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Benson v SA Mutual Life Assurance Society (152/85) [1985] ZASCA 114; [1986] 2 All SA 30 (A) (7 November 1985)

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C R BENSON APPELLANT

and

S A MUTUAL LIFE AS
SURANCE SOCIETY RESPONDENT

HEFER,JA.

IN THE SUPREME COURT OF SOUTH AFRICA

APPELLATE DIVISION

IN THE MATTER BETWEEN

C R BENSON APPELLANT

and

S A MUTUAL LIFE ASSURANCE

SOCIETY RESPONDENT

CORAM : CORBETT, KOTZé, HEFER, J J A, GALGUT et CILLIé, A J J A.

HEARD : 7 NOVEMBER 1985.

DELIVERED: 29 NOVEMBER 1985.

J U D G M E N T HEFER, J A :

In the Court below the present respondent claimed

from 2

2.

from the appellant delivery of 63 600 ordinary shares in a company known as McCarthy Group Limited (the "com-pany"). It was alleged in the declaration that the respondent on 17 August 1982 had purchased from the ap-pellant 171 500 shares in the company at a price of 210 cents per share, that it was an implied term of the a -greement that delivery of the shares would take place within a reasonable time, and, that the appellant had delivered 107 900 of the shares but had failed to de-liver the remaining 63 600. Respondent also claimed damages from appellant in ah amount of R9 540. This claim was based on the following allegations which appear in paragraph 9 of the declaration:

"As 3

3.
"As a result of defendant's failure to place plaintiff in possession of the said scrip, Plaintiff was unable to register the said 63 600 shares in Plaintiff's name by the 22nd October 1982, that being the last date to register the shares in Plaintiff's name so as to become entitled to a dividend of 15 cents per share. Plaintiff has accordingly suffered a loss of dividend in the sum of R9 540, being 15 cents per share on 63 600 shares, as a result of Defendant's said failure to effect timeous delivery to Plaintiff, and Plaintiff has accordingly suffered damages in the sum of R9 540 which sum Defendant is accordingly obliged to pay to Plaintiff."

Appellant in his plea admitted his failure to deliver the 63 600 shares. His main defence is irrelevant for present purposes; it was rejected by the
trial Court and no reliance was placed on it in this

Court .4

4.

Court. An alternative defence was pleaded in the
following terms:

"11. Alternatively, if Defendant has breached his obligations to deliver the said 63 600 shares. Defendant pleads that :
11.1. Plaintiff should not be awarded an order for specific performance as claimed in prayer (a), as :
11.1.1Plaintiff knew, by the latest on on 4 September 1982, that the a-foresaid 63 600 shares would not be forthcoming from Defendant;
11.1.2Ordinary shares in McCarthy Group Limited were at all material times hereto daily dealt in on the stock market;
11.1.3Plaintiff could have bought in 63 600 ordinary shares in McCarthy Group Limited on the stock market without difficulty (and

Defendant.......5

5.

Defendant furthermore pleads that this could have been done at less than 210c a share);
11.1.4 Plaintiff should have bought in the said shares at the end of August beginning September 1982, and in any event on or immediately after 4 September 1982;
11.1.5 It would furthermore and in any event be inequitable and unconscientious to order specific performance against Defendant in view of the circumstances set out in 11.1.1 toe 11.1.4 above.

11.2 Plaintiff was at all material times under a duty to buy in 63 600 ordinary shares in McCarthy Group Limited to mitigate any loss flowing from Defendant's failure to deliver same, and Defendant here refers to paragraphs 11.1.1 to 11.1.5 above.
11.3Defendant pleads furthermore, and with

reference 6

6.
reference to the claim for loss of divi-dends set out in paragraph 9 of Plaintiff's Declaration, that had Plaintiff bought in the said shares as it was obliged to do, it would not have suffered any loss of dividends."

The trial Court rejected the alternative defence as well and granted judgment against appellant for delivery of the shares, for payment of, an amount of R7 447,96 by way of damages and for costs. Against that judgment the appellant, with leave of the trial Court has now appealed.
In view of the nature of the argument which was presented to this Court on appellant's behalf, it is unnecessary to discuss the evidence at this stage

beyond 7
7. beyond saying that the respondent called two witnesses at the trial one of whom was its equity portfolio manager at the relevant time, Mr W J Mitchell. Appellant led no evidence and on Mitchell's evidence the trial Court was satisfied that the agreement for the sale of the shares on which respondent relied, had been established. On that basis the Court found that the appellant was obliged to deliver the shares to respondent within a reasonable time after 17 August 1982. Due to his admitted failure to deliver them he was also liable for the damages which respondent had suffered as a result of the loss of the dividend referred to in paragraph 9 of the declaration. The amount of the loss

