MDA Law
Shakawa Hunting & Game Lodge (Pty) Ltd v Askari Adventures CC (44/2014) (2015) ZASCA 62 (17 April 2015)
Facts
- A written agreement was concluded between Shakawa Hunting Lodge and Askari Adventures in terms of which:
1. Askari would receive 10% of the value of Shakawa if the company was sold; and
2. This 10% share would be calculated after costs such as legal fees, agents commission etc.
- Shakawa owned 5 adjoining farms which operated as a game and hunting lodge. In January 2011 all 5 farms and the entire business was sold as a going concern for an amount of R32 500 000.
- Askari accordingly claimed a sum of R3 230 000, being 10% of R32 500 000 less costs.
- Shakawa in turn argued that before calculating the 10% share due to Askari the amount of a loan account held in Askari by a third party must first be deducted. The sale price of 32 500 000 less the loan account of R28 270 000 left a remaining R4 230 000. Askari would then be entitled to 10% of R4 230 000 less costs, equalling an amount of R403 600.
Issue
- The Court was required to interpret the meaning of the contract and specifically the meaning of the ‘value’ of the assets. Such value differing depending on whether the loan amount is deducted.
The Court a quo
- Held that the only issue for determination was the proper interpretation of clause 2 and the meaning of the word ‘costs’.
- It applied the eiusdem generis rule and held that costs did not include the loan account.
- It accordingly found in favour of Askari and awarded them the amount of R3 230 000 as claimed.
The SCA – Statements on the Law
- The Court had the following to say in respect of the law of interpretation:
- ‘What the parties and their witnesses ex post facto think or believe regarding the meaning to be attached to the clauses of the agreement, and thus what their intention was is of no assistance in the exercise.’
- The court cited with approval Worman v Hughes 1948 (3) SA 495 (A) which held that ‘It must be borne in mind that in an action on a contract, the rule of interpretation is to ascertain, not what the parties’ intention was, but what the language used in the contract means…’
- The court further cited with approval Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 which held that ‘Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production.’
The SCA – Application & Ruling
- The SCA held that the High Court had erred in ignoring clause 1 when interpreting and giving meaning to clause 2.
- The SCA held that attributing meaning to the words in a contract must be undertaken ‘…having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence.’
- The SCA accordingly considered the agreement as a whole and considered the circumstances relevant to the agreement coming into existence.
- The SCA held that the value of Shakawa in terms of clause 1 must first be ascertained before effect is given to the deductions
in terms of clause 2. - The SCA held that the court a quo had misinterpreted a witnesses evidence and that the value of the property in the sense of its selling price (being R32 500 000) and the value of the company, Shakawa, which owned the property are two different concepts.
- The SCA accepted the evidence of a testifying accountant that set out that the value of a company is calculated as its assets less its liabilities.
- The SCA accordingly found that on a proper construction of the contract that the ‘value’ of the company in terms of clause 1 is the sale price less the loan account amount.
- From this net amount, Askari was entitled to 10% less costs.
- The accordingly SCA found in favour of Shakawa and awarded Askari (the smaller) amount of R403 600.
