THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

NOT REPORTABLE

Case number:  447/06

In the matter between:

D B BOTHA
Appellant

and

GIYOSE t/a PARAGON FISHERIES
Respondent

CORAM:

FARLAM, COMBRINCK and CACHALIA JJA

HEARD:

11 MAY 2007

DELIVERED:
31 MAY 2007

Summary:

Contract – undisclosed principal – when agent may sue in own
name

Neutral citation:
This judgment may be cited as Botha v Giyose t/a Paragon
Fisheries [2007] SCA 73 (RSA)

___________________________________________________________________

COMBRINCK JA:

[1] This appeal has its origin in a disputed sale of a fast-food business conducted in
Queenstown in the Eastern Cape.  Mr Botha, the appellant (the plaintiff in the
magistrates’ court), claimed he had sold the business to Mr Giyose (the
respondent/defendant) for R90 000 in February 2003.  The latter denied the existence of
such an agreement.

[2] The appellant instituted action against the respondent in the Queenstown
magistrates’ court claiming payment of R90 000.  The respondent, in his plea, alleged
he had taken over the premises from which the business had been conducted after the
appellant had abandoned the business.  He had, he averred, not entered into any
agreement with the appellant.  I shall return later to deal more fully with the pleadings.

[3] The appellant was the only witness to testify at the trial.  The respondent closed
his case without leading any evidence.  The magistrate accepted the appellant’s
evidence and her findings of fact were not challenged by the respondent in his
subsequent appeal to the Full Bench of the High Court, Eastern Cape Division.  The
respondent in this court filed a notice advising he abides the decision.  There was
therefore no appearance for him before us.

[4] The undisputed facts found were that the appellant had indeed sold the business,
formerly known as ‘Skippers’ but at the date of sale known as ‘Food for Africa’, to the
respondent.  The agreement was orally concluded on  31 January 2003, the terms
being:
(i)
the merx was the business as a going concern together with all fixtures, fittings
and equipment;
(ii)
the purchase price was R90 000;
(iii)
the price was payable by way of an initial amount of R45 000 payable
immediately;
(iv)
the balance in 24 equal monthly instalments of R1 875 payable on the first day of
each and every succeeding month, the first payment to be made on 3 February
2003;

(v)
interest at 5% per annum payable on the amount of R45 000 over 24 months.
At the instance of the respondent it was subsequently agreed that he pay the initial
amount on or before 12 March 2003.  The appellant handed over possession of the
business to respondent at the beginning of February 2003.  The respondent concluded
an agreement of lease with the owner of the building in which the business was
conducted and commenced trading.  He failed to make any payment.

[5] The magistrate found in favour of the appellant and made the following order:
‘1.
That the Contract of Sale between the parties is considered to be validly cancelled.
2.
That judgment is granted in favour of the Plaintiff in the amount of R90 000,00 same representing
the damages suffered by the Plaintiff as a result of the defendant’s breach of contract.
3.
That interest at the rate of 15,5% p.a. shall run with effect from 19/03/2003 same being the date
that the defendant fell into mora.
4.
That the Defendant is ordered to pay all costs on an attorney and client scale upon presentation of
a taxed bill of costs.’

[6] The respondent, as mentioned earlier, appealed against the judgment.  He noted
a number of grounds in his notice of appeal but restricted his argument in the court  a
quo to a single ground and that is that the appellant had failed to prove that he had
locus standi in iudicio.  The issue arose as a consequence of questions put to the
appellant by his attorney (Mr Malan) at the end of the examination in chief.  The
following exchange took place:
‘MR MALAN:
Your Worship, I only need two minutes more.  Mr Botha, you, your wife and your one son
also have a closed corporation which you run?
PLAINTIFF:
That’s correct, Your Worship.
MR MALAN:
Can you tell the court what the name of the cc is?
PLAINTIFF:
The name of the closed corporation is Dacawi Investments.
MR MALAN:
Your Worship, that is Dacawi Investments CC.  Who are the members?
PLAINTIFF:
The members are myself, my wife and my son.
MR MALAN:
Name of your son?
PLAINTIFF:
Willem Cornelius Botha.
MR MALAN:
Mr Botha, the business you sold to Mr Giyose, did it belong to you or to the cc?
PLAINTIFF:
The business was under the cc’s name, Dacawi Investments.
MR MALAN:
Were you fully authorised to act on behalf of the cc by the members?
(Answer inaudible)’
Despite lengthy cross-examination, no questions were asked concerning this aspect.  At

a stage the appellant handed in a written resolution passed by Dacawi Investments CC
to the effect that the appellant’s authority to sell the business on behalf of the close
corporation was confirmed.  The document is dated 1March 2004.

[7] The issue argued in the court  a quo was whether the appellant acting as agent
for an undisclosed principal (Dacawi Investments CC) was entitled to sue the third party
(the respondent) in his own name.  The learned acting judge referred in his judgment to
the leading case of Cullinan v Noord-Kaaplandse Aartappelkernmoerkwekers
Koöperasie Bpk 1972 (1) SA 761 (A) and accepted that it laid down that a sale
agreement concluded between an agent acting for an undisclosed principal and a third
party was valid and enforceable by the agent in his own name.  Later in his judgment
he, however, said the following:
‘To the extent that the evidence reads that the respondent was at all material times relevant to the
conclusion of the sale agreement and the bringing of the action acting on behalf of the close corporation
cannot be interpreted otherwise than that he was an agent.’
He then referred to the case of Gravett NO v van der Merwe 1996 (1) SA 531 (D) and
quoted the passage at p 537 G-J.  He concluded:
‘Applying the case of Gravett, supra, to the present matter shows that the respondent was not entitled to
act in his personal capacity on behalf of the close corporation.  Further, in my view is that as in Gravett’s
case the fact that respondent brought the action on behalf of an undisclosed principal was an afterthought;
hence the argument was only raised at appeal stage.  According to the summons as well as evidence led
in the court  a quo plaintiff did not consider himself as an agent of an undisclosed principal.  The
conclusion must inevitably be that the respondent failed to prove that he had the necessary locus standi at
the time when he initiated the action against the appellant.  Therefore, the court  a quo erred in this
regard.’
The appeal was therefore allowed and the order in the magistrates’ court  set aside and
an order of absolution from the instance substituted.

[8] It would appear that the doctrine of the undisclosed principal was not fully
understood.  The rights of the agent as against the third party are succinctly
summarised by Joubert, LAWSA 2ed paras 228 and 231 as follows:
Par 228:  ‘In a standard situation of representation the representative acquires no rights and incurs no
liabilities from the contract concluded by him or her on behalf of his or her principal.  The rights and
obligations come into being between the principal and the third person.  In an undisclosed principal
situation the intermediary and the third person create vincula iuris between themselves by the contract

concluded in their own names, but also so it is said, alternative vincula iuris between the undisclosed
principal and the third person.’
Par 231:  ‘The contract is concluded between the third person and the intermediary acting in his or her
own name.  The third person is in terms of the contract liable to the intermediary.  He or she cannot avoid
liability to the intermediary on the ground that he or she is liable to the undisclosed principal, unless and
until the undisclosed principal elects to hold him or her liable.’
The reliance on Gravett NO v Van der Merwe, supra, was misplaced.  What Booysen J
meant in the passage quoted is better stated in Sentrakoop Handelaars Bpk v Lourens
1991 (3) SA 540 (W) (a case relied upon by Booysen J as authority for his proposition)
where Marais J said the following (at 545D):
‘I am therefore of the view that both on principle and on the authorities it is not proper for an agent to sue
as representing his principal by suing in his own (that is the agent’s own) name, where the claim being
enforced is that of the principal and the principal is the true plaintiff.  This does not, of course, apply where
the agent has the right to sue in his own name, as is the case where he has contracted on behalf of an
undisclosed principal and sues on the relevant contract.’
The appellant throughout the negotiations and conclusion of the agreement acted in his
personal capacity.  No mention was made of the close corporation.  It seems clear that
what happened, (as so often does with lay persons), is that the appellant did not see the
close corporation as a separate legal entity and considered that he and the close
corporation were one and that he was entitled personally to sell the business.  The
appellant’s attorney raised the question of authority in passing and only when he
became aware of the existence of the close corporation, it appears, did the question of
authority arise and the resolution was prepared to regularise the transaction.  The
question of locus standi was in any event not properly raised on the pleadings, contrary
to the finding of the court  a quo.  The resolution was clearly an attempt at ratification.
As stated in Durity Alpha (Pty) Ltd v Vagg 1991 (2) SA 840 (A) at 843A authority to act
on behalf of an undisclosed principal must exist at the time of conclusion of the
agreement.  There can be no ratification.

[9] The appeal in so far as the single issue of locus standi is concerned should not
have succeeded.  That however, is not the end of the matter.  There is another aspect
which was overlooked by the magistrate and the court  a quo.

[10] In his particulars of claim, after pleading the existence of the contract, its terms
and the failure to pay, the appellant continued with the following allegations:

‘7.
Despite demand Plaintiff has persisted in his failure or refusal to pay.
8.1
In the premises Plaintiff is entitled to cancel the sale agreement and hereby cancels the said sale
agreement.
8.2
Alternatively, Plaintiff is entitled to cancel the sale agreement by virtue of Defendant’s breach of
material terms thereof, and hereby cancels the said sale agreement.
9.
As a result of Defendant’s aforesaid breach of the sale agreement Plaintiff has suffered damages
in the amount of R90’000.00, plus interest thereon a temporae morae.
Wherefore Plaintiff prays for judgment against the Defendant in the following terms:
a.
an order declaring the sale agreement to have been validly cancelled;
b.
Payment of the sum of R90’000.’
c.
interest on R90’000.00 a temporae morae;
d.
costs of suit;
e.
further or alternative relief.’
When asked in a request for further particulars how the damages were computed the
reply was:
‘The amount of R90 000 constitutes the purchase price agreed to by the parties.’