was 8

8. was reduced during the trial to the amount for which judgment was granted.
In this Court the argument for the appellant generally followed the lines of the alternative plea to the effect 1) that specific performance by the appellant of his obligations in terms of the agreement of sale should not have been decreed, and 2) that respondent should in any event have mitigated (and possibly averted) the loss of the dividend by buying shares elsewhere once it became apparent that delivery of all the shares purchased from the appellant would not be forthcoming. I shall first deal with the argument re-lating to specific performance. In doing so, I shall

not 9
9. not deal with all the grounds which were advanced in the written heads of argument for the submission that specific performance should not have been ordered. Some of them derive from what I shall later refer to as the English rules relating to specific performance. They may conveniently be dealt with collectively. Others were abandoned at the hearing of the appeal and with them I shall not deal at all.
At the outset there are three preliminary observations that I wish to make. The first relates to the general approach in an appeal in which the Court of appeal is asked to interfere with the grant of a decree of specific performance. It is settled law

that 10

10.

that the grant or refusal of such an order is entirely a matter for the discretion of the Court in which the claim is made. (Haynes v Kingwilliamstown Municipa- lity 1951(2) S A 371 (A D) at p 378; Tamarillo (Pty) Ltd v B N Aitken (Pty) Ltd 1982(1) S A 398 (A D) at p 440-1). It is an equally well-settled principal that the power to interfere on appeal in matters of discretion is strictly circumscribed. In Ex parte Neethling and Others 1951(4) S A 331 (A D) at p 335 GREENBERG JA indicated that the question in such a case is whether -

"the Court a quo has exercised its discretion, capriciously or upon a wrong principle, that it has not brought its unbiassed judgment to bear on the question or has not acted for substantial reasons."

(See 11

11.

(See too R v Zackey 1945 A D 505 at p 510, 511; Madnit-sky v Rosenberg 1949(2) S A 392 (A D) at p 398; Com-missioner for Inland Revenue v Da Costa 1985(3) S A 768 (A D ) at p 775). That, in my view, is the approach which is to be adopted in the instant case. The second observation is that none of the trial Court's factual findings were challenged in this Court. One of these unchallenged findings was that the appellant had agreed to deliver all the shares within a reasonable time. The appeal accordingly has to be decided on the basis that the respondent's right to the delivery of the 63 600 shares which were not delivered, was established. Thus, adopting the approach to which I have

just 12

12. just referred, the only remaining question on this part of the case seems to be whether the learned trial judge has been shown to have exercised his discretion to order delivery of the shares in an unjudicial manner in the sense explained in the Neethling case (supra).
This leads to the third observation which relates generally to the nature of the discretion in question and to the way in which it is to be exercised. In Haynes v Kings-williamstown Municipality (supra at p 378) DE VILLIERS AJA
dealt with the matter in the following terms:

"It is correct, as Mr. Miller states, that in our law a plaintiff has the right of election whether to hold a defendant to his contract and claim performance by him of precisely what he had bound himself to do, or to claim damages for the breach. (Cohen v Shires, McHattie and King, 1882

Kotzé's 13

13 .

Kotzé's Reports, p.41) This right of choice a defendant does not enjoy; he cannot claim to be allowed to pay damages instead of having an order for specific performance entered against him. (Farmers' Co-operative Society v Berry, 1912 A.D. 343 at p. 350.)

It is, however, equally settled law with us that although the Court will as far as possible give effect to a plaintiff's choice to claim specific performance it has a discretion in a fitting case to refuse to decree specific performance and leave the plaintiff to claim and prove his id quod interest. The discretion which a Court enjoys although it must be exer -cised judicially is not confined to specific types of cases, nor is it circumscribed by rigid rules. Each case must be judged in the light of its own circumstances."
The statement that the discretion is not

circumscribed by rigid rules requires some elucidation.

The 14
14. The use of the word "rigid" may be taken to imply that there are indeed rules regulating the exercise of the discretion but that they are not inflexible; that is in effect what Story (Equity Jurisprudence ) says in the passage which the learned judge of appeal cited with approval at p 379 of the report. I doubt, how-ever, whether that is what was intended, particularly after it was accepted, that a plaintiff has the right to . elect whether to demand performance or to sue for dama-ges, and that the Courts will as far as possible give effect to his election. That a right to specific per-formance exists was decided as long ago as 1882 (in Cohen v Shires, McHattie and King (supra)) and subsequently

reaffirmed 15

15. reaffirmed in a host of cases (see e g Thompson v Pullinger 10R

293 at p 301; Farmer's Co-operative Society (Reg) v Berry 1912 A D 343 at p 350; Woods v Walters 1921 A D 303 at p 309; Shill v Milner 1937 A D 101 at p 109; B K Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979(1) S A 392 at p 433, to mention only a few), subject only to the qualification that the Court has a discretion to grant or to refuse an order for performance. This right is the cornerstone of our law relating to specific performance. Once that is realised, it seems clear, both logically and as a matter of principle , that any curtailment of the Court's discretion inevitably entails an erosion of the plaintiff's right to performance, and that there can be no rule, whether it be flexible

