THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

REPORTABLE
Case No: 216/2013

In the matter between:

SPENMAC (PTY) LTD (Formerly BOBCART
(PTY) LTD                                                                                         APPELLANT

and

TATRIM CC                                                                                  RESPONDENT

Neutral citation: Spenmac v Tatrim CC (216/2013) [2014] ZASCA 48 (1 April
2014)

Coram:
Mthiyane DP, Lewis, Shongwe, Petse JJA and Mocumie AJA

Heard:
28 February 2014
Delivered:
1 April 2014

Summary: Agreement of purchase and sale of unit in sectional title scheme ─ purchase made
in the mistaken belief that sale included right of veto in respect of sub-division of other unit─
mistake induced by seller’s misrepresentation ─ mistake precluding parties from reaching
consensus ─ exemption clause not availing seller ─ purchaser entitled to avoid the contract ─
Entire contract vitiated by the mistake.

______________________________________________________________________________

ORDER

On appeal from: Eastern Cape High Court, Port Elizabeth (Goosen J sitting as
court of first instance):

The appeal is dismissed with costs
__________________________________________________________________

JUDGMENT

Mthiyane DP (Lewis, Shongwe, Petse JJA and Mocumie AJA concurring):

[1] This is an appeal against a judgment and order of the Eastern Cape High
Court, Port Elizabeth (Goosen J), setting aside an agreement of sale concluded
between the appellant, Spenmac (Pty) Ltd, and the respondent, Tatrim CC, in
respect of a sectional title property, Park Towers on 8 October 2010 and declaring
it void for lack of consensus. The appellant (the defendant) was ordered to pay the
respondent (the plaintiff) the sum of R788 157,89 together with interest at the rate
of 15 per cent per annum a tempore morae to date of payment and costs of suit.

[2] The appeal to this court is with the leave of the high court. At the heart of
the dispute between the parties is whether a misrepresentation on the part of the
plaintiff’s representative, Mr Spendley, at the time of the conclusion of the
agreement, resulted in a fundamental mistake. If it did, the question is then whether
the plaintiff purchaser was entitled to rely on the mistake to avoid the sale
agreement, given the exemption clause in the contract which provided that the
property was sold ‘voetstoots’ and that the purchaser had acknowledged that he

had not been induced to enter into the agreement by any express or implied
information, statement, advertisement or representations made by any other person
on behalf of the seller.

[3] The relevant clause reads as follows:
‘14 VOETSTOOTS, EXTENT AND REPRESENTATIONS
14.1 The PROPERTY is sold “voetstoots” and subject to the terms and conditions and servitudes
mentioned or referred to in the current and/or prior Title Deeds and to the conditions of
establishment of the Township in which it is situated and to the zoning applied to it under the
Town Planning Scheme. . . .
14.2 The PURCHASER hereby acknowledges that he has not been induced into entering into
this agreement by any express or implied information, statement, advertisement or representation
made by the AUCTIONEER or any other person, or by or on behalf of the SELLER. The
PURCHASER hereby waives any rights whatsoever which he may otherwise have obtained
against the SELLER as a result of such information, statement, advertisement or representation
made by or on behalf of the SELLER.
14.3 The PURCHASER acknowledges that he has fully acquainted himself with the PROPERTY
he has purchased.’

[4] The background facts are the following. During the latter half of 2010 a unit
in a multi-storey building was offered for sale by the defendant. The unit (the
property) comprised commercial premises, while the remainder of the scheme was
residential. The plaintiff, represented by a Mr Joseph Thompson, made enquiries
and submitted an offer to purchase. But his offer was rejected. Thereafter, on 30
September 2010, the defendant offered the property for sale by public auction. The
plaintiff entered a bid at the auction but its bid was not accepted. Immediately after
the auction the plaintiff made a further offer increasing the price offered to R10,5
million. On 8 October 2010 the plaintiff and the defendant entered into an
agreement of sale in terms of which the plaintiff agreed to pay the sum of R10,5

million for the property. In terms of the agreement the plaintiff undertook to pay a
deposit of five per cent of the purchase price (which it did) and would also be
liable to pay the sum of R300 000 including Vat in respect of the auctioneer’s
commission at a later stage.

