Consumer Information

Author : Maryna Botha – STBB
6 October 2016

WHEN CAN A SALE AGREEMENT BE RECTIFIED?
TAMRYN MANOR (PTY) LTD V STAND 1192 JOHANNESBURG (PTY) LTD (785/2015) [2016] ZASCA 147 (30 SEPTEMBER 2016)

This appeal raises a crisp legal issue: when is an agreement for the sale of land, on the face of it valid and compliant with the requirements of the Alienation of Land Act, capable of being rectified? The circumstances giving rise to this dispute were that the person who signed as the purchaser was not the true purchaser and an order was sought substituting the true purchaser in the agreement.

SUMMARY OF JUDGMENT

FACTS
In August 2007, Stand 1192 Johannesburg (Pty) Ltd (Stand 1192) sold an immovable property to Tamryn Manor (Pty) Ltd (Tamryn Manor) for a purchase price of R3,2 million. An agent acting on behalf of Stand 1192 signed for it and one Ryan Otto (Otto) signed ostensibly as the purchaser. Otto did not indicate on the deed of sale that he was signing as an agent or representative of Tamryn Manor. Furthermore, on the same day, Otto signed a Suretyship Agreement in terms whereof he bound himself jointly and severally as surety and co-principal debtor in solidum with the purchaser for the due and punctual performance by the purchaser of all its obligations in terms of the agreement of sale of the immovable property. In terms of clause 2.1 of the agreement, Tamryn Manor was required to pay a 10% deposit to Stand 1192 upon signature of the agreement. Tamryn Manor, not Otto, duly paid the deposit. Tamryn Manor furthermore also paid the transfer duty and all other costs of transfer of the immovable property in accordance with the terms of the sale agreement. In October 2008, Tamryn Manor furnished Stand 1192 with guarantees in respect of the balance of the purchase price. Stand 1192 demanded and duly accepted these guarantees.

Notwithstanding the fact that Tamryn Manor had complied with its obligations in terms of the agreement and the lapse of a reasonable time, Stand 1192 failed to do the necessary to effect registration of transfer of the property into Tamryn Manor’s name. As a result, Tamryn Manor instituted an action asking the court for an order directing Stand 1192 to cause the transfer and registration of the immovable property into its name, as well as for rectification of the agreement to reflect Tamryn Manor as the true purchaser and not Otto. In seeking rectification, Tamryn Manor averred that due to a bona fide and mutual error, the agreement did not reflect the common intention of the parties correctly as it erroneously reflected Otto as the purchaser and not Tamryn Manor; and that, contrary to what appeared ex facie the agreement (on the face of it), it was the common continuing intention of the parties that Tamryn Manor was the true purchaser. Stand 1192 raised exceptions to the claim. It argued that:

(i) There was no error regarding who the real purchaser was and that the written agreement correctly reflected what the parties intended – namely that it contracted with Otto and not Tamryn Manor. Therefore there was no basis for the rectification of the agreement.

(ii) If it was true, as Tamryn Manor alleged, that the written agreement does not reflect the correct purchaser, then this rendered the agreement invalid as it did not comply with the strict requirements of section 2(1) of the Alienation of Land Act 68 of 1981 (the ALA). As a result, rectification of the agreement was not permissible.

The Court a quo (lower Court which first pronounced on the matter) agreed with Stand 1192. It held that Otto was identified in unqualified terms as the purchaser in the agreement. Crucially, it held that to correct the alleged mistake, extraneous evidence of the negotiations preceding this agreement would be necessary, but that it was not permissible due to the parol evidence rule (which holds that, where there is a clear and unambiguous written agreement between the parties, this will be deemed to be the only and exclusive record of their agreement and neither party will be permitted to allege that the terms of the written agreement bearing his signature are not the true terms, and that he signed the document believing it to contain other terms or to mean something else). The Court then concluded that in the circumstances the agreement was not capable of being rectified.

HELD:

• Section 2(1) of the ALA reads as follows:

“No alienation of land shall be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.”

• The correct approach to the question whether or not to grant rectification of an agreement involved a two-stage enquiry. The first is to determine whether the formal requirements were met – in this instance the requirements of the ALA. The focal point at this stage is whether the written document on its own, constitutes a valid contract of sale. If it did not, the enquiry ends there. If it did, then the enquiry moves to the second leg which focuses on whether a proper case for rectification has been made out. If the answer to the latter question is in the affirmative, an order for rectification must be granted.

• The starting point in the present matter was thus whether the agreement met the statutory requirements set out in section 2(1) of the ALA. For an agreement for the sale of land to be valid, it had to be reduced to writing and signed by the parties thereto or by their agents, duly authorised in writing. This was important as one cannot, by rectification, invest a document which, on the face of it is null and void, with legal force.

• In the present matter, there was no dispute that the written agreement, on the face of it, identified who the seller and the purchaser were, as well as the object being sold and the agreed price. These are the essential elements for a valid contract of sale. It was further not in dispute that the agreement was reduced to writing and duly signed by the parties. Thus ex facie the written agreement, all the statutory requirements set out in section 2(1) of the ALA had been met.

• The agreement was thus formally valid and capable of rectification.

CONCLUSION:
As a result, the Court a quo erred in granting Stand 1192’s exception and the appeal was accordingly upheld. (The appeal Court was not required to enter into the second stage of the enquiry, i.e. whether to grant rectification. For that, the matter was thus referred back to the trial Court to decide if indeed rectification should be granted.)

The Judgment can be viewed here: