Current Commercial Cases

2016

ISBN 978-1-920569-39-6

A SURVEY OF THE CURRENT CASE LAW

written by

Mark Stranex BA (Natal) Hons LLB (Cape Town)Advocate of the High Court of South Africa

The Law Publisher CCCK92/26137/23

Contents

Index .......................................................................................................................................................... 4ASMAL v ESSA ......................................................................................................................................... 7MBD SECURITISATION (PTY) LTD v BOOI ............................................................................................. 8EURO BLITZ 21 (PTY) LTD v SECENA AIRCRAFT INVESTMENTS CC ................................................. 9CHETTY v HART N.O. ............................................................................................................................. 10HENNIE LAMBRECHTS ARCHITECTS v BOMBENERO INVESTMENTS (PTY) LTD .......................... 12LARRET v COEGA DEVELOPMENT CORPORATION (PTY) LTD ........................................................ 13MINNAAR v VAN ROOYEN NO............................................................................................................... 14MTHIMUNYE-BAKORO v PETROLEUM AND OIL CORPORATION OF SOUTH AFRICA (SOC) LTD . 15CLOETE N.O. v FIRSTRAND BANK LTD ............................................................................................... 17FOUR ARROWS INVESTMENTS 68 (PTY) LTD v ABIGAIL CONSTRUCTION CC............................... 18LESTER v NDLAMBE MUNICIPALITY ................................................................................................... 19RUITERS v MINISTER OF HUMAN SETTLEMENTS ............................................................................. 21SNYDERS N.O. v LOUISTEF (PTY) LTD ................................................................................................ 23MAYO N.O. v DE MONTLEHU ................................................................................................................ 24ABSA BANK LIMITED v HAMMERLE GROUP (PTY) LTD .................................................................... 26BOTHMA-BATHO TRANSPORT (PTY) LIMITED v NEDBANK LIMITED .............................................. 27AIRPORTS COMPANY SOUTH AFRICA LTD v AIRPORT BOOKSHOPS (PTY) LTD ........................... 28NOVARTIS SA (PTY) LTD v MAPHIL TRADING (PTY) LTD ................................................................... 30AFRICAN INFORMATION TECHNOLOGY BRIDGE 1 (PTY) LTD v THE MEMBER OF THE EXECUTIVE

COUNCIL FOR INFRASTRUCTURE DEVELOPMENT ..................................................................... 32STANDARD BANK OF SOUTH AFRICA LTD v A-TEAM TRADING CC ................................................. 34HENDRICKS v HENDRICKS ................................................................................................................... 35MIGHTY SOLUTIONS CC v ENGEN PETROLEUM LTD........................................................................ 36TSHWANE CITY v LINK AFRICA ............................................................................................................ 38PEEN N.O. v THE WESTVILLE COUNTRY CLUB ................................................................................. 41FEDGROUP PARTICIPATION BOND MANAGERS (PTY) LTD v TRUSTEES OF THE CAPITAL PROP-

ERTY TRUST ...................................................................................................................................... 42ZIETSMAN v DIRECTORATE OF MARKET ABUSE .............................................................................. 43FIRSTRAND BANK LIMITED v NKATA .................................................................................................. 45ABSA BANK LIMITED v KEET ............................................................................................................... 47BLAIR ATHOLL HOMEOWNERS ASSOCIATION v TSHWANE CITY .................................................... 48HERITAGE HILL DEVCO (PTY) LTD v HERITAGE HILL HOMEOWNERS ASSOCIATION ................... 50NELSON MANDELA BAY METRO v GEORGIOU .................................................................................. 52WERNER v FLORAUNA KWEKERY BK ................................................................................................. 54RANDBURG MANAGEMENT DISTRICT v WEST DUNES PROPERTIES 141 (PTY) LTD.................... 55LAND AND AGRICULTURAL DEVELOPMENT BANK OF SOUTH AFRICA v CHIDAWAYA ................. 57KGOMO v STANDARD BANK OF SOUTH AFRICA LTD ....................................................................... 58LAND AND AGRICULTURAL DEVELOPMENT BANK OF SOUTH AFRICA v FACTAPROPS 1052 CC 59MIRACLE MILE INVESTMENTS 67 (PTY) LTD v STANDARD BANK OF SA LTD ................................ 61NAIDOO v KALIANJEE N.O. ................................................................................................................... 63UNICA IRON AND STEEL (PTY) LTD v MIRCHANDANI ........................................................................ 65HALSTEAD-CLEAK v ESKOM HOLDINGS LTD .................................................................................... 66EX PARTE CONCATO ............................................................................................................................. 68GRIFFITHS v JANSE VAN RENSBURG N.O. ......................................................................................... 70LAGOON BEACH HOTEL (PTY) LTD v LEHANE N.O. .......................................................................... 72SAFARI THATCHING LOWVELD CC v MISTY MOUNTAIN TRADING 2 (PTY) LTD ............................. 74ABSA BANK LTD v DE BEER ................................................................................................................. 76ABSA LTD v MOORE .............................................................................................................................. 78NEDBANK LTD v NORRIS ...................................................................................................................... 80FREE STATE PROVINCE v TERRA GRAPHICS (PTY) LTD .................................................................. 82JOROY 4440 CC v POTGIETER N.O. ..................................................................................................... 84TSHWANE CITY v MITCHELL ................................................................................................................ 85

VAN DEVENTER v NEDBANK LTD ........................................................................................................ 86AFRICAN BANKING CORPORATION OF BOTSWANA LTD v KARIBA FURNITURE MANUFACTUR-

ERS (PTY) LTD ................................................................................................................................... 87BSB INTERNATIONAL LINK CC v READAM SOUTH AFRICA (PTY) LTD ............................................ 89PA PEARSON (PTY) LTD v ETHEKWINI MUNICIPALITY ...................................................................... 91SINGH v MOUNT EDGECOMBE COUNTRY CLUB ESTATE MANAGEMENT ASSOCIATION (RF) NPC

93BUSINESS PARTNERS LTD v TSAKIROGLOU ..................................................................................... 95CHILIZA v GOVENDER ........................................................................................................................... 96GRAINCO (PTY) LTD v VAN DER MERWE ............................................................................................ 97MAKATE v VODACOM LTD .................................................................................................................... 99MONEYWEB (PTY) LTD v MEDIA 24 LTD ............................................................................................ 101ATTACHMATE CORPORATION v MINISTER OF WATER AND ENVIRONMENTAL AFFAIRS............ 103NOVA PROPERTY GROUP HOLDINGS LTD v COBBETT .................................................................. 105SMYTH v INVESTEC BANK LTD .......................................................................................................... 107SHERIFF, JOHANNESBURG NORTH v YELLOW DOT PROPERTY INVESTMENTS ........................ 108COCHRANE STEEL PRODUCTS (PTY) LTD v M-SYSTEMS GROUP (PTY) LTD ...............................110FISHER v NATAL RUBBER COMPOUNDERS (PTY) LTD ....................................................................111KLD RESIDENTIAL CC v EMPIRE EARTH INVESTMENTS 17 (PTY) LTD ..........................................113EX PARTE FULS * ..................................................................................................................................115BUTTON N.O. v AKBUR ........................................................................................................................117GRIESSEL v LIZEMORE ........................................................................................................................118KYTHERA COURT v LE RENDEZ-VOUS CAFE CC ............................................................................ 120SHERIFF, PIKETBERG v LOURENS .................................................................................................... 121MINISTER OF MINERAL RESOURCES v MAWETSE (SA) MINING CORPORATION (PTY) LTD ...... 122HAIGH FARMING (PTY) LTD v E.G. ELLIOT REAL ESTATE CC ......................................................... 123FERRARI v GUNNER ............................................................................................................................ 124ELLIS v CILLIERS N.O. ........................................................................................................................ 126

IndexAAudit clause

interpretation of 103Authority

ostensible, distinguished from estoppel 99

BBusiness rescue

arbitration proceedings 10company in unlawful occupation of premises 120failure to notify practitioner of legal proceedings 10grounds for 74not preventing liquidation order 34resolution to be taken in good faith 118surety’s liability 95

CCession

effect on interruption of prescription 111Close Corporation

prescription relating to 86Companies

access to information 105action not authorised by board of directors 13business rescue 34fiduciary duty of director 15minority shareholders 107security for costs 12time period for submission of claims 24unfairly prejudicial conduct 107winding up, business rescue application 34

Companybusiness rescue 118final order liquidating 74

Competitionpassing off 97soliciting former customers 97

Constitutioncontracts, compliance with 28lessor’s right to evict 36prescription of debt 99property rights 38s 133 Companies Act 95surety’s liability, business rescue 95

Consumer protectionelectricity supply 66

Contractadministrative body failing to pay 82conclusion of 30formation of 65implied terms 27misrepresentation 124tacit term 28tacit terms 27true purpose of 18

waiver, failure to assert right 108when concluded 65whether or not concluded 30

Copyrightnews articles 101originality 101substantial copying 101

Credit Transactionsdebt rearrangement, parameters of 80loan not subject to NCA 7notice of default 58notice to recover debt 57reckless credit 76reinstatement of credit agreement

sale in execution 45rescission of judgment 8

DDamages

distinguished from specific performance 103Delegation

municipality’s power to impose rates 55Director

fiduciary duty 15personal liability for debts of company 14

EEstate agent

fidelity certificate 123Evidence

admissibility, without-prejudice communications 113

IInsider trading 43Insolvency

and National Credit Act 115cancellation of credit agreement 17commercial insolvency 26foreign trustee 72preservation of assets 72time period for submission of claims 24voidable disposition 117voluntary surrender 68voluntary surrender, requirements for 115warrant, issue of 63winding up, commercial insolvency 26

Instalment sale agreementreservation of ownership clause 47

Interestsimple compared with compound 9

Interpretationrules of 9

JJurisdiction

debtor not residing within area 8

LLease

business rescue 120

eviction 36lessor’s right to evict 36

Liquidationnot prevented by business rescue application 34

Local authoritybuilding regulations 89city improvement district 55rezoning decision 52statutory hypothec 85

MMineral rights

prospecting right, lapsing ofBEE requirement 122

Misrepresentationacceding expressly to terms objected to 124

Mortgage bondinvalid when passed by non-owner 78

NNational Credit Act

debt rearrangement, parameters of 80notice of default 58

OOwnership

not passing when fraud present 78prescription period applicable 47

PPayment under protest

municipality, provision of services 91Prescription

close corporation, in liquidation 86creditor not demanding payment 61debt, meaning of 99interruption of by admission of indebtedness 26interruption of, cession of debt 111period of, debt secured by notarial bond 59vindicatory claim, period applicable 47when debt is due 61

Propertybuilding at variance with town planning scheme 89building regulations 19building restrictions 21demolition order, court’s discretion 19deprivation of, constitutionality 38developer 50development of 54eviction, by holder of right of habitation 35homeowner’s association 93levies, liability for 50municipal rates 48municipality, provision of services 91owner builder 21rezoning of 52

SSale

latent defect 126

merx, existence of 23voetstoots clause 126

Sale in executionproperty rates and 85

Sale in exesutionpurchaser’s obligation to pay VAT 121

Sale of fixed propertyagricultural land 18

Sequestrationservice of provisional order on SARS 96

Servituderegistration of 54

Softwareaudit clause 103license fee applicable 103

UUnlawful competition

passing off 110search for keyword 110

WWords and phrases

enforcement 17furnish 96interest calculated daily 9ordinary course of business 117serve 96subject to 65

7

ASMAL v ESSA

A JUDGMENT BY MAYA JA(MPATI P, LEWIS JA, SHONGWEJA and MATHOPO AJAconcurring)SUPREME COURT OF APPEAL14 MAY 2014

2016 (1) SA 95 (SCA)

A profit share agreement betweentwo parties under which one givescredit to the other andno date of repayment was fixed, arenot guaranteed, may not haveeventuated is not a loan subject tothe National Credit Act (no 34 of2005).

THE FACTSAsmal issued cheques in favour

of Essa. When Essa presented thecheques for payment, they weredishonoured because Asmal hadcountermanded payment. Essabrought provisional sentenceproceedings against Asmal forpayment according to the tenor ofthe cheques.

Asmal defended the action onthe grounds that the chequeswere given in repayment of loansmade by Essa, that the loans weresubject to the National Credit Act(no 34 of 2005) and Essa had failedto comply with sections 40(1), 129and 130 of the Act. Asmalcontended that the loans weresecured loans as defined in theAct. The loans were agreed in theform of profit shares in which nodate of repayment was fixed,were not guaranteed, may nothave eventuated, and their value,if any, was to be determined byAsmal at his sole discretion.

