- November 15, 2022
- |Civil Law, Practice, And Procedure, Concise Law Reports (CLR)
CIVIL PRACTICE – PROSPECTS OF SUCCESS – INTERPRETATION OF CONTRACTS TO ASCERTAIN THE INTENTION OF PARTIES AT THE TIME OF CONTRACTING
In an action instituted by the respondent in the court a quo, the respondent pleaded in the main claim that in terms of the agreement, the first appellant was liable to refund the respondent in the sum of N$550 000 which amount was due, owing, and payable. Alternatively, the first appellant had, by failing to repay the said amount, breached the agreement concluded between the parties and thereby occasioned damages to the respondent in the aforesaid amount.
The first appellant defended the action and denied that she was liable to refund the respondent in the amount claimed. She pleaded among other things that she only had to secure the approval of the sale and purchase of the property and not to effect the registration of the property into the name of Landscape Development CC.
The court a quo found that the main purpose of the 20 November 2012 agreement and the addendum of 31 March 2014, was the coming into existence of a written agreement of sale between the Council of the Municipality of Windhoek and Landscape Development CC in respect of an erven for mixed development and that such an agreement was never concluded. The court a quo found that, in context, the words or phrase ‘securing the Erven/Property to establish the Mixed Development of ERF/Re 2621 Avis’ meant nothing else than at least the signing of an agreement of sale between the Council of the Municipality of Windhoek and Landscape Development CC. That, without such a signed agreement, no payment was due by the plaintiff (respondent) to the first defendant (first appellant), and that the consultancy fee already paid was refundable on demand.
On appeal, the primary submission made on behalf of the first appellant was that the first appellant was required to only secure the approval of the sale of the property. The Supreme Court dealt with this question as follows:
‘[104] The golden rule in the interpretation of contracts is to ascertain the intention of the parties at the time of the conclusion of the contract and that one must have regard to the nature, purpose, and context of the contract as a whole.
[105] It has been held that ‘a purposive construction rather than a purely literal one derived from applying it to the kind of meticulous verbal analysis in which legal practitioners are too often tempted by their training to indulge’. This case is a good example of such meticulous verbal analysis of one clause in the agreement and a reluctance to look at all the terms of the agreement in context.
[106] The approach of this court in the interpretation of documents was recently expressed in the matter of McLean v Botes (SA 54/2019) [2022] NASC (17 May 2022) para 120 by Damaseb DCJ as follows:
‘In Total Namibia v OBM Engineering 2015 (3) NR 733 (SC) O’Regan JA set out the proper approach to the interpretation of documents generally. The construction of a contract or a document is a matter of law, and not of fact. Interpretation is therefore a matter for the court and not for witnesses. Interpretation is ‘essentially one unitary exercise’ in which both text and context are relevant to construing the contract. The court engaged upon its construction must assess the meaning, grammar, and syntax of the words used; and the words used must be construed within their immediate textual context, as well as against the broader purpose and character of the document itself . . . Where more than one meaning is possible, each possibility must be weighed in light of all these factors. The process is objective, not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or one that undermines the apparent purpose of the document . . .’
[107] I shall examine the contention that the only obligation of the first appellant was to secure the approval of the sale of the property, in the light of the contract as a whole, and in view of the disagreement between the parties as to at what stage the first appellant became entitled to payment of the consultancy fee.
[108] The first observation which needs to be made is that the provisions of the preamble which contains the words: ‘. . . securing the approval of the sale . . . ,’ do not stipulate at all when the first appellant would have been entitled to the payment of the consultancy fee. Therefore, in order to determine this issue, one has to examine the other clauses of the agreement. I must add that where an agreement or contract consists of more than one document, as in this instance, those documents must be considered together.
[109] Clause 3.2(1) explains very clearly and unambiguously the circumstances under which the first appellant would have been entitled to payment. This was ‘within three (3) days after an Agreement of sale has been signed’ between Landscape Development CC and the Council of the Municipality of Windhoek in respect of the property. It is common cause that a sale agreement was never signed between the parties.
[110] I shall demonstrate hereunder that the payments received by the first appellant, as reflected in the addendum, did not modify or amend the provisions contained in clauses 3.2(1) and 3.2(2). It merely brought forward the time when partial payment was to be made.