or 16
16. or inflexible, as to the way in which the discretion is to be exercised, which does not affect the plain -tiff's right in some way or another. The degree to which it is affected depends, of course, on the nature and extent of the rule; theoretically, I suppose, there may be a rule which regulates the exercise of the discretion without actually curtailing it but, a-part from the rule that the discretion is to be exercised judicially upon a consideration of all relevant facts, it is difficult to conceive of one. Practi-oally speaking it follows that, apart from the rule just referred to, no rules can be prescribed to regulate the exercise of the Court's discretion.

This 17
17. This does not mean that the discretion is in all respects completely unfettered. It remains, after all, a judicial discretion and from its very nature arises the requirement that it is not to be exercised ca-priciously,nor upon a wrong principle (Ex parte Neethling (supra) at p 335). It is aimed at preventing an injus-tice - for cases do arise where justice demands that a plaintiff be denied his right to performance - and the basic principle thus is that the order which the Court makes, should not produce an unjust result which will be the case e g if, in the particular circumstances, the or-der will operate unduly harshly to the defendant. Ano-ther principle is that the remedy of specific performance

should. 18
18. should always be granted or withheld in accordance with legal and public policy (Cf De Wet & Yeats ; Kon-traktereg en Handelsreg (4th ed p 189). Furthermore, the Court will not decree specific performance where performance has become impossible. Here a distinction must be drawn between the case where impossibility extinguishes the obligation and the case where performance is impossible but the debtor is still contractually bound. It is only the latter type of case that is relevant in the present context, for in the former the creditor clearly has no legal remedy at all. (See De Wet & Yeats, op cit., p 189, n 61 and the cases there cited; and see too in this connection Tamarillo (Pty) Ltd v B N

Aitken 19

19.

Aitken (Pty) Ltd supra, at pp 441-3).
With these preliminary remarks in mind I now proceed to deal with the argument presented to us by appellant's counsel.

His main contention was
that the trial Court should have exercised its
discretion against granting specific performance be
cause ordinary shares in the company were readily
available in the market at the relevant time;
the respondent, once it became apparent that the
remaining 63 600 shares would not be forthcoming
from the appellant, could have bought shares else
where 20
20. where and could have sued the appellant for such damages as it may have suffered as a result of the purchase. There is no finding in the judgment of the Court a quo as to the availability of the shares at the relevant time but, although the evidence seems to point the other way, I am prepared to assume that they could have been obtained without difficluty and to deal with the argument on that basis.
Three propositions were advanced in support of the main contention. The first one was based on a statement in Wessels' Law of Contract in South Africa (2nd ed par 3136 ), to the effect that specific performance will not be granted where an award of damages

will 21

21.

will adequately compensate the plaintiff. The second
one was based on what Wessels says in par 3137 viz that

" if ordinary goods or chattels

are sold as may be bought anywhere, the court will not order specific performance"

The third proposition was based on the decision in Thompson v Pullinger (supra) and on a remark in the minority judgment of SCHREINER JA in R v Milne and Erleigh 1951 (1) S A 791 (A D ) at p 873 which reads as follows:

" in contracts for the sale of

shares which are daily dealt in on the market and can be obtained without difficulty specific performance will not ordinarily be granted (Thompson v Pullinger 10R 298 at p 301)."
It is immediately apparent that all

three 22

22.

three propositions are in effect rules (indeed well-known rules in English law) by which the Court's dis-cretion, and thus the respondent's clearly established right to performance, is sought to be circumscribed. Take the first one for instance; a rule like the one contended for unduly limits the Court's discretion, and is a complete negation of a plaintiff's right to select his remedy (Cf Swartz & Son (Pty) Ltd v Wol-maransstad Town Council 1960 (2) S A 1 (TPD) at p 3 ). The second one is equally foreign to our law and inconsistent with a plaintiff's right to perfor-mance. It simply means that a purchaser of an ar-ticle which is readily available anywhere has no

right ...23

23 .

right to demand its delivery from the seller; he knows that a claim for its delivery will be refused; he has no option but to sue for damages, and his right of election to hold the seller to his contract and to demand performance or to claim damages, is rendered completely nugatory (De Wet & Yeats p 190).
For this reason alone none of these propositions can be accepted. I shall proceed, however, to demonstrate why, for a more fundamental reason, they are to be rejected. For the sake of convenience I shall do so by dealing specifically with the third proposition.
SCHREINER JA based his remark on Thomp -son v Pullinger (supra). In that case KOTZé CJ after

reviewing 24
24. reviewing some of the Roman Dutch authorities and coming to the conclusion that "the right of a plaintiff to specific performance of a contract, where the defendant is in a posiiton to do so, is beyond doubt", proceeded to say (at p 301) :

