THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

NOT REPORTABLE
Case No: 182/13
In the matter between:

COMWEZI SECURITY SERVICES (PTY) LTD                            FIRST APPELLANT
MOHAMED SHAFFIE MOWZER NO                                      SECOND APPELLANT

and

CAPE EMPOWERMENT TRUST LTD
RESPONDENT

Neutral citation:
Comwezi Security Services v Cape Empowerment Trust
(182/13) [2014] ZASCA 22 (28 March 2014)
Coram:
Mpati P, Lewis, Bosielo and Wallis JJA and Van Zyl AJA
Heard:
10 March 2014
Delivered:
28 March 2014

Summary:
Contract – repudiation – election not to accept repudiation – effect of
repudiation on contractual obligations – repudiating party placing
reliance on failure of innocent party to comply with its contractual
obligations – obligation to perform may in appropriate circumstances
be excused or suspended – repudiating party not to obtain an
advantage from its own unlawful conduct – innocent party not expected
to perform a futile or useless act.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: Western Cape High Court, Cape Town (Traverso DJP sitting as
court first instance):

The appeal is dismissed with costs including those of two counsel.

The period of ten days in para 21.2 of the order of the high court dated
5 December 2012 is to be construed as a reference to ten days from the date
of this judgment.

___________________________________________________________________

JUDGMENT
___________________________________________________________________

Van Zyl AJA (Mpati P, Lewis, Bosielo and Wallis JJA concurring)

[1] The issue which arises for decision in this appeal requires us to consider the
conflict between two principles of law expressed as follows: A „“[p]arty may not
repudiate a contract and at the same time seek the advantage of a stipulation in the
very contract he has repudiated”. What is the theory that justifies such a principle?
Against it there is the argument that an unaccepted repudiation is a “thing writ in
water” not affecting legal rights in any way . . . and that therefore all contractual
rights remain available to the repudiating party.‟1

1 Per Mahoney JA in Nina’s Bar Bistro (Pty) Ltd (Formerly Mytcoona Pty Ltd) v MBE Corporation
(Sydney) Pty Ltd [1984] 3 NSWLR 613 (CA) at 633.

[2] The background facts relevant to the dispute between the parties appear from
the judgment of this court in Comwezi Security Services (Pty) Ltd & another v Cape
Empowerment Trust Ltd.2  The first appellant, Comwezi, borrowed R4 million from
the respondent, Cape Empowerment Trust Ltd (CET). Repayment of this amount
was secured by way of a cession and pledge of shares in Comwezi held by the
Grapsy Trust (the trust), which is represented by the second appellant, Mr Mowzer,
in his capacity as its trustee. Comwezi failed to repay the loan and the parties
entered into settlement negotiations. These culminated in the conclusion of a
settlement agreement in terms of which the loan would be discharged by way of the
issue to CET of 25 ordinary shares in the issued share capital of Comwezi.

[3] The settlement agreement entitled CET to conduct a comprehensive due
diligence investigation in respect of the affairs of Comwezi before deciding finally
whether to take up the shares in settlement of the amount owing to it. Both Comwezi
and the trust accepted the obligation to co-operate with CET in conducting this
investigation, and to lend their assistance. This included the obligation to make all
documentation relating to Comwezi available for inspection. The relevant provisions
in this regard are found in clause 7 of the settlement agreement:
„7 DUE DILIGENCE INVESTIGATION
7.1
CET shall be entitled, immediately after the Signature Date to conduct a
comprehensive due diligence investigation in respect of the affairs of Comwezi.
7.2
Comwezi and the Grapsy Trust shall co-operate with CET in conducting the due
diligence investigation and shall procure that CET and its duly authorised
representatives are given every reasonable assistance in this regard, and that all
documentation of Comwezi are made available for inspection.
7.3
. . .
7.4
. . .
7.5
. . .
7.6
CET shall have the sole and absolute discretion to proceed with or abandon this
Settlement Agreement based on the outcome of its own findings and conclusions
from the due diligence investigation.
7.7
CET shall, for purposes of the resolutive condition contained herein, notify Comwezi
by not later than 3 months after the Signature Date whether or not it is satisfied with