[111] Clause 3.2(2) seems to emphasise clause 3.2(1) by stating that the respondent ‘shall pay the amount of N$1 000 000’ . . . ‘after fulfilment of the . . . obligations in terms of the provisions of 2.1 herein above’.
[112] Another clause relevant in the interpretation of the question when the first appellant would have become entitled to the payment of the consultancy fee is clause or article 2, which deals with the duration of the agreement. This provides that the agreement would come to an end upon a date on which the first appellant ‘successfully concludes the agreement with respect to’ the property as may be agreed between the Council of the Municipality of Windhoek and Landscape Development CC.
[113] The addendum confirms that payment would have been made to the first appellant ‘. . . on the date of signature by both parties . . .’.
[114] The fact that the addendum provides that the remaining N$450 000 was to be paid as soon as the deed of sale between Landscape Development CC and the Council of the Municipality of Windhoek has been signed by both parties, is in my view, consistent with the intention of the parties at the time the agreement was signed, namely that the first appellant would only have become entitled to payment of her consultancy fee upon the successful conclusion of a deed of sale in respect of the property.
[115] The submission by counsel that the first appellant had a ‘solid’ defence and was not obliged in terms of the contract to refund the amount of N$550 000 to the respondent since she earned it legitimately, is misconceived and contrary to the explicit provisions contained in the agreement. The first appellant’s plea that she was entitled to the monies received because she incurred expenses for her own account in providing consultancy services, is also contrary to the unambiguous provisions of the agreement.
[116] In terms of the pre-trial report, it was common cause that one of the terms of the written agreement of 20 November 2012 was that the first appellant would ‘at her own costs make all technical representations and technical motivations with respect to the establishment of the mixed development insofar as the technical services may require the first defendant to hire other technical partners to render such services, such costs would be first defendant’s own costs . . .’.
[117] It is further not disputed by the first appellant that she had presented the respondent with quotations for various expenses and that the respondent had paid her the amount of N$11 270 for these services.
[118] In my view, it is disingenuous for the first appellant to content that she legitimately earned the amount of N$550 000 in the face of very clear provisions in the agreement to the contrary, an agreement signed by her personally. The first appellant has no defence at all.
[119] The submission that in terms of the agreement the respondent had reached consensus with first appellant that the amount of N$1 000 000 would become due and payable only at the event of the mere approval of the sale by the Council of the Municipality of Windhoek is in view of the very clear provisions of the agreement, simply untenable.
[120] The respondent would, if such an interpretation is to be accepted, be obliged to pay such an amount to the first appellant without fulfilling the purpose of the agreement, and that was to eventually acquire the property. There would, in such an interpretation, be no quid pro quo for the respondent. The respondent would in effect donate an amount of N$1 000 000 to first appellant (for services not rendered). Such an interpretation, in my view, makes no business sense and is absurd. On this version the respondent would have been prevented from enforcing the conditions of the agreement in circumstances where the first appellant had breached a material condition of the agreement. Such a result could never have been the intention of the parties when the agreement was concluded and signed on 20 November 2012.
[121] If the mandate of the first appellant was only to secure the approval of the sale and nothing further, the first appellant would have been entitled to and certainly would have claimed the payment of the balance of the consultancy fee of N$450 000 upon approval of the sale. In my view the fact that she did not counterclaim supports the fact that she had not carried out her mandate. The explanation that she had the option not to counterclaim and was concentrating on defending the claim by the respondent sounds hollow and unconvincing.
[122] In my view, the first appellant’s claim that it was impossible to successfully conclude her mandate because of the Minister’s disapproval of the sale, is without merit, since she signed the agreement with the full knowledge and understanding that the Minister’s approval of the sale would be vital for the successful conclusion of the sale of the property between the parties.
[123] In conclusion, the first appellant breached the agreement by failing to facilitate the successful conclusion of an agreement of the sale of the property between Landscape Development CC and the Council of the Municipality of Windhoek and was therefore not entitled in terms of the agreement to have received a consultancy fee.’
Shikongo v Lee’s Investments (Pty) Ltd (SA 33-2020) [2022] NASC (15 November 2022) – Interpretation of Contracts