The plaintiff’s case
[22] The plaintiff testified that he first met late Schneider in April/May 2004 and expressed interest in the property and established that it was owned by a Close Corporation (the 3rd defendant) in which late Schneider was the 100% member. They agreed then he would purchase the disputed membership interest and in that way acquire the property. It was agreed that he would rent the property in the meantime until he takes transfer of the disputed membership interest. Mudge testified that he was also allowed to effect alternations to the property to fit his needs, but at his own expense. He testified that he was never under any impression that late Schneider was putting him under pressure to sign anything, or that he was planning to sell the disputed membership interest to someone else. (In my view to suggest that the plaintiff was allowed to effect alterations ‘to fit’ his ‘needs’ is, with respect, stretching it a bit far. The purchaser had very limited authorisation as I have shown).
[23] Mudge testified that around 25th June and before he left on holiday, late Schneider told him he would ask his lawyers to attend to the drafting of a contract which they would sign. Schneider then faxed through to him a written agreement which he duly signed and returned to Schneider. (The purchase price in that agreement is given as N$1 700 000.) Mudge testified that he was not aware that late Schneider never signed the document as it has since turned out to be the case.
[24] Mudge testified that upon his return from holiday he met Schneider and told him that he was busy with a ‘development project’ and would use some of the proceeds thereof to pay part of the purchase price. He testified that he did not mention a specific amount. He added that he informed late Schneider that the project was behind schedule and would be completed only around December 2004/January 2005, and Schneider said there ‘is no pressure’. This implies that both Mudge and Schneider at that stage foresaw the possibility that the proceeds from the property development might only come to hand later than 31 December 2004. This is significant because it is a factor which could influence Schneider in deciding what to have included in the agreement.
[25] It is Mudge’s testimony that late Schneider was quite happy for him to take occupation of the property, start with the alterations and that the transfer of the disputed membership interest take place at a later stage. According to Mudge they agreed that the initial agreement Schneider had not signed be changed to reflect this, Schneider offering to have his attorneys attend thereto. Mudge testified that the reason he wanted the transfer to take place much later was because he wanted to pay a ‘substantial amount’ of the purchase price from the earnings derived from the property development and that Schneider had no problem with this. Again, Mudge testified, he had to leave town on business and Schneider promised to deliver to him the new agreement reflecting the changes agreed. Schneider, however, later called to say that his attorneys had not completed the agreement. This was still in July 2004. Mudge testified that he had also at that stage informed Schneider that his bank had approved loan finance for a part of the purchase price and that he would pay the balance in cash.
[26] Upon Mudge’s return from the business trip he learnt that late Schneider had concluded a written agreement with the 2nd defendant for the purchase of the disputed membership interest. Mudge testified that he protested to Schneider about that, reminding Schneider that the two of them had concluded an oral agreement in respect of the disputed membership interest. Schneider then said to him not to worry as the ‘option’ given to the 2nd defendant would run out in 10 days. Mudge testified that he chose not to do anything further because he was sure he had an agreement with Schneider.
[27] Mudge, however, on 13th August decided to write a letter to late Schneider insisting that they had a binding agreement and was told by Schneider that the 2nd defendant had not yet performed under his contract and that he was prepared to sign another agreement with Mudge. It was then they concluded the written agreement of 24th August 2004 after Mudge paid the deposit of N$50 000, Schneider first having refused to sign the agreement until he was paid the deposit.
[28] Mudge in evidence produced an application for a home loan on the letterhead of Bank Windhoek dated 22nd June 2004. There is no indication for what amount and in respect of which subject matter the application was completed. He says the application pertained to the purchase of the disputed membership interest. Mudge was asked by his counsel for what amount the loan application was and he answered:
“It was an amount that I mention to the Bank that I wanted an amount or they wanted to know from me for what amount and I said “well the best you can do” because I had in mind, as I said to pay a substantial amount in cash and I said to them you can do your evaluation of the property and you tell me what you can, are prepared to give on that property and then I could decide how much of that I will take up.”
This implies that Mudge left it to the bank to decide how much to advance to him.
[29] Mudge next produced a letter dated 12th August 2004 from Bank Windhoek’s ‘Loan Administration’ to him advising that his ‘application for a Mortgage Loan to the value of N$1 213 200 has been approved and will be payable on the registration of a Covering Mortgage Bond in favour of Bank Windhoek Limited’. Mudge also produced another application, again on a Bank Windhoek letterhead, with a loan amount of N$1 700 000 in respect of No. 6 Hügel Street as property to be mortgaged and the seller being Jörn Schneider. This document is undated.
[30] Mudge testified that he applied for an amount ‘as high as possible and then I have the opportunity to decide what I need and what I don’t need. What I didn’t want to happen was to be prepared to pay five hundred thousand of the purchase price and that Bank only agreed to give a loan of eight hundred thousand (800 000)…” (What is clear to me is that whatever amount he applied for, Mudge was authorised a loan of N$1213 200 only by Bank Windhoek and that it was the ‘best’ the bank could do.)
[31] Mudge testified that at some stage during the month of September, the 2nd defendant came to the property and laid claim to it and enquired what Mudge’s people were doing there. Mudge said he raised this issue with Schneider who promised to look into the matter. Schneider later came back to him and said he was ‘in trouble’ as the 2nd defendant threatened to sue him for damages for selling the disputed membership interest to Mudge. Mudge then offered Schneider to write a letter recording what had transpired in respect of the transaction and, if Schneider agreed, to take same to his lawyer, presumably to enable Schneider’s lawyers to counter 2nd defendant’s threats of litigation and to demonstrate that Schneider was not in a position, when he did, to sell the disputed membership interest to 2nd defendant. Mudge wrote such a letter on 17th September 2004. This letter makes no mention of the loan already secured by Mudge at that stage and that he does not wish to secure the entire balance of the purchase price by way of a loan since some of the money will come from his own pocket.
[32] Mudge testified that Schneider then by letter confirmed the contents of his letter. The alleged confirmation is contained in a terse letter dated 21 September 2004 which states:
“Dear Mr Mudge,
I can confirm that we had an agreement as described in your letter.
The reason why I gave an option to Mr Maritz for ten days is that I was not sure of how serious you were with regard to the purchase of the Hügel STR 6CC because we could not get hold of each other and I did not want to lose a buyer again. (My emphasis)
Mudge in a letter dated 10 February 2005 to legal practitioners Behrens & Pfeiffer who were then acting as executors of the estate of late Schneider asserted his right to the transfer of the disputed membership interest. Mudge testified about the extensive renovations he effected to the property, totalling N$128 000. Mudge is conspicuously silent about whether these alterations were allowed by the agreement. Mudge remains in occupation of the property since September 2004, and is paying occupational rent of N$15 000 per month.
[33] Mudge denied the correctness of the averments he made in paragraphs 12 and 15 of the founding affidavit for the urgent application and to which I already referred. He attributes this to possible misunderstanding between him and his legal advisors which, in turn, was attributable to the fact that he was under a lot of pressure when the urgent application was brought.
[34] Mudge also testified that on 19th July 2004 he had informed Schneider by letter that he no longer wished to apply for loan finance in respect of the full balance of the purchase price. By reference to a loan application submitted to Bank Windhoek, Mudge testified that he had at the time informed Bank Windhoek that his own contribution towards the purchase price would be N$500 000.
[35] On cross-examination, Mudge did not give a satisfactory explanation for why the averment was made in the affidavit in support of the urgent relief that he had secured the full balance of the purchase price by way of loan from a financial institution. This when regard is had to the fact that he reiterated those allegations in the replying papers. When Mr Heathcote put to him that he approached Court to obtain urgent interdictory relief on the basis of falsehoods in papers he had on his own admission not read, Mudge testified:
“My Lord I’m not a legal person and I’ve got a legal team and I rely on them to do the whatever necessary and if there are mistakes been made then that can be rectified. I’ve got no problem to admit that if anything has been said or written it is not correct to say that it is not correct.”
[36] Mudge maintained on cross-examination that the clause in the agreement that he should obtain loan finance for the balance of the purchase price was for his (buyer’s) benefit and that he could have waived that whenever he wanted – as indeed he did. He was, however, unable to give any satisfactory explanation for the absence of this averment in the urgent application, considering that this is now the main pillar of his case. ‘Whenever’ is, in light of the state of the law as I will presently demonstrate, untenable.
[37] The plaintiff made a very poor impression on me as a witness. He was very evasive in the answers he gave when confronted with statements he made under oath in the urgent application in support of the relief he sought in those proceedings, but which have now turned out, on his own admission, to be falsehoods. He even chose the rather suspect and risky approach of placing the blame on his legal advisors as the possible source of these falsehoods, but was unable to explain how his legal advisors could have come to the information which has now turned out to be false – the very information which he, by signing the affidavits, accepted as emanating from him. Waiver was not the basis for the urgent application, contrary to Mr Sniijman’s submission. Paragraph 7 which I quoted above in any event is very ambiguous and tentative at best. Waiver requires clear evidence. Mudge could not in any event have relied in the urgent application on the allegation that he complied with the suspensive condition while relying on a waiver. The two are mutually exclusive. It was really one or the other. In the unreported judgment of this Court in L O Rall Scrap Dealers CC and Anor v Oosthuizen & 2 Others (P) A 162/2000 delivered on 11.08.2004 I said (at p14): “The rule nisi obtained by the applicants … was in all probability on the basis of perjured testimony … . It surely must offend judicial conscience and sensibilities to confirm a rule nisi that was granted, albeit with hindsight , on the strength of such testimony …” For that reason I discharged the rule in that case.
[38] Mudge testified on cross-examination that it was when he returned in January 2005 that he learnt that Schneider had died. He then called the executors to inform them that he was ready to proceed with the transaction and that he was in a position to perform. He is not specific as to when in January he returned and the date on which he called the executors or what proof he provided that he was in a position to perform.
[39] In cross-examination of Mudge Mr Heathcote established two things: (a) that late Schneider was not prepared to sign the agreement of 24th August 2004 with Mudge before he had been paid the deposit of N$50 000 and (b) late Schneider, despite Mudge’s version that he, with Schneider’s knowledge, intended to source a substantial part of the purchase consideration from the property development he was then busy with , proceeded to instruct his lawyers to settle the agreement of 24 August containing the suspensive condition requiring Mudge to obtain loan finance by 31st December 2004 ; and Mudge then signed that document as presented. The only conclusion that I can come to, if Mudge’s assertion that he told Schneider that the property development would be completed in December 2004/January 2005 is to be accepted, is that Schneider did not accept that and wanted to make sure – by inserting the suspensive condition- that the remainder of the money to consummate the transaction should be available no later than 31st December 2004 from a more reliable source, being a loan from a financial institution. That in law - as regards the source of the money - his intention was irrelevant is a separate issue; it certainly is significant in the evaluation of the truth of Mudge’s version that Schneider was unconcerned where the money came from.
[40] At the conclusion of the cross-examination Mr Heathcote put to Mudge the following question:
“Question: Well you never said to any lawyer that drafted the affidavits, that you have waived a suspensive condition, is that correct?
Answer: No I cannot recall by having said it or not saying that?”
[41] The next witness in support of the plaintiff’s case was Willem Adrianes Hartog from Bank Windhoek’s Property Finance Branch, Windhoek. He was, in his capacity as credit manager, involved in Mudge’s loan application. He had known Mudge as a client for 5-6 years at the time. Hartog’s evidence established that his bank on 5th August 2004 approved a loan application of Mudge in the amount of N$1 213 200 towards the purchase price of N$1 680 000 subject to Mudge’s own contribution of N$500 000. Mudge was, according to Hartog, to pay his own contribution ‘up front’. The fact of the approval was communicated to Mudge on 12th August 2004. To Hartog’s knowledge the Bank Windhoek was never asked to provide any guarantee towards the purchase price.
