THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case No: 406/10

In the matter between:

BURGER & WALLACE CONSTRUCTION (PTY) LTD

Appellant

and

BALLPROP TEN (PTY) LTD

Respondent

Neutral citation: Burger & Wallace Construction (Pty) Ltd v Ballprop Ten

(Pty) Ltd (406/10) [2011] ZASCA 136 (23 September 2011).

Coram:
CLOETE and MALAN JJA, and MEER, PLASKET

and PETSE AJJA

Heard:
25 AUGUST 2011

Delivered:
23 SEPTEMBER 2011

Summary:
Contract: whether joint venture agreement, breach and
entitlement to claim damages established on the facts.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: Western Cape High Court (Cape Town) (Saldanha J sitting
as court of first instance):
The appeal is dismissed with costs, including the costs of two counsel.
______________________________________________________________

JUDGMENT
______________________________________________________________

CLOETE JA (MALAN JA and MEER, PLASKET and PETSE AJJA
concurring):

[1] The appellant as the plaintiff sued the respondent as the defendant in
the Western Cape High Court for payment of R461 335,25 in respect of
services rendered. It is convenient to refer to the parties as they were in the
court a quo. The defendant admitted the claim but counterclaimed for
payment of damages for breach/repudiation of a joint venture agreement. The
merits of the counterclaim were separated from the amount claimed in terms
of rule 33(4) and were determined in favour of the defendant by Saldanha J,
who granted leave to appeal to this court.

[2] The plaintiff is a company that provides civil engineering services in
construction projects. The defendant is a property development company that
buys and develops land and constructs and sells houses.

[3] It was the defendant's case that in or about April 2001 and in Cape
Town the parties entered into a joint venture agreement to develop what came
to be known during the trial as 'the Ogden erven'. For reasons which will
become apparent it is necessary to quote paragraph 3 of the defendant's
counterclaim:
'3.
The relevant terms of the joint venture agreement between the Defendant and
the Plaintiff were inter alia as follows:

3.1
the Defendant would attend to the rezoning, subdivision and other issues
concerning the development of the relevant erven with the intention to subdivide and
develop approximately 600 erven in total and to sell these by plot and plan;
3.2
the Plaintiff would obtain and/or arrange the necessary finance for the project
and furthermore see to the site services for each plot for which service the Plaintiff
was to be paid a market-related fee for its services rendered;
3.3
the Defendant would act as building contractor and build the dwellings for the
plot and plan purchasers;
3.4
the Defendant and the Plaintiff would each be entitled to half of the profit
generated by the sale of these plots to purchasers;
3.5
the Defendant would be entitled to all profit for the building work done in
accordance with the agreement of the parties;
3.6
the joint venture agreement would be undertaken in the name of a company
to be nominated as the purchaser of the Ogden erven.'

[4] Three principal issues were raised on appeal, namely:
(a)
Whether the defendant had proved a binding contract on the terms it
alleged;
(b)
whether the defendant had established that the contract had been
breached in the manner alleged; and
(c)
whether the defendant had suffered loss.
The plaintiff accepted the defendant's version for the purposes of argument on
these three issues. In the alternative, the plaintiff submitted that the evidence
of the principal witness called on behalf of the defendant, Mr Frederick Peter
Carse, should not have been accepted. It is logical to determine the last
question first and I shall accordingly do so.

[5] The judgment of the court a quo was comprehensive. After setting out
the history of the relationship between the parties, the court devoted some 26
pages of the judgment to setting out the relevant facts in careful detail. It was
not submitted that the court committed any factual misdirection. It is
accordingly unnecessary to repeat the exercise. It suffices to say that this

judgment should be read together with that part of the judgment of the court a
quo.1

