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- Klub Lekkerrus Libertas v Troye Villa (Pty) Ltd and Others [2011] ZASCA 101; [2011] 3 All SA 597 (SCA) (1 June 2011)
Klub Lekkerrus Libertas v Troye Villa (Pty) Ltd and Others [2011] ZASCA 101; [2011] 3 All SA 597 (SCA) (1 June 2011)
Another case featuring the Shifren clause: In this matter the tacit agreement was not ousted by the Shifren clause is the tacit agreement replaced the previous agreement on the same terms and conditions and hence there was no variation to the terms of the original agreement.
Ross Shepstone
July 05, 2024
The case involves a dispute between Klub Lekkerrus/Libertas (the Club) and various respondents regarding the ownership of shares in two companies, Troye Villa (Pty) Ltd and Lekkerrus Warmwaterbron (Pty) Ltd. The Club was formed through the amalgamation of two voluntary associations, Klub Lekkerrus and Klub Libertas, which operated as holiday clubs. The dispute revolves around agreements for the purchase of shares in the two companies, which were initially owned by Mr. van Tonder.
The main issue was whether agreements for the sale of shares in two companies (referred to as agreements 'E' and 'F') had lapsed when two clubs amalgamated to form the appellant Club, or whether the agreements continued with the new amalgamated Club. Did the agreements for the sale of shares in the two companies (agreements 'E' and 'F') continue to be valid and binding on the amalgamated Club after the merger of the two original clubs, or did these agreements lapse upon amalgamation?
"The evidence is overwhelming that he elected to keep the agreements, including the new tacit agreements, extant. As stated above, he did not threaten cancellation, nor did he demand immediate payment of the outstanding balance."
After the amalgamation, the Club continued with the agreements to purchase the shares, despite a non-variation clause in the agreements. The Club believed it was the rightful owner of the shares, while the respondents claimed that the agreements had lapsed due to non-payment and the dissolution of the original clubs upon amalgamation.
Mr. van Tonder passed away, and subsequent attempts to transfer the shares to his estate and then to Troye Villa were deemed null and void due to uncertainties in the agreements. The Club, represented by Mrs. van Tonder, entered into a new agreement (agreement 'G') which was also found to be invalid.
"It is also trite that a contracting party, when faced with breach of the contract by the other party, must elect whether to terminate or to enforce the contract. Once an election is made, the party is bound by it. A party who elects to cancel must clearly and unequivocally express an intent to do so."
The court found that tacit agreements were formed between the parties, allowing the Club to be the rightful owner of the shares. It was also established that Mr. van Tonder had elected to continue with the agreements despite non-payment. The court dismissed the claims against the Club, upheld the counterclaim for rectification of share registers, and ordered the respondents to pay the Club's costs.
The court also addressed issues related to termination of lease agreements, unauthorised agreements entered into by Mrs. van Tonder, and the use of properties belonging to the respondents without agreements in place. The court ultimately ruled in favor of the Club on the main issues, leading to the dismissal of the respondents' claims and the ordering of costs against them.
The core legal principle underlying the decision is that tacit agreements can replace previous written agreements, even if there is a non-variation clause in the original agreements. The court found that in this case, new tacit agreements were formed between the parties after the amalgamation of the clubs, allowing the Club to be the rightful owner of the shares in the companies. Additionally, the court emphasised that a party must clearly and unequivocally express an intent to cancel a contract in case of breach, and in this instance, Mr. van Tonder's conduct indicated an election to continue with the agreements despite non-payment. The court also highlighted the importance of authority in entering into agreements, stating that unauthorised agreements are not valid, even if certain clauses within them could be considered severable.
In my analysis the reason why the tacit agreement was not ousted by the Shifren clause is the tacit agreement replaced the previous agreement on the same terms and conditions and hence there was no variation to the terms of the original agreement.
Here are the key cases relied on by the court in its reasoning:
1. Golden Fried Chicken (Pty) Ltd v Sirad Fast Foods CC & others 2002 (1) SA 822 (SCA) - Cited for the principle that agreements can be concluded tacitly to replace previous agreements.
2. Telcordia Technologies Inc v Telkom SA Ltd 2007 (3) SA 266 (SCA) - Cited for the principle that non-variation clauses do not preclude tacit new agreements from being formed.
3. Gordon Lloyd Page & Associates v Rivera & another 2001 (1) SA 88 (SCA) - Cited regarding the evidence required to infer tacit consensus between parties to form a new agreement.
4. KPMG Chartered Accountants (SA) v Securefin Ltd & another 2009 (4) SA 399 (SCA) - Cited regarding the principles for interpreting contracts and determining whether clauses are severable.
5. Swart & 'n ander v Cape Fabrix (Pty) Ltd 1979 (1) SA 195 (A) - Also cited regarding principles for interpreting contracts and severability of clauses.