[42] Mudge was recalled in an attempt to show that after the agreement was concluded with Schneider on 24th August 2004, the two parties discussed Mudge’s waiver of the right to secure loan finance for the balance of the purchase price, and he specifically stated that he informed Schneider that he was going to pay N$500 000 in cash upon transfer. He also added that he also briefed Schneider about the good progress he was making with the property development and that he would be able to fulfil his obligations. This is what Mudge added:
“Mr Schneider and myself both understood that it was not really necessary for me to tell him were the money will be coming from, it was just the matter that on the date when I was going to be requested to supply guarantees for the Attorneys to effect the transfer that I will be in a position to do that as that stage but he was, I did it just as according to sign a goodwill or good business just to keep him informed about the fact that the progress was going well and that the agreement that I will, that I will pay a certain amount of money is, is still standing.” (My emphasis)
In terms of the agreement, Mudge’s obligation was to have loan finance arranged for the balance of the purchase price on 31st December 2004, not on the day that a request was made for him to produce the guarantee as is suggested in the passage quoted above. I find it most improbable that Schneider would have been unconcerned about where the N$ 500 000 would come from if regard is had to the fact that he made sure of the inclusion of the suspensive condition when, as alleged, he had already been told in July that some of the money would come from a property development Mudge was engaged in. Apart from Mudge’s say-so, I find no independent corroboration for Mudge’s version. In fact, there is, as I have shown, very clear evidence of Schneider’s conduct which undermines Mudge’s claim.
[43] When asked by Mr Heathcote why he did not mention the alleged communication of waiver after 24 August when he first testified in-chief, Mudge asserted that he had mentioned it ‘most definitely on number of occasions yesterday that it was discussed with the deceased?’ (Why he chose to return to the witness box to repeat the same thing then begs for an answer!). When asked by Mr Heathcote whether he had any bank statement proving he had N$500 000, Mudge answered:
“I don’t need to pay from my bank account I can pay it from various other or through various other means.”
When pressed if he has N$500 000 available now, Mudge gave an incomprehensible explanation which left me wondering why he was recalled in the first place. Mudge did not present any proof whatsoever that he had N$500 000 available to meet his obligations under the agreement in order to top-up the loan he received from Bank Windhoek either on 31st December or on any other date subsequent thereto.
[44] The next plaintiff’s witness was Edbert Bonzaaier who was an employee of Bank Windhoek’s Credit Department. He too knows Mudge and was involved in his loan application which is the subject of dispute in these proceedings. He confirmed Hartog’s evidence about the bank granting Mudge a loan and also added that had Mudge applied for the full purchase price he would have been granted same. Bonzaaier confirmed that the loan granted to Mudge is still available today. When cross-examined how he could be sure that the full purchase price could have been loaned to Mudge, Bonzaaier said although the decision would have had to be taken by the Credit Committee – of which he is not a member - he is sure it would be approved on the ground Mudge is a reputable client who always met his liabilities. This, clearly, is the witnesses’ opinion only which cannot count for much.
[45] The next witness for the plaintiff was Marcell Bonzaaier. She is Bank Windhoek’s loan’s consultant. She assisted in the completion of Mudge’s application. She did so on 22nd June 2004.
[46] The next witness was Christiaan Louw Van Der Westhuizen who is Mudge’s son in law. He did the renovations on the property for Mudge. Nothing turns on his evidence.
[47] The final witness for the plaintiff was the instructing attorney Charmaine Else Van Der Westhuizen who was called to buttress Mudge’s version that the papers for the urgent application were prepared under pressure and in some haste and that misunderstandings may have crept in. Her evidence does not, in my respectful view, add much to the plaintiff’s case. She specifically testified on cross-examination that Mudge did not inform his legal team about the ‘waiver’ until the day before the Rule 37 conference which, as the record shows, was held on 5 July 2006. The allegation that Mudge had complied by securing the full balance of the purchase price by way of a loan is so prominent in the affidavits in the urgent application and indeed formed the basis for the relief that was sought there in that it gave him the necessary locus that I cannot accept that it crept in mistakenly. I reject the version that it did and I do find that Mudge knowingly relied on it for the relief that he sought in the urgent application.
The Law
[48] The seller’s interest lies in being certain that the purchase consideration will be available to consummate the transaction. The purchaser’s interest, on the other hand, lies in being able to meet the obligation to pay on the due date, and also not to be required to proceed with the transaction when he may not have the financial means to proceed with the transaction and possibly face a claim for damages. These two interests are ordinarily addressed by providing, for the benefit of the seller, for a time period within which payment must take place (usually the date of transfer) and, in respect of the purchaser who does not have the cash readily available but is reasonably certain of securing loan finance, by providing that the transaction is subject to the purchaser obtaining a loan from a financial institution and to provide the guarantee for payment within a defined period. The purchaser may, of course, in the meantime win the jackpot or inherit a fortune from a rich uncle and may no longer need loan finance and thus be able to meet his obligation to pay on the due date. In that event the seller cannot be heard to say that since the purchase consideration was not secured by means of a loan from a financial institution as provided in the agreement, he/she can resile from the transaction.