[5] The plaintiff alleged that the defendant’s representative made certain
representations which he knew to be false, and that these representations induced
the plaintiff to enter into a contract. The plaintiff therefore sought cancellation of
the agreement. In its plea the defendant denied that it made any representations at
all. It, too, pleaded cancellation of the agreement by reason of the plaintiff’s failure
to effect payment and claimed retention of the deposit as unliquidated damages.

[6] The misconception upon which the plaintiff relies was pleaded in the
following terms. It alleged that Spendley expressly represented, partly orally and
partly in writing, that the remainder of the scheme (the residential parts of the
building) consisted of only one unit, namely unit 2, and that in terms of Rule 27 of
the Scheme Rules, it would not be possible for the owner of unit 2 to sub-divide it
without the consent of the owner of unit 1. The plaintiff alleged that the written
representation was contained in a brochure prepared and distributed by the
auctioneers on behalf of the defendant. According to the brochure the scheme
consisted of only two units. The plaintiff further alleged that the representations
‘both oral and written’ were false in that (a) during 2007 the defendant had, by
resolution of the Trustees of the Body Corporate, granted permission to the owners
of unit 2, Southern Palace Investment (Pty) Ltd to sub-divide the unit into 110
units, and (b) unit 2 had in fact been sub-divided into 110 units which sub-division
was registered on 2 July 2010. Accordingly, the plaintiff alleged that the owner of

unit 1 did not enjoy the alleged right of veto contained in Rule 27 of the Scheme
Rules as had been represented by the defendant.

[7] Rule 27 of the Scheme Rules provided as follows:
‘No instrument signed on behalf of the Body Corporate shall be valid and binding unless it is
signed by at least two trustees whereof one shall be a nominee of the owner or owners from time
to time of section 1 (or any other sub-division thereof) of the Scheme.’

[8] It was common cause that Rule 27 conferred upon the owner of unit 1 an
effective right of veto in respect of the sub-division of unit 2. The essential issue
between the parties was whether it had been represented to the plaintiff that such
right was extant or not: if not then the plaintiff would have bought something
completely different from what it in fact was. In the alternative to its reliance on
the alleged fraudulent misrepresentation, the plaintiff alleged that at all relevant
times it was the continuing common intention of the parties that unit 1 be sold
together with the right of veto to prevent any sub-division of unit 2. The plaintiff
contended that at the time of the conclusion of the agreement it was, or should
reasonably have been known to the defendant, that it had previously granted its
consent to the sub-division of unit 2 and that accordingly the right of veto had been
rendered nugatory. In these circumstances, so it was alleged, the defendant’s
representative, Spendley, was under a duty to speak and a failure to do so induced
in the mind of the plaintiff a reasonable but mistaken belief that it purchased unit 1
together with the right of veto. There was accordingly no consensus between the
parties, which entitled the plaintiff to avoid the agreement.

[9] The correspondence between the parties and the defendant’s attorney
revealed that in October 2007 the defendant (represented by Spendley) had

authorised the then owners of unit 2, Southern Palace Investments, to sub-divide it
into 110 units and that unit 2 had, as a matter of fact, been sub-divided into 110
units by its present owner. What was in dispute was whether Spendley made any
representation at all in respect of the sub-division of unit 2 and what effect the
defendant’s failure to disclose the sub-division had, given the defendant’s assertion
that Spendley had no knowledge of the fact of sub-division and no recollection of
the October 2007 approval of the sub-division given by the defendant to Southern
Palace Investments.