Asmal contended that a creditagreement, as defined in the Act,entails credit being granted andthe imposition of a ‘fee, charge orinterest’ in respect of the deferredrepayment, for the use of thecredit. He contended that thisqualified as a ‘charge’, one of thethree wide terms used in s 8(4)(f)of the Act to describe payment forthe use of money owed. Thereforethe loans, of which the chequeswere part and parcel, constitutedcredit agreements and weresubject to the provisions of theAct. Because Essa was notregistered as a credit provider, inbreach of section 40(1)(b) of theAct, the credit agreements wereunlawful and thus void in termsof section 89(2)(d) and the chequescould not found provisionalsentence in the circumstances.

THE DECISIONThe measures introduced by the

National Credit Act wereobviously intended to protect theconsumer from any hidden coststhat may arise from the creditagreement, and to ensure that heor she has an opportunity toconsider the precise risk and costinvolved before binding himselfor herself. In that case, the partiesmust quantify the charge, fee orinterest and specify the mannerin which it is to be paid whenthey determine their contractualterms and conclude the creditagreement. It would follow thatthe indeterminate profit sharesagreed upon by the parties, forwhich no date of repayment wasfixed, which were not guaranteedand could well not even haveeventuated, and whose value, ifany, was to be determined byAsmal at his sole discretion, couldnot qualify as ‘a charge’ under theAct.

The loans were not creditagreements as envisaged by theAct if no charges attached tothem. The loan agreementsconcluded by the parties were notsecured loans.

Essa therefore had no obligationto register as a credit provider inthe circumstances, and he had noduty to comply with sections 129and 130 of the Act beforecommencing litigation againstAsmal

Credit Transactions

8

MBD SECURITISATION (PTY) LTD v BOOI

A JUDGMENT BY DAFFUE J(WILLIAMS AJ concurring)FREE STATE DIVISION,BLOEMFONTEIN2 JULY 2015

2015 (5) SA 450 (FB)

A debtor may not consent tojudgment which allows a court nothaving jurisdiction over him or herto grant judgment against him orher.

THE FACTSMBD Securitisation (Pty) Ltd

brought an action against Booi forpayment of R4854,14. Its claimwas based on the allegation thatthis amount outstanding to it ascreditor in respect of goods soldand delivered. In signing aconsent to judgment, Booiconfirmed receipt of a letter interms of section 129(1) of theNational Credit Act (no 34 of2005), acknowledged that theamount of R4854,14 was due andpayable, and accepted liability toMBD for the debt, the costs of theletter of demand, further costs onan attorney and client scale in theamount of R2452,92 plus 10%collection commission on allpayments received, and 14% VATthereon.

The consent included a consentto the issue of an emolumentsattachment order in theHennenman Magistrates’ Court interms of section 65J of theMagistrates Court Act (no 32 of1944). Respondent also explicitlyconsented in terms of section 45to jurisdiction of that court inrespect of the proceedings aboutto be instituted against her. Booiwas resident in Alice,approximately 800 kilometresaway from Henneman.

In its summons, MBD allegedthat it had purchased a numberof debtors’ books from variouscompanies. During the transfer ofthe portfolio, the physical file wasnot supplied to it and all attemptsto obtain the documentation hadbeen. A request for judgment waspresented to the magistrate of theHennenman Magistrates’ Court.In terms thereof judgment wasgranted in favour of MBD. Anemoluments attachment orderwas issued by the Hennenmanclerk of the court

Booi applied for and obtainedrescission of judgment. MBDappealed.

THE DECISIONThere was no doubt that the

Hennenman Magistrates’ Courtnever had any jurisdiction overBooi in accordance with section28 of the Magistrates Court Act.She was not resident or employedin that district and was neverresident or employed there.

In terms of s 90(2)(k)(vi)(bb) ofthe National Credit Act, aprovision in a credit agreement isunlawful if it contains a consentto jurisdiction of ‘any courtseated outside the jurisdiction of acourt having concurrentjurisdiction and in which theconsumer resides or works’.Acredit provider is prohibited interms of s 91(a) to directly orindirectly require or induce aconsumer to enter into asupplementary agreement, orsign any document, that containsa provision that would beunlawful if it were included in thecredit agreement.

Both the Magistrates Court Actand the NCA prohibit a provisionin a contract embodying consentto jurisdiction in a specific districtby one of the parties. The consentto judgment and the letter ofdemand referred to MBD as theplaintiff and apparent creditprovider, but no reference wasmade in any of the documents tothe fact that MBD was merely apurchaser of certain book debts ofa specific and identified creditprovider. The allegations in thedocuments prepared byappellant’s attorney — the noticein terms of s 129(1) and theconsent to judgment — weretherefore blatantly false.

MBD’s attorney decided forreasons unknown thatproceedings had to be institutedin Hennenman notwithstandingthe addresses of the parties andthe fact that the cause of action,did not arise in that district.

The appeal was dismissed.

Credit Transactions

9

EURO BLITZ 21 (PTY) LTD v SECENAAIRCRAFT INVESTMENTS CC

A JUDGMENT BY MBHA JA(MAYA JA, MAJIEDT JA, PILLAYJA AND MAYAT AJA concurring) SUPREME COURT OF APPEAL19 MARCH 2015

2015 SACLR 230 (A)

A provision that interest becalculated daily does not mean thatinterest is to be calculated ascompound interest.

THE FACTSSecena Aircraft Investments CC

claimed arrear rental from EuroBlitz 21 (Pty) Ltd in the sum ofR353 126.40 as well as interest atthe rate of prime plus 5% perannum. The claim for interestwas based on clause 21.4 of thelease. It provided that Euroagreed to pay interest charges onall outstanding amounts due toSecena arising from any matterwhatsoever, calculated on a dailybasis, at a rate of prime plus 5%.

Secena obtained an order in themagistrates’ court that Euro paythe sum claimed, plus interest onthat sum at the rate of ‘primeplus 5% calculated daily perannum a tempora morae to dateof final payment’.

Secena contended that theinterest was to be calculateddaily and compounded dailyfrom the date of default to date ofpayment. Euro contended that theinterest was to be calculated assimple interest only.

THE DECISIONThe rules of interpretation are

that if there is no uncertainty inthe meaning of words, theintention must be establishedprimarily from the language usedas construed according to theusual, well-known rules ofinterpretation of documents. If,however, uncertainty arises,regard may be had to extrinsicand the surroundingcircumstances.

The word ‘calculated’ in the trialcourt’s order pertaining tointerest, had to be given itsgrammatical and ordinarymeaning, unless that would resultin some absurdity, repugnancy orinconsistency with the rest of theorder. The Oxford EnglishDictionary defines the word as to‘[e]stimate or determine byarithmetical or mathematicalreckoning; estimate or determineby practical judgement or on thebasis of experience’. On the otherhand, ‘capitalise’ means to‘convert into a capital sum’ and‘compound interest’ is defined as‘reckoned on the principaltogether with the accumulatedunpaid interest’.

Based on these distinctions, itcould be concluded that thewords ‘calculated daily’ do notenvisage that interest is to becompounded daily.

In any events, it was trite lawthat compound interest wasclaimable only in certain definedcircumstances. These were whereparties agree to pay compoundinterest, if the obligation to payinterest was alleged, and if it wasestablished by evidence that auniversal custom of lessorscharging compound interest onarrear rentals was uniformly anduniversally observed in leasesconcluded in the country. Secenadid not establish any of thesegrounds. Its contentions were tobe rejected.

Credit Transactions

10

CHETTY v HART N.O.

A JUDGMENT BY CACHALIA JA(WILLIS JA, SALDULKER JA,MATHOPO JA and GORVEN AJAconcurring)SUPREME COURT OF APPEAL4 SEPTEMBER 2015

2015 (6) SA 424 (SCA)

Arbitration proceedings are ‘legalproceedings’ as referred to insection 133(1)(a) of the CompaniesAct (no 71 of 2008). Failure tonotify a business rescuepractitioner of the existence of legalproceedings does not result innullity of those proceedings.

THE FACTSChetty concluded a subcontract

agreement with TBP Building andCivils (Pty) Ltd for the provisionof an electrical installation at ahospital. A dispute arose betweenthe parties and the subcontractwas cancelled on 6 October 2010.The disputed cancellation led toan arbitration. The proceedingswere postponed for argument to12 October 2012.

On 5 October 2012, TBP beganbusiness rescue proceedings byfiling a resolution to place itselfunder business rescue. Thebusiness rescue was registered on11 October 2012, and a businessrescue practitioner wasappointed to oversee the affairs ofthe company.The arbitratorheard argument and on 23October 2012, unaware that TBPwas under business rescue, hedelivered his award.

Section 133(1)(a) of theCompanies Act (no 71 of 2008)provides that during businessrescue proceedings, no legalproceeding, includingenforcement action, against thecompany, may be commenced orproceeded with in any forum,except with the written consent ofthe practitioner.

The effect of this section wasthat once the business rescueproceedings began, themoratorium on legal proceedingsapplied to claims against TBP. Theeffect was that no legalproceedings against the companycould proceed, except with thewritten consent of thepractitioner. The consent of TBP’sbusiness rescue practitioner wasnot obtained.

Chetty contended that thearbitration was a ‘legalproceeding’ as envisaged in thesection and that the moratoriumtherefore applied to her claim. Her

failure to apply for consent thusnullified the award. She sought toinvalidate the award in itsentirety. TBP contended that themoratorium on legal proceedingsin section 133(1) applied only tocourt proceedings, notarbitrations, and that, even if itdid apply to arbitrations, theaward was not a nullity.

THE DECISIONThe purpose of business rescue

is to give the practitioner anopportunity to assess the affairsof the company so that it can berestructured in a manner thatwould allow its return tofinancial viability. Based on this,only an interpretation of section133 that includes arbitrationswithin, instead of excluding themfrom, the meaning of legalproceedings in the section, allowsthis provision to be readharmoniously with section142(3)(b). That section obligesdirectors of a company inbusiness rescue to assist thepractitioner by providing detailsof any court, arbitration oradministrative proceedings,including pending enforcementproceedings, involving thecompany.

There is no reason why section142(3)(b) obliges the company toprovide details of arbitrations tothe practitioner other thanbecause they are also legalproceedings.

The question then was whetherthe effect of failing to obtain thewritten consent of thepractitioner results in nullity ofthe arbitration award. Section133(1)(a) is not a shield behindwhich a company not needing theprotection may take refuge tofend off legitimate claims. Section133(1) in general, and s 133(1)(a)in particular, appears to have

Companies

11

been enacted exclusively for thebenefit of the company and thepractitioner appointed to overseeits affairs. In consequence, aclaimant against the companymay not rely on non-compliance

with the section. Only thepractitioner may seek itsprotection, and only he maywaive or consent to dispensewith compliance therewith.

But the question the respondent is unable to answer is, why the lawmaker would wantthe company to provide details of all proceedings, including arbitration proceedings, to apractitioner, but exclude arbitrations from the ambit of the moratorium and theobligation to obtain a practitioner’s consent in s 133(1)(a). After all, the outcome of anarbitration by way of award is usually that the losing party has to pay a sum of money,which is the outcome of most court actions involving commercial disputes. In my viewthe answer lies in properly understanding the purpose of these provisions as they apply tobusiness rescue proceedings and the consequences that flow from the parties’ contendinginterpretations.

In my view once this purpose of business rescue — to give the practitioner breathingspace — is properly understood, it becomes apparent that only an interpretation thatincludes arbitrations within, instead of excluding them from, the meaning of legalproceedings in s 133(1), allows this provision to be read harmoniously with s 142(3)(b).Such a reading is in line with the well-known canon of statutory construction, which isthat if by any reasonable construction the two can be made to be compatible, notcontradictory, that is the interpretation that should be given. There can be no reason whys 142(3)(b) obliges the company to provide details of arbitrations to the practitioner otherthan because they are also legal proceedings — as contemplated in s 133(1) — that mayhave a bearing on its financial viability and of which the business rescue practitionermust be cognisant.

Companies

12

HENNIE LAMBRECHTS ARCHITECTS vBOMBENERO INVESTMENTS (PTY) LTD

A JUDGMENT BY MOCUMIE J(LEKALE J concurring, MOLOI Jdissenting)FREE STATE DIVISION20 FEBRUARY 2014

2015 (6) SA 375 (FB)

In order to avoid an order thatsecurity for costs be ordered, acompany should adduce all theevidence which will convince thecourt that it has sufficient funds topay costs in the event that costs aregranted against it.