[49] Dealing with a suspensive condition in a contract of sale of immovable property making an ‘offer’ “subject to the successful sale of property situated at 75 Eros Road within 30 days as from date of acceptance of this offer”, Muller AJ (as he then was) said in Hill v Hildebrandt 1994 NR 84 at 96 G-J:
“The purchaser is the only party that can take advantage of this provision and implement it by fulfilling this suspensive condition. Where a time limit has been included, he must do so before expiring of that time limit.
…
While the purchaser … can implement the particular condition by fulfilling it in the way it is worded, the seller cannot take advantage of that clause or do anything to implement or prevent fulfilment of the condition before the expiry of the time limit. Consequently on the clear and unambiguous wording of clause 12 in this particular contract I find that it has been inserted … for the sole benefit of the purchaser …. Only the applicant as purchaser can fulfil the suspensive condition but he must do so within 30 days of the date of acceptance of the offer.”
[50] The learned judge went on to deal with the issue of waiver of the suspensive condition by the party for whose benefit it was inserted and said:
“[W]hen there was no ‘waiver’ of the benefit for the purchaser contained in such a suspensive condition … within the time limit the contract is void ab initio. It is therefore important that the party for whose benefit such a suspensive condition has been inserted and who does not intend to fulfil it, shall clearly and unambiguously communicate this intention to the other party before expiry of the time limit.”
[51] His Lordship held that such a waiver must comply with the strict requirements of a waiver (at 99C) as contemplated in Bortslap v Spangenberg & Andere 1974 (3) SA 695 (A).
[52] These themes were picked up by Hannah J in Deventer v Engelbrecht 1995 NR 257. He said:
”There was a time when judicial opinion in South Africa was to the effect that the non-fulfilment of a suspensive condition in a contract of sale inserted solely for the benefit of the buyer could not be relied upon by the seller in order to avoid his obligations under the contract: Wacks v Goldman 1965 (4) SA 386 (W); Lashey v Steadmet (Edms) Bpk h/a Wessel de Villiers Agentskap 1976 (3) SA 696 (T); Allessandrello v Hewitt 1981 (4) SA 97 (W). The first of these cases also decided that, in an appropriate case, the purchaser could unilaterally waive such a condition after the stipulated date for fulfilment. However, beginning with the case of Phillips v Townsend 1983 (3) SA 404 (C), judicial opinion changed and the courts in South Africa declined to follow this series of cases … The reason for this change in judicial opinion was summed up by Van Schalkwyk J in the Ning-Chieh Shen case … [1992 (3) SA 496 (W)] The learned judge pointed out that a condition precedent suspends the operation of the contract and the non-fulfilment of the condition renders the contract void ab initio. It is not a question of the seller relying upon the failure of the contract as a result of the non-fulfilment of the condition. However … the judges … recognised that where the suspensive condition is inserted solely for the benefit of the purchaser then the purchaser can waive it unilaterally. But to be effective such waiver must occur within the time stipulated by the condition and must be communicated to the other party within that period, failing which the inchoate contract will be rendered void ab initio by the failure of the condition’’ (at 261 I-J at 262 A-F).
[53] This is the approach enunciated by Muller, AJ in Hildebrandt supra (at 95 E) and followed by Hannah J in Engelbrecht (at 262 F). It represents the law in Namibia and I find it unnecessary to consider the South African cases referred to by counsel in argument.
The Law to the facts
[54] The reason, in my view, why Mudge relies on a waiver is recognition of the fact that the strict letter of the agreement of 24 August a propos the suspensive condition had not been complied with. Whether or not a clause such as the present is intended for both parties, or only the purchaser, involves an interpretation of the contract. Schneider’s interest lay in being assured of payment on the effective date. On a proper construction of the agreement, the parties intended that the balance of the purchase consideration should be available on the 31st December 2004. The transfer process could really only be commenced with when there was certainty that the money was available. On a proper construction of the agreement therefore, the parties intended the suspensive condition obliging the purchaser to obtain a loan from a financial institution not later than the 31st December 2004 to operate for the sole benefit of the purchaser. The parties also intended that the purchaser should have had available by that date the balance of the purchase consideration and only after that date could demand have been made for the delivery of the guarantee to be made good within 7 days of such demand.
