The answer lies in the rules of interpretation
The answer lies in the rules of interpretation
In the recent case of Zoviflo (Pty) Ltd v Prokas and Others (010253/2023)  ZAGPJHC 918 (15 August 2023), the essential issue for determination by the Gauteng Division of the High Court, Johannesburg, was whether the existence of a nominee agreement was impacted by the failure to successfully conclude and implement a joint venture agreement. Are the agreements interlinked or can they be viewed as independent, standalone contracts between the parties?
At a glance
- In Zoviflo (Pty) Ltd v Prokas and Others (010253/2023)  ZAGPJHC 918 (15 August 2023) the Gauteng Division of the High Court, Johannesburg had to determine whether the existence of a nominee agreement was impacted by the failure to successfully conclude and implement a joint venture agreement.
- In coming to its decision, the court reaffirmed that when faced with the issue of interpretation of a document, courts must first have regard to the plain, ordinary, grammatical meaning of the words used in the document.
- The court concluded that the nominee agreement was a standalone agreement and should be implemented on its own terms. The court reaffirmed that the privity and sanctity of contracts must prevail and unless an agreement is unlawful or contra bonos mores, parties must be held to their agreements.
Zoviflo and Prinia Heritage Trust (trust) concluded a nominee shareholders agreement whereby Zoviflo, as the beneficial owner of the ordinary par shares representing 80% of the entire issued share capital in Prinia Investment Capital (PIC), nominated the trust to hold the shares on its behalf. As the nominee, the trust warranted that it was the actual owner of the shares, which represented 15% of the issued share capital in PIC. In March 2020, Zoviflo and the trust went on to conclude a joint venture agreement with ZJ Purchase Assist (Pty) Ltd (ZJ). The purpose of the joint venture was to acquire other entities and properties for the purposes of building a property portfolio.
The issue for determination by the court was whether the nominee agreement could be viewed as a standalone and independent agreement which was not interlinked with the joint venture agreement concluded between the parties.
The respondents submitted that the nominee agreement was interlinked and dependent on the successful conclusion and implementation of a valid and binding joint venture agreement. Therefore, so the argument went, the nominee agreement could not be considered or implemented in isolation from the purpose for which it was executed. Further, the respondents submitted that a valid joint venture agreement did not come into existence between the parties since negotiations were still ongoing. According to the respondents, although a joint venture agreement was signed on 26 March 2020, it was not a final document since the first respondent was dissatisfied with some of its terms – hence the parties continued to negotiate a second joint venture agreement which in the end, did not come into effect.
In coming to its decision, the court reaffirmed that when faced with the issue of interpretation of a document, courts must first have regard to the plain, ordinary, grammatical meaning of the words used in the document. While maintaining that words should generally be given their grammatical meaning, it was restated that a contextual and purposive approach must be adopted in the interpretative process.
The court, in interpreting both the nominee agreement and the joint venture agreement, stated that the words used in both documents were both plain and unambiguous. There was nothing in the nominee agreement which linked it to the joint venture agreement nor was there anything that stated that it was dependent on the successful conclusion and implementation of a valid joint venture agreement. The nominee agreement was clear, in clause 7, that the agreement constituted the entire agreement between the parties with regard to the matter dealt with therein and that no representation, term, condition or warranty expressed or implied that was not contained in the agreement would be binding on the parties.
The court also stated that there was no merit in the argument that the joint venture agreement was merely a working draft. The essence of the matter was that the parties agreed, and the joint venture agreement was reduced to writing and signed by the parties concerned. The negotiation or suggested changes to the joint venture agreement were negotiated in the form of an addendum to the joint venture agreement, which addendum was not successfully concluded and implemented. The failure to successfully conclude and implement the addendum had no bearing on the nominee agreement which was concluded for a different and separate purpose.
The court concluded that the nominee agreement was a standalone agreement and should be implemented on its own terms. The court reaffirmed that the privity and sanctity of contracts must prevail and unless an agreement is unlawful or is demonstrated as contra bonos mores, parties must be held to their agreements.
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