[10] Thompson, the sole member of the plaintiff, testified that in early 2010 the
plaintiff wished to acquire commercial property for investment purposes. At the
time he dealt with Mr Roger Venter who was a property agent. He was introduced
to the Park Towers property and informed that it comprised two units. At the time
he was given a set of the Scheme Rules as well as copies of several leases in
respect of unit 2. After taking advice from certain of these associates he decided he
was not interested in purchasing the property. He was particularly concerned about
acquiring a building in which there were many units: having to deal with multiple
owners did not make sound business sense. According to him, however, he was
then contacted by Spendley, at some stage later in the year. When he informed
Spendley that he was concerned about the sub-division of unit 2 Spendley
informed him that he need not be concerned since the owner of unit 2 could not
sub-divide without the consent of the owner of unit 1. He could accordingly veto
any sub-division that the owner of unit 2 wished to make. Thompson stated that
having satisfied himself with regard to the rental returns he could earn and having
spoken to the financial director of the owner of unit 2 regarding the plans for the
building he then, on 12 August 2010, submitted an offer which included a
suspensive condition relating to a due diligent assessment.

[11] The price offered was R10,5 million of which R3 million was payable in
cash and the balance of R7,5 million was to be secured by way of a mortgage bond
This offer was, however, not accepted. The property was then placed on auction.
The defendant published a brochure advertising the property for sale at the auction.
At the auction the plaintiff made a bid of R9 million which was also not accepted.
Following the auction the plaintiff and the defendant entered into further
negotiations and arising from those, the agreement in question was concluded.

[12] The deed of sale records that the property was purchased as a rental
enterprise and as a going concern. It included a clause in which the purchaser
acknowledged that the property was subject to the rules and regulations of the
Body Corporate which had been established in terms of the sectional title scheme
and that the purchaser had read and familiarised himself with such rules and
regulations. Thompson stated in his evidence that the plaintiff intended to finance
the balance of the purchase price and to this end approached various banking
institutions for loan finance, which was approved. The conveyancing documents
were prepared by the defendant’s attorney, Ms Tracy Watson. According to
Thompson, after he had signed the documents necessary to take transfer of the
property, he was informed by Watson that it had been discovered that unit 2 had in
fact been sub-divided into 110 separate units, apparently in July 2010. Spendley,
he was told, was not aware as to how this could have occurred. This disclosure
resulted in an exchange of correspondence between Thompson and Watson. The
upshot of this exchange was that the plaintiff indicated that it was resiling from the
agreement.

[13] Spendley testified that in early 2010 Thompson had contacted him in
response to an advertisement regarding the property to ask him for information

about it. As a result of this he dropped off certain documents in respect of tenants
and the costs associated with the building at Thompson’s office. On this occasion
he had no discussion with Thompson regarding the property. Later that year in
July, contrary to Thompson’s evidence that Spendley had contacted him, he said
Thompson had telephoned him indicating that the property had been introduced to
him by an agent, Roger Venter. At that time Thompson inquired whether the
property that was being offered was still the same property, and whether it
comprised the same deal. Spendley confirmed that it was and further explained to
Thompson why he considered it to be a good bargain. In this regard he explained
that all tenancies in respect of unit 1 were secured, that the property was 100 per
cent let and that the income stream was good. He also indicated that the Rules
favoured the owner of unit 1. This, he said, related to the fact that in terms of the
Rules, the levy payable by unit 1 was less than that payable by unit 2. Spendley
testified that he had received this telephone call when he was at the Spar
Supermarket and that there was no discussion about the sub-division of unit 2.
Thereafter, Spendley said he had no further contact with Thompson directly. He
also denied that Thompson had brought to his attention any concern about the
division and therefore ownership of unit 2.

[14] Spendley testified further that during August 2010 the plaintiff submitted a
written offer on the property. This offer was presented to him by Roger Venter.
The offer was immediately rejected because it contained unacceptable suspensive
conditions, in particular the due diligence investigation, relating to the property.
Spendley’s evidence was that he was not aware of the fact that unit 2 had been sub-
divided and that he only became aware after the sale had been concluded and when
Watson established that unit 2 had been so sub-divided. Upon enquiries being

made as to how this occurred he remembered that he had granted approval in
October 2007 to the erstwhile owners of unit 2 to sub-divide that unit.