[55] It follows that Mudge could, before the 31st December 2004, have sourced the balance of the purchase consideration through own sources; in other words to waive the clause requiring him to obtain a loan from a financial institution. He was, however, required to actually waive the right and to communicate such waiver to Schneider before the 31st December 2004.
[56] It is obvious from all that I have said so far that by the 31st December 2004, the only proven finance raised by Mudge from a financial institution was N$1213 200. As I said, on a proper construction, the agreement required him to have the entire balance of the purchase price available on 31st December 2004. Although he could waive how to source the funds, he was not entitled to waive the requirement that he should have had the balance of the purchase price by 31st December 2004. The loan approved by Bank Windhoek before the agreement was concluded, was for the amount of N$1213,200,00 and was, on plaintiff’s own case, subject to Mudge paying up front the amount of N$500 000. The bank could therefore never have issued a guarantee for the full purchase balance of the purchase consideration as suggested by Mr. Sniijman. Mudge could therefore not have relied on the bank’s loan for the assertion that he fully complied without also providing proof that he had sufficient means to top-up the bank loan to make up the balance of the purchase price. As I have shown he failed to prove that he had the funds available as at 31st December 2004, or any other day for that matter.
[57] I cannot accept as constituting waiver that which occurred prior to the agreement of 24th August 2004 – more so when late Schneider, notwithstanding Mudge’s alleged statements to that effect, proceeded to have had included in the agreement the very suspensive condition which Mudge says he waived and communicated to Schneider.
[58] I have not been shown anything in writing after 24th August 2004 between Mudge and Schneider that supports the allegation of waiver and its communication to Schneider before 31st December 2004. In the letter of 17th September 2004 there is no reference to Mudge waiving his right to secure a loan through a financial institution. In his reply to that letter, not only does Schneider make no reference to the suspensive condition, but he makes clear that he had concluded the agreement of 9th August because he was not sure if Mudge was serious. Mudge’s assertion that Schneider had always maintained that he was not bothered by Mudge’s ability to perform is thus not supported by this letter. In fact it points to the contrary.
[59] When he launched the urgent application to interdict the transfer of the disputed membership interest, Mudge did not rely on a waiver. He, au contre, relied on the fact that he fully complied with the terms of the agreement by having secured all the money through loan finance. That, and the fact that in the urgent application false testimony was presented to the court at his behest, irredeemably undermines the credibility of the plaintiff’s version there was waiver after 24th August, duly communicated to Schneider, of the suspensive condition.
[60] Mudge was, in any event, required to communicate any waiver to Schneider before 31 December 2004. I have no hesitation in finding that the alleged communication of the waiver to Schneider is an afterthought. No satisfactory explanation exists for why it was never raised as the basis of his case in the urgent application. Schneider is not there to meet the allegation and I find it improbable having in the first place specifically demanded for its inclusion, that he would, in view of all the circumstances that I have described, have noted a waiver without protest as suggested by Mudge.
[61] I am accordingly satisfied that the plaintiff, even on the lower threshold agreed by the parties , failed to establish a prima facie case that he had waived his right to secure a bank loan to finance the balance of the purchase price before 31st December 2004 and duly communicated the same to Schneider before that date. Accordingly the contract between Schneider and Mudge is void ab initio on account of Mudge’s failure to waive and or to communicate the same to Schneider before 31 December 2004.
[62] In view of the conclusion to which I have come, I do not think it is necessary to specifically make an order to discharge the rule nisi I granted in Case no. A 91/2005 as asked for by Mr. Heathcote as my judgment today achieves that result.
[63] In the result:
The plaintiff’s claim is dismissed with costs, including the costs of one instructed counsel.
_______________
DAMASEB, JP
ON BEHALF OF THE APPLICANT:
Mr Snijmann, SC
Assisted by:
Mr L C Botes
Instructed By:
Stern & Barnard
ON BEHALF OF THE 2ND RESPONDENT:
Mr R Heathcote
Instructed By:
LorentzAngula Inc.