THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 831/2020
In the matter between:

NOEL PATRICK McGRANE

APPELLANT

and

CAPE ROYALE THE RESIDENCE (PTY) LTD
RESPONDENT

Neutral citation: McGrane v Cape Royale The Residence (Pty) Ltd (831/2020)
[2021] ZASCA 139 (6 October 2021)

Coram:
SALDULKER, MATHOPO AND PLASKET JJA AND KGOELE
AND POTTERILL AJJA

Heard:
7 September 2021

Delivered: This judgment was handed down electronically by circulation to the
parties’ legal representatives by email, publication on the Supreme
Court of Appeal website and release to SAFLII. The date and time
for hand-down is deemed to be 09h45 on 6 October 2021.

Summary: Contract – agreement of sale of immovable property – whether
unenforceable on account of non-fulfilment of a condition precedent clause
embodied in the agreement – interpretation of the clause – whether condition
precedent applicable – the impugned clause sufficiently clear – agreement not
subject to condition precedent – waiver proven – agreement valid and binding.

ORDER

On appeal from: Western Cape Provincial Division of the High Court, Cape
Town (Sievers AJ sitting as court of first instance):
The appeal is upheld with costs.
The order of the court below is set aside and replaced with the following
order:
‘1 It is declared that the agreement of sale concluded by the parties is not
null and void on account of the non-fulfilment of the suspensive condition,
as alleged by the defendant in paragraphs 5.3 and 5.4 of the plea;
2 The defendant is directed to pay the plaintiff’s costs in respect of the trial
on the separated issue.’

JUDGMENT

Kgoele AJA (Saldulker, Mathopo and Plasket JJA and Potterill AJA
concurring):

[1] The issue in this appeal concerns the interpretation of an agreement of sale
in respect of an immovable property. In particular, it concerns whether the
agreement relied upon by the appellant, Mr Noel Patrick McGrane, had been
rendered unenforceable by the non-fulfilment of a condition precedent embodied
in the said agreement which he concluded with the respondent, Cape Royale The
Residence (Pty) Ltd. The litigation that culminated in this appeal commenced by
way of a trial in the Western Cape Division of the High Court (the high court),
before Sievers AJ, who upheld a plea raised by the respondent that the agreement

was subject to a condition precedent which had not been fulfilled. In the result,
the claim instituted by the appellant against the respondent for specific
performance was dismissed with costs on 14 April 2020. The appeal is before us
with special leave granted by this Court.

[2] The factual matrix within which the issue arose is largely common cause.
In November 2006, the parties entered into a written agreement of sale (the
agreement) in terms of which the appellant purchased and the respondent sold a
unit yet to be built in a sectional title development, commonly known as section
215 of the sectional title scheme ‘Cape Royale’ situated at Green Point, Cape
Town (the property). The agreement comprised of a contract, a covering schedule
(the schedule) and the standard terms and conditions. Only the clauses of the
agreement relevant to the determination of the issues in this appeal will be
referred to.

[3] The appellant signed the agreement on 1 July 2006 in Dublin, Ireland,
while the respondent signed it on 20 November 2006 at Cape Town. In terms of
clause 4 of the schedule, the purchase price agreed upon was R1 298 960,
inclusive of Value Added Tax (VAT). In terms of clause 5 of the schedule, a
deposit of R324 740 was payable on signature of the agreement and the balance
of R974 200 on registration of the transfer. Transfer to the purchaser was to be
effected ‘as soon as possible after the opening of the sectional title register . . .’.
When the agreement was concluded, the unit had not yet been constructed. As a
result, the floor area of the property decreased when a structure was built thereon.
In October 2007, the parties concluded a written addendum to the agreement in
respect of the floor area. The purchase price was accordingly adjusted to
R1 278 342 inclusive of VAT. The addendum did not change anything in the
original agreement except for the purchase price.

[4] As evidenced by the present proceedings, the relationship between the
parties became strained at a later stage. According to the appellant, the strained
relationship arose as a result of the respondent having stopped its attorneys from
proceeding with the process of transferring the property, despite the fact that he
had already at that time paid the full purchase price. The payment of the full
deposit and the purchase price were disputed by the respondent. Clause 5 of the
standard terms and conditions of the agreement, which provides for the
acquisition of loan finance by the appellant to pay part of the purchase price, is
the subject of the contested issue between the parties. For the sake of coherence
in the narrative, the full text thereof will be set out later in this judgment.

