Van Aardt v Galway

• Jurisdiction: South Africa
• Judge: Ponnan JA, Shongwe JA and Wallis JA
• Judgment Date: 24 November 2011
• Citation: 2012 (2) SA 312 (SCA)
• Docket Number: 923/10 [2011] ZASCA 201
• Hearing Date: 03 November 2011
• Counsel: EAS Ford SC (with him ML Beard) for the appellant. Johann Gautschi SC for the respondent.
• Court: Supreme Court of Appeal

Wallis JA (Ponnan JA and Shongwe JA concurring):

[1] This is a dispute between two dairy farmers over the sale of a farm. E The respondent, Mr Galway, owns the farm Midhurst situated in the Makana Municipality near Grahamstown. The appellant, Mr Van Aardt, owns one of the neighbouring farms. On 31 August 2001 Mr Galway leased Midhurst to Mr Van Aardt for a period of five years for the purpose of dairy farming. He also leased his herd of Jersey cows to F Mr Van Aardt. The lease agreement contained an option to purchase 'the farm property'. On 3 March 2005 Mr Van Aardt purported to exercise this option. Mr Galway disputed his right to do so. That led Mr Van Aardt to commence these proceedings to compel Mr Galway to transfer the farm Midhurst to him. Mr Van Aardt's claim was dismissed by Jones J and with his leave he appeals to this court. G

[2] The relevant clauses of the lease are clauses 1 and 14, which read as follows:

'1. LETTING AND HIRING

The Lessor lets and the Lessee hires the farm property Midhurst in the H district of Grahamstown being more fully described as Portion 9 (a portion of portion 5) of the farm Sevenfountain no 447 together with the dairy and its equipment but exclusive of the house presently occupied by the Lessor and his family.

. . .

14. OPTION TO PURCHASE I

The Lessor extends to the Lessee an option to purchase the farm property for the sum of R700 000 in which regard the Lessee shall exercise the option not later than three months before the termination of the Lease and not before a date six months before the termination of the Lease by delivering to the Lessor a signed agreement of sale in the terms aforesaid.' J

Wallis JA (Ponnan JA and Shongwe JA concurring)

A [3] On 3 March 2005 Mr Van Aardt's attorneys addressed a letter to Mr Galway in the following terms:

'We enclose herewith a draft Deed of Sale which has been signed by our client, the Lessee of the property described in the enclosure hereto. Our client exercises the option to purchase the immovable property in B question at a purchase price of R700 000 as stipulated in the Agreement of Lease. To the extent that it is necessary for our client to exercise the option in writing, he does so by appending his signature to the foot hereof which is to be read in conjunction with the Deed of Sale enclosed herewith. Obviously should you require any reasonable amendments to the Deed of Sale, our client will give due consideration C thereto.'

At the foot of this letter appeared the following inscription:

'I, Christiaan van Aardt do hereby exercise the option granted to me in terms of the Deed of Lease concluded between myself (as Lessee) and John Richard Galway (as Lessor). The exercise of this option to be read D in conjunction with the annexed Deed of Sale.'

Mr Van Aardt appended his signature below this.

[4] Attached to the letter was a deed of sale. For present purposes I need only quote the first three paragraphs thereof. They read as follows:

'1.

E The Seller hereby sells to the Purchaser who hereby purchases:

1.1

the farm Midhurst in the area of Makana Municipality, District of Albany more fully described as Portion 9 (a portion of portion 5) of the farm Seven Fountains No 447;

2.

PURCHASE PRICE

2.1

The purchase price of the immovable property hereby sold F shall be the sum of R700 000 (Seven Hundred Thousand Rand);

2.2

The purchase price shall be payable in cash against registration of transfer of the said immovable property into the name of the Purchaser.

2.3

The Purchaser shall when called upon so to do by the Seller's G Conveyancer furnish to such Conveyancer an acceptable guarantee for the due payment of the said purchase price against registration of transfer.

3.

VALUE ADDED TAX

The parties record that the said purchase price is inclusive of Value H Added Tax.'

[5] The remaining six clauses of the deed of sale were relatively straightforward. Clause 4 was a voetstoots clause. Clause 5 provided that Mr Van Aardt would be liable to pay all the costs of registration of transfer plus a pro rata share of rates, taxes and other levies in respect of I the rateable year in which transfer was registered into his name. It also provided for him to bear the costs of preparing the deed of sale. Clause 6, dealing with occupation and possession, provided that this would be given against registration of transfer. Clause 7 provided for Mr Galway to appoint a conveyancer and required Mr Van Aardt to pay to the conveyancer all amounts due in respect of rates, taxes and assessments, J transfer duty, the costs of registration of transfer and other costs and

Wallis JA (Ponnan JA and Shongwe JA concurring)

charges on demand. Clause 8 was a breach clause and clause 10 (there A was no clause 9) a clause in which the parties select domicilia citandi et executandi.

