Comwezi Security Services (Pty) Ltd v Cape Empowerment Trust Ltd

Comwezi Security Services (Pty) Ltd borrowed R4 million from Cape Empowerment Trust Ltd (CET), secured by a cession and pledge of shares held by the Grapsy Trust. When the loan was not repaid on the agreed date, the parties concluded a settlement agreement under which the loan would be discharged by the issue of shares to CET. The settlement agreement was subject to a resolutive condition requiring CET to complete a due diligence investigation and notify Comwezi within three months that it was satisfied. The condition was imposed for the benefit of CET and could be waived or relaxed by it. CET repeatedly extended the three‑month period, alleging lack of cooperation by Comwezi. Comwezi contended that the extensions were invalid, that the resolutive condition failed after three months, and that the settlement agreement lapsed. The High Court rejected this argument and ordered Comwezi to cooperate with the due diligence. Comwezi appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel. The High Court order compelling Comwezi to cooperate with the due diligence investigation remained in force.

The case is significant for South African contract law as it clarifies the interpretation of resolutive conditions and contractual powers to waive or relax such conditions. It reinforces the Endumeni approach to interpretation, confirms that contractual provisions must be construed so as to have practical effect, and affirms that subsequent conduct of the parties may be relevant context in interpreting contracts.