The Supreme Court of Appeal (SCA) has confirmed the conditions that must be present for a suspensive condition to be waived and for someone who acts as an agent to waive a principal’s rights.
The judgment flows from an appeal by Christopher Hughes, who sought to retain a deposit of R1 million as damages after the sale of his property fell through.
In 2022, the High Court in Cape Town ordered Pam Golding Properties to return the R1m to the buyer.
The matter originated shortly before the lockdown in 2020, when Hughes asked Monique Dollenberg of Pam Golding to market his property in Hout Bay.
Peter Green sought to buy a home for his daughter, Cindy-Ann Oosthuizen (the second respondent), and her partner, Nicolas Gargassoulas (first respondent). To this end, he enlisted the services of Karen Williamson of Signature Real Estate.
Green and Hughes concluded a sale agreement for the property on 12 February 2020. The purchase price was R4.95m, including a deposit of R1m, which was paid into Pam Golding’s trust account.
The agreement included a suspensive condition that Green obtain approval for a mortgage bond to finance the balance of the purchase price by no later than 13 March 2020 (clause 6.1).
If the suspensive condition was not fulfilled by 13 March 2020, it was to be automatically extended for a further 14 days, to 2 April 2020.
The agreement stated that the suspensive condition had been inserted for the benefit of the purchaser, who may waive it “by giving notice in writing to the seller at any time prior to the date for fulfilment or waiver” (clause 6.2). If the suspensive condition was not fulfilled or waived by the due date, the agreement would become null and void (clause 6.5).
The agreement also contained standard clauses to the effect that all additions and variations had to be in writing and signed by the parties (clause 19.4). Further, that no waiver of any rights by any party arising out of or in connection with the agreement or any part thereof shall be of any force or effect unless in writing and signed by the parties (clause 19.5).
Green did not obtain approval for a mortgage bond by 30 March or 2 April.
The troublesome email
Central to the case was an email by a conveyancing secretary employed by HJ Joubert Attorneys, the appointed conveyancers, sent on 10 March 2020.
The email informed Gargassoulas and Signature Real Estate, and copied to Green, that “the purchaser advised that he will make full payment of the purchase price. He will be buying the property cash.”
Williamson (of Signature) forwarded the email to Dollenberg (Pam Golding), who forwarded it to Hughes.
In the subsequent months, a series of emails were exchanged between Henning Joubert of the conveyancers and Hughes about the progress of the transaction, which was hampered by the Covid-19 lockdown.
In one email, dated 14 May 2020, Joubert informed Hughes that Green had wanted to buy the property for cash, but his cash flow had been compromised because of the lockdown. He had started with the process of applying for a bond.
In an email dated 17 June, Joubert informed Hughes that the bank had granted final approval for a bond on 10 June.
The emails also addressed the request by Oosthuizen and Gargassoulas to take early occupation and effect renovations to the property. Hughes granted them early occupation on 18 June.
By 22 August 2020, the transfer had still not taken place.
The deal collapses
According to the SCA’s judgment, the deal collapsed after the buyers engaged an architect to draw up plans for their intended alterations to the property and discovered that there were no plans for certain parts of the building on the property and that it was thus illegal.
Oosthuizen and Gargassoulas vacated the property by 7 September 2020.
Hughes’ attorney sent Green a letter, dated 9 September 2020, referring to HJ Joubert’s email of 10 March 2020.
The attorney said the email constituted a waiver of the benefit of the suspensive condition and consequently the transaction became a cash sale. It was therefore a matter of “complete indifference” whether the purchaser decided to proceed with obtaining a bond.
In a subsequent letter, dated 14 September, Hughes’ attorney informed Green that the vacation of the property constituted “a repudiation on your part”.
In response, Green’s attorneys contended that an email amending the original terms of the offer to purchase does not in itself constitute a waiver unless the seller and the purchaser enter a separate written addendum specifically setting out the amendment, and it is signed by both parties.
Green ceded all his rights, entitlements, and obligations in respect of the sale agreement to Oosthuizen and Gargassoulas, who brought a claim for the repayment of the deposit, which was held in trust by Pam Golding.
Hughes later sold the property to someone else. He contended he was entitled to retain the R1m deposit as damages for Green’s repudiation of the agreement.
The High Court agreed with Oosthuizen and Gargassoulas, and Hughes appealed to the SCA.
Why there was no valid waiver
The SCA said the central issue in the matter was whether Green had waived the suspensive condition in the agreement.
The High Court found that Green did not. It held that:
- Green’s conduct after the email of 10 March had to be taken into account.
- It must be proved that Green knew what the rights were that he was allegedly waving.
- If it is alleged that an agent waived those rights, it must be proved that the agent knew all the relevant facts, as well as the principal’s legal rights, and that the principal intended to waive those rights.
- The agent was authorised to waive the principal’s rights.
The High Court came to these conclusions on the authority of what was held in Pretorius v Greyling (1947).
The SCA said The Law of Contract in South Africa correctly states the following about the requirements for waiver: “Having gone to all the trouble to acquire contractual rights, people are, in general, unlikely to give them up. There is therefore a factual presumption, even in some cases a strong one, against waiver.”
The High Court held that the email of 10 March 2020 emanated from Joubert’s conveyancing secretary, or from an estate agent, and not from Joubert, who was alleged to be Green’s agent.
It was not clear from the email whether Joubert had full knowledge of the right(s) allegedly waived by Green. There was no proof that Joubert was authorised to waive Green’s right to the suspensive condition. Green’s conduct and the email of 10 March 2020 did not conclusively prove an unequivocal intention on Green’s part to waive his rights under the agreement.
The High Court held that Joubert did not have the authority to act Green’s agent in respect of the alleged waiver, because Joubert’s authority was limited to the transfer of the property. Joubert required a special mandate for waive Green’s rights, and it was not proved that he had such a mandate.
According to the SCA’s judgment, Green’s version was that before the due date, after he had been pressed by the agents to expedite the application for a bond, he had a conversation with Joubert about the possibility of paying the balance in cash. He had not made a firm decision in this regard. Two days later, after his auditor had advised him against that option, he had informed Joubert accordingly.
“His version is borne out by the fact that he never withdrew his application for a bond and persisted therewith. He never authorised Mr Joubert to waive his rights to rely on the suspensive condition, and both he and Mr Joubert seemed to proceed on the (erroneous) basis that the contract was still valid, subject to the condition that he obtain a mortgage loan for the balance of the purchase price.”
Since the suspensive condition had not been fulfilled by midnight on 2 April 2020, and since there had been no valid and unequivocal waiver of the suspensive condition, the agreement lapsed and became null and void. There was no subsequent valid variation of the agreement that could validly and effectively alter that situation, the SCA said.
In the circumstances, Green was entitled to the return of his deposit, and he was entitled to cede his rights for the repayment of his deposit to the first and second respondents.
The SCA said the High Court’s reasoning and conclusion could not be faulted, and it dismissed Hughes’ application with costs.