[6] In his plea Mr Galway contended on two grounds that clause 14 did not grant an enforceable option to purchase to Mr Van Aardt. He said B first that the property that was the subject of the potential sale was insufficiently described in clause 14 so that the clause was void for vagueness. Second he said that the requirement that the option should be exercised by the delivery of a signed agreement of sale showed that the parties contemplated that the exercise of the option would be accompanied by further negotiations between them on the terms of that agreement, C and, accordingly, that the act of acceptance would not on its own give rise to a binding contract. For those same reasons he said that the option did not comply with s 2(1) of the Alienation of Land Act 68 of 1981 (the Act), which requires the provisions of a deed of alienation of immovable property to be in writing and signed by or on behalf of the parties thereto. D

[7] If those contentions were not accepted Mr Galway turned his fire on the exercise of the option. Here he advanced three contentions. First he said that the option referred only to the farm property whereas the exercise of the option purported to include the dairy and its equipment, E which he said were movable and not included in the option. Second he said that the terms embodied in the deed of sale were not those embodied in the option and in particular that the price was incorrect because of the reference to it being inclusive of VAT. By way of a late amendment to his plea [1] he alleged that it was implicit in the lease, F alternatively it was tacitly agreed, that the purchase price would be exclusive of VAT. Third he said that the letter invited amendments to the deed of sale and hence it was not a final acceptance of the option contained in clause 14 of the lease. Although not pleaded as such, reliance was again placed on non-compliance with the requirements of the Act. G

[8] One other point needs to be mentioned before turning to address these contentions. It is that where the lease recorded that the farm property Midhurst was 'more fully described as Portion 9 (a portion of Portion 5) of the farm Sevenfountain No 447', this was an error. In turn that error was carried over into the deed of sale. The correct description H of the farm property according to the title deed shows that it consists of four pieces of land described as follows:

'Portion 9 (Bayville) (Portion of Portion 5) of the farm Sevenfontein No 447 8.502 hectares in extent;

Remainder of Portion 5 (Midhurst) of the farm Sevenfontein No 447 248.4576 I hectares in extent;

Wallis JA (Ponnan JA and Shongwe JA concurring)

A Remainder of Portion 8 (Greylands) (Portion of Portion 5) of the farm Sevenfontein No 447 169.2050 hectares in extent; and

Portion 20 (Portion of Portion 14) of the farm Sevenfontein No 447 3.8354 hectares in extent;

all in the Division of Albany, Eastern Cape Province.'

B This error in description prompted Mr Van Aardt to seek the rectification of clause 1 of both the lease and the deed of sale and thereafter an order compelling Mr Galway to transfer the farm to him, against a tender to pay the purchase price and comply with his other obligations under the deed of sale. His entitlement to rectification, if he showed that a C binding agreement had been concluded, was conceded before us. It is therefore unnecessary to deal with an argument based on the inability to rectify an acceptance of an offer prior to the conclusion of an agreement. [2] If there was a binding contract Mr Van Aardt is entitled to an order for rectification of the documents embodying that contract.

D [9] Evidence was led at the trial from Mr Van Aardt, Mr De la Harpe (the draftsman of the agreement and at the time a practising attorney), Mr Galway and Mr Parker. Almost all of this evidence was plainly inadmissible. It concerned the intention of the parties in regard to various issues and in particular whether the purchase price was inclusive or exclusive of VAT and whether the property subject to the sale was inclusive E or exclusive of the dairy and the equipment in the dairy. That evidence was inadmissible because it was evidence of the intention of the parties and their prior negotiations and it is clear on the authorities that such evidence is inadmissible. [3] If there had been a prayer for rectification directed at these issues then it might have been relevant and admissible F to explore the parties' intentions and discussions at the time of concluding the lease. However, there was no such prayer and it was not, contrary to counsel's submissions, relevant and therefore admissible as 'context' in relation to either the interpretation of the documents or the importation of implied or tacit terms into the lease.

G [10] Furthermore the evidence was utterly unhelpful in resolving the issues in the case. It showed that the VAT issue was not raised by anybody when the lease was drafted. As regards...