2 Comwezi Security Services (Pty) Ltd & another v Cape Empowerment Trust Ltd (759/11) [2012]
ZASCA 126 (21 September 2012).

the outcome of its due diligence investigation and accordingly whether it wishes to
proceed with this transaction, provided that if CET fails to so notify Comwezi
timeously, CET shall be deemed not to be satisfied.‟

[4] In terms of clause 10, which was described as a resolutive condition, CET had
to complete the investigation and notify Comwezi in writing that it was satisfied with
the outcome thereof within 3 months after the date of the signing of the said
agreement. If it did not do so, the settlement agreement would lapse, and the parties
would revert to their respective positions under the loan agreement. CET was given
the right to waive or „relax‟ the resolutive condition. Clause 10 in its entirety reads as
follows:
„10 RESOLUTIVE CONDITION
10.1
The Parties agree that this Settlement Agreement is subject to the resolutive
condition that CET has completed the due diligence investigation set out in clause 7
in respect of Comwezi and has notified Comwezi in writing that it is satisfied with the
outcome thereof by no later than 3 (three) months after the Signature Date.
10.2
In the event of CET not notifying Comwezi that it is satisfied with the outcome of the
due diligence investigation, this Settlement Agreement will automatically fail and be
of no further force and effect and the Parties shall restore the status quo ante as near
as possible and no party shall have any claim against the other party arising from this
Settlement Agreement and for the avoidance of doubt, the Parties will then only be
able to rely on the terms of the Loan Agreement to enforce its rights against the
other.
10.3
The resolutive condition contained herein is imposed for the benefit of CET and may
be waived or relaxed, in writing, by CET prior to the period of 3 (three) months after
the Signature Date.‟

[5] Relying on the power in clause 10.3, CET from time to time extended the
three month period. It needed to do so by reason of Comwezi‟s failure to comply with
its obligation to co-operate with the due diligence investigation and to provide the
necessary documentation to enable it to complete the investigation. The last
extension was until 4 November 2011. Before the expiry of the extended time period
CET approached the high court on application (the first proceedings) seeking an
order to compel Comwezi to provide it with certain specified documentation; to assist
CET in conducting the investigation; and to allow it access to Comwezi‟s premises.

Comwezi and the trust resisted the application, inter alia on the basis that
clause 10.3 of the settlement agreement did not entitle CET to extend the three
month period as it had purported to do, and that the settlement agreement had
lapsed as a result. The high court held that the extensions were permissible and that
the agreement remained in force. On 10 October 2011 it granted an order in favour
of CET compelling Comwezi to co-operate with CET in the due diligence
investigation. Comwezi was given 10 days to comply with the order.

[6] Comwezi lodged an appeal against that order. This court (per Wallis JA)
found that on a proper interpretation of clause 10.3, it afforded CET the right to
extend the period in which it had to inform Comwezi that it was satisfied with the
outcome of the due diligence investigation, and by necessary inference, the period
within which it was to conduct that exercise.3 On 21 September 2012 the appeal was
dismissed with costs. CET subsequently attempted to execute the order of the high
court of 10 October, only to be informed by Comwezi that because the three month
period had not been extended beyond 4 November 2011, the settlement agreement
had lapsed and that it would not comply with the order. It is common cause that CET
did not extend the date for the finalization of the due diligence investigation, or the
date for notifying Comwezi of the outcome of that investigation beyond 4 November
2011.

[7] This prompted CET once again to approach the high court for assistance. It
applied for a declaratory order that the settlement agreement had remained valid and
binding, and that Comwezi must comply with the order of 10 October 2011. The high
court (per Traverso DJP) granted the relief sought. It is this order which forms the
subject matter of this appeal. Relying on the decisions in Erasmus v Pienaar4 and
Moodley & another v Moodley & another5 the high court found that the failure of
Comwezi to comply with its obligations in terms of the settlement agreement. This,
the court said, constituted a repudiation of the agreement, and it „not only entitles the
innocent party to cancel, but that, for as long as the repudiation endures, it suspends
the obligation of the innocent party to perform in terms of the agreement‟.

