JOHANNESBURG - The Supreme Court of Appeal has overturned a North Gauteng High Court ruling that a sale agreement between Pangbourne Properties and Basinview Properties had been valid.
A contract was entered into by the two parties in November 2007, whereby Basinview sold Pangbourne its business of letting immoveable property. The business was defined as comprising certain immoveable property, fixed assets and leases in respect of the property. The purchase price was almost R60m. the agreement provided that on transfer the sum of around R9m would be retained by an agreed upon conveyancer. The agreement was made subject to three suspensive conditions. One of them became a bone of contention among the two parties. Pangbourne took the view that since one of the three conditions had not been fulfilled timeously, the agreement was not binding. Basinview then applied to the North Gauteng High Court for an order declaring the contract binding. The order was subsequently granted and Pangbourne then took the matter on appeal. One of the suspensive conditions was that the board of directors of both companies had to approve the purchase and sale within 14 days of the signature date. Pangbourne's board of directors did not give its approval within the specified time, rendering the agreement invalid. The High Court found that the agreement had been "revived" by a written addendum. It was also heard that Pangbourne's company secretary had informed Basinview that the company's CEO, Craig Hutchison, had approved the purchase. However, it subsequently transpired that Hutchison had acted outside of his mandate. The court said that while Hutchison had exceeded the limit of his authority, he did not constitute the company's board. Basinview contended in the High Court that the letter confirming Hutchison's approval was binding on the basis of the fact that Pangbourne had not followed its own internal procedures and that third parties could not be expected to "take cognisance" of that and must rely on what is communicated to them. Basinview also claimed that the letter of approval was misrepresented. The Appeals Court judgement disputed this, saying: "... the letter made no misrepresentation that the conditions had been fulfilled, and Basinview could not reasonably have relied on it believing that the board had passed the requisite resolution". The judgement also rejected Basinview's contention that the addendum amounted to a new agreement. "The High Court was thus wrong in finding that the addendum ?revived' the agreement for the sale of the property by Basinview to Pangbourne," the judgement stated. It concluded: "The appeal is upheld with costs. The order of the High Court is replaced with ?this application is dismissed with costs'."