Ridon v Van der Spuy and Partners (Wes-Kaap) Inc

• Jurisdiction: South Africa
• Citation: 2002 (2) SA 121 (C)

Ridon v Van der Spuy and Partners (Wes-Kaap) Inc
2002 (2) SA 121 (C)

2002 (2) SA p121

Citation	2002 (2) SA 121 (C)
Case No	5847/2000
Court	Cape Provincial Division
Judge	van Heerden J
Heard	October 15, 2001; October 17, 2001
Judgment	November 5, 2001
Counsel	A P Möller for the plaintiff.; A J Smit SC for the defendant.

Flynote : Sleutelwoorde F

Contract — Formation — Consensus — Generally — South African law, as general rule, concerned with external manifestation of, and not G working of, minds of parties to contract — Where subjective consensus absent, resort to be had to 'reliance theory' to determine whether binding contract coming into being — Decisive question is whether party whose actual intention not conforming to expressed H intention led other party, as reasonable man, to believe that declared intention represented actual intention — Necessary, in application of reliance theory, to determine expressed or declared intention by reference to and interpretation of words used.

Contract — Interpretation of — Written undertaking to pay by firm of attorneys 'on behalf of' client — Such phrase not having single 'ordinary' or 'literal' meaning — Thus not necessarily I suggesting agency — Meaning depending upon context of its use, its interrelation to language of document as whole and nature and purpose of transaction as it appears from document — In this instance, Court finding that, although undertaking clearly given on instructions of client, contextual interpretation indicating that, J

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irrespective of attorney's actual intention, 'expressed intention' had been that A firm assuming personal liability to pay and that such personal liability not terminated by purported withdrawal by client of underlying mandate.

Costs — Attorney and client costs — When to be awarded — Written undertaking to pay given by firm of attorneys 'on behalf of' client in terms of which firm assuming personal liability to pay — Although knowing that recipient arranging affairs on basis of undertaking, attorneys failing to disclose that client purporting to B withdraw 'mandate' — Firm of attorneys bound by stringent standards of professional ethics — Such standards breached by its conduct — Costs on scale as between attorney and client awarded.

Headnote : Kopnota

South African law, as a general rule, concerns itself with the external manifestations of, and not the workings of, the minds of C parties to a contract. Where there is no subjective consensus between the parties resort must be had to the 'reliance theory' in order to determine whether a binding contract has come into being. In order to apply the reliance theory it is necessary to determine what the defendant's expressed or declared intention was by reference to and interpretation of the words he has D used, or to which he appears to have assented. (At 135B/C - E.)

Like most words and phrases, the phrase 'on behalf of' does not have a single 'ordinary' or 'literal' meaning. Where such phrase appears in a document its meaning will necessarily depend upon the context in which it is used, its interrelation to the language of the document as a whole and the nature and purpose of the transaction as it appears E from the document. (At 136C - D.)

Soon after his arrival in South Africa in 1996 the plaintiff, a qualified winemaker, entered into an agreement in terms of which F (Pty) Ltd (F) purchased a property known as Signal Hill Farm for R800 000, the plaintiff contributing R100 000 to the purchase price. The intention was to develop the property as a wine estate through A Estates (Pty) Ltd (A), with the plaintiff as winemaker. In return for F his investment the farm was supposed to have been subdivided to enable the plaintiff to become the registered owner of five hectares of the land. This never happened, but a company of which the plaintiff was a director and in which he and his wife were the only shareholders (R (Pty) Ltd (R)) became the lessee of five hectares of the farm in terms of a written lease with F. The lease was to last for an initial period G of nine years and 11 months from 21 January 1997 and thereafter for an indefinite period, terminable by either party on one calendar year's written notice. The rental was to be R100 per annum. The plaintiff was also appointed as a director of both F and A and held share options in the latter company. Both companies were subsidiaries of 2000 Holdings Ltd.