3 Comwezi Security Services (Pty) Ltd & another v Cape Empowerment Trust above para 13.
4 Erasmus v Pienaar 1984 (4) SA 9 (T).
5 Moodley & another v Moodley & another 1990 (1) SA 427 (D).

[8] It was correctly acknowledged in argument by counsel for Comwezi that the
refusal of Comwezi to cooperate in the due diligence investigation and its unjustified
insistence that clause 10.3 of the agreement did not entitle CET to extend the time
period for completing the investigation, constituted a wrongful repudiation of the
agreement. The test to determine whether conduct amounts to a repudiation which
justifies cancellation is „. . . whether fairly interpreted it exhibits a deliberate and
unequivocal intention no longer to be bound.‟6 It is not in issue that CET, by insisting
that Comwezi comply with its contractual obligation to render assistance in the
investigation, elected not to accept the repudiation. The effect of that election was
that the agreement remained in place and each party remained subject to all its
obligations and liabilities. Comwezi relies on the following legal proposition in support
of its contention that CET‟s failure to extend the time period beyond 4 November
2011 has resulted in the agreement lapsing:
„A repudiation, as was once said, is “a thing writ in water” . . . . It merely affords the injured
party an election to terminate the agreement by accepting the repudiation . . . and unless
and until that happens the repudiator's obligation to perform and the other party's right to
receive performance remain wholly unaffected.‟7

[9] Comwezi‟s contention is that the failure of CET to cancel the agreement
meant that it was bound to continue to extend the time period in clause 10 if it
wished to maintain the contract in force. It argued that the failure of CET to do so
beyond 4 November 2011 meant that the resolutive condition had not been fulfilled
and the agreement had lapsed. Its noting of an appeal against the order of
10 October 2011 and the prosecution thereof cannot, according to Comwezi, in any
way assist CET. It said that the effect of the appeal was simply to suspend the
operation and the execution of the order. It did not operate to extend the period
provided for in clause 10 of the agreement, or obviate the need for CET to take the
steps it was obliged to take under the contract to keep it alive.

[10] What is immediately apparent from Comwezi‟s submission (that its own
unaccepted repudiation did not take away its entitlement to take advantage of the
claimed failure of CET to comply with the terms of the agreement) is its inequity.

6 Per Williamson J in Street v Dublin 1961 (2) SA 4 (W) at 10B-C. See Datacolor International (Pty)
Ltd Intamarket (Pty) Ltd 2001 (2) SA 284 (SCA) para 1.
7 Per Hefer JA in Culverwell & another v Brown 1990 (1) SA 7 (A) at 28E-F.

What it amounts to is the following: Comwezi refused to cooperate in the due
diligence investigation and to make the documentation requested available, on the
basis that clause 10.3 did not entitle CET to extend the three month period in
clause 10.1, and that the agreement had lapsed as a consequence. It adopted that
position in the first proceedings. But now that its interpretation of clause 10 has been
found to be incorrect and it must comply with its obligation to participate in the due
diligence investigation, Comwezi seeks to rely on CET not having further extended
the three month period beyond 4 November 2011. What it effectively seeks to do, to
its own advantage, is to rely on the terms of the agreement it had elected to
repudiate. „It does not appear to me to be sound law to permit a person to repudiate
a contract, and thereupon specifically to found upon a term in that contract which he
has thus repudiated.‟8

[11] It is correct that repudiation as such does not have any effect on the rights
and duties of the parties to a contract, as long as the innocent party is willing,
prepared and able to perform his obligations. However, it is recognised that the
repudiation of one party may in appropriate circumstances excuse the innocent party
from taking measures which it would otherwise have been obliged to take, or may
suspend the performance of his own obligations, until such time as the repudiating
party indicates his willingness to give effect to the contract. Appropriate
circumstances would be that the innocent party cannot proceed without the co-
operation of the repudiating party, or that the principle of mutuality of performance
would entitle the innocent party to withhold its own performance.9 This rule has its
origin in the English law from where repudiation as a form of breach of contract
made its way into our own law.10 In Erasmus v Pienaar the court (per Ackermann J)
dealt extensively with this rule and concluded that there exists sufficient authority for
it to form part of our law. The decision in Erasmus has found approval in a number of
subsequent decisions,11 including decisions of this court.12