[5] In January 2013, the appellant instituted an action in which he sought an
order directing the respondent to comply with the terms of the agreement by
taking all the necessary steps to transfer ownership of the property to him. In his
particulars of claim, the appellant alleged that he had complied with all of his
obligations under the agreement, by paying the deposit and the remainder of the
purchase price to the respondent’s transferring attorneys. The sectional title
register had been opened, triggering transfer. Despite this, so he claimed, the
respondent refused and/or failed to transfer ownership of the property to him.
This failure, according to appellant, constituted a breach of the agreement. He
elected to enforce the agreement, hence the claim for specific performance.

[6] In response to the appellant’s particulars of claim, the respondent set up
the following defence. In its plea, the respondent claimed that in terms of clause
5.1 of the standard terms and conditions read with clause 6.1 of the schedule, the
agreement was subject to a condition precedent that the appellant obtain a loan of
R649 480 within 21 days from the date of acceptance. This clause had not been
fulfilled as there was no such loan secured by the appellant within the stipulated
time period, thereby rendering the agreement null and void. Furthermore, the

appellant paid a deposit of only R151 300 instead of R324 740, and refused to
pay the balance of R173 440 in terms of clause 5.1 of the schedule. Alternatively,
pleaded the respondent, if the court did not rule in its favour (regarding the issue
of the agreement being null and void), then the failure by the appellant to pay the
deposit as set out above amounted to a repudiation of the agreement, which
repudiation the respondent accepted and therefore consequently elected to cancel
the agreement. The appellant did not replicate.

[7] At the commencement of the trial, the respondent successfully applied to
have the issue of the enforceability of the agreement, on the basis of the
appellant’s failure to comply with the condition precedent as raised in paras 5.3.
and 5.4 of its plea, adjudicated separately in terms of rule 33(4) of the Uniform
Rules of Court.

[8] At the heart of the dispute between the parties, are clauses 5.1 and 5.2 of
the standard terms and conditions of the agreement. The parties differ in the
interpretation of these clauses. It is of crucial importance that the text of these
contentious clauses be quoted in full as they form the matrix of this appeal. They
provide:
‘5.1
In the event of the Purchaser requiring a mortgage loan to finance the acquisition of the
Unit and Exclusive Use Area, this sale shall be subject to the condition precedent that the
Purchaser obtains approval in principle from a recognised financial institution for such a loan
in the amount as specified in Clause 6.1 of the Schedule within 21 (twenty-one) days of
signature hereof by the Purchaser, on the institution’s usual terms and conditions relating to
such loans. The Purchaser undertakes to use his best endeavours to ensure that the loan referred
to is granted timeously and undertakes to sign all such documentation and co-operate with the
Seller fully in order to ensure that the said loan is approved. This condition shall be deemed to
have been fulfilled upon the Purchaser obtaining approval in principle from a financial
institution for a loan as herein contemplated.

5.2
In the event that the condition precedent is not fulfilled within the time period provided
for in clause 5.1 above, the Seller may in its sole discretion extend this period for 7 (seven)
days at a time until the Seller, in its absolute discretion, notifies the Purchaser of the termination
of such time period.’

[9] Clause 6 of the schedule referred to above in clause 5.1 of the standard
terms and conditions provides:
‘6.
MORTGAGE BOND

6.1
Amount required: R649,480
Date by when to be granted: Within 21 days after the date of acceptance of this Agreement by
the Seller, or such extended period as the Seller in its sole discretion may allow.’

[10] The only evidence led during the trial on the separated issue was that of the
appellant. He testified that he had paid the full purchase price. The first payment
was a deposit of R151 300 on 29 September 2006. On 11 December 2007, less
than two months after the addendum was signed, the balance of the purchase price
was paid. It was paid into the Phelan Cape Royale account held in Dublin which
was given to him by Mr Phelan, who represented the appellant at all times.