THE FACTS Bombenero Investments (Pty)

Ltd brought an action againstHennie Lambrechts Architects.Hennie Lambrechts requestedBombenero to furnish security forits costs on the grounds thatBombanero did not ownimmovable property and/ortangible assets capable ofattachment, which rendered itimpecunious, did not disclose itsfinancial statements as requested,and did not indicate whether anyfunds had been set aside for theprosecution of the action. HennieLambrects submitted, in theevent that it succeeded with itsdefence and have the claimagainst it dismissed with costs, itwould be unable to executeagainst Bombenero to recover itscosts. It claimed security for costs.

Bombenero refused to tendersuch security. It disputed that itwould be unable to pay the costs.

THE DECISIONThe purpose of section 13 of the

old Companies Act was to protectpersons against liability for costsin regard to any action institutedby bankrupt companies and toensure that companies, who wereunlikely to be able to pay costsand therefore not effectively atrisk of an adverse costs order ifunsuccessful, did not institutelitigation in circumstances wherethey have no prospects of success,thus causing their opponentsunnecessary and irrecoverableexpenses.

This section was not re-enactedin the new Companies Act, and sothe common law had todetermine the position regardingthe provision of security.Companies consist of naturalpersons, directors, who, whensued, can hide behind the

corporate veil and not furnishsecurity, well knowing that thecompany they run is actually orcommercially insolvent and willnot afford the costs of an awardin favour of the respondent. Itcannot be ‘just or equitable’ toequate companies to what theSupreme Court of Appeal referredto as ‘widows and orphans’. Moreso where there have beeninstances where even such‘widows and orphans’ wereordered to furnish security,depending on the circumstancesof the particular case.

A finding, as a general rule, thatan incola company, regardless ofthe peculiar facts which call forthe furnishing of security, is notbound to provide security wouldnot be in keeping with the spirit,purport and objects of aConstitution designed to ensureequality of all before the law. Sucha finding would mean that aparty, who would be gravelyprejudiced by another’s refusal tofurnish security because of theabsence of the equivalent ofsection 13, would be withoutremedy, and thus left to suffer theconsiderable financialconsequences. This would in turnoffend against the principles ofequality and of just and equitabledecisions.

In order to avoid an order thatsecurity for costs be ordered, acompany should adduce all theevidence which will convince thecourt that it has sufficient fundsto pay costs in the event thatcosts are granted against it.Courts should insist on moredetails and not the say-so of theincola company.

In the present case, Bombenerohad not done this. Therefore itwas right that security for costsshould be ordered against it.

Companies

13

LARRET v COEGA DEVELOPMENTCORPORATION (PTY) LTD

A JUDGMENT BY STRETCH JEASTERN CAPE DIVISION,GRAHAMSTOWN13 MARCH 2015

2015 (6) SA 16 (ECG)

Section 163(1) of the CompaniesAct (no 71 of 2008) does notempower a court to authorise theinstitution of an action by acompany as against a third partywhere such institution has not beenduly authorised by the board ofdirectors of the company.

THE FACTSLarret, a director of Independent

Crushers Consortium (Pty) Ltd(ICC), brought an action in thename of the company againstCoega Development Corporation(Pty) Ltd and the Standard Bankof Africa Ltd.

When the summons was issuedLarret lacked the necessaryauthority from the board ofdirectors of ICC to instructattorneys to institute the action.When challenged on this point,the attorneys were unable toestablish the requisiteauthorisation.

Larret brought an application interms of section 163(1) of theCompanies Act (no 71 of 2008).She alleged that she could not setup the required board meetingbetween herself and the otherdirector in order to secure thenecessary authorisation for theinstitution of the action, becausethe other director refused to co-operate.

Section 163(1) provides that adirector of a company may applyto a court for relief if any act oromission of the company has hada result that is oppressive orunfairly prejudicial to, theapplicant.

THE DECISIONSection 163(2) provides for the

remedies a court may apply upona successful application in termsof section 163(1). This includes thepower to order a restraint againstthe conduct complained of.However, section 163(2) does notinclude the power to authorisethe institution of an action by thecompany as against a third partywhere such institution has notbeen duly authorised by theboard of directors of thecompany.

The legislature specificallydesigned section 165 for the verypurpose of securing the rights ofsomeone such as Larret in thesecircumstances whilst at the sametime ensuring that the rights ofthe company and those of thethird party concerned areproperly taken into account.Extensive procedures have beencreated by that section towardsthese very ends, such as section16(4)(a), which provides that thecompany must (upon a demandbeing made to commence orcontinue legal proceedings)appoint an independent andimpartial person or committee toinvestigate the matter and toreport to the board on variousaspects, including the probablecosts which would be incurred.

The appropriate section to havebrought the application wassection 165 which provides forderivative actions. Theapplication was thereforedismissed.

Companies

14

MINNAAR v VAN ROOYEN NO

A JUDGMENT BY LEWIS JA(TSHIQI JA, MAJIEDT JA,DAMBUZA JA and BAARTMANAJA concurring)SUPREME COURT OF APPEAL10 SEPTEMBER 2015

2016 (1) SA 117 (SCA)

An order that a director be heldpersonally liable for the debts of hiscompany must be sought on thebasis of evidence led, even if adefault order is obtainable againstthe director.

THE FACTSIn 1999, Minnaar was appointed

as a consultant to Askari Miningand Equipment Ltd. In 2000, hewas appointed as its financialdirector in 2000. He resigned as adirector in November 2001.Askari was provisionallyliquidated in June 2003, andfinally liquidated in July 2008.

In March 2004, an enquiry intothe affairs of Askari wasconducted. Four years later, theliquidators instituted actionagainst the five directors,claiming an order that they beheld personally liable for thedebts of Askari. All the directorsappointed the same attorney torepresent them. They issued ajoint plea to the claim, denyingthe allegations against them. Thematter was set down for trial on22 February 2012. Before thatdate, the directors and thenliquidators had starteddiscussing a settlement. Minnaarwas advised that he was requiredto attend a pre-trial conferencescheduled for 30 November 2011.He wrote to the attorney for thedirectors, on that day, by email,saying that he knew about thepre-trial conference and thatsettlement proposals would bemade. He said that he was placingit on record that he would not bepart of any settlement. Hiscolleagues, he said, were free tosettle the claims against them, buthe was convinced that he haddone no wrong, and in any eventcould not afford to pay what theliquidators were asking.

Minnaar also advised that hewould handle his own defenceand would appoint a newattorney as soon as possible.

Minnaar failed to take any stepsto appoint an attorney torepresent him at trial. He did notattend court on 22 February 2012.When the trial was called, defaultjudgment was granted againsthim.

Minnaar sought rescission of thedefault judgment.

THE DECISIONThe remedy that a director be

held personally liable for thedebts of a company is a punitiveone - a director can be heldpersonally liable for liabilities ofthe company without proof ofany causal link between hisconduct and those liabilities. Theonus is upon the party allegingrecklessness to prove it on abalance of probabilities.

None of the allegations againstMinnaar was supported byevidence, and none was led. Therewas thus no proof at all ofwhether his conduct had beenfraudulent or reckless. Defaultjudgment should, therefore, nothave been granted.

The liquidators were not entitledprocedurally to default judgmentagainst Minnaar without leadingevidence. By its very nature, theright to the relief sought had to beproved on a balance ofprobabilities. The liquidatorswere not entitled to rely onallegations made in theparticulars of claim and denied inthe defendants’ joint plea. At thevery least they should have ledwitnesses to show that thedirectors had acted recklessly orwith intent to defraud creditors.The order was thus erroneouslysought, and erroneously granted,and had to be rescinded.

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MTHIMUNYE-BAKORO v PETROLEUM AND OILCORPORATION OF SOUTH AFRICA (SOC) LTD

A JUDGMENT BY DAVIS JWESTERN CAPE DIVISION, CAPETOWN4 AUGUST 2015

2015 (6) SA 338 (WCC)

The fiduciary duty directors owe toeach other is of paramountimportance. The central purpose ofcorporate governance is theaccountability of seniormanagement and the board of acompany because of the extensivepowers vested therein.

THE FACTSDuring December 2014 it came to

the attention of the board ofPetroleum And Oil Corporation ofSouth Africa (Soc) Ltd that thecompany was expected to declarea substantial loss of severalbillion rand for the financial yearending March 2015. The companyhad performed far below thetarget performances which hadbeen expected. This loss was laterrevised in May 2015 in theamount of R14,89 billion.

The board then commenced aprocess of seeking to establish thecause of these losses. It formed theprima facie view that the poorfinancial performance could beattributed, at least in part, toMthimunye-Bakoro’s who was anexecutive director of the companyand its chief financial officer. Theboard also held the prima facieview that Mthimunye-Bakorohad committed acts of seriousmisconduct and had possiblybeen involved in contraventionsof the provisions of the PublicFinance Management Act.

The company determined thatan investigation was requiredinto the causes of the substantiallosses and the poor performancegenerally, together withMthimunye-Bakoro’s possiblerole in this poor performance andthe losses which had beenincurred. The company imposed aprecautionary suspension on fullpay of Mthimunye-Bakoro. On 2June 2015, the companyaddressed a letter to Mthimunye-Bakoro in which she was advisedof the board’s proposal to placeher on a precautionarysuspension. She was called uponto make representations as towhy this decision should not betaken. She was also advised that,if her precautionary suspensionwere confirmed, it was theboard’s intention to suspend heras a director.

A meeting of the non-executivedirectors of the company wascalled on 18 June 2015. Theprimary purpose of this meetingwas to consider theprecautionary suspension ofMthimunye-Bakoro. All of thecompany’s directors, but notMthimunye-Bakoro, were givennotice of the meeting. At thatmeeting the board decided toplace Mthimunye-Bakoro onprecautionary suspension. All butone of the non-executive directorswho attended voted in favour ofthis decision.

A further meeting of the boardwas held on 13 July 2015. Theboard reconsidered, the decisionswhich were taken at the meetingof 18 June 2015 to suspendMthimunye-Bakoro. She wasgiven notice of the meeting andattended it. The board confirmedits earlier decision.

Mthimunye-Bakoro brought anapplication for an order declaringthe meeting to be unlawful,declaring any decision taken atsuch meeting to suspend her asemployee and/or chief financialofficer of the company to beinvalid and of no force and effectand declaring the purportedresolution of the board ofdirectors taken at such meeting tobe invalid and of no force andeffect.

THE DECISION Whatever the legality of the

meeting of 18 June, the latermeeting held the key to theresolution of the dispute. Themeeting of 13 July was differentfrom the earlier one in thatMthimunye-Bakoro was givennotice, she attended the meeting,and addressed the meeting beforebeing excused from it prior to theresolution being taken. Hercomplaint fell within fourcategories: (1) She was giveninsufficient notice of the meeting,

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(2) She was not provided withsufficient information in order toparticipate, (3) A view wasformed that she was conflictedwhen she was not, and she wascompelled to leave the meeting,and (4) The meeting was called foran improper motive.

Timeous notice of the meetingwas given to Mthimunye-Bakoro- four days prior thereto. Withregard to the complaint ofinadequate information,Mthimunye-Bakoro said that shewas not given adequateinformation to properlyformulate an opinion. However,she had made her opinion clearly

known. There was acomprehensive case made out asto her attitude to the suspension.

With regard to questions ofconflict, Mthimunye-Bakorocontended that she was notconflicted and that she should nothave been required to leave themeeting. This averment had to bedismissed. There could be norational basis for suggesting thata person who faces suspensionhas no conflict and can deal withthe matter utterly impartially,without taking their own interestinto account and only takingaccount of the company’sinterests.

With regard to the question ofimproper motive Mthimunye-Bakoro averred that the meetingof 13 July was called for animproper motive ‘in an attemptto avoid the previous unlawfulconduct of the non-executivedirectors’. The meeting of 13 Julywas held for the avoidance of anydoubt. Mthimunye-Bakoro wasinvited, to avoid any furthertechnical challenge. No morecould be expected of the companyin this connection. Even if thepurpose of the meeting were toaddress an early invalid decision,there did not appear to beanything untoward and, as such,such conduct and the motivationwould not invalidate the meeting.

The application was dismissed.