[15] Spendley explained that the previous owners, Southern Palace Investments
(Pty) Ltd, had proposed the sub-division for purpose of selling off residential units
as luxury apartments. The defendant had, on the strength of this, granted its
consent to the sub-division. Southern Palace Investments, however, was thereafter
liquidated in 2008 and unit 2 was sold to its present owners by public auction on
10 December 2008 (without reference to the defendant). It was established that the
sub-division had proceeded during the course of 2010 without further reference to
the defendant or the Body Corporate. Spendley stated that at the time of
concluding the sale with the plaintiff he had completely forgotten about the
approval that had been given in 2007.

[16] Spendley denied that there had ever been a discussion between himself and
Thompson relating to the sub-division of unit 2. According to him the matter was
not raised at all. However, the high court found that the correspondence relating to
the discovery that unit 2 had in fact been sub-divided suggested that the issue had
been raised prior to the plaintiff submitting its offer to purchase the property.

[17] Although the high court found that Thompson was not a particularly good
witness it accepted his evidence. It found that much of his evidence was supported
by the content of the correspondence which passed between him and Watson upon
the discovery that unit 2 had already been sub-divided. Not only does the
correspondence record his shock at this discovery (and indeed that of Spendley) it
contains the clear assertion made at that time that the issue of the sub-division was
particularly discussed, an assertion which was not placed in dispute by the

defendant in correspondence subsequent to that. The finding of the court in this
regard cannot be faulted.

[18] The representation alleged by the plaintiff is not denied. It is also not denied
that the question of sub-division of unit 2 formed part of the discussion between
the parties. The brochures handed to the plaintiff reflected the scheme as
comprising only two units. It was not in dispute that the defendant had, prior to the
conclusion of the agreement of sale, represented that the scheme comprised two
units.

[19] Having regard to the plaintiff’s evidence and the exchange of
correspondence once it was discovered that unit 2 had been subdivided into 110
units, the court below came to the conclusion that the plaintiff had, as contended,
raised the possibility of sub-division as a concern prior to the conclusion of the
sale. It also accepted that it was represented that the owner of unit 1 enjoyed a right
of veto in respect of any future sub-division of unit 2, as provided in the Rules of
the Scheme. The court rejected the evidence of Spendley where it differed from
that of the plaintiff.

[20] The high court accepted, however, that Spendley had forgotten that he had
signed the approval for the sub-division of unit 2. That is why he was shocked by
the correspondence found by Watson which revealed that he had done so.
Accordingly the court accepted that the fact of the sub-division was unknown to
him at the time of concluding the agreement of sale with the plaintiff. The court
accepted that since it had occurred in 2007 and had related to a proposal by
Southern Palace Investments, prior to its liquidation, he had considered that the

intervening liquidation would have brought that to an end. Since Spendley had
heard nothing further about the matter he had simply forgotten about it thereafter.

[21] The high court accordingly found that the defendant’s misrepresentation in
regard to the two units comprising the scheme, and the existence of an effective
right of veto in respect of the proposed sub-division, had not been made
intentionally. In the circumstances the court found that there was no scope for a
finding that the plaintiff had established the requisites of fraudulent
misrepresentation upon which its case, in the main, was based.

[22] The high court found, however, in favour of the plaintiff on the alternative
basis upon which it sought to avoid the agreement of sale: that Thompson, as a
result of the misrepresentation, had made a fundamental mistake as to the nature of
the property that he was buying.

[23] For purposes of this appeal it is not necessary to enquire into whether the
high court was correct in concluding that fraudulent misrepresentation on the part
of Spendley had not been established. We are required to consider the effect of an
innocent misrepresentation by Spendley on the agreement between the parties.
Relying on Trollip v Jordaan,1 counsel for the defendant submitted that the
agreement of sale between the parties was not void because the misrepresentation
by Spendley had been made innocently. In the Jordaan case the majority held that
a contract of sale was not void as a result of an innocent misrepresentation that did
not give rise to an error in corpore, and therefore that a non-misrepresentation
clause contained therein applied, and precluded reliance on the misrepresentation.2

1 Trollip v Jordaan 1961 (1) SA 238 (A) at 252G-H.
2 At 254B.

In Jordaan the dispute turned on the effect of the misrepresentation: the majority
said:3
‘It is obvious that any actionable misrepresentation must have as its effect a mistaken belief on
the part of the representee. If [the contract’s ‘no-representation’ clauses] prevent the appellant
from relying on any innocent misrepresentation, then they are equally effective in preventing him
from relying on a mistake induced solely by that very misrepresentation.’