[11] The appellant did not deny that the condition precedent was embodied in
the agreement, however, his testimony was that it was not applicable to him as he
did not require the mortgage loan. He had enough money to pay the full purchase
price and Mr Phelan was aware of this. He therefore did not even apply for the
loan. According to his testimony, he stated emphatically to Mr Phelan when they
concluded the agreement that he will pay the purchase price in cash, which he
did.

[12] Furthermore, he testified that he was never given notice that he was in
breach of any condition of the agreement and to remedy same as required by
clause 15.1 of the standard terms and conditions. He was also never given notice,

in terms of clauses 15.1.1 and 15.1.2 regarding the cancellation or termination of
the agreement by the respondent as a result of the non-fulfilment of the condition
precedent or payment of the full deposit.

[13] In support of his evidence that the respondent at all the times accepted that
an obligation to acquire a mortgage loan was not a condition precedent, the
appellant relied on two account reconciliations which reflected the payment of
the full purchase price, and a surplus of some R28 000 owing to him, which
documents were written by Mr Phelan himself in his presence. He also included
an email from Mr Janse van Rensburg, the financial manager of Phelan Holding
(Pty) Ltd, to Mr Phelan, which stated that the funds (paid into the respondent’s
Dublin account) which were initially disputed by the respondent, had been traced
and were to be transferred to the respondent’s conveyancers. The appellant relied
too on an email from Mr Phelan, in which Mr Phelan acknowledged that the
appellant paid more than the amount specified in the addendum, and had earned
interest. Mr Phelan further stated therein that the transfer of the unit would take
place in September, at which stage the appellant would get the Rental Pool
income. The appellant was surprised by this as the agreement did not include a
Rental Pool agreement, which was something the respondent had unilaterally
introduced. The disagreement between the parties was sparked by the appellant’s
refusal to sign the Rental Pool agreement, when the respondent insisted that it
was required before transfer could be effected.

[14] As already indicated above, the high court found favour with the
respondent’s interpretation that the agreement was subject to a condition
precedent in terms of clause 5.1 of the standard terms and conditions. In
dismissing the appellant’s claim, the high court reasoned that even though the
appellant pleaded that he had complied with all of his obligations under the
agreement, his evidence established unequivocally that the mortgage loan was

not obtained as required by clause 5.1 of the standard terms and conditions of the
agreement. As a result, the condition precedent had not been fulfilled, and the
agreement was held to have no legal force.

[15] In this Court, the appellant persisted with his contention that the agreement
was not subject to a condition precedent. He maintained that the contentious
clause was not applicable to him and if this Court does not find favour with his
interpretation, then the respondent was entitled to extend the period, which it did.
The respondent’s stance was that the high court’s finding is correct. The basis for
this contention was twofold. First, the respondent argued that the agreement
expressly provided that a mortgage bond was required to pay part of the purchase
price and this is the only manner in which clause 5.1 of the standard terms and
conditions could be interpreted. Second, the same argument grew more nuanced
in this Court as it was also argued in the alternative that, in the absence of the
appellant pleading and proving waiver, estoppel or any other ground upon which
the effect of the non-compliance could be neutralised, the appellant’s action could
not be sustained. He must be kept to the immutable consequences of his choice
of not deleting the said clause. Further that, there was no sufficient evidence
adduced to establish waiver.

[16] It is therefore apparent that two issues crystallised in this appeal. The first
and primary issue is whether the agreement, properly interpreted, was subject to
a condition precedent which was not fulfilled. The second is whether, despite the
condition precedent remaining unfulfilled, the agreement survived in the
circumstances where waiver was not pleaded. The second issue only arises if the
answer to the first issue is not positive.

[17] The approach to interpretation of contracts is settled.1 Recently, this Court
re-stated the trite principles involved in Passenger Rail Agency2 and held that
when interpreting a contract an ‘insensible or unbusinesslike result’ or a result
undermining the apparent purpose of the document, must be avoided. It is also
well established that the mere use of the word ‘condition’ does not always
translate into the condition in question being a suspensive condition.3

[18] In an enquiry such as the present one, it is best to start with the clause itself.
Accordingly, it becomes necessary to examine clause 5.1 in order to decide
whether its proper characterisation meant to merely create a condition precedent
with legally enforceable obligation or not. A proper reading of clause 5.1 reveals
that it is prefixed by the words ‘[i]n the event of the Purchaser requiring a
mortgage loan to finance the acquisition of the Unit . . . this sale shall be subject
to the condition precedent . . .’ (Emphasis added). From the language of the text,
the structural and grammatical construction, including the punctuation of the
whole clause, it is self-sufficiently clear that the parties did not expressly provide
that the appellant, as purchaser, was obliged to obtain the mortgage loan. This is
certainly not what clause 5.1 says.

