proceed with the immediate implementation of the sale of shares agreement. Thus, the nominal purchase consideration of the shares was not paid over, and delivery of the shares was, in turn, delayed. Likewise, the Edward Hotel property C remained the property of Karos.
[9] A scheme of arrangement in terms of s 311 of the Companies Act [61 of 1973 - Eds] was ultimately sanctioned on 31 December 2002. In January 2003 the plaintiff's attorney, Mr Traub, produced a set of fresh D agreements which would implement a restructured deal. This gave rise to protracted negotiations between the parties, which had not come to fruition when new shareholders acquired the shares in the first defendant on 7 November 2003.
[10] It is quite evident from the correspondence that the new shareholders E of the first defendant were not au fait with the negotiations that had been ongoing until that stage...
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