8 Municipal Council of Johannesburg v D Stewart & Co (1902) Ltd 1909 HL 53 at 56 referred to in
Hurwitz’s Trustees v Magdeburg Fire Insurance Co 1917 TPD 443 at 448 and Erasmus v Pienaar
1984 (4) SA 9 (T) at 24B.
9 Moodley above at 431E-F.
10 S W J van der Merwe, L F van Huyssteen, M F B Reinecke and G F Lubbe Contract General
Principles 4 ed (2012) at 308 and Crest Enterprises (Pty) Ltd v Rycklof Beleggings (Edms) Bpk 1972
(2) SA 863 (A) at 869C-H.
11 Moodley at 430E-431I; Culverwell & another v Brian 1988 (2) SA 468 (C) at 475I-J.

[12] The rationale for this rule is twofold:  A party to a contract should not by its
own unlawful conduct be allowed to obtain an advantage for himself to the
disadvantage of his counterpart. „It is a fundamental principle of our law that no man
can take advantage of his own wrong‟13 and „to permit the repudiating party to take
advantage of the other side‟s failure to do something, when that failure is attributable
to his own repudiation, is to reward him for his repudiation‟.14 The converse is that
the innocent party is not expected to make the effort or incur the expense of
performing some act when, by reason of the repudiation, „it has become nothing but
an idle gesture‟.15 This is consistent with the general principle that the law does not
require the performance of a futile or useless act. These principles are of general
application and may find application in a variety of circumstances. The doctrine of
fictional fulfilment of contractual terms is, for example, similarly based on the
principle that a contractant cannot take advantage of its own wrongful conduct to
escape the consequences of the contract.16

[13] Comwezi submitted that the principle in Erasmus and Moodley does not find
application on the facts of the present matter. The argument was that this case does
not deal with the failure of the innocent party to comply with a contractual obligation,
but rather the failure of CET to exercise a contractual power or authority to extend
the time period in clause 10.1 so as to prevent the fulfilment of a resolutive condition.
It was submitted that the exercise of that power was not in any way dependent on
the co-operation or the due performance by Comwezi of its own contractual
obligations. It is correct that clause 10.3 of the agreement does not provide for a right
in the sense that there is a correlative duty. It is rather a power or authority that is „an
ability on the part of a person to produce a change in a given legal relationship by
doing or not doing a given act‟. Its correlative is not a duty but a liability.17

12 GNH Office Automation CC v Provincial Tender Board, Eastern Cape 1998 (3) SA 45 (SCA) at 51F-
G; Ashcor Secunda (Pty) Ltd v Sasol Synthetic Fuels (Pty) Ltd (624/10) [2011] ZASCA 158
(28 September 2011) para 8 and Food and Allied Workers Union v Ngcobo NO & another [2013] 7
BLLR 648 (SCA) para 50.
13 P M Nienaber „The Effect of Anticipatory Repudiation: Principle and Policy‟ (1962) Cambridge Law
Journal 213 at 225, quoted with approval in Food and Allied Workers Union v Ngcobo & another para
50.
14 Moodley at 431F-G.
15 Moodley at 431G-H and Erasmus at 22E-H.
16 Macduff & Co Ltd (in liquidation) v Johannesburg Consolidated Investment Co Ltd 1924 AD 573 at
591 and Koenig v Johnson & Co Ltd 1935 AD 262 at 272.
17 G W Paton A Textbook of Jurisprudence 4 ed (1972) at 293.

[14] The difficulty with this argument is, however, that it focuses too narrowly on
clause 10.3 of the agreement. The rights and obligations of the parties must be
determined from the agreement as a whole. Clause 7.1 gave CET a contractual right
to conduct a due diligence investigation. Clause 7.2 in turn placed an obligation on
Comwezi to co-operate with CET in conducting that investigation. On a construction
of clause 10.1, read with clauses 7.7 and 10.2, it clearly imposed a time limit on the
envisaged investigation. It placed a contractual obligation on CET to complete it
within three months or an extended time period as determined by it under
clause 10.3. Clause 10.1 is clearly a term containing a resolutive time clause. „‟n
Tydsbepaling kan op twee maniere aan „n verbintenis toegevoeg word, t.w.
opskortend en ontbindend. Ontbindend is die tydsbepaling wanneer die verbintenis
of verbintenisse uit die ooreenkoms slegs tot op „n sekere dag werking sal hê . . . .‟18
The label which the parties to the agreement attached to it cannot turn it into a
resolutive condition. There is a fundamental difference between a condition and a
term containing a time clause. The former is subject to a future uncertain event. The
latter on the contrary deals with the performance by a party of an obligation within a
stipulated period.19 Clause 10.1 falls in the latter category.