Whatever the legality of the meeting of 18 June and, in my view, without deciding, theresolution of suspension may have been valid. Given the law as I have outlined it, the latermeeting holds the key to the resolution of this dispute. What was different about the meetingof 13 July was that the applicant was given timeous notice, she attended the meeting, andaddressed the meeting before being excused from it prior to the resolution being taken.Applicant’s complaint appears then to fall within four categories:(1) She was given insufficient notice of the meeting.(2) She was not provided with sufficient information in order to participate.(3) A view was formed that she was conflicted when she was not, and she was compelled toleave the meeting.(4) The meeting was called for an improper motive.

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CLOETE N.O. v FIRSTRAND BANK LTD

A JUDGMENT BY FOURIE AJA(NAVSA ADP, PONNAN JA,ZONDI JA AND SCHOEMAN AJAconcurring)SUPREME COURT OF APPEAL26 MARCH 2015

2015 SACLR 215 (A)

Enforcement action as referred to insection 133 of the Companies Act(no 71 of 2008) does not refer to thecancellation of an agreement by acreditor.

THE FACTSFirstrand Bank Ltd lent money

to Skyline Crane Hire (Pty) Ltd byway of instalment saleagreements. On 29 May 2012 theboard of Skyline voluntarilyresolved that Skyline be placedunder business rescue in terms ofthe provisions of section 129 ofthe Companies Act (no 71 of2008), and on the following day,the resolution was filed with theCompanies and IntellectualProperty Commission.

Skyline had by then fallen intoarrears in respect of the monthlyinstalments payable under theinstalment sale agreements. On30 May 2012 the bank despatcheda letter to Skyline, cancelling theagreements due to Skyline’sfailure to pay the monthlyinstalments due in terms thereof.

The business rescue practitionerappointed in terms of the Actconsented to the bankrepossessing and selling thegoods relating to the instalmentsale agreements. The proceedsrealised from the sale weresufficient to discharge the debtowing by Skyline to the bank,leaving a surplus of someR800 000. The bank retained thesurplus, relying on set-off inrespect of other amountsallegedly owing to it by Skyline.

On 10 September 2012 a finalorder of liquidation was grantedagainst Skyline. Cloete and theother appellants were appointedas the co-liquidators of Skyline.The liquidators took the view thatthe bank’s cancellation of theagreements was contrary to theprovisions of section 133(1) of theAct and accordingly of no force oreffect. They contended that thefull proceeds of the sale of thegoods were to be paid over tothem to be dealt with undersections 83 and 84 of theInsolvency Act (no 24 of 1936).

THE DECISIONSection 133(1) provides that

during business rescueproceedings, no legal proceeding,including enforcement action,against the company, or inrelation to any propertybelonging to the company, orlawfully in its possession, may becommenced or proceeded with inany forum, except (inter alia)with the written consent of thepractitioner, or with the leave ofthe court and in accordance withany terms the court considerssuitable.

The liquidators argued that thecancellation of the agreementsconstituted ‘enforcement action’as meant in the subsection, and asthe written consent of thepractitioner and the leave of thecourt had not been obtained,, thecancellation was of no force oreffect. The bank submitted thatthe cancellation of an agreementdoes not constitute ‘enforcementaction’ as envisaged bysection 133(1) of the Act, so thatthe consent of the practitioner orthe leave of the court was notrequired to effect a lawfulcancellation of the agreements.

The essential issue was whetherthe cancellation of the agreementsby means of the letter of 30 May2012, constituted ‘enforcementaction’ as meant in section 133(1)of the Act. ‘enforce’ or‘enforcement’, usually refer to theenforcement of obligations, incontrast to cancellation. In thecontext of section 133(1) of theAct, it is significant that referenceis made to ‘no legal proceeding,including enforcement action’. Theinclusion of the term‘enforcement action’ under thegeneric phrase ‘legal proceeding’,indicated that ‘enforcementaction’ is considered to be aspecies of ‘legal proceeding’ or, ismeant to have its origin in legalproceedings. ‘enforcement action’cannot mean the cancellation ofan agreement. Contextually itreferred to enforcement by way oflegal proceedings.

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FOUR ARROWS INVESTMENTS 68 (PTY) LTD vABIGAIL CONSTRUCTION CC

A JUDGMENT BY SWAIN JA(LEWIS JA, MHLANTLA JA,WILLIS JA and SALDULKER JAconcurring)SUPREME COURT OF APPEAL17 SEPTEMBER 2015

2016 (1) SA 257 (SCA)

An option, the purpose of which isto enable the sale of a portion ofagricultural land without theconsent of the Minister, falls withinthe prohibition contained insection 3(e)(i) of the Subdivision ofAgricultural Land Act (no 70 of1970).

THE FACTSFour Arrows Investments 68

(Pty) Ltd concluded an agreementof sale of immovable propertywith Abigail Construction CC,Abigail being the seller and FourArrows the purchaser.

Clause 2.7.1 provided that theagreement would be deemed to bean option to purchase theproperty granted by the seller tothe purchaser ‘at the price andupon and subject to the termsand conditions hereof whichoption shall be exercisable by thepurchaser at any time after thepurchaser and the seller succeedsin obtaining the required consentto the subdivision of the propertyfrom Portion 175’.

Four Arrows contended that theagreement constituted an optionfor the sale of a portion ofagricultural land, and as such didnot fall within the prohibitioncontained in section 3(e)(i) of theSubdivision of Agricultural LandAct (no 70 of 1970). The sectionprovides that ‘no portion ofagricultural land . . . shall be soldor advertised for sale . . . unlessthe Minister has consented inwriting’.

Four Arrows sought an ordercompelling Abigail to passtransfer of the property to it.

THE DECISIONThe object of the legislation was

not only to prohibit concludedsale agreements, but alsopreliminary steps which may bea precursor to the conclusion of aprohibited agreement of sale. Thisis clear from the fact that the

legislature has prohibited theadvertisement of a portion ofagricultural land for sale in theabsence of ministerial consent.The grant of an option wouldclearly be a precursor to theconclusion of a prohibitedagreement of sale, at the electionof the option holder.

An option falls within the ambitof the prohibition contained in theAct because the essence of anoption is that it is binding on theoption grantor. It is an offer to sellproperty, which cannot berevoked.

In the present case, the optiongrantor purported to be bound tosell a portion of agricultural landwithout ministerial consent, onthe election of the option holder,contrary to the provisions of theAct. The fact that the optionprovided that the option holdercould only exercise the optionafter the consent of the Ministerhad been obtained, wasirrelevant. In the interim theoption grantor purports to bebound to sell a portion ofagricultural land withoutministerial consent. This wascontrary to the provisions of theAct.

The probable intention of theparties was to enable FourArrows to purchase one-half ofthe property. The provisions ofthe contract which provided forthe acquisition of the wholeproperty were clearly subsidiaryto this principal purpose. Theoffending clause consequentlyresulted in the entire contractbeing null and void.

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LESTER v NDLAMBE MUNICIPALITY

A JUDGMENT BY MAJIEDT JA(MTHIYANE DP, CACHALIA JA,THERON JA and ZONDI AJAconcurring)SUPREME COURT OF APPEAL22 AUGUST 2013

2015 (6) SA 283 (SCA)

Once it is established that ademolition order should be given interms of section 21 of the NationalBuilding Regulations and BuildingStandards Act (no 103 of 1977), acourt does not have a discretion toissue any other order including anorder that the property owner bepermitted to alter the dwelling soas to avoid the demolition order.

THE FACTSLester built a luxury house

without having obtained anyapproved building plans asrequired by section 4(1) of theNational Building Regulationsand Building Standards Act (no103 of 1977).

An order of court was obtainedagainst Lester which requiredhim to submit plans within onemonth complying with allstatutory and zoningrequirements. Failure to do sowould render the housesusceptible to demolition.

Lester sought to comply withthis order by submitting varioussets of amended and revisedplans to the NdlambeMunicipality. None of them metsecured approval. On 5 December2010 Ndlambe adopted therecommendations of the buildingcontrol officer and resolved interms of section 7(1)(b) of the Actnot to approve the final planssince they did not comply withthe court order. Lester wasnotified of this outcome and ademolition application followed.Lester instituted a counter-application to permit him to alterthe dwelling so as to avoid thedemolition order.

A court granted the demolitionorder in terms of section 21 of theAct. The section provides that acourt shall have jurisdiction tomake an order prohibiting anyperson from commencing orproceeding with the erection ofany building or authorising suchlocal authority to demolish suchbuilding if the court is satisfiedthat such erection is contrary toor does not comply with theprovisions of the Act or anyapproval or authorisationgranted thereunder. Lesterappealed.

THE DECISIONSection 26 of the Constitution

provides that everyone has theright to have access to adequatehousing, and that no one may beevicted from their home, or havetheir home demolished, withoutan order of court made afterconsidering all the relevantcircumstances.

Lester argued that the court’sauthority to order a demolitionunder section 21 of the BuildingStandards Act had to be readwith section 26 of theConstitution. Its requirement thatthe court consider ‘all relevantcircumstances’ before making ademolition order conferred a widediscretion on the court to considerall the relevant circumstancesbefore ordering the demolition ofLester’s house.

This argument could not besustained. What constitutes‘adequate housing’ is a factualenquiry. Executing a writ ofexecution in respect of a luxuryhome, which Lester’s houseundeniably was, had no bearingon the right of access to adequatehousing. The fact that thedwelling sought to be demolishedwas the person’s primaryresidence did not detract fromthis principle. The cardinalquestion was whether demolitionof Lester’s property wouldinfringe upon his right to accessto adequate housing. The answerwas clearly ‘No’.

Section 21 gives a court nolatitude not to order thedemolition once it is proved thatthe building was erected contraryto the Act.

A court has a statutory andmoral duty to uphold the law andto see to due compliance with itstown planning scheme. A lenientapproach could be an openinvitation to members of thepublic to use land illegally with ahope that the use will be legalised

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in due course and that pendingfinalisation the illegal use will beprotected indirectly by thesuspension of an interdict.Ndlambe was in exactly thisposition — it was statutorily andmorally duty-bound to approachthe court below for a demolition

order in order to uphold the law.The court had a concomitant dutyto uphold the doctrine of legality,by refusing to countenance anongoing statutory contraventionand criminal offence.

The appeal was dismissed.

I conclude by reverting to what Harms J said in United Technical Equipment (supra) withregard to the City Council’s obligations to enforce the law in the face of an ongoing illegalitybeing perpetrated by the appellant company in that case: ‘The respondent has not only a statutory duty but also a moral duty to uphold the law andto see to due compliance with its town planning scheme. It would in general be wrong towhittle away the obligation of the respondent as a public authority to uphold the law. Alenient approach could be an open invitation to members of the public to follow the courseadopted by the appellant, namely to use land illegally with a hope that the use will be legalisedin due course and that pending finalisation the illegal use will be protected indirectly by thesuspension of an interdict.’Ndlambe is in exactly the same position as the respondent in the aforementioned case — it wasstatutorily and morally duty-bound to approach the court below for a demolition order in orderto uphold the law. The court a quo, in turn, had a concomitant duty to uphold the doctrine oflegality, by refusing to countenance an ongoing statutory contravention and criminal offence.Conclusion[28] As stated, Lester has erected an unlawful structure on his property — this fact isunchallenged and common cause. The jurisdictional basis for a demolition order in terms of s21 has therefore been established. All administrative actions, such as the unanimous resolutionof Ndlambe’s full council on 5 December 2010 not to approve the final revised plans, remainvalid and legally binding until set aside on review or appeal. Absent any challenge on appeal— internally in terms of s 9 of the Act to a review board, or on review in terms of PAJA to acompetent court — that resolution had legal consequences.

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RUITERS v MINISTER OF HUMAN SETTLEMENTS

A JUDGMENT BY DONEN AJWESTERN CAPE DIVISION, CAPETOWN12 AUGUST 2015

2016 (1) SA 239 (WCC)

The Housing Consumers ProtectionMeasures Act (no 95 of 1998) doesnot authorise the RegistrationCouncil to reject an application byan owner builder on the ground thatthe owner commenced buildingbefore making his application forexemption. The Act also does notprohibit an owner builder fromcommencing building before makingapplication for exemption.

THE FACTS Ruiters secured the approval ofthe City of Cape Town of certainbuilding plans for a new house tobe built on his property. Hesubmitted the plans in terms ofsection 4 of the National BuildingRegulations and BuildingStandards Act (no 103 of 1977). Hethen began the construction of hishome.