[19] The clause is not capable of the contrary interpretation that was contended
for by the respondent namely that the appellant was obliged to obtain a loan. The
words ‘[i]n the event of the Purchaser requiring a mortgage loan’, cannot be
wished away and render the respondent’s interpretation untenable. The clause is
clear. The condition precedent of obtaining a mortgage loan was for the benefit
of the appellant and only arose if the appellant required finance. If he did not

1 See Natal Joint Municipal Pension v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA 262 (SCA);
2012 (4) 593 (SCA) para 18.
2 Passenger Rail Agency of South Africa v Sbahle Fire Service CC [2020] ZASCA 90 at 28.
3 Sivubo Trading v Development Bank [2019] ZASCA 28 para 11.

require any, no obligation was created by this condition and the condition
precedent did not have any force and effect.

[20] The finding of the high court inclusive of its reasoning is difficult to discern
as it amounts to striking out the words ‘[i]n the event’ from clause 5.1. As
pronounced by this Court in Sivubo,4 the mere inclusion of the word ‘condition
precedent’ in the contract does not always translate into the condition in question
being a suspensive condition. It follows that the high court misconceived the
inquiry. The decision of the high court cannot therefore be supported. Despite the
fact that the alternative argument raised by the appellant is dependent on the
conclusion that I have reached, I am of the view that for the sake of completeness,
an analysis of the arguments regarding waiver is necessary.

[21] The high watermark of the respondent’s case is that the appellant’s
arguments in this Court suggest that the condition precedent should be regarded
as having been waived and by reason of the fact that waiver was not specifically
pleaded, this court cannot come to the assistance of the appellant. It was also
argued that the appellant’s evidence did not establish waiver at all. Even though
it is trite that the defence of an election or waiver must be pertinently raised and
pleaded,5 there are several reasons why this argument cannot advance the
respondent’s case either.

[22] It is not necessarily fatal to the appellant’s case that waiver was not
expressly pleaded. In Collen v Rietfontein Engineering Works6 this Court decided
the matter on the basis of a contract that was never pleaded and contained
different terms to the one that was pleaded. It held that because of the fact that all

4 Fn 3 above.
5 Collen v Rietfontein Engineering Works 1948 (1) SA 413 (A); Montesse Township and Investment Corporation
(Pty) Ltd and Another v Gouws NO and Another 1965 (4) SA 373 (A) at 381B-D.
6 Fn 5 above at 433.

the relevant material had been produced and placed before it, it would have been
‘idle for it not to determine the real issue which emerged during the course of the
trial’. Similarly, where a party sought to rely on a tacit contract that was not
pleaded, Schreiner JA stated that ‘where there has been full investigation of a
matter, that is, where there is no reasonable ground for thinking that further
examination of the facts might lead to a different conclusion, the Court is entitled
to and generally should treat the issue as if it had been expressly and timeously
raised’.7

[23] More recently this Court held that litigation is not a game.8 In my view, the
issues in the present case were defined, ventilated and examined by way of viva
voce evidence before the high court. The appellant, from the onset, and during
the trial proceedings, established waiver. He emphatically indicated that he had
paid the deposit and the full price in cash and that the respondent’s representative
knew that he did not require a loan even before the conclusion of the agreement.