[15] The position is therefore that CET was clearly willing and able to comply with
its contractual obligations. Due to Comwezi‟s refusal to co-operate, CET was
prevented from completing the due diligence investigation within the required time
period, that is, the time period as determined in accordance with the terms of the
agreement. Its obligation to complete the investigation within that period was
dependent upon Comwezi‟s co-operation. Its attempt at enforcing Comwezi‟s
contractual obligation to render the necessary assistance was met with a wrongful
insistence that clause 10.3 of the agreement did not entitle CET to extend the three
month period, and that the failure of CET to complete the investigation within that
period meant that the agreement was no longer in existence. The position taken by
Comwezi therefore amounted to an intimation that it would be an act of futility for

18 J C de Wet and A H van Wyk Kontrakreg en Handelsreg 5 ed Vol 1 at 146. „A time clause may
either be suspensive or resolutive in its operation. It is resolutive when the obligation or obligations
arising from the contract shall only be operative until a certain day.‟ (my translation)
19 De Wet and Van Wyk at 146; A J Kerr The Principles of the Law of Contract 6 ed at 457; Jurgens
Eiendomsagente v Share 1990 (4) SA 664 (A) at 674I and Venter Agentskappe (Edms) Bpk v De
Sousa 1990 (3) SA 103 (A) at 111D-F.

CET to act in terms of clause 10.3 of the agreement. In these circumstances it would
have served no purpose whatsoever for CET to continue to extend the time period in
which to conclude the due diligence investigation.

[16] I therefore conclude that on the facts of this matter CET‟s contractual
obligation to complete the due diligence investigation within the determined time
period was suspended from 11 October 2011 when the high court in the first
proceedings found that Comwezi was in breach of its obligations in terms of the
agreement.

[17] In the result:

The appeal is dismissed with costs including those of two counsel.

The period of ten days in para 21.2 of the order of the high court dated
5 December 2012 is to be construed as a reference to ten days from the date
of this judgment.

___________________
D van Zyl
Acting Judge of Appeal

APPEARANCES

For Appellant:
S P Rosenberg SC (with him P B J Farlam)

Instructed by:

Edward Nathan Sonnenbergs Inc, Cape Town

Lovius Block Attorneys, Bloemfontein

For Respondent:
M J Fitzgerald SC (with him P van Eeden)

Instructed by:

Hayes Inc, Cape Town

Naudes Inc, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
28 March 2014
Status:
Immediate

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

COMWEZI SECURITY SERVICES (PTY) LTD & ANOTHER
V
CAPE EMPOWERMENT TRUST LTD

The parties in this appeal concluded a settlement agreement in a dispute about the
repayment of a loan. In terms of the agreement the respondent had the right to
conduct a due diligence investigation into the affairs of the first appellant. The
agreement obliged the appellants to co-operate with and to assist the respondent
in the investigation. The respondent had to complete the investigation within three
months but had the authority to extend that time period.

When the appellants failed to comply with their obligation to co-operate in the
investigation, the Western Cape High Court granted an order compelling them to
do so. In subsequent proceedings for the enforcement of that order the appellants
contended that the agreement had lapsed. The reason advanced was that the

respondent had failed to extend the time period in which it was obliged to complete
the investigation.

The Supreme Court of Appeal found that the failure of the appellants to co-operate
in the investigation was a repudiation of their contractual obligations. It held that
the principle that a party to a contract may not repudiate its obligations and at the
same time seek the advantage of a stipulation in the very same contract, and that a
contractant is not expected to perform a futile act, found application on the facts of
the matter. The high court was accordingly correct that the agreement had not
lapsed and that the appellants must comply with their contractual obligations. The
appeal was dismissed.