Some six months later, on 1August 2012, the National HomeBuilders Registration Councilserved a notice of non-compliancewith the provisions of section14(1) of the Housing ConsumersProtection Measures Act (no 95 of1998) on Ruiters. Thenon-compliance report statedthat, as a home builder, he hadcommenced the construction of ahome prior to enrolment by theCouncil. He was required toachieve compliance by 8 August2012.

Ruiters submitted an exemptionapplication to the Council on 12September 2012 in terms of theAct, in order to qualify as anowner builder. This qualificationwould exempt him fromcomplying with the provisions ofsection 14 of the Act.

The Council advised Ruitersthat his application had beenrejected. The Council stated thatsections 10 and 14 of the Actprohibited the commencement ofconstruction of a home prior toregistration of home builder andenrolment of a home.Accordingly, exemption in termsof section 14 of the Act could onlybe made prior to construction. Asa result thereof the Councilcontended that Ruitersapplication for exemption did notfall within the ambit of the Act.

Ruiters appealed to the Ministerof Human Settlements. Basing herdecision on the criteria of section29(1)(b) of the Act, the Ministerdismissed the appeal. That section

provides that an exemption maybe granted if it would notundermine the objectives of theAct, or the effectiveness of theCouncil. Ruiters applied for anorder reviewing and setting asidethe Minister’s decision, as well asher confirmation of the Council’srefusal of his exemptionapplication.

THE DECISIONThe protective measures in the

Act are directed at protectinghousing consumers from homebuilders. There is no reference inthe above protective provisions toowner builders. Nor are anyduties placed upon them.

Two main consequences arisefrom the Act’s definition of homebuilder. Firstly, if an ownerbuilder has not applied forexemption in terms of section10A, he or she remains subject tothe duties resting upon a homebuilder and the consequence ofbreach of such duties. Secondly, ifsuch application for exemptionhas been made, no such duties orconsequences arise.

If an applicant for exemptionsatisfies the Council that he or shefulfils the definition of an ownerbuilder, that would be sufficientto eliminate him or her fromregulation as a home builder. TheAct does not require an applicantwho satisfies the Council that heor she is an owner builder also tosatisfy the Council that theconstruction complies withtechnical requirements. TheMinister made her decision withreference to the criteria in section29(1)(b) of the Act. The Councildid not appear to have consideredthose criteria. Because an ownerbuilder poses no apparent risk toa housing consumer, an applicantfor exemption who satisfies theCouncil that he or she is an ownerbuilder would not appear toundermine the objects of the Act.

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An undertaking such as the onemade by Ruiters, to occupy andnot to sell the owner builder’shouse for five years, coupled withindemnification of the Councilfrom claims by housingconsumers, would appear toeliminate the chance ofundermining the effectiveness ofthe Council. Furthermore, severeprejudice to a bona fide ownerbuilder would result if exemptionwere not granted, because theburdens of protecting housingconsumers would be imposed on

him or her for no reason. Thiswould not be in the publicinterest. Prima facie therefore, aproven owner builder satisfiesthe requirements of section 29(1).

From the reasons given by theCouncil for its refusal to grant theapplicant exemption, it wouldappear that the Council did notinvestigate and try to satisfyitself whether the section 29(1)criteria were established, orwhether in fact Ruiters was anowner builder. Instead it basedits rejection of the application on

the ground that Ruiterscommenced building beforemaking his application forexemption. The Act does notauthorise the Council to reject anapplication by an owner builderon this ground. Nor does itprohibit an owner builder fromcommencing building beforemaking application forexemption.

The matter was is referred backto the Council for determinationas to whether the applicant isentitled to exemption in terms ofsection 10A and s 29.

The Minister made her decision with reference to the criteria in s 29(1)(b) of the Act. TheCouncil does not appear to have considered these criteria. Because an owner builder poses noapparent risk to a housing consumer, an applicant for exemption who satisfies the Councilthat he or she is an owner builder would not appear to undermine the objects of the Act. Anundertaking such as the one made by the applicant, to occupy and not to sell the ownerbuilder’s house for five years, coupled with indemnification of the Council from claims byhousing consumers, would appear to eliminate the chance of undermining the effectiveness ofthe Council. Furthermore, severe prejudice to a bona fide owner builder would result ifexemption were not granted, because the burdens of protecting housing consumers would beimposed on him or her for no reason. This would not be in the public interest. Prima facietherefore, a proven owner builder satisfies the requirements of ss 29(1)(a), (b) and (c).[64] The Minister accepted in her reasons that the applicant was an owner builder. Prima facieat least the conclusions above had to follow. In passing it should be noted that s 29 is framed inbroad general terms. It avails ‘a person or a home’ with exemption from any provision of theAct. Passage through the criteria mentioned in s 29, for persons other than applicants in termsof s 10A, may not be as self-evident as for an owner builder.The decision of the Council[65] From the reasons given by the Council for its refusal to grant the applicant exemption, itwould appear that the Council did not investigate and try to satisfy itself whether the s 29(1)criteria were established, or whether in fact the applicant was an owner builder. Instead it basedits rejection of the application on the ground that applicant commenced building beforemaking his application for exemption. The Act does not authorise the Council to reject anapplication by an owner builder on this ground. Nor does it prohibit an owner builder fromcommencing building before making application for exemption.

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SNYDERS N.O. v LOUISTEF (PTY) LTD

A JUDGMENT BY JANSE VANNIEUWENHUIZENGAUTENG DIVISION, PRETORIA7 JULY 2015

2016 (1) SA 123 (GP)

The owner of an existing site fallswithin the provisions of regulation12(2) of regulations promulgatedunder the Petroleum Products Act120 of 1977. A site licence istransferred to the owner byoperation of law immediately thelicence held by another personoccupying the site terminates.

THE FACTSLouistef (Pty) Ltd conducted a

petrol filling station on propertyowned by Snyders. It did sounder a site licence granted to itby the third respondent. WhenLouistef’s lease with Snydersterminated,, the parties enteredinto a written agreement interms of which Snyderspurchased the site licence fromLouistef for R1m. In pursuance ofthe agreement, Snyders paid R1minto the bank account of the thirdrespondent.

Prior to the purchase price beingpaid to Louistef, Snyders receivedlegal advice to the effect that thewritten agreement was null andvoid and unenforceable. As aresult, he instructed the thirdrespondent to withhold paymentof the purchase price. Snydersalleged that the agreement wasinvalid, null and void andunenforceable because a sitelicence was not an asset capableof being sold.

Louistef contended that the sitelicence formed part of itsproperty, had a value and wascapable of being sold.

THE DECISIONSection 2A(1) of the Petroleum

Products Act 120 of 1977stipulates inter alia that a personmust have a site licence to hold ordevelop a site and must have aretail licence to retail prescribedpetroleum products. Regulation12(2) provides that the site licence

issued to (a) a land owner, mustbe transferred to the new ownerof that land, or (b) a lessee, mustbe transferred to the new lesseeor to the new owner of that land.

In distinguishing between ‘newsite’ licences and ‘existing site’licences, the legislature createdtwo distinct scenarios to whichdifferent criteria apply. ‘Newsites’ have more cumbersomerequirements than ‘existing sites’.In view of the provisions ofregulation 12, Snyders contendedthat Louistef was obliged totransfer the site licence to him.

No reason appears from the Actand regulations to distinguishbetween a new owner and anexisting owner of an ‘existingsite’. Having regard to thestructure of the Act and theregulations, it followed logicallythat the owner of an existing siteshould by implication fall withinthe provisions of regulations 12(2)and (3). The fact that an existingowner of an ‘existing site’ is notexpressly referred to in regulation12, renders this interpretationreasonable and necessary.

In view of this interpretation,Louistef had a statutoryobligation to transfer the sitelicence to Snyders. A site licencetherefore did not havecommercial value and was not anasset which could be sold.Consequently the sale agreementbetween the parties did notcomply with the essentialelements of a valid sale agreementand was null and void.

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MAYO N.O. v DE MONTLEHU

A JUDGMENT BY WILLIS JA(BOSIELO JA, LEACH JA, MAJIEDTJA and ZONDI JA concurring)SUPREME COURT OF APPEAL23 SEPTEMBER 2015

2016 (1) SA 36 (SCA)

Section 44(1) of the Insolvency Act(no 24 of 1936) applies to claims bycreditors against a company inliquidation by virtue of theoperation of section 366(1) of theCompanies Act (no 61 of 1973).

THE FACTS Chevreau Construction (Pty)

Ltd took over the completion of atownhouse propertydevelopment from StarspanInvestments (Pty) Ltd. A disputearose between the parties as towhich was responsible for estateagents commission. Chevreauwas wound up by way of aspecial resolution adopted on 22July 2011 and registered on 6September 2011.

After the appointment of Mayoas joint liquidator, and at a timewhen no creditors had provedclaims against the company inliquidation, the joint liquidatorslaunched an application to setaside the sales and transfers oftwo immovable properties byChereau to two companies. Inresponse de Montlehu, who hadbeen the sole director andshareholder of Chevreau broughta counter-application seeking astay of the winding-up ofChevreau on the grounds thatStarspan had not proved itsclaim, with the consequence thatthe company no longer appearedto be insolvent, with no othercreditors having submittedclaims.

On 5 October 2012, Mayoconvened a special meeting ofcreditors for the purpose ofproving claims. Two claims byStarspan were lodged. The firstwas for R173 479,40, being anamount of taxed costs awarded inan arbitration, and R1 577 432,70,being the amount in dispute inthe arbitration. The Masteradmitted both claims to proof.

De Montlehu contended that theproof of these claims was flawedas it had taken place without theleave of the Master as required bysection 44(1) of the Insolvency Act(no 24 of 1936). The sectionprovides that no claim shall beproved against an insolventestate after the expiration of a

period of three months as fromthe conclusion of the secondmeeting of creditors of the estate,except with leave of the court orthe Master.

THE DECISIONThe essential question was

whether the three-month timeframe as provided for in section44(1) of the Insolvency Act,applied to companies inliquidation or not.

Section 366(1) of the CompaniesAct (no 61 of 1973) provides thatin the winding-up of a company,the claims against the companyshall be proved at a meeting ofcreditors mutatis mutandis inaccordance with the provisionsrelating to the proof of claimsagainst an insolvent estate underthe law relating to insolvency.Section 366(2) provides that theMaster may fix a time withinwhich creditors of the companyare to prove their claims orotherwise be excluded from thebenefit of any distribution underany account lodged with theMaster before those debts areproved.

The question therefore, waswhat precisely was affected bythe qualification ‘mutatismutandis’. The strictness ofmeaning to be given to ‘mutatismutandis’ implied that the fixedtime period provided for insection 44(1) of the InsolvencyAct, and therefore the fixing ofcosts by the Master and thepayment thereof by the creditor,should apply both in the case ofsequestration and the liquidationof a company.

A plain reading of section 366(2)of the Companies Act does notaffect the applicability of thethree-month time period insection 44(1) and the issues thatarise therefrom. Neither in logicnor in the grammar of therespective provisions is there a

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reason why the three-month timeperiod, together with the fixing ofcosts and the payment thereof bya late creditor, should not applyalongside the discretionarypower granted in terms of section366(2). In both instances, thelodging of claims needsmomentum driven by the factorof time.

Were the three-month periodnot to apply, then in the absenceof a time period being fixed by the

Master in terms of section 366(2),there would be no formal timeperiod within which creditorswould be required to lodge andprove their claims. The three-month period stipulated insection 44(1) of the Insolvency Actrelating to the proof of claimsremains the bench mark in bothsequestrations and liquidations.

Section 366(2) does not affect theapplicability of section 44(1) ofthe Insolvency Act to companiesin liquidation.

The court a quo found that the reasoning in Stone & Stewart was wrong and that s 366(2) ofthe old Companies Act did not, in the case of companies in liquidation, push aside the timeperiod in s 44(1) of the Insolvency Act. I agree. A plain reading of s 366(2) of the oldCompanies Act does not affect the applicability of the three-month time period in s 44(1) ofthe old Companies Act and the issues that arise therefrom. Neither in logic nor in thegrammar of the respective provisions is there a reason why the three-month time period,together with the fixing of costs and the payment thereof by a late creditor, should not applyalongside the discretionary power granted in terms of s 366(2). In both instances the lodgingof claims needs momentum driven by the factor of time.[19] Were the three-month period not to apply, then in the absence of a time period being fixedby the master in terms of s 366(2), there would be no formal time period within whichcreditors would be required to lodge and prove their claims. The risk of tardiness, if notinertia, would be ever present. Clearly, this would not be in the interest of either the creditorsor the general public. The three-month period stipulated in s 44(1) of the Insolvency Actrelating to the proof of claims thus remains the bench mark in both sequestrations andliquidations. Section 366(2) does not, therefore, affect the applicability of s 44(1) of theInsolvency Act to companies in liquidation.