[6] The court a quo found that a joint venture agreement between the
parties had been established. In summary, the court accepted the evidence of
Carse that after approaches to the Cape of Good Hope Bank and Absa for
finance for the joint venture had not succeeded, he, with the assistance of Mr
Izak Martin Burger and with the co-operation of Mr Terence James Wallace,
the directors and shareholders of the plaintiff, had approached Mr Andrew
David Ribbans. Ribbans agreed on behalf of a company (to which I shall refer
as 'the Ribbans company') to finance the purchase of the Ogden erven by a
'shelf' company. The 'shelf' company used was Defacto Investments 12 (Pty)
Ltd. Ribbans required that the shareholding in Defacto would be the Ribbans
company as to 80 per cent and the defendant as to 20 per cent. Ribbans also
required that the first R10 million of the anticipated profit to be made by
Defacto in selling subdivided plots was to be split 80 per cent in favour of the
Ribbans company (which would include the plaintiff's 50 per cent share of
those proceeds in accordance with the joint venture) and 20 per cent in favour
of the defendant; and this ratio was to be reversed in respect of the second
R10 million of the anticipated profit ─ provided that if the development took
more than four years but less than five years, the ratio was to be 70/30 and if
the development took more than five years but less than six years, the ratio
was to be 60/40. Ribbans, Burger and Carse were appointed directors of
Defacto. The plaintiff's version, which the court a quo rejected, was that
Ribbans was only prepared to commit his company to the purchase of the
Ogden erven on the basis that that company would own the land, indirectly by
means of a 100 per cent shareholding in a 'shelf' company; that Ribbans had
not stipulated any payment ratios; and that the joint venture ─ if it existed at
all (a point on which Wallace and Burger contradicted each other) ─ did not
survive the refusal of the two banks to provide finance.

1 Burger & Wallace v Ballprop Ten (Pty) Ltd [2007] ZAWCHC 91.

[7] The court a quo scrutinized and evaluated the evidence given by the
witnesses in some detail and concluded that:
'Carse, although at times argumentative in cross-examination, cast a more
favourable impression on the court as a witness than any of those for the plaintiff.'
On appeal it was contended that the court had erred in this regard. Notably, it
was not suggested that the court's criticisms of the evidence of Wallace,
Burger and Ribbans was not justified. The submission, rather, was that the
court had not properly evaluated Carse's evidence, which it was submitted
was neither credible nor probable, for a number of reasons. I shall deal with
the probabilities presently. Some of the reasons advanced against Carse's
credibility do not warrant consideration. The others, which I shall now deal
with, are without merit.

[8] It was submitted that there were contradictions between Carse's oral
testimony and his affidavit resisting summary judgment, his version in the
Rule 22(4) proceedings, the original claim in reconvention, and the amended
claim in reconvention. It was also submitted that in terms of the Companies
Act 61 of 1973 the agreements to which Carse testified had to be reflected in
the defendant's annual financial statements, but they were not. It is
unnecessary to discuss the alleged contradictions and omission as none of
this was put to Carse in cross-examination and he was not given an
opportunity of dealing with it.

[9] It was submitted that on his own version, Carse made no effort to bind
Defacto, Ribbans or the defendant to the agreements to which he testified. It
is true that no written agreements were concluded, but according to Carse,
there was an agreement between the shareholders of Defacto and an
agreement between the parties to the joint venture agreement, the workings
and terms of which I shall deal with later in this judgment.

[10] It was submitted that it is telling that Carse did not raise the
agreements referred to in the previous paragraph with Ribbans at any time
after July 2001, and that he only raised a claim in respect of the Ogden
properties by way of an attorney's letter in response to the plaintiff's

application for summary judgment in January 2005. The submission
concluded that this did not reflect the conduct of a man who genuinely
believed that he had the rights of the kind and value for which the defendant
contends. The submissions are not entirely accurate, nor do they reflect all of
the facts. Carse sent a memorandum to the plaintiff dated 15 August 2002,
the heading of which was 'Defacto ─ Sunrise Beach' in which he said, inter
alia:
'Although progress to date does not maybe reflect it, a tremendous amount of work
and energy goes into this project. It would be appreciated if we could formalise the
arrangement between the parties.'
In his evidence Carse explained the reasons behind this request as follows:
'U Edele [the defendant] sowel as myself, professionele mense het geweldige
hoeveelheid tyd en ure ingesit in die projek en ek wou graag dat ons ooreenkoms,
die ooreenkoms met Burger & Wallace en die deelname van Master Tyre Properties
[a Ribbans company], dat dit meer formeel geskied. Ek wil hulle ook meer betrokke
gehad het by die ontwikkeling omdat hulle vennote was, finansierders, en daar
besluitneming in terme van baie goed geneem moet word.'
On 8 April 2003 Carse wrote to Ribbans. The heading of the letter was
'Defacto Investments 12 (Pty) Ltd'. In the letter, Carse said:
'I want to remind you that I have [on] various occasions suggested/requested that we
have regular meetings to address matters relating to this joint venture. As the
financing partners, it is in your interest to have such contact and communication.'
In February 2004 when Carse was asked by Ribbans to resign as a director of
Defacto, he reacted, according to him, by saying:
'Maar wat van 'n aandeelhouding, julle kan mos nie net dit doen nie.'
In August 2004 Carse received a letter to attend a meeting for his removal as
a director of Defacto and consulted an attorney, who advised him to prepare
for litigation to enforce the defendant's claim. In January the following year
Carse and his attorney, Mr Horak, attended a meeting with Wallace. During
that meeting they attempted to raise the question of a claim by the defendant.
Wallace abruptly terminated the meeting. Shortly thereafter, the plaintiff
instituted its claim by summons dated 10 February 2005. It must be borne in
mind that the defendant was facing expensive litigation with two potential
adversaries which had far deeper pockets that it did ─ the Ribbans company,
and the plaintiff. When all of these facts are borne in mind Carse's conduct

does not suggest that the defendant's claim is mala fide or that he had no
genuine belief in its existence or validity, and his conduct in putting up
R850 000 in cash to be invested by the plaintiff's attorneys pending the
outcome of the litigation as security for the plaintiff's costs, tends to indicate
the contrary.

[11] Carse's evidence was supported by contemporaneous documents. The
original memorandum compiled by him dated 15 May 2001 was addressed to
the plaintiff. It was compiled to enable the plaintiff to approach the Cape of
Good Hope Bank for finance, and it was used for that purpose. It makes it
quite clear that the finance was required by a joint venture between the
plaintiff and the defendant. Burger's denial that the parties had agreed to
embark on a joint venture subject to finance being obtained, was untenable.
Even Wallace was ultimately obliged to concede that there had been such an
agreement.

[12] The other contemporaneous document which is of cardinal importance
is Carse's recordal of what he says Burger had told him and Wallace after he
(Carse) and Wallace had made a presentation to Ribbans in June 2001. It
was not suggested to Carse that the document was a forgery. It reflects the
percentage payments (80/20 or 70/30 or 60/40) referred to above which
Carse says Burger told him were required by Ribbans. Wallace recalled that
figures were 'bandied about' at the meeting attended by himself, Carse and
Burger at which Burger reported back on Ribbans' reaction to the
presentation. But those figures would have been irrelevant had Ribbans
insisted on purchasing the Ogden erven without any obligation to develop
them as agreed by the parties to the joint venture. Burger flatly denied that the
figures were discussed at all. Ribbans said that he never gave such ratios to
Burger. The evidence given by the witnesses called on behalf of the plaintiff is
irreconcilable with the contents of the document and counsel for the plaintiff
was unable on appeal to advance any explanation how the document might
have come into existence, other than on the basis testified to by Carse.

[13] In the circumstances I am not surprised that the court a quo preferred
the evidence of Carse to the evidence of the plaintiff's witnesses whose
evidence, as I have said, it criticised for reasons not challenged on appeal.
The court a quo also set out a number of probabilities which favour the
defendant's version. These were relied on on appeal by the defendant. There
was no attack on appeal by the plaintiff on this part of the judgment either. I
shall accordingly not repeat the findings of the court a quo, but simply
emphasise some of the probabilities which favour the defendant's version. I
shall then deal with the argument that there are probabilities in favour of the
plaintiff, to demonstrate that there are not.

[14] Carse entered into the written contract for the purchase of the Ogden
erven on behalf of the defendant on 4 May 2001. The contract contained a
suspensive condition that made it subject to the defendant being able to
obtain a loan equal to the purchase price of R4 115 400 from a bank or other
financial institution upon the security of a first mortgage bond to be passed
over the erven. The contract also entitled the defendant to nominate a
purchaser in its place, in which case the defendant bound itself to the seller as
surety and co-principal debtor in solidum for the due performance by the
nominee of all the obligations of the nominee as purchaser arising under or by
virtue of the contract, including payment of any damages which might be
suffered by the seller by reason of the nominee failing to fulfil its obligations
arising under or by virtue of the contract.

[15] On the plaintiff's version it is difficult to understand why the defendant
would have exercised its option, as it did, to nominate a shelf company in
which the Ribbans company would have held all the shares, thereby incurring
liability as a surety to the seller of the Ogden properties. Nor would one have
expected Ribbans to request Carse, as he did via Burger, to obtain the shelf
company through Carse's attorney, Mr Shaer. The defendant was also
required to waive the suspensive condition in the sale agreement and rely on
the Ribbans company to provide finance. According to Ribbans, his company
was not obliged to develop the Ogden erven as contemplated in the joint
venture ─ indeed, his evidence was that he was unaware of a joint venture.

How, one may ask, did any of this benefit the defendant? It might not even
have received development fees and it is inconceivable that Carse would
have agreed to this. The suggestion by Ribbans was that Carse really had no
option but to agree to Ribbans' terms, as the defendant faced defaulting under
the contract for the purchase of the Ogden erven. But that is not so. The
defendant, as Carse testified, could simply have walked away from that
contract, letting it lapse by reason of the non-fulfilment of the suspensive
condition. He said that it would have done so. In argument, it was submitted
that Carse needed to get the Ogden erven into other hands as the owners
were not prepared to assent to a rezoning application, the grant of which was
in the defendant's interests as it was developing other properties in the area.
But the evidence established quite clearly that although the consent of the
owners of the Ogden erven to the rezoning would have been helpful to the
defendant, it was by no means necessary for the rezoning to take place. And
neither of these explanations provide an answer to the question why, on the
plaintiff's version, a shelf company was to be used to purchase the property,
instead of Carse nominating the Ribbans company. Nor do they explain why
Carse refused to resign as a director of Defacto when asked to do so in July
2001: he would have had no reason to want to stay on as a director ─ he was
paid no fees and, on the plaintiff's version, Ribbans was entitled to do what he
liked with Defacto and the Ogden erven owned by it.

[16] It was submitted on behalf of the plaintiff that there were probabilities in
favour of the plaintiff's case. Three were relied on. First, it was submitted that
it is improbable that a civil engineering contractor such as the plaintiff would
have been prepared to agree to the development of the Ogden erven simply
on the strength of an oral agreement, particularly because of the risks
involved; and that to conclude such an agreement orally would also have
been inconsistent with the policy of the plaintiff company and its practice of
concluding written agreements. It was said that this is borne out by the
contract in respect of an earlier development, in respect of the Breakers. But
that contract was not concluded before the plaintiff commenced work on it and
it was never signed on behalf of the defendant. The plaintiff had had a
successful professional relationship with Carse in the past and Burger and

Wallace would obviously have trusted Ribbans, who was related to Burger by
marriage and with whom Burger sat on the board of a large family company.

[17] The second probability contended for in favour of the plaintiff was that
the plaintiff had no independent financing. But that is the very reason why it
was a condition of the joint venture agreement that the financing for the joint
venture had to be obtained from a third party. Then third, it was submitted that
developing properties was not the plaintiff's core business. That, however, did
not prevent the plaintiff from embarking on just such a venture after Carse had
been removed as a director of Defacto, as will appear from the section of the
judgment below dealing with the breach/repudiation of the joint venture
agreement.

[18] I therefore find no basis upon which the court a quo can be criticised
for accepting the evidence of Carse, and rejecting that of the plaintiff's
witnesses. It is now necessary to consider the arguments advanced on behalf
of the plaintiff on the basis that this finding was correct. As I have said, they
fall under three broad headings. The first is that the defendant did not prove
that a binding joint venture agreement had been concluded on the terms
pleaded. Two arguments were advanced in this regard:
(a)
That it was common cause that 'from the outset' the plaintiff's
participation in any venture was expressly subject to a bank providing 100 per
cent of the requisite finance, and a bank had not done so; and
(b)
that a further essential prerequisite for the anticipated joint venture was
that the parties acquire the entire shareholding in Defacto, because until this
happened the cornerstone of the joint venture was not in place.

[19] If regard is had to paragraph 3 of the defendant's counterclaim quoted
above, it is plain that the defendant neither alleged that a bank had to provide
100 per cent of the finance nor that the parties had to acquire all of the shares
in a company to serve as a vehicle for the joint venture. Certainly, that was
what the parties contemplated in the memorandum of 15 May 2001. So far as
finance is concerned, it was clear that neither party could provide it and that it
had to be obtained from a third party. What the parties originally contemplated

was that the finance would be provided by a bank. When this failed, finance
was obtained from the Ribbans company ─ with the co-operation and direct
involvement of Wallace and, particularly, Burger. It would therefore be more
accurate to say that it was common cause that the parties' participation in any
joint venture required 100 per cent financing and that at the outset (not from
the outset) it was contemplated that this would be done by a bank. So far as
Defacto is concerned, it was also initially contemplated by the parties that
there would be equal shareholding in such a company. But ultimately, the joint
venture agreement was, as pleaded, 'undertaken in the name of a company to
be nominated as the purchaser of the Ogden erven'. Defacto purchased the
erven. And it was Defacto that would have contracted with the plaintiff to
provide the civil engineering works for the development, that would have
contracted with the defendant to attend to the rezoning and subdivision of the
Ogden erven and that would have sold the plots to the purchasers for whom
the defendant would have constructed houses. Nor, as a matter of principle,
was it necessary for the parties to be the sole shareholders in Defacto. Before
dealing with the argument in this regard, I would say that even if the
defendant's pleadings were deficient in regard to either of the points raised
(finance and shareholding), the defendant's version of how the joint venture
was to operate after Ribbans had agreed to put up the finance and how
Ribbans' requirements were to be accommodated, was fully ventilated in
evidence. Carse testified on this aspect, and so did Burger, Wallace and
Ribbans, and all were cross-examined. Any deficiency in the pleadings was
accordingly cured by the evidence.

[20] I return to the question whether the joint venture parties had to be the
sole, and equal, shareholders in Defacto. It was submitted in the plaintiff''s
heads of argument that:
'The central pillar of the joint venture pleaded by Defendant, and an inescapable
requirement for its implementation, was that it would be conducted using a corporate
vehicle (Defacto), in which Plaintiff and Defendant would each own 50% of the
shares.'

It was further submitted that Carse 'clearly recognised' that the plaintiff and
the defendant would have to be the sole shareholders in Defacto and I shall
deal with this submission presently.

[21] Both propositions in the passage just quoted were conceded in oral
argument to be incorrect. The concessions were well made. As appears from
paragraph 3 of the counterclaim quoted above, it was not in fact pleaded that
the parties to the joint venture had to be equal shareholders in Defacto. Nor
was this necessary for the operation of the joint venture. A distinction must be
drawn between the joint venture agreement and the agreement between the
shareholders of Defacto. The joint venture agreement was between the
plaintiff and the defendant. One of the terms of that agreement was that they
would share equally in the profit generated by the sale of the plots to
purchasers. The shareholders' agreement was between the Ribbans company
that provided the finance, and the defendant. The evidence of Carse makes it
clear that that agreement recognised the joint venture agreement and
therefore the term of it to which I have just referred. The shareholders'
agreement also provided that the profit made by the company would be
divided up in a defined ratio (depending on the number of years the
development took) giving more to the Ribbans company than to the defendant
in respect of the first R10 million anticipated profit, and reversing the ratio in
respect of the next R10 million. The plaintiff's share was to come out of the
amount paid to the Ribbans company.

[22] There were three directors of the company which acquired the Ogden
erven for the development, ie Defacto: Ribbans, who would protect the
interests of his company that provided the finance; Burger, who would protect
the interests of the plaintiff; and Carse, who would protect the interests of the
defendant. All knew of the joint venture agreement and intended that it be
performed. The fact that the plaintiff was not a shareholder of Defacto is of no
moment ─ Burger would have looked to Ribbans to protect the plaintiff's
interests and as I have said, Ribbans was related to him by marriage and he
was a co-director with Ribbans in a large family company. Nor does it make
any difference that the defendant was a minority shareholder in Defacto. Part

of the agreement between the shareholders of Defacto, which the directors
intended to implement, was that ultimately the plaintiff and the defendant
would participate equally in the profits made by Defacto as provided for in the
joint venture agreement. The defendant would have been entitled to enforce
that part of the shareholders' agreement.

[23] As I have said, it was submitted that Carse 'clearly recognised' that the
plaintiff and the defendant would have to be the sole shareholders in Defacto.
That is certainly what the memorandum of 15 May 2001 contemplated. But
when Ribbans came on the scene, matters changed. Carse said in cross-
examination:
'U Edele, die ooreenkoms was gewees tussen my en Burger & Wallace, dit het
gegaan oor 'n 50% verdeling van winste op die ontwikkeling van grond. Die
aandeelhouding [in Defacto] is nie 'n aanduiding van die ooreenkoms tussen my en
Burger & Wallace nie; daar was praktiese reëlings gewees hoekom die
aandeelhouding in Defacto verskil van 'n 50/50 aandeelhouding. My ooreenkoms
was met Burger & Wallace en dit het gegaan oor, soos ek nou net gesê het, die
verdeling van winste op die ontwikkeling van grond.
. . .
Die aandeelhouding [in Defacto] het niks gemaak aan my en Burger & Wallace se
ooreenkoms nie.
. . .
And the interests of the parties in the development would be determined by their
shareholding in the company. --- Edelagbare, dit is nie noodwendig die geval nie.
Daar kan ooreenkomste buite die aandeelhouding wees. Ek verskil van mnr Myburgh
[the plaintiff's then senior counsel to whose proposition Carse was replying] op
daardie punt.'

[24] I therefore conclude that the joint venture agreement as testified to by
Carse, was established. The next question is whether it was breached. The
defendant's pleaded case in this regard is not well phrased. The allegation in
question reads:
'Contrary to the joint venture agreement and in breach thereof, the Plaintiff reneged
[on] the said agreement with the Defendant and contracted with third parties to do the

development on the said erven, thereby failing to honour its commitment in terms of
the joint venture agreement with the Defendant.'
But the allegations are wide enough to cover a repudiation: the word 'reneged'
means (according to the Concise Oxford English Dictionary 10 ed) 'to go back
on a promise, undertaking, or contract'. And for the reasons which follow, the
evidence in my view establishes the very repudiation alleged. If the events
relevant to this question are set out in chronological order, the conclusion
reached by the trial court, which I shall quote in due course, is inevitable.

[25] On 19 July 2001 New Invest 212 (Pty) Ltd (the Ribbans company) was
registered as the sole shareholder in Defacto. That was not in accordance
with Carse's agreement with Ribbans, and Carse said that he had no
knowledge of it. I have to interrupt the chronology at this point to deal with the
submission that Carse's evidence in this regard should be rejected. I see no
reason to do so. Ms Kim Olivier, the employee of Shelf Company Warehouse
who sold Defacto to the defendant's attorney, Mr Shaer, said that it was
impossible that the CM42 security transfer form would have contained the
identity of the transferee, New Invest, or the number of shares to be
transferred, when it left their offices. Shaer said that he had not inserted this
information and could not have done so, because it was typed in and he did
not possess, nor had he ever possessed, a typewriter. He sent the form to
Ribbans' auditors under cover of a letter and sent a copy to Ribbans, whose
evidence was that when he received the copy attached to Shaer's letter the
number of shares and the identity of the transferee had already been filled in.
Counsel for the plaintiff submitted on appeal that we should accept this
evidence because the letter Shaer wrote to Ribbans said:
'Attached please find copy of CM42 duly completed and signed by the existing
shareholder . . . .'
This meant, said counsel, that the form had been completed in all its
particulars. But the letter is equally capable of the interpretation that the form
had been 'duly' completed by the existing shareholder to the extent that it was
necessary for him to do so, and not that the form had been completed in full.
And the probabilities favour this interpretation. It was no part of the function of
Shelf Company Warehouse to fill in the identity of the transferee(s) and the

number of shares to be transferred. An employee from that organisation was
called to say that this was never done and, indeed, such information was
none of its business. And the particulars of the issuer of the security as typed
in on the form, ie Defacto, as well as the name of the transferor (the then
holder) are in a different type face to the typed particulars of the transferee.
There is no reason to reject the evidence of Mr Shaer that he could not have
filled in the particulars of the transferee. The plaintiff's counsel emphasized
that Carse had given no instruction to Shaer that the shares in Defacto were
to be transferred to more than one person. The suggestion obviously was that
had Carse agreed with Ribbans that the shareholding would be split 80 per
cent/20 per cent, he would have informed Shaer accordingly. This argument
loses sight of the fact that it was not Shaer, but Ribbans' auditors who were to
attend to the transfer. I therefore accept that when New Invest was registered
as the sole shareholder in Defacto on 19 July 2001, Carse had no knowledge
of this.

[26] I continue with the chronology of events relevant to determining
whether the plaintiff repudiated the joint venture agreement. On 14 December
2002 the plaintiff acquired 50 per cent of New Invest's shares and thereby
became an equal shareholder in Defacto with Ribbans' company, New Invest.
In the middle of the following year, on 10 July 2003, the plaintiff's 50 per cent
shareholding in Defacto was transferred to LA Burger Investment CC, which
was a vehicle Wallace and Burger at that stage used to hold their assets.
Carse was not told about either of these latter two changes in shareholding.

[27] On 11 February 2004 Carse was asked to resign as a director of
Defacto. He refused and was subsequently removed at a general meeting of
Defacto convened for that purpose on 25 August 2004.

[28] On 6 October 2004 a presentation was made by an entity called MSP
about the potential for the development of the Ogden erven. The invitation to
attend the presentation forming part of the record was addressed to Wallace.
Burger, Wallace and Ribbans were amongst those who attended. In cross-
examination Ribbans agreed with the proposition:

'Now in its proper context, when this presentation was made on 6 October, it was a
presentation to Defacto and in effect therefore clearly also to its shareholders, being
New Invest and LA Burger Investment CC.'

[29] On 5 May 2005 Defacto entered into what was termed a 'Land
Availability Agreement' with Steenberg Station Development Company (Pty)
Ltd. The effect of that agreement was summarised by Ribbans in his
evidence-in-chief as follows:
'Well, effectively we [Defacto] were the owners of the land and we undertook in this
document to make the land available to Steenberg Station Development Company
which was a separate development company which would develop . . . the land and
effectively buy the land from us in stages . . . .'
He then went on to agree with the proposition put by the plaintiff's counsel
that:
'They [Steenberg] had the right to develop the land and in effect it’s a sort of a
deferred Sale Agreement. At some point they acquire the land then sell it . . . .'

[30] Ribbans testified that over R7 million was made by Defacto from the
sale of the land. He said that that amount was available for distribution
between the shareholders of Defacto, ie Ribbans' company, New Invest, and
Burger and Wallace's close corporation, LA Burger Investment CC. In
addition, Ribbans' company and LA Investments were 50 per cent
shareholders in an entity called Market Demand Trading that held one third of
the shares in Steenberg. The shareholders in Steenberg executed a
shareholders' agreement that gave equal rights and obligations to the three
shareholders. Steenberg embarked on what the defendant's counsel
described as 'a full blown residential development', a description with which
Ribbans agreed. Ribbans said that this resulted in 'a good return on our
[Steenberg's] investment'. The plaintiff did the civil engineering works for the
development.

[31] In its original counterclaim delivered in March 2006, the defendant
pleaded:

'Contrary to the joint venture agreement and in breach thereof, the Plaintiff
contracted with third parties to do the necessary building on [sic] construction works
and failed to honour its commitment with regards to the 50% or the half share of
profits on the sale of the erven as specified herein above.'
It will be recalled that the counterclaim ultimately contained the allegation that
'the Plaintiff reneged [on] the said agreement with the Defendant [ie the joint
venture agreement] and contracted with third parties to do the development
on [the Ogden] erven'.

