Remo Ventures Pty Ltd v Cecile Van Zyl and Others (1262/2022) [2023] ZASCA 09 (26 January 2024)

1. Parties Involved: The appellants are Remo Ventures (Pty) Ltd, Ekuzeni Supplies (Pty) Ltd, and Mr. Nthabiseng Segoale. The respondents are Ms. Cecile Van Zyl, Ms. Susan Leonora Meintjies, and the late Judge Neels Claassen.

2. Sale of Shares Agreement (SoS): On April 3, 2017, the appellants and the respondents entered into a written Sale of Shares Agreement (SoS agreement), which stipulated that the purchase price of R50 million was to be paid in tranches. The first tranche was paid, but subsequent payments were subject to certain conditions precedent.

3. Conditions Precedent: The SoS agreement included conditions precedent, such as the cession of a life insurance policy by Mr. Segoale to the sellers (respondents) before a specified effective date. Failure to meet these conditions would render the agreement null and void.

4. Non-fulfillment and Continuation: Despite the non-fulfillment of the conditions precedent by the effective date, the parties continued to act as though the SoS agreement was still valid, including extending payment dates and transferring shares.

5. Disputes and Arbitration Agreement: Disputes arose regarding the performance obligations under the SoS agreement. On February 20, 2019, the parties entered into an arbitration agreement, which was intended to amend the arbitration clause in the SoS agreement and refer the disputes to arbitration, appointing the late Judge Claassen as the arbitrator.

6. Validity of Arbitration Agreement: The arbitration proceedings were conducted, and an award was issued. However, the validity of the arbitration agreement came into question because it was predicated on the SoS agreement, which was considered void due to the non-fulfillment of the suspensive conditions.

7. High Court Ruling: The High Court ruled that the arbitration agreement was a self-standing agreement and survived the voidness of the SoS agreement. The appellants disagreed with this ruling and appealed to the Supreme Court of Appeal.

The Supreme Court of Appeal was tasked with determining whether the arbitration agreement and the subsequent arbitration proceedings and award were nullities as a result of the SoS agreement being void.

The Supreme Court of Appeal's held that / If the primary agreement is considered to have never come into existence because the conditions precedent were not met, then any subsidiary agreements, including an arbitration agreement that is dependent on the primary agreement, are also rendered null and void.

The court emphasized that the parties' intention was to have a single, indivisible transaction, and the Sale of Shares Agreement was the foundation for the other related agreements, including the arbitration agreement. Since the Sale of Shares Agreement lapsed due to the unfulfilled conditions, the arbitration agreement, which was meant to amend and substitute the arbitration clause in the lapsed agreement, also lapsed and could not be treated as a separate, self-standing agreement.

The court further held that the conduct of the parties subsequent to the lapse of the Sale of Shares Agreement could not resuscitate or validate the arbitration agreement. The arbitration proceedings and the award issued were therefore declared nullities, as they were based on an agreement that was void ab initio.

In summary, the core legal principle is that an arbitration agreement cannot survive independently if the underlying contract, upon which it is predicated, is void due to the non-fulfillment of suspensive conditions.

In its reasoning process, the Supreme Court of Appeal of South Africa relied on several cases:
Africast (Pty) Ltd v Pangbourne Properties Limited [2014] ZASCA 33; [2014] 3 All SA 653 (SCA). This case was used to support the principle that a contract containing a suspensive condition is enforceable immediately upon its conclusion, but the obligations are postponed pending the fulfillment of the suspensive condition. If the condition is not fulfilled, the contract is considered to have never come into existence.

Paradyskloof Golf Estate (Pty) Ltd v Municipality of Stellenbosch [2010] ZASCA 92; [2010] 4 All SA 591 (SCA); 2011 (2) SA 525 (SCA). This case was referenced to highlight that non-fulfillment of a suspensive condition renders a contract void ab initio.

North East Finance (Pty) Ltd v Standard Bank of South Africa Ltd [2013] ZASCA 76; 2013 (5) SA 1 (SCA). This case was used to affirm the principle that if a contract is void from the outset, then all of its clauses, including arbitration clauses, fall with it.