Insolvency

26

ABSA BANK LIMITED v HAMMERLEGROUP (PTY) LTD

JUDGMENT BY MBHA JA(BRAND, MAYA, CACHALIAAND MHLANTLA JJAconcurring) SUPREME COURT OF APPEAL26 MARCH 2015

2015 SACLR 238 (A)

A subordination clause in a loanagreement makes the creditor acontingent creditor but does notprevent such a creditor frombringing an application to liquidatethe debtor.

THE FACTSAbsa Bank Ltd advanced two

loans to Hammerle Group (Pty)Ltd. Hammerle becamecommercially insolvent andunable to pay its debts. Thebank’s attorney addressed a letterof demand to Hammerle forpayment of the arrears within 30days of receipt of the letter, failingwhich the entire capital andinterest outstanding wouldimmediately become due andpayable. Hammerle’s attorneyreplied stating, that Hammerlewould tender payment only ifthere were surplus fundsavailable subject to asubordination clause contained inone of the loan agreements,known as the subscriptionagreement. In terms of thatagreement, the bank’s loan wassubordinated in favour ofHammerle’s other creditors

The bank’s attorney despatcheda notice in terms of section 345(1)of the Act calling upon Hammerleto settle all outstanding arrearswithin three weeks after deliveryof the notice, failing which thebank would apply for theliquidation of Hammerle.Hammerle’s attorney repliedstating that ‘[o]ur client hasalways indicated that it wouldlike to make [a] settlementproposal . . .’. It also stated that‘[n]otwithstanding the aforesaid,please note that our client hasbeen struggling to turn thebusiness around. However, ourclient believes that it may in duecourse turn the business aroundby making it profitable. At thisstage our client has not been ableto make any meaningful profit inthe business’.

Absa applied for the winding upof Hammerle on the grounds thatit was commercially insolventand unable to repay the loans.The bank averred that as at 31

May 2011, Hammerle wasindebted to it in the total amountof R21 005 197,46. This amountcomprised of R4 693 437,78 owingunder the loan agreement and thenotarial bond, and R16 311 759,68arising from the subscriptionagreement.

Hammerle raised two defences,that the bank’s claim under theloan agreement had prescribedand consequently that the debthad become extinguished, andthat as the loan advanced interms of the subscriptionagreement was subordinated infavour of Hammerle’s creditorsand as Hammerle was indebted toits creditors in the amount ofR2 205 657,07, the amountclaimed by the bank was not dueand payable.

THE DECISIONIn the light of the subordination

clause in the subscriptionagreement, the bank was acontingent creditor of Hammerle.In terms of section 346(1) of theCompanies Act (no 61 of 1973), thebank was within its right toapply for the winding-up of therespondent. The section providesthat an application to court forthe winding-up of a companymay be made by one or more ofits creditors, including contingentor prospective creditors.

The contents of Hammerle’sattorney’s letter showed anunequivocal acknowledgement ofindebtedness by Hammerle in theamount claimed under the loanagreement. It also showed thatHammerle was unable to pay itsdebts and, was in consequence,commercially insolvent.

This was an admission whichinterrupted the running ofprescription, and showed thatHammerle was susceptible tobeing wound up as it wascommercially insolvent.

Insolvency

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BOTHMA-BATHO TRANSPORT (PTY)LIMITED v NEDBANK LIMITED

A JUDGMENT BY WILLIS JA(PONNAN JA, LEACH JA ,SALDULKER JA AND MEYER AJAconcurring)SUPREME COURT OF APPEAL25 MARCH 2015

2015 SACLR 207 (A)

A court will not order parties toreinstate an agreement upon theterms of an existing agreement ifthere are no grounds for theimportation of the terms of theexisting agreement.

THE FACTSBothma-Batho Transport (Pty)

Limited ceded to Nedbank Ltd alife insurance policy on the life ofMr T Bothma as security for aloan given by the bank to thatcompany.

The company defaulted infulfilling its obligations to thebank. A settlement agreementwas reached but the companyagain defaulted. The life insurercancelled the life policy because ofnon-payment of the premiums.

As a result of the cancellation,the bank brought an applicationthat the insured and the debtortake steps to reinstate the policy,alternatively that they take stepsto take out a similar policy andcede it to the bank. The high courtordered that the debtor and theinsured procure a policy with atleast similar benefits than theprevious policy, and cede suchpolicy to the bank.

The company and Bothmaappealed.

THE DECISIONThere was no basis upon which

the bank could obtain an order inthe terms it sought. The ordersought was vague and lacking incertainty. It failed to indicate inwhat degree the benefits had tobe ‘similar’, failed to specify towhom the policy had to appearto be ‘similar’, whether or not itwas to be taken out with the sameinsurer, what would happen ifthe insurer declined, whether ornot the bank had to first approvethe policy before it came intooperation, and by whenperformance had to take place.The order also might have beenimpossible of performance.

Even if such an order wereconsidered not to be vague orlacking in certainty, it requiredthat terms be imported into thecontract which were neitheralleged in the founding papers,nor appeared from the contractbetween the parties.

The appeal was upheld.

Contract

28

AIRPORTS COMPANY SOUTH AFRICA LTD vAIRPORT BOOKSHOPS (PTY) LTD

A JUDGMENT BY DODSON JGAUTENG LOCAL DIVISION,JOHANNESBURG3 JULY 2015

2016 (1) SA 473 (GJ)

An organ of state must comply withsection 217 of the Constitution inits contractual dealings andaccordingly any agreement it entersinto may incorporate a tacit termwhich ensures that that section iscomplied with.

THE FACTSIn 2009 the Airports Company

South Africa Ltd (Acsa) and theAirport Bookshops (Pty) Ltd(Exclusive Books) entered into alease agreement in terms of whichAcsa let to Exclusives shoppremises at OR TamboInternational Airport. The leasewas for a period of five yearsterminating on 31 August 2013.

On 15 August 2013 the partiesconcluded an extensionagreement. It provided that theexisting lease agreement wasrenewed month on month at theminimum monthly rental of R585761,70 excluding VAT.

On 4 December 2013 Acsa issueda ‘request for bids’ which invitedsuitably qualified companies tosubmit bids to take up the rentalof 13 shops.Exclusive Booksresponded by submitting a bidwith a view to retaining itstenancy of its shop. On 18 June2014 Acsa informed ExclusiveBooks that its bid had beenunsuccessful. Acsa addressed anemail to Exclusive Books, giving itnotice to vacate the premises by31 July 2014. On 25 June 2014Exclusive Books’ attorneysaddressed a letter to Acsa,asserting that the decision toaward the tender was irrational,procedurally flawed andtherefore invalid. It also assertedthat Acsa was obliged to givereasonable notice of thetermination of the renewalagreement. The letter called onAcsa to withdraw the ‘purportedcancellation’ and to undertakethat ‘any subsequent cancellationnotice will be based on areasonable period’.

Acsa insisted that ExclusiveBooks was obliged to vacate inaccordance with the notice given.Another reminder to vacate wassent on 29 July 2014. Consistentwith the stance in its letter,Exclusive Books did not vacate.

Acsa brought an application foreviction of Exclusive Books fromthe premises.

Acsa contended that it wasentitled, on the basis of theextension agreement, to terminatethe lease on a month’s notice at itsdiscretion. Exclusive Bookscontended that the extensionagreement was subjected to atacit term, in terms of whichneither party was entitled toterminate the extensionagreement until completion of avalid and lawful tender process toidentify a new tenant.

THE DECISION Given the fact that the extension

agreement was not clear, a simplereliance on its terms would notassist. Section 217 of theConstitution provides that whenan organ of state contracts forgoods or services, it must do so inaccordance with a system whichis fair, equitable, transparent,competitive and cost-effective. Asa state-owned company, Acsawas bound to comply with thissection when letting of the shop,as this involved the disposal byway of letting of a state asset. Theeffect of the contract was toprovide a service for thosemembers of the public making useof the departure area at theairport.

The extension agreement was avariation of the original leaseagreement. Neither partysuggested that the original leaseagreement was invalid. Theconstitutional and statutoryframework for contracting by anorgan of state applied at the timeof its conclusion. If one took theextension agreement as consistingonly of its express words andinterpreted it in the mannercontended for by Acsa, itcontemplated a lease that couldrun indefinitely. This is so,notwithstanding that it was

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‘month on month’. So read, theextension agreement had thepotential to bypass therequirements of section 217 andthe statutory framework of thePreferential Procurement PolicyFramework Act (no 5 of 2000). Asan indefinite lease it was acontract that could not have beenenvisaged at the time of theoriginal tender process. Thattender process envisaged a leaseof limited duration. On that basisthe extension agreement and the

decision-making giving rise to itwould be unlawful and invalid. If,on the other hand, the tacit termcontended for by Exclusive Bookswas incorporated in the extensionagreement, the extensionoperated only temporarily andonly for as long as it took tocomplete a valid tender processfor a new lease agreement. Itprovided for what wasprobablyan unforeseen circumstance, iethat the tender process for a newlease had not been completed bythe end of the previous lease. The

limitation in duration broughtabout by the tacit term thusrendered the extension agreementcompliant with section 217 of theConstitution and the statutoryframework, on the basis that itwas a limited and legitimateexception to the competitiveprocess that should ordinarilyapply.

The tacit term contended forwas therefore to be incorporatedin the extension agreement, andthe eviction of Exclusives couldnot be allowed.

Acsa is an organ of state as envisaged in s 217(1). However, the questionthat then arises is whether the phrase ‘contracts for goods or services’refers to the acquisition of goods or services only, or whether it includesthe disposal of goods, such as the sale or letting of state-ownedimmovable property.

Contract

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NOVARTIS SA (PTY) LTD v MAPHILTRADING (PTY) LTD

A JUDGMENT BY LEWIS JA(MAJIEDT JA, PILLAY JA, ZONDIJA and MATHOPO JA concurring)SUPREME COURT OF APPEAL3 SEPTEMBER 2015

2016 (1) SA 518 (SCA)

Whether or not a contract has beenconcluded is determined by thesignificance of the terms discussedbetween the parties, and not by aninterpretation of the meaning ofsuch terms.

THE FACTSVan Jaarsveld, the business

manager of Sandoz SpecialtyDivision one of the divisions ofNovartis SA (Pty) Ltd,approached Lambrecht, adirector of Maphil Trading (Pty)Ltd, and suggested that Sandozand Maphil enter into anarrangement in terms of whichMaphil would receive a fee forputting Sandoz branding on thepackaging of devices supplied byMaphil to hospitals. Lambrechtwas amenable to this.

Maphil was about to put in a bidfor the supply of medical devicesto Mediclinic, a national private-hospital group. If Sandozcommitted to paying a fee for themarketing proposed, Lambrechtwould be able to reduce the pricesof the items that Maphil wastendering to supply by someR3m. Lambrecht’s tenderdocuments had to be submittedto Disa-Med, the procurementdepartment for Mediclinic.

Van Jaarsveld and a director ofSandoz, Van der Spuy, produceda signed draft marketingagreement between Sandoz andMaphil, offering a marketing fee ofR3,5m for the year 2005. Aftersome amendments effected to itby the Sandoz representatives atLambrecht’s request, he orallyaccepted the commitment.

The full contract could not beconcluded in 2004 because Maphiland Sandoz had yet to agree uponthe exact items on which theSandoz name would be used andon the details of logos andnaming. Furthermore, Maphil didnot yet know what itemstendered for would be acceptedby the party to which it wassubmitting its tender, Disa-Med.Addendum A to the agreementpresented to Maphil by Sandozwas headed ‘MarketingAgreement’, and typed below thatwere the words ‘To be finalized

by 30 November 2004’. There wasnever any formalised addition tothe addendum.

The tender by Maphil, in whichthe prices had been reduced bysome R3m, was in due courseaccepted by Disa-Med. Maphilproceeded as if there were acontract with Sandoz, as didSandoz. By February of thefollowing year the chairman ofthe executive committee ofSandoz, Hallam, had secondthoughts about the feasibility ofthe contract, and after a meetingwith a representative ofMediclinic, at which hediscovered that SSD would notget rebates on medicines. On 4March 2005 Hallam wrote a letterto Maphil, stating that there wasno contract between Novartisand Maphil, and that the invoicethat Maphil had submitted to itfor the first monthly paymentwould not be paid.

