Agile Capital Holdings (Pty) Ltd v 68 Melville Road Properties (Pty) Ltd

Agile Capital Holdings (Pty) Ltd (Agile Capital) entered into a purchase and sale agreement with 68 Melville Road Properties (Pty) Ltd (Melville Road) to buy a section in a mixed-use sectional title scheme known as Illovo Point. The purchase price was subject to final adjustment upon completion of the development based on the total base development cost determined by a quantity surveyor, allocated according to each shareholder’s participation quota. If the amounts already paid exceeded the adjusted purchase price, the difference would be refunded; if there was a shortfall, the purchaser had to pay it. After the scheme was completed in August 2020, DHP Quantity Surveyors issued a final total base development cost. Melville Road then claimed shortfall payments from Agile Capital and nine other shareholder-purchasers. Agile Capital resisted payment on several grounds: the deponent lacked authority; the wrong quantity surveyor had made the determination; the schedule was unsworn hearsay; certain costs (storage, insurance) should have been excluded; and additional ‘rolled up’ interest and finance costs caused by delays of a fellow shareholder (Illovo Point Properties) should not be borne proportionally by all shareholders but recovered from the delinquent shareholder. The high court and a full court dismissed all defences and entered judgment for Melville Road. Agile Capital was granted special leave to appeal to the Supreme Court of Appeal on two issues only: whether there was a contractual bar to jurisdiction because the dispute required expert determination, and whether the quantity surveyor’s schedule was inadmissible hearsay.

• Whether a dispute regarding the total base development cost was contractually required to be determined by a quantity surveyor acting as an expert under clause 4.4 of the purchase and sale agreement before the court could adjudicate the claim.
• Whether the quantity surveyor’s schedule (Annexure FA 6) determining the base development cost constituted inadmissible hearsay evidence under section 3 of the Law of Evidence Amendment Act 45 of 1988.
• Whether the inclusion of finance costs and 'rolled up' interest in the base development cost gave rise to a material dispute of fact incapable of resolution on the papers.

The appeal is dismissed with costs, including the costs of two counsel.

A contractual clause requiring expert determination by a quantity surveyor does not oust the court’s jurisdiction unless the party relying on it has actually referred the dispute to the expert for determination. A document evidencing a quantity surveyor’s contractual determination of base development cost, tendered only to establish that the determination was made and not to prove the veracity or accuracy of the figures contained therein, does not constitute hearsay evidence under section 3 of the Law of Evidence Amendment Act 45 of 1988 or section 34 of the Civil Proceedings Evidence Act 25 of 1965. Disputes about the allocation of additional costs (such as delay-related interest) among shareholders fall within the shareholders’ agreement and its internal remedies, not the purchase agreement.

The court expressed grave doubts about the full court’s approach to the interpretation and application of section 3 of the Law of Evidence Amendment Act but declined to engage with that issue because the hearsay contention lacked substance. The court also observed, by way of illustration, that if the accuracy or veracity of the quantity surveyor’s determination had actually been challenged, the document may have been inadmissible hearsay and would then have required proof or admission under an exception.

The judgment clarifies that expert determination clauses are not automatic jurisdictional bars to litigation unless the dispute has actually been referred to the contractual expert. It also provides important guidance on the hearsay rule, distinguishing between tendering a document to prove the fact of a contractual determination (which is not hearsay) and tendering it to prove the truth or accuracy of its contents (which may be hearsay). Additionally, the decision affirms that disputes regarding the internal allocation of development costs and liability for delay-related interest among shareholders are governed by the shareholders’ agreement and its enforcement mechanisms, not by the purchase and sale agreement between the developer and each purchaser.