"But it is said that in a contract of purchase and sale of shares which are daily dealt in on the market, as a rule, no specific performance is decreed, because the payment of compensation, calculated by the difference between the purchase price of the shares and that at which they can be obtained at the time when the defendant is placed in mora, is a full and satisfactory compensation. With respect to transactions in the public funds, and shares in

companies 25

25.

companies which can daily be obtained on the market without difficulty, this is the case; but not with respect to shares which cannot easily be obtained, nor where, owing to some circumstance or the other, the rule ought not to be applied. (2 Story, Eg. 717, a; 3 Parsons on Contract, part 2, Division 2,s.3. )"

As is to be expected there is nothing in the writings on Roman Dutch law about the enforcement by a purchaser of an agreement for the sale of shares. Now, although it is by no means uncommon for the Courts to explore other comparable systems of law in cases where the Roman Dutch authorities are silent upon a particular point, and although there can be no objection to such an

excursion 26

26.

excursion if its purpose is to seek guidance and no more, the reference in Thompson's case to English law on the subject of specific performance was particularly unfor-tunate. Its result was that whereas the substance of the law relating to the specific performance of contracts was sought and discovered in the Roman Dutch authorities, English law became the source of its practical applica-tion. Had the two systems of law been compatible on the subject on which they thus became married, there could have been no objection. But they are not. I have already dealt fairly extensively with a plaintiff's right according to South African law to demand perfor-mance and referred to the fact that the Courts will as

far 27
27. far as possible give effect to that right. That is not the posiiton in England. At common law a plaintiff has no right to demand performance; his only remedy is a claim for damages (Cf Benjamin's Sale of Goods (2nd ed) par 1447; Fry : Specific Performance of Contracts (5th ed) parr 7 and 11 ). Specific performance is a form of equitable relief which could originally only be obtained in the Court of Chancery in accordance with well-defined rules. (Snell's Principles of Equity (27th ed) p 573; Odgers ; The Common Law of England Vol 2 p 1156). The most important rule from which many of the others derived, was that specific performance would not be granted where the plaintiff could be compensated

adequately 28

28.

adequately by damages. It would thus appear that even in the Court of Chancery the emphasis fell on damages and that an order for specific performance was the exception rather than the rule. (Cf Baragwanath v Oli-fants Asbestos Co Ltd 1951(3) S A 222 (TPD) at p 228).
Despite this distinctly different approach, rules deriving purely from Chancery practice were applied in South Africa not only in Thompson v Pullinger but in a number of other cases. Some of our textbook writers, particularly the older ones, naturally followed suit. (Cf Wessels (op cit) parr 3113 to 3138) and so it came about that English cases came to be followed somewhat indiscriminately without noticeable

regard 29

29.

regard to the fundamentally different approach which the Courts in England adopt when it comes to the exercise of the discretion to order performance. There is neither need nor reason for this process to continue.
This does obviously not imply that there is to be no reference on the subject to English law or to some other system of law or that factors which other Courts have considered to be obstacles or possible obstacles in the way of granting an order for specific performance, now cease to be pertinent. On the contrary, they remain relevant factors which are to be considered on the same basis as any other relevant fact is to be considered.

Reverting then to the facts of the instant

case 30

30 .

case, the trial Court considered the fact that the shares were readily available in the market and the fact that the respondent could have been adequately compensated by the damages, and found them insufficient reason to deny the respondent specific performance. There is no indication that in making that finding the Court did not exercise its discretion judicially. It follows that this Court will not interfere with the order for the delivery of the shares.
There is one further ground on which appellant's counsel submitted that specific performance should have been refused. It relates to what counsel referred to as the impossibility on appellant's part to

deliver 31
31. deliver the shares, and was based on a submission that the sale to the respondent was a sale of 171 000 specific shares - the specific shares being those that the appellant had earlier purchased through a broker on the Stock Exchange but of which he had not received delivery at the time when he resold them to respondent. I have no intention of dwelling at any length on this submis -sion for it obviously has no merit. The trial Court found that the sale to the respondent was a generic one which did not relate to the shares which the appellant had purchased. That finding was not challenged and the whole argument therefore collapsed.

What remains then is the submission that

the 32

32.

the respondent should have mitigated its loss of the dividend by buying shares elsewhere. This submission does not require lengthy discussion either for it is equally without substance. No more need be said than that it proceeds from the false premise that the respondent was obliged to cancel its agreement with the appellant and to purchase 63 600 shares elsewhere in order to qualify for the dividend, and cannot possibly be upheld.
The appeal is dismissed with costs, which will include the costs occasioned by the employment of
two counsel.

J J F HEFER,JA.) CORBETT,JA. KOTZé , JA.

GALGUT, AJA.

CILLIé , AJA. )