Maphil treated Novartis’conduct as a repudiation of thecontract between them, andinstituted action for damages forbreach of contract.

THE DECISIONMaphil contended that the

marketing agreement on which itrelied, comprising both writtenand oral agreements, wasconcluded in the meetings and bysubsequent exchange of emails,ending on 30 November 2004. Thematerial terms of the agreementwere that Maphil would performmarketing activities for Sandoz ata fee of R3,5m for the year 2005,payable in monthly instalmentson receipt of an invoice issued byMaphil to Sandoz. Novartiscontended that no contract hadbeen proved; the documentsigned in 2004 was inchoate andlacked exigible content; theparties had intended to concludea contract only when one wasdrafted by an attorney; and none

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of the representatives of Novartiswho purported to bind it hadauthority to do so.

The agreement expresslyprovided that the marketingactivities had to be finalised inthe future, ie before 30 November2004. In agreeing such activitiesin a meeting and by way of emailthe parties did exactly what theycontemplated, in agreeing to thecontent of the document. Nothingin the document required that thefuture agreement should complywith any formality. In theabsence of a statutoryrequirement that particularformalities be adhered to, or an

agreement that an instrumentwill have no force unlessparticular formalities arefollowed, as long as the terms of acontract satisfy otherrequirements for contractualvalidity, the parties mayconclude their contract in anymanner they choose.

Both parties did want a lawyer’scontract to replace the onedrafted by Sandoz, signed by VanJaarsveld and Van der Spuy, andconcluded orally and by emailcorrespondence. But theynonetheless regarded the latter asbinding, and took steps toimplement it on that

understanding. Lambrecht’sevidence that the contract wasnot concluded on 14 Octoberwhen he was given theundertaking by Van Jaarsveldand Van der Spuy did not assistNovartis since he made it clearthat he wanted legal advice andto know the outcome of Maphil’stender to Disa-Med: but thesematters had been resolved by 30November when the marketingactivities were confirmed. Thematerial terms of the contracthad in fact been agreed. Thecontract pleaded and relied on byMaphil was concluded by 30November 2004.

This court has consistently held, for many decades, that the interpretative processis one of ascertaining the intention of the parties — what they meant to achieve.And in doing that, the court must consider all the circumstances surroundingthe contract to determine what their intention was in concluding it. KPMG, inthe passage cited, explains that parol evidence is inadmissible to modify, vary oradd to the written terms of the agreement, and that it is the role of the court, andnot witnesses, to interpret a document. It adds, importantly, that there is no realdistinction between background circumstances and surrounding circumstances,and that a court should always consider the factual matrix in which the contractis concluded — the context — to determine the parties’ intention.The passage cited from the judgment of Wallis JA in Endumeni summarises thestate of the law as it was in 2012. This court did not change the law, and itcertainly did not introduce an objective approach in the sense argued by Novartis,which was to have regard only to the words on the paper.

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AFRICAN INFORMATION TECHNOLOGY BRIDGE 1 (PTY) LTD v THEMEMBER OF THE EXECUTIVE COUNCIL FOR INFRASTRUCTUREDEVELOPMENT

JUDGMENT BY SCHOEMAN AJA(MAYA JA, BOSIELO JA, FOURIEAJA AND MAYAT AJAconcurringSUPREME COURT OF APPEAL2 JULY 2015

2015 SACLR 281 (SCA)

A contract will be void ab initio ifone of the parties mistakenly thinksthe other is a different party and themistake is reasonably made and isfundamental to the contract.

THE FACTS Executive Council for

Infrastructure Development,Gauteng Province, invited AfricanBridge (Pty) Ltd to complete apilot project for the department inconjunction with anothercompany, iNathi TechnologyHoldings. The abbreviation AITBwas used for African Bridge indealings between the departmentand African Bridge. Theabbreviation on the letterheads ofAfrican Bridge referred to AITBand African Bridge referred toitself as AITB. Following thesuccessful completion of this pilotproject, the Executive Councilcalled for tenders for thedevelopment of ConstructionContact Centres.

African Information TechnologyBridge 1 (Pty) Ltd (AITB 1), adifferent company from AfricanBridge, submitted tenders.African Bridge did not do sobecause one of its directors was asister of one of the seniormanagers in the Department. Thiscompany was controlled by oneof the directors of African Bridge,a certain Mr Tucker. Inmotivating for the tender, Tuckerused the name of African Bridge.The Department’s AcquisitionCouncil awarded the tenders to‘AITB’, iNathi and anothercompany. Letters of acceptancefor the tenders were written andsigned and were addressed toAfrican Bridge (AITB) and iNathi.The following day, AITB 1requested that the letters ofappointment be changed to reflectthat the tender of AITB 1 had beenaccepted. An employee of thedepartment, signed the letters inthe absence of the Director:Procurement and BEE and thesignatory to the letters ofacceptance. The AcquisitionCouncil did not meet to discussthe amended letters of award. Itwould not have awarded the

tenders to AITB 1 because thatcompany had no experience, noassets and no personnel.

AITB 1 brought an action fordamages based on the contracts italleged were concluded with theDepartment. The Departmentpleaded that it intended tocontract with African Bridge andnot AITB 1 and therefore nocontracts were entered into inrespect of those tenders. Itcontended that there was aunilateral mistake on the part ofthe Department which renderedthe contracts void ab initio.

THE DECISIONTucker used the name of African

Bridge instead of AITB to presentto the Department that the samecompany that successfullycompleted the pilot project withInathi, was the one bidding forthe tenders. He knew that had thetrue state of affairs come to theattention of the department, thebid by AITB 1 would not havebeen accepted as it did not qualifyfor the tender. It was clear thatTucker deliberately misled theDepartment to create theimpression that it was AfricanBridge contracting with thedepartment and not a differententity with no experience, noassets and no personnel.

The Department was clearlymistaken with regard to theentity with whom it thought thatit was contracting. There was nodoubt that the Departmentintended to award the tenders toAfrican Bridge, a company that itwas familiar with and which hadcompleted the pilot project andcomplied with all therequirements of the departmentin respect of the particulartenders. The Department’scontinued reference to AfricanBridge and not AITB 1 showedthat this is what the Departmentintended.

33

The mistake was also clearly amaterial one: if the tenders weresubmitted with the particulars ofAITB 1, it would not have beenawarded the tender.

The mistake of the Departmentwas justus as the actions ofTucker were deliberately taken tomislead. It was reasonable for theDepartment to conclude that itwas accepting the tender ofAfrican Bridge as Mr Tucker haddeliberately created the

confusion. The Department was ofthe view that it was AfricanBridge that had submitted thetenders. Such mistake in respectof the identity of the othercontracting party wasfundamental. Therefore, therewas a material and justus errorin respect of the contractspurportedly entered into betweenAITB 1 and the Department. Insuch a situation, there is nocontract and both were void abinitio.

The court a quo found the following.‘ On a consideration of all the facts, I am satisfied that Tucker convenientlyused the name of AITB [African Bridge] instead of the plaintiff [AITB 1] topresent to the defendant that the same company that successfully completedthe pilot project with Inathi, was the one bidding for tenders 1417, 1418 and1419. He knew that had the true state of affairs come to the attention of thedepartment, the bid by the plaintiff would not have been accepted. Theplaintiff simply did not qualify in any respect for the tender.’I agree with this conclusion. It is clear that Mr Tucker deliberately misled thedepartment to create the impression that it was African Bridge contractingwith the department and not a different entity with no experience, no assetsand no personnel.

Contract

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STANDARD BANK OF SOUTH AFRICA LTD vA-TEAM TRADING CC

A JUDGMENT BY PLOOS VANAMSTEL JKWAZULU NATAL DIVISION,PIETERMARITZBURG17 NOVEMBER 2015

2016 (1) SA 503 (KZP)

The effect of a business rescueapplication is to suspend anapplication for the liquidation ofthe company in question.

THE FACTSStandard Bank of South Africa

Ltd brought an application forthe provisional winding-up of A-team Trading CC on the groundsthat it is unable to pay its debts.After the application wasbrought, but before it was heard,an application was brought foran order placing A-Team undersupervision and commencingbusiness rescue proceedings interms of section 131 of theCompanies Act (no 71 of 2008).

The issue between the partieswas whether it was competent togrant a provisional winding-uporder, given that the businessrescue application had beenbrought. A-Team contended thatthe effect of the business rescueapplication was to suspend theliquidation application in termsof section 131(6) of the Act. Thebank contended that the effect ofthe section was not to suspendthe liquidation application, butthe liquidation process whichfollows upon a liquidation order,until either of the events referredto in section 131(6)(a) and (b)occurred.

Section 131(6) provides that ifliquidation proceedings havealready been commenced by oragainst the company at the timean application for business rescueis made, the application willsuspend those liquidationproceedings until (a) the court hasadjudicated upon the application,or (b) the business rescueproceedings end, if the courtmakes the order applied for.

THE DECISIONIf the bank’s contentions were

correct, and a provisionalwinding-up order was granted,A-Team would be precluded fromrunning its business, but sowould the liquidator, as thewinding-up process would besuspended in terms of section131(6). This hiatus wouldcontinue until the court hadadjudicated upon the businessrescue application. In the interimA-Team might lose its contractsand its customers and theremight be no basis for a rescueplan. The interpretation did notappear to be a sensible one It wasalso not supported by thewording of section 131(6).

The application for liquidationitself formed part of theliquidation proceedings, in thesame way as an application forthe eviction of an unlawfuloccupier forms part of theeviction proceedings. Thedescription merely tells one whatthe nature of the proceedings is.Sub-section 6 refers to liquidationproceedings which have alreadybeen commenced ‘by or against’the company.

The effect of the business rescueapplication was therefore tosuspend the application for theliquidation of A-Team.

Insolvency

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HENDRICKS v HENDRICKS

A JUDGMENT BY MAJIEDT JA(MHLANTLA JA, LEACH JA,TSHIQI JA and SALDULKER JAconcurring)SUPREME COURT OF APPEAL25 NOVEMBER 2015

2016 (1) SA 511 (SCA)

A holder of a right of habitation is aperson in charge of property asdefined in the Prevention of IllegalEviction from and UnlawfulOccupation of Land Act (no 19 of1998) and has locus standi to bringan eviction application in respect ofpersons occupying that property.

THE FACTSOn 5 November 1990 Mrs A

Hendricks, the appellant, sold herresidential property to her son,Mr G Hendricks, the secondrespondent. A lifelong right ofhabitation was registered infavour of Mrs Hendricks in theproperty’s title deed. A cession ofright of habitation, signed by MrG Hendricks in favour of Mrs AHencricks in respect of theproperty, was recorded in anotarial deed Mrs A Hendrickslived in the property when herson took occupation thereof afterregistration of the transfer.

Mr G Hendricks married thefirst respondent in community ofproperty. She took up residence inthe property. After their divorce,the first respondent remained inoccupation of the property,together with her daughter froma previous relationship, hergranddaughter and the threechildren born of the marriagebetween her and Mr G Hendricks.Mrs Hendrick’s attorneys wroteto the first respondent, assertingher right of habitation and callingupon the first respondent tovacate the property by 22February 2012, failing which aneviction order would be obtained.

The first respondent contendedthat Mrs A Hendricks did nothave the right to evict her interms of the Prevention of IllegalEviction from and UnlawfulOccupation of Land Act (no 19 of1998) as she was not a ‘person incharge’ as defined in that Act.

THE DECISIONThe question was whether, as

far as the Act was concerned, aholder of the limited real rightheld by Mrs A Hendricks was a‘person in charge’ of the propertyin respect of which the habitatiooperated, and whether thatholder could obtain an evictionorder against an owner whooccupied the property withoutthe holder’s consent.

The first respondent’s baredominium as owner of theproperty had to yield to Mrs AHendrick’s right of habitation.Like usus and usufruct, habitatiois a limited real right, enforceableto the extent of the right itself,against the entire world. Withoutthe consent of Mrs A Hendricks,the first respondent was anunlawful occupier of theproperty.