[11] It is trite that once there is a breach of a contract the innocent party has an
election to claim enforcement or cancellation and damages.  The two are inconsistent
with each other and mutually exclusive.  The innocent party cannot approbate and
reprobate the contract.  (Christie, The Law of Contract in South Africa 5ed p 540.)  In
the present case appellant claimed cancellation and payment of the purchase price
which is impermissible.  On cancellation his remedy was restitution (return of the
business) and damages.  He could not claim that the purchase price represented his
damages.  Unfortunately the magistrate was not alive to the problem.  The court  a quo,
so it appears from the judgment, was under the impression that appellant had elected to
enforce the contract and was claiming the purchase price.

[12] The next question is whether the appellant was entitled to any relief, and if so
what form of relief he was entitled to.  The appellant in his particulars of claim alleged
that he had by letter dated 9 May 2003 placed the respondent in mora and when the
latter failed to heed the demand within the stipulated 22 days, he was entitled to cancel
the agreement.  In evidence, however, he testified that the letter which was sent by
registered post was returned unclaimed.  His attorney then formally withdrew the
allegation that demand had been made.  In doing so he in effect conceded that the

cancellation was invalid.  What remains is appellant’s claim for payment of the
purchase price and his prayer for alternative relief.  The parties did not agree on an
acceleration clause.  Consequently the full purchase price could not be claimed.  What
the appellant’s evidence did establish was that the initial payment of R45 000 and the
instalments payable in February, March, April, May and June were not paid (summons
was issued on 2 June 2003).  In my view the appellant is entitled to judgment for these
amounts together with the agreed interest of 5%.  The appellant’s evidence in regard to
interest was terse in the extreme.  All he said was that he had stipulated for 5% interest
on the balance (of R45 000) over 24 months.  Implicit in that is that the interest was
payable monthly on the reducing balance.  What also must follow is that the payment of
5% interest ceased after two years.  Thereafter it seems the appellant is entitled to
interest at the statutory rate of 15,5%.

[13] The final issue is that of costs.  The magistrate granted the appellant costs on the
scale as between attorney and client.  In the light of respondent’s conduct in contesting
the action when he had no real defence this order was justified.  I  consider that, having
regard to the fact that the respondent was entitled to a measure of success in the court
a quo, (to the extent afforded him in this judgment) a fair order should be that each party
bear his own costs in that court.

[14] 1.
The appeal is upheld with costs.
2.
The order in the court  a quo is set aside and each party shall pay his own
costs in that appeal.
3.
The magistrates’ court order is set aside and substituted by the following:

‘(a)
there will be judgment for the plaintiff as follows:

(i)
payment of the amount of R45 000;

(ii)
interest thereon at the rate of 15,5% per annum from the
13th March 2003 to date of payment;

(iii)
payment of the amount of R1 875 being the February 2003
instalment;

(iv)
interest thereon at the rate of 5% per annum from 4
February 2003 to 1 January 2005;

(v)
payment of the amount of R1 875 being the March 2003

instalment;

(vi)
interest thereon at the rate of 5% per annum from 2 March
2003 to 1 January 2005;

(vii)
payment of the amount of R1 875 being the April 2003
instalment;

(viii)
interest thereon at the rate of 5% per annum from 2 April
2003 to 1 January 2005;

(ix)
payment of the amount of R1 875 being the May 2003
instalment;

(x)
interest thereon at the rate of 5% per annum from 2 May
2003 to 1 January 2005;

(xi)
payment of the amount of R1 875 being the June 2003
instalment;

(xii)
interest thereon at the rate of 5% per annum from 2 June
2003 to 1 January 2005;

(xiii)
interest at 15.5% per annum on R9 375 from the 2 January
2005 to date of payment;

(xiv)
costs of suit on the scale as between attorney and client.’

COMBRINCK JA

CONCUR:

FARLAM JA)
CACHALIA JA)
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:
Thursday, 31 May 2007
Status:
Immediate

BOTHA v GIYOSE t/a PARAGON FISHERIES

In February 2003 Mr Botha sold his fast food business to Mr Giyose
for R90 000.  Mr Giyose took-over the business but made no
payment, claiming Mr Botha had abandoned the business and he
had taken over the abandoned business,  Mr Botha successfully
sued Mr Giyose for payment of the R90 000 in the Queenstown
Magistrates’ court.  On appeal to the High Court, Grahamstown the
court found that the business belonged to a close corporation of
which Mr Botha was a member and that he should have sued in the
name of the close corporation.

The Supreme Court of Appeal set aside the High Court’s judgment
on the basis that Mr Botha was entitled to sue in his own name.  It
further held that as Mr Botha had not lawfully cancelled the contract
he was only entitled to payment of the initial amount of R45 000

and the monthly instalments which had fallen due as at the date of
institution of action in the magistrates’ court.

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