[24] A different approach was adopted by Howard J in Allen v Sixteen Sterling
Investments (Pty) Ltd4 where it was stated that an error in corpore caused by a
misrepresentation, and which vitiated the consent to the contract concerned,
rendered that contract void ab initio and therefore the representor could not rely on
an exemption clause.5

[25]  Jordaan did not consider that the mistake that had resulted from the
misrepresentation was material. In Allen, on the other hand, the mistake clearly
was material. Accordingly, a clause that excludes liability for misrepresentation
will fall with the contract where the fundamental mistake that precludes consensus
was induced by a misrepresentation, whether made innocently or not.6

[26] This court recently affirmed the principle enunciated by Howard J in the Allen
case that where the misrepresentation results in a fundamental mistake, the
‘contract is void ab initio’.7  Cloete JA, writing for the majority, explained the
rationale for the approach as follows:
‘In this way, the law gives effect to the sound principle that a person, in signing a document, is
taken to be bound by the ordinary meaning and effect of the words which appear over his or her

3 At 254D-E.
4 Allen v 16 Stirling Investments (Pty) Ltd 1974 (4) SA 164 (D).
5 Allen at 171B-F.
6 D Hutchison & CJ Pretorius (eds) et al The Law of Contract in South Africa (2010) at 121.
7 Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA) para 2.

signature, while at the same time, protecting such a person if he or she is under a justifiable
misapprehension, caused by the other party who requires such signature, as to the effect of the
document.’

[27] In the present matter the correct enquiry is whether the error has precluded
the parties from reaching consensus ad idem and secondly, whether it is reasonable
for the resiling party to labour under a misapprehension.8 See Morgan Air Cargo v
Sim Road Investments & another,9 Murphy J noted in relation to the enquiry into
whether an exemption clause is enforceable, that ‘. . . the emphasis has shifted
from the nature of the fault element attending the misrepresentation to the nature
and quality of the consensus vitiating error caused by the misrepresentation.’

[28] Academic writers10 appear to be at one that a contract, including an
exemption clause may fail for lack of consensus between the parties. In the Allen
case11 Howard J referred with approval to a comment by P M A Hunt on Trollip v
Jordaan, which appeared in the Annual Survey of South African Law,12 where the
writer said the following in regard to the effect of an exemption clause:
‘Prima facie it would seem that the vice taints consent to the whole contract, including the
exemption clause. All the terms of the contract together regulate the contract’s object, and it is
difficult to see how the consent can but stand or fall as a whole. It seems impermissible to find a
separate untainted consent to the exemption clause.’

8 Goldberg & another v Carstens 1997 (2) SA 854 (C) at 859B; R H Christie & G B Bradfield Christie’s The law of
Contract in South Africa (6 ed 2011) at 335.
9 [2009] 4 All SA 249 (GNP) para 83.
10 AJ Kerr The Principles of the Law of Contract (6 ed 2002) at 253; D Hutchison & C J Pretorius (eds) et al The
Law of Contract in South Africa (2010) at 121; S W J van der Merwe, L F van Huyssteen, M F B Reinecke & G F
Lubbe Contract: General Principles (4 ed 2012) at 258.
11 At 171A.
12 1961 at 95.

Like Howard J, I can find no fault with the reasoning and understand the ‘vice’
referred to in the above passage to mean ‘something in the nature of an essential
error which vitiates consent and renders the contract void ab initio.’13

[29] It is against these principles that I turn to consider whether the exemption
clause, quoted above, can avail the defendant. In the present matter the plaintiff’s
mistake, induced by the defendant’s representative, Spendley, was as to the true
nature of the merx and as such no consensus was established in concluding the
contract. Both parties laboured under the mistaken belief that the unit in the
building was one of only two. The plaintiff’s mistake was, as the high court
accepted, induced by the misrepresentation that there were only two units in the
building and that the owner of unit 1 could veto the right of unit 2 to subdivide it.
In these circumstances the parties were mutually mistaken as to the true nature of
the merx and accordingly it cannot be said that the parties achieved consensus as to
the subject matter of the sale.

[30] The fact that Spendley had forgotten about the resolution signed in 2007
approving the sub-division of unit 2 and that the misrepresentation was therefore
not fraudulent makes no difference in the greater scheme of things. Regardless of
the nature of the misrepresentation, the plaintiff concluded the agreement on the
basis of a justus error and is accordingly bound on the basis of the principles set
out in Sonap Petroleum (SA) (Pty) Ltd (formerly known as SONAREP (SA) (Pty)
Ltd v Pappadogianis.14 Harms AJA explained the legal position as follows:
‘In my view, therefore, the decisive question in a case like the present is this: did the party whose
actual intention did not conform to the common intention expressed, lead the other party, as a

13 Allen at 171B.
14 Sonap Petroleum (SA) (Pty) Ltd (formerly known as Sonarep (SA) (Pty) Ltd v Pappadogianis 1992 (3) SA 234 (A)
at 239I-240B.

reasonable man, to believe that his declared intention represented his actual intention? Compare
Corbin on Contracts (1 volume edition) (1952) at 157. To answer this question, a three-fold
enquiry is usually necessary, namely, firstly, was there a misrepresentation as to one party’s
intention; secondly, who made that representation; and thirdly, was the other party misled
thereby?
See also Du Toit v Atkinson’s Motors BPK 1985 (2) SA 893 (A) at 906C-G; Spindrifter (Pty) Ltd
v Lester Donovan (Pty) Ltd 1986 (1) SA 303 (A) at 316I-317B.
The last question postulates two possibilities: Was he actually misled and would a reasonable
man have been misled?’

[31] In the present matter there can be no question that the plaintiff’s
representative, Thompson, was misled by Spendley’s misrepresentation that the
sectional title scheme comprised only two units, and the non-disclosure of the fact
that the approval to the sub-division of unit 2 had been granted prior to the
conclusion of the agreement of sale between the plaintiff and the defendant. The
misrepresentation resulted in a reasonable and material mistake as to what the
merx was. The contract was thus void from the outset. In the circumstances the
appeal must fail.

[32] In the result, the following order is made:
The appeal is dismissed with costs.

K K Mthiyane
Deputy President

Appearances
For the Appellant:
A Beyleveld SC
Instructed by:
De Villiers & Partners, Port Elizabeth
Honey Attorneys, Bloemfontein

For the Respondent:
R P van Rooyen SC
Instructed by:
Friedman Scheckter, Port Elizabeth
Matsepes Inc, Bloemfontein
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME
COURT OF APPEAL

FROM
The Registrar, Supreme Court of Appeal

DATE
1 April 2014

STATUS
Immediate

Please note that the media summary is for the benefit of the media and
does not form part of the judgment.

SPENMAC v TATRIM CC (216/2013) [2014] ZASCA 48 (1 APRIL 2014)

The SCA today dismissed an appeal by the seller, Spenmac (Pty) Ltd, of a
sectional title unit, in Park Towers Port Elizabeth, against the judgment and
order of the Easter Cape High Court (Goosen J) which upheld the decision of
the buyer, Tatrim CC to resile from the agreement. The high Court had found
that
the
buyer
was
induced
into
concluding
an
agreement
by
misrepresentation on the part of the sellers agent, Mr Spendley into believing
that a sectional unit was being sold with a veto right in respect of the sub-
division of another unit. The buyer’s representative Mr Joseph Thompson,
was led to believe that as owner of sectional title unit 1 that he was entitled to
veto the sub-division of unit 2.

The evidence subsequently revealed that the seller had already signed a
resolution approving sub-division unit. Therefore at the time unit 1 was
purchased that right of veto was no longer extant. The high court ruled in

favour of the buyer and held that the buyer was entitled to avoid the contract.
The SCA agreed and dismissed the appeal with costs.