Section 4(7) provides that acourt may grant an eviction orderonly if it is satisfied that it is justand equitable to do so. In order tomake that determination, it mustconsider the factors enumeratedin the subsection. Some of thefactors to be considered in termsof section 4(7) are the rights andneeds of the elderly, children,disabled persons and householdsheaded by women. There waslittle information on these andother potentially relevant aspects.In the circumstances, the matterhad to be remitted to theSomerset West Magistrates’Court for a full enquiry ascontemplated in section 4(7) intowhether it would be just andequitable to order the eviction ofthe first respondent, and all thoseoccupying the property throughher.

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MIGHTY SOLUTIONS CC v ENGEN PETROLEUM LTD

A JUDGMENT BY VAN DERWESTHUIZEN J(MOGOENG CJ, MOSENEKE DCJ,CAMERON J, JAFTA J,KHAMPEPE J, MADLANGA J,MATOJANE AJ, NKABINDE J,WALLIS AJ and ZONDO Jconcurring)CONSTITUTIONAL COURT19 NOVEMBER 2015

2016 (1) SA 621 (CC)

There is no constitutional reason todevelop the common law rule thatlessees cannot raise the defencethat the lessor has no right tooccupy the property when beingsued for ejectment at thetermination of the lease.

THE FACTSEngen Petroleum Ltd leased a

property from its registeredowner and developed theproperty into a branded servicestation. In September 2005 Engenentered into an operating leasewith Mighty Solutions CC. Thelease was to continue until theend of March 2008 and wascancellable at a month’s notice byeither party. Under the lease,Mighty Solutions operated aservice station on the property,and used Engen’s equipment,signage and trademarks.

Mighty Solutions was a licensedpetroleum retailer in terms of thePetroleum Products Act (Act). Thelease continued on a month-to-month basis until it was validlycancelled in July 2009. Followingthe cancellation, Mighty Solutionscontinued to occupy the site. Itcontinued using Engen’sequipment, signage andtrademarks without paying rentto Engen or the registeredproperty owner.

In 2013 Engen applied to theHigh Court for an order to evictMighty Solutions. The issues to bedetermined were (a) whetherEngen had locus standi atcommon law to evict MightSolutions, and (b) whetherMighty Solutions could rely onpossessory rights arising from itsfuel retail licence as read with thePetroleum Products Act. Theparties agreed that MightySolutions had no common lawright to continue occupying thepremises, as both the operatinglease and any subsequent leasearrangements had been validlyterminated.

As regards the first issue,Mighty Solutions contended thatEngen lacked legal standing toseek its eviction because Engen’shead lease with the site ownerhad terminated before thecommencement of the evictionproceedings.

As regards the second issue,Mighty Solutions contended thatthe Act had effectively abolishedEngen’s common law rights. Itargued that a retail licence-holderin its position acquiredpossessory rights under the Actand that these could only beterminated after the licence wasrevoked by the Controller. Itrelied mainly on section 2A(5)(a)of the Act, which provides that noperson may make use of abusiness practice, method oftrading agreement, arrangement,scheme or understanding whichis aimed at or would result in alicensed wholesaler holding aretail licence except for trainingpurposes as prescribed. MightySolutions argued that the contractbetween it and Engen amountedto a scheme that resulted in awholesaler effectively holding aretail licence. Once a retail licencehad been granted to a party to sellpetrol on a particular property,the landowner or lessor could notevict that licence-holder. If alandowner or lessor wished toevict a licensed retailer, they hadto apply to the Controller to havethe licence revoked.

THE DECISIONThe common law rule is that

law that lessees cannot raise thedefence that the lessor has noright to occupy the propertywhen being sued for ejectment atthe termination of the lease.The facts of the case did notrequire the court to considerwhether a lessee can rely on adefence that the lessor lacks validtitle in circumstances where thelessee asserts its ownindependent title to the premises.Mighty Solutions did notestablish that it had acquired anyindependent title to the premises.It abandoned its argument thatits retail licence gave it statutorypossessory rights.

Mighty Solutions’ submission

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that the common-law rule fellaway, because its rationale didnot apply in this case, wasuntenable. The rule was clear: alessee or sublessee cannot rely ona defence that its lessor orsublessor lacks title in order toresist eviction upon terminationof the lease. Mighty Solutions wasa sublessee trying to do exactlythat. Under the common lawEngen had standing to evictMighty Solutions. The common

law rule in question was soentrenched that it was a naturalincident of all contracts of lease.That is, it is implied by law unlessthe parties expressly agreeotherwise. For this reason, adevelopment of the common lawwould itself not be enough forMighty Solutions’ success. Even ifthis settled common-law rulewere adjusted, the contractbetween Engen and MightySolutions would still stand. Therewas no basis for developing the

common law. The rule did notoffend the spirit, purport andobjects of the Bill of Rights, or thevalues of our constitutionaldemocracy.

Since under the common law oflease Mighty Solutions could notquestion Engen’s title as a defencein eviction proceedings after thevalid termination of the leaseagreement between it and Engen,Engen had standing to evictMighty Solutions.

Mighty Solutions’ submission that the common-law rule ‘falls away’,because its rationale does not apply in this case, is untenable. The rule isclear: a lessee or sublessee cannot rely on a defence that its lessor orsublessor lacks title in order to resist eviction upon termination of thelease. Mighty Solutions is a sublessee trying to do exactly that. Under thecommon law Engen had standing to evict Mighty Solutions. Questioningthe rationale for the rule takes us rather to a separate question, namelywhether the law ought to be developed.

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TSHWANE CITY v LINK AFRICA

A JUDGMENT BY CAMERON Jand FRONEMAN J(KHAMPEPE J, MADLANGA J,MOLEMELA AJ and THERON AJconcurring, JAFTA J, TSHIQI AJ,MOSENEKE DCJ and NKABINDE Jdissenting)CONSTITUTIONAL COURT23 SEPTEMBER 2015

2015 (6) SA 440 (CC)

Section 22 of the ElectronicCommunications Act (no 36 of2005) does not permit arbitrarydeprivation of property rights andis accordingly not unconstitutional.

THE FACTSLink Africa chose the municipal

area of Tshwane City as a placewhere it wished to install fibre-optic cabling network. In 2011, itsubmitted a formal proposal tothe City’s chief informationofficer. In terms of the proposal,the City was required to grantLink Africa the right to make useof existing municipalinfrastructure, especially existingservice ducts and sewage andstormwater infrastructure. Inexchange for this right of use LinkAfrica would either provide theCity with the use of two fibrepairs on all routes deployed, andendeavour to route the fibre-opticcables as closely as possible to theCity points of interest to facilitateeasy connections, or pay the Cityan annual rental on a per-metrebasis for the City’s infrastructureused for the deployment.

The City’s Water and SanitationDivision granted Link Africapermission to ‘proceed withphysical surveys of the proposedinitial sites’. A series of meetingstook place and in March 2012 theDivision’s acting executivedirector recommended theapproval of Link Africa’s request.The City’s strategic executivedirector for servicesinfrastructure also recommendedapproval and in his capacity asacting deputy city manager,granted final approval.

Link Africa published a pressrelease confirming the installationof the network. When the citymanager was alerted to theapproval, he did not endorse it.He immediately convened ameeting with Link Africa.Following this meeting the citymanager wrote a letter requestingLink Africa to halt the installationof the fibre-optic cables on theCity’s infrastructure, pending aninvestigation into the approvalby the City. Link Africa acceded

to this request and temporarilystopped the installation.

Link Africa invited the City tomake representations to it inrelation to its proposed decision.The city manager outlined thenew direction the City wanted totake in relation to the roll-out ofbroadband connectivity. He alsostated that the City was in atender process for the broadbandproject and would have expectedLink Africa to tender andparticipate in the process if itwere serious about partneringwith the City in the furtherance ofits vision to build a ‘smart city’.In the same letter the Cityinformed Link Africa that itsrequest to install an electroniccommunications network on itsunderground infrastructure wasrefused.

Later, Link Africa provided theCity with full reasons for itsdecision to proceed with theinstallation. It also informed theCity of its right to review thedecision. Link Africa’s attorneysaddressed a letter to the Citystating, among others, that as theCity had at no stage sought toreview and set aside Link Africa’sdecision to proceed with theinstallation of its fibre-opticcables, Link Africa would proceedwith the installation, and it didso.

On 6 December 2013 Link Africahad already completed phase oneof the installation of its fibre-opticcables in the City’s undergroundinfrastructure. Subsequent to thatit was agreed between the partiesthat Link Africa would suspendphase two of the installation of itsfibre-optic cables, if the Citylaunched interdict proceedingsby 27 January 2014.

On 28 January 2014 the Citybrought an application for adeclaration that section 22 of theElectronic Communications Act(no 36 of 2005) requires consent of

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the landowner before actionauthorised by the section couldbe undertaken. It also sought aninterdict restraining Link Africafrom taking the actions listed insection 22, on the City’sinfrastructure, without consentor agreement from the City, and amandamus directing Link Africato remove the cables alreadyinstalled was also requested. Italso sought to impugn LinkAfrica’s decision on the basis thatit breached the principle oflegality. A fourth part of theapplication was devoted to aconstitutional attack againstsections 22 and 24 of the Act. Theconstitutional attack contendedthat by authorising licence-holders to install an electroniccommunications network orfacility on municipalinfrastructure, section 22 of theAct forced municipalities toaccept services from licence-holders in contravention of s217(1) of the Constitution. It alsocontended that, contrary tosection 25 of the Constitution,section 22 permitted arbitrarydeprivation of property.

Section 22(1) provides that anelectronic communicationsnetwork service licensee may (a)enter upon any land, includingany street, road, footpath or landreserved for public purposes, anyrailway and any waterway of theRepublic, (b) construct andmaintain an electroniccommunications network orelectronic communicationsfacilities upon, under, over, alongor across any land, including anystreet, road, footpath or landreserved for public purposes, anyrailway and any waterway of theRepublic, and (c) alter or removeits electronic communicationsnetwork or electroniccommunications facilities, andmay for that purpose attachwires, stays or any other kind of

support to any building or otherstructure.

Section 22(2) provides that intaking any action in terms ofsubsection (1), due regard must behad to applicable law and theenvironmental policy of theRepublic.’

THE DECISIONThe essential question centred

on the common-law positionwhen the owner of a servientproperty, one over which aservitude is granted, is confrontedby a servitude created by law.

The common-law principlesregarding servitudes show thatsection 22 of the Act inflicts noarbitrary deprivation ofproperty. While section 24 doesnot contain the express injunctionfound in section 22(2) to the effectthat other applicable law (ie thecommon law on servitudes)applies, it too must be interpretedin a manner that is least invasiveof fundamental rights if it isreasonably possible to do so. It isreasonably possible to do so.Section 24 contains expressprocedural and substantivesafeguards, includingrequirements of notice andcompensation. The result is thatdeprivation of property under s24 will not be arbitrary.

The primary object of the Act isto regulate electroniccommunications in the publicinterest. The language of section22 is broad. It provides access toany land in order to constructelectronic communicationsfacilities. This is intended to servea legitimate and importantlegislative purpose which isessential for the unhindereduniversal provision of electroniccommunications services. Theimportant point is that the grantof the right under section 22(1) toa network licensee does notdetermine how that licensee may

exercise it. For that, it is necessaryto examine section 22(2). Thisexplicitly requires that ‘(i)ntaking any action in terms ofsubsection (1), due regard mustbe had to applicable law’. Herethe analogous principles andrules of the common law ofservitudes point the way to thestatute’s validity.

Section 24 differs from section 22in that it does not contain theexpress injunction that ‘dueregard must be had to applicablelaw and the environmental policyof the Republic’. However, theprovision harmonises the exerciseof licensees’ powers and theprotection of local authorities’ orownership interests, byincorporating express proceduraland substantive safeguards. First,the licensee is required to provide30 days’ prior written notice of itsintention to construct, maintainor alter electroniccommunications facilities.Second, the notice must specifythe manner in which theinfrastructure is to beconstructed and maintained.Third, it may provide forcompensation for ‘all reasonableexpenses incurred . . . or anysupervision of work relating tosuch alteration’. The provisionthus clearly contemplates ameasure of agreement betweenlicensee and landowner. This isnecessary to determine‘reasonable expenses incurred’.And it demands sufficientdeference to the local authority orowner, because they are entitledto ‘supervise’ the licensee’s workon their property.

The rights section 22 grants aresimilar to a general servitude.These allow the dominant ownerto select the essential incidentalrights of the necessary premisesand to take access to them asneeded for the exercise of theservitude. But the right is not

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unrestricted. The dominantservitude-holder cannot simplyassert its rights. Section 22(2)requires that due regard mