Written by: Jerusha Naidoo

A recent Supreme Court of Appeal case provides not only legal redress but much needed food for thought. A brief discussion follows:


Royal Anthem Investments Pty Ltd (the Appellant) (“RAI”) approached the SCA to appeal against a decision granted in the North Gauteng High Court. The dispute was based out of a written agreement of sale which was concluded on 01 June 2009 in which Yen Fan Lau (“YFL”) and Shun Cheng Liang (“SCL”) (a married couple from China being the Respondents) agreed to pay RAI an amount of R3.6 million for immovable property situated on a golf estate in Tshwane. The sale failed and the Respondents tried to recoup a deposit of R720 000 and a further sum of R264 723 in lieu of transfer duty held in trust by the transferring attorneys.

The court looks at a stipulated term in the agreement and makes the following remarks,” I quote the clause verbatim; drafted by the estate agent through whom the sale was negotiated, it is a model of neither language nor precision”. The court continues the critique,” It is not necessary for present purposes to deal with further anomalies such as the failure to identify the bank to which reference was made or the apparently meaningless provision that the condition would be regarded as fulfilled should a financial institution grant a loan subject to a suspensive condition.”

The court delved in to the specifics surrounding SCL’s attempt to secure a banking loan from not one but two established financial institutions and in accordance with the terms of the contract but also due to the insistence of RAI. SCL went so far as to make application to rescind a default judgment incorrectly granted against a CC that she was a member of. Once the necessary bank guarantee was obtained proof of same was submitted to the Appellant as well as prompt payment of transfer duty.

The Respondents tried to source an alternative bank guarantee as they were not satisfied with the interest rates they were given. RAI was unhappy with this situation and threatened to “cancel” the agreement. The Appellant thereafter made various demands against the Respondents and threatened that unless interest was paid for “delaying transfer” no property would be transferred until same was received. YFL and SCL sought legal advice and they refused to pay interest and alleged that the sale had lapsed due to non-fulfillment of a suspensive condition their demand was that the deposit should be repaid. Both parties reached an impasse and it was broken by RAI alleging breach of contract. The property was then sold to a third party whilst the deposit continued to remain in an interest-bearing account of RAI’s attorneys whom were acting on client’s instruction.

The court further looked into the phrasing of “’other amounts”’, the argument was put forward that the retaining of the deposit fell under the penalty clause and as such RAI should be entitled to the amount. The court concluded that the deposit was never brought within the covering of the clause in question and thus should be paid back to YFL and SCL. A similar argument was put forward regarding a sum paid to SARS in lieu of transfer duty and which SARS had repaid to RAI’s attorneys. Though the Court ordered that the deposit and transfer duty amounts be repaid to the Respondents it reduced the interest rate applicable on the deposit from the prescribed legal rate to the lower rate of investment. The rate regarding the SARS payment however remained the same, although the court took the date of payment into consideration.

The appeal was dismissed with costs including costs of two counsel and to be taxed on the scale as between attorney and client.

Thus, from the discussion above one can see the importance of correct drafting in a contract of sale and other agreements. Intention and interpretation will be vitally important when a dispute occurs.

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