[24] Even if this Court was to find that the agreement was subject to a
suspensive condition, the fallacy of the argument of the respondent lies in the fact
that it has long been established that a subject-to-bond clause such as clause 5.1
of the standard terms and conditions of the agreement including the consequent
clause 6 of the schedule, operates solely for the benefit of the purchaser.9 In Mia
v DJL Properties,10 De Villiers J stated that the purpose of a subject-to-bond
clause was to ‘create a facility of which the purchaser could avail himself if he

7 Middleton v Carr 1949 (2) SA 374 (A) at 385; See also Minister of Safety and Security v Slabbert [2009] ZASCA
163; [2010] 2 All SA (SCA) paras 11-12; South British Insurance Co LTD v Unicorn Shipping Lines (Pty) Ltd
1976 (1) SA 708 (A) at 714G.
8 Cadac (Pty) Ltd v Weber-Stephen Products Company and Others [2010] ZASCA 105; [2011] 1 All SA 343
(SCA); 2011 (3) SA 570 (SCA) para 10; Madibeng Local Municipality v Public Investment Corporation Ltd
[2018] ZASCA 93; 2018 (6) SA 55 (SCA) para 30.
9 Van Jaarsveld v Coetzee 1973 (3) SA 241 (A) at 244 C-G.
10 Mia v D J L Properties (Waltloo) (Pty) Ltd and Another 2000 (4) SA 220 (T) at 222.

wished’ and that ‘[i]t was not intended at all to protect the seller’. The following
remarks made by De Villiers J are apposite in this matter and bears repetition:
‘Furthermore, since the suspensive condition was inserted to protect the purchaser in the event
of his not being able to raise the purchase price without obtaining a bond over the purchased
property, the parties obviously intended that, if the purchaser chose to make provision for the
delivery of the guarantees without obtaining such a bond, he would be free to do so. The parties
could accordingly not have intended that the purchaser would be obliged to apply for the bond
and that, if he failed to apply therefor, he would thereby breach the contract.’11

[25] It is clear against the backdrop of the authorities quoted above that the
appellant had the right to waive his reliance on the condition precedent clause. A
waiver is a unilateral act12 and so the appellant did not require an acceptance on
the part of the respondent for it to be effective. Of significant importance in the
appellant’s evidence is that his waiver or election occurred at the outset. Although
there is no evidence of the precise date on which his waiver occurred, the manner
in which the impugned clause is phrased lends credence to the probability that he
expressly indicated upfront that he would pay cash and waived his right. It is
furthermore clear that Mr Phelan, the representative of the respondent with whom
the appellant dealt, knew that the appellant did not require a bond, because he
undertook to invest the cash on behalf of the appellant.

[26] I turn now to the conduct of the respondent. Throughout the period
concerned, the respondent treated the agreement as valid. The most telling
instance is when the addendum was signed to make provision for the amendment
of the purchase price. This occurred long after the expiry of the period within
which, on the respondent’s argument, the appellant had been required to obtain a
loan. On this argument, the condition precedent would have come into operation

11 Footnote 10 above at 229.
12 Absa Bank Ltd v Master and Others NNO 1998 (4) SA 15 (N) at 28B.

and it would have had the effect of nullifying the agreement; yet the respondent’s
conduct manifests an intention to comply with the terms of the agreement.

[27] The respondent failed in various respects to utilise the powers conferred
upon it by the agreement. These failures are consistent with a party who had
accepted waiver or, at least, was aware of such a waiver. They are: (a) the
agreement provided that the application for the mortgage loan by the purchaser
would be submitted to the relevant financial institution through the respondent or
its appointed agents. Clause 5.4 of the standard terms and conditions further
provided that the agreement operated as a power of attorney in favour of the
respondent, ‘which shall have the power to apply for a loan . . . on behalf of the
[the appellant]’. No such application was submitted by either party. The
respondent in particular, did not utilise the power conferred upon it to apply for
the mortgage bond on behalf of the appellant; (b) the respondent did not give
notice to the appellant, informing the appellant that he was in breach of the terms
of the agreement, and that as a result, the respondent has decided to terminate the
agreement. The only ‘notice’ given to the appellant of the breach and subsequent
termination was when the respondent filed its plea on 24 May 2013. This is a
period of almost 7 years after the agreement was concluded; (c) throughout the
duration of the agreement, the respondent used the purchase price and paid the
appellant interest as recompense for the use of his funds; and (d) the respondent
had already instructed its attorneys to pass transfer of the property to the
appellant, only to renege when the appellant refused to sign the Rental Pool
agreement.

[28] In conclusion, it is clear that, from the onset, the appellant did not require
a bond or loan in order to effect the purchase price in due course and the parties
accepted this. The condition precedent embodied in clause 5.1 of the agreement
created an obligation on the appellant only in the event that he required a bond or

a loan. Therefore, as a result of the fact that the evidence of the appellant remained
uncontroverted that he paid the full purchase price in cash, clause 5.1 had no
application and its benefits were waived by the appellant. What is more, the
respondent never regarded the agreement as having failed due to the non-
fulfilment of the condition precedent. The finding of the high court that the
condition precedent did apply to the agreement of the parties; that the appellant
failed to fulfil such a condition; and that such a failure rendered the agreement
unenforceable was flawed. The appeal must therefore succeed.

[29] In the result the following order is made:
The appeal is upheld with costs.
The order of the court below is set aside and replaced with the following
order:
‘1 It is declared that the agreement of sale concluded by the parties is not
null and void on account of the non-fulfilment of the suspensive condition,
as alleged by the defendant in paragraphs 5.3 and 5.4 of the plea;
2 The defendant is directed to pay the plaintiff’s costs in respect of the trial
on the separated issue.’

_____________________
A M KGOELE
ACTING JUDGE OF APPEAL

APPEARANCES

For the appellant:

P Tredoux
Instructed by:
Francis Thompson Aspden, Cape Town
Symington & De Kok, Bloemfontein

For the respondent:

A D Brown
Instructed by:
Abraham & Gross Inc, Cape Town

Lovius Block Inc, Bloemfontein.

THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:

6 OCTOBER 2021
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does not form part of
the judgments of the Supreme Court of Appeal
McGrane v Cape Royale The Residence (Pty) Ltd (831/2020) [2021] ZASCA 139 (6 October
2021)
Today the Supreme Court of Appeal (SCA) handed down judgment upholding the appeal, with costs,
against the Western Cape Division of the High Court, Cape Town (the high court).
The issue in this appeal concerned the interpretation of clause 5.1 embodied in an agreement of sale
concluded by the appellant and the respondent in respect of an immovable property situated at Green
Point, Cape Town. The text of the contentious clause provides: ‘In the event of the Purchaser requiring
a mortgage loan to finance the acquisition of the Unit and Exclusive Use Area, this sale shall be subject
to the condition precedent that the Purchaser obtains approval in principle from a recognised financial
institution for such a loan in the amount as specified in Clause 6.1 of the Schedule within 21 (twenty-
one) days of signature hereof by the Purchaser. . . ’
A disagreement arose when the transfer of the property was to be effected. In July 2013, the appellant
instituted an action for specific performance against the respondent for failing to effect transfer of the
property to him, despite the fact that, as the appellant contended, the deposit and the balance of the
purchase price was paid in full. In defence, the respondent disputed these allegations, and further raised
a defence that the condition precedent provided in clause 5.1 was not fulfilled because the appellant
failed to secure a loan of R649 480 within the stipulated period, thereby rendering the contract null and
void.

At the commencement of the trial, the issue of the enforceability of the agreement was separated to be
adjudicated first by the high court. In his testimony, the appellant insisted that the clause was not
applicable to him; he did not apply for a loan as he did not require any; and the respondent was aware
of this. After hearing the only evidence adduced by the appellant on this separated issue, the high court
held that the agreement was subject to a condition precedent which had not been fulfilled, and declared
the agreement null and void.
Before this Court, the arguments revolved firstly on the issue of whether the agreement, properly
interpreted, was subject to a condition precedent. The respondent argued further that in the absence of
the appellant specifically pleading waiver in the circumstances where the non-fulfilment remained
common cause, the agreement cannot survive.
The SCA held that the words ‘[i]n the event of the Purchaser requiring a mortgage loan’, contained in
the condition precedent, made it clear that the condition precedent only arose in the event the appellant
required finance. On the issue of waiver, the SCA held that the failure to plead waiver was not fatal
because the undisputed evidence of the appellant was that he paid the balance of the full price in cash

as he required no loan; Clause 5.1 had no application and its benefits were waived by the appellant.
The SCA held further that the respondent never regarded the agreement as having failed due to the
non-fulfilment of the condition precedent. As a result, the appeal was upheld with costs and the order
of the high court was set aside and replaced with the order that the agreement was not rendered
unenforceable because of the non-fulfilment of this clause.

~~~~ends~~~~