[32] The court a quo said:
'There was much debate during the trial about when exactly the breach of the joint
venture agreement occurred. It is therefore necessary to look at the conduct of the
parties with regard to this question. The defendant claimed that the plaintiff had in
collusion with Ribbans "hijacked" the development of the Ogden erven and which
conduct on the part of the plaintiffs constituted a reneging of its obligations under the
joint venture agreement. In this regard the conduct of Burger was significant by his
deliberate failure to disclose to the defendant the plaintiff's purchase of the 50%
shareholding in Defacto and its subsequent transfer to LA Burger Investment CC.
Burger was simply unable to give any reason or explanation for his conduct which in
turn supported the defendant's claim that the plaintiff had in fact colluded with
Ribbans and its entities to "cut the defendant out" of any role in the development of
the Ogden erven. The collusive behaviour is further evidenced by the conduct of both
Wallace and Burger at the meeting in February 2004 when Carse was asked to
resign as a director of Defacto.'2
The court subsequently concluded:
'I am of the view that the breach as claimed by defendant was evidenced by the
collusive conduct between the plaintiff and Ribbans in which the plaintiff reneged on
its obligation in the joint venture agreement and in collusion with other entities (such
as Ribbans and others) indirectly became involved in the development of the Ogden
erven to the exclusion of the defendant.'3
Save for pointing out that the defendant's case, properly interpreted, was that
the plaintiff repudiated the agreement, I find no reason to differ from this
conclusion.

2 Para 95.
3 Para 97.

[33] It is convenient at this stage to deal with the argument by the plaintiff's
counsel that the plaintiff could not have repudiated (or breached) the joint
venture agreement until the shares in Defacto had been transferred to it. The
argument loses sight of the fact that on Carse's version, the plaintiff was not to
become a shareholder in Defacto.

[34] I therefore conclude that the defendant did establish that the joint
venture agreement had been repudiated by the plaintiff in the manner alleged
in its pleadings. The last submission made on behalf of the plaintiff was that
Defacto suffered no loss inasmuch as Carse said to Ribbans that he wanted a
family trust (of which he was one of the trustees) to be the shareholder in
Defacto. The argument was that profits made by Defacto would then have
gone to the family trust and not to the defendant. The argument is
misconceived. Had the family trust been registered as a 20 per cent
shareholder in Defacto, it would have made no difference to a claim by the
defendant against the plaintiff flowing from the latter's repudiation of the joint
venture agreement. By becoming a member of the company, the family trust
would not have succeeded to the rights or undertaken the obligations of the
defendant under that latter agreement. Nor did the rights of the parties to that
agreement depend upon the identity of the shareholder(s) in Defacto. The
joint venture agreement was between the plaintiff and the defendant, and it is
the defendant that suffered any loss of profit it would have made from
constructing houses, and any loss in respect of its share of the profits made
by Defacto from the sale of the plots.

[35] The appeal is dismissed with costs, including the costs of two counsel.

_______________
T D CLOETE
JUDGE OF APPEAL

APPEARANCES:
APPELLANTS:

J G Dickerson SC (with him R J Howie)
Instructed by Edward Nathan Sonnenbergs, Cape
Town
Lovius Block, Bloemfontein

RESPONDENTS:

J A le Roux SC (with him E S Grobbelaar)
Instructed by Fourie Basson Veldtman, Parow
Walkers Attorneys, Cape Town
Naudes Attorneys, 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: 23 September 2011

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

BURGER & WALLACE CONSTRUCTION (PTY) LTD v BALLPROP TEN (PTY) LTD

1.
Burger & Wallace Construction (Pty) Ltd ('B & W') provide engineering services in
construction projects. Ballprop Ten (Pty) Ltd is a property development company that buys
and develops land and constructs and sells houses.

2.
Ballprop claimed that it had entered into a joint venture agreement with B & W to
develop property in the Western Cape and that this agreement had been repudiated. B & W
denied any such agreement.

3.
The Western Cape High Court found in favour of Ballprop and its decision was
confirmed on appeal.

--ends--