On 11 February 2000 F, duly represented by one of its directors, S, entered into a written agreement for the sale of Signal Hill Farm H for R3,5 million. In terms of this agreement F warranted that, 'save . . . as disclosed to the purchaser in writing, the property is not subject to any lease, lien, encumbrance or servitude of whatsoever nature'. What had not been disclosed to the purchaser was the plaintiff's interest in the property. One V, a conveyancer and director of the defendant firm of attorneys, was engaged to attend I to the transfer of the property. By e-mail dated 26 April 2000 S instructed V to draft a letter for S's signature. The terms of the letter were that, upon the plaintiff's fulfilling certain conditions, 2000 Holdings Ltd (represented by S), as 100% shareholder of F, undertook to pay to the plaintiff the sum of R358 000 'as a one time conditional payment from the proceeds of the sale' of Signal Hill farm. These conditions included the J

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plaintiff's resignation as director and winemaker of A, the return of his company car, his A resignation as director of F and his signature, witnessed by V, of a letter in which he acknowledged that neither he nor R had any claims against 2000 Holdings or its subsidiaries, 'and in particular towards [F] in relation to the farm Signal Hill . . ., including any lease agreement, shares or repayment to [F]'. The e-mail concluded by authorising the defendant to pay the plaintiff R358 000 'provided the sale of Signal Hill has been duly completed and the full payment B received from the buyers' by the defendant.

On 2 May the plaintiff visited V at the defendant's offices, bringing with him a letter from the general manager of A (one G) in terms of which the latter informed V that the plaintiff had complied with the conditions listed in S's e-mail (these were reiterated in G's letter) and instructed V to prepare a letter for signature by the plaintiff in V's presence in the terms previously specified by S and C reiterated in G's letter. V prepared the letter, addressed to S, in the requisite terms and the plaintiff signed it. Two days later V addressed a letter to the plaintiff drafted on the defendant's letterhead and signed by V on the defendant's behalf (the letter of undertaking). The letter bore the following headings on successive lines: 'Ashanti Estates/J V Ridon' and 'Our transfer Factaprops 131 (Pty) Ltd/Signal Hill Farm'. The letter read as follows: 'On behalf D of [S] we hereby undertake to pay to yourself the amount of R358 000 upon registration of the above property in the name of the purchaser. We confirm that we expect transfer to be registered by more or less the end of May.' The letter had been written at the plaintiff's request because, so he informed V, he was 'involved in another deal' and his bank required it. V did not draft the letter until he had G's authority to do so. E

The transfer of the farm was registered on 21 July 2000. The defendant had received the proceeds of the sale on the same day. On 24 July the defendant informed the plaintiff that S had instructed them not to pay the sum of R358 000 to him because certain other amounts, yet to be quantified, had to be set off against it. It had received these instructions approximately one month prior to registration of transfer and, despite the plaintiff's several F telephonic enquiries thereafter about the progress of the transfer, the defendant had never informed him about them. The defendant paid the plaintiff R177 596,96 on 27 July after receiving a formal demand and notice of pending legal action from an attorney acting for the plaintiff. The plaintiff pursued the action for the balance of the unpaid amount.

It was the plaintiff's case that, in terms of the letter of undertaking, the defendant had undertaken to pay him the G sum of R358 000 upon registration of transfer of the farm, that he had accepted the undertaking, that a binding contract between the parties had thus come into being and that, by failing to pay the sum of R358 000 to the plaintiff upon registration of the transfer, the defendant had breached the contract. The defence was that, since the undertaking had been given by the defendant in its capacity as agent and attorney of S, the plaintiff's acceptance thereof had not H given rise to a contract between the plaintiff and defendant.

The plaintiff's evidence was that he would not have accepted an undertaking either from F itself or from S as the relationship of trust between himself and S had broken down. His understanding had been that the proceeds of the sale would be paid first to the defendant and, since he had been required to waive his rights in respect of the farm I and his share options, he had wanted to ensure that 'his share' would be paid directly to him by the conveyancer. He had therefore required the undertaking to be given to him by V in the latter's capacity as conveyancer.

Held, that, although accepting V's evidence that, by drafting and signing the letter of undertaking, he had not intended binding the defendant vis-à-vis J

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the plaintiff but had intended, instead, to act as S's agent, binding S as principal to give A effect to the undertaking (at 135A - B), it was clear from the case law that the phrase 'on behalf of' did not necessarily suggest agency. (At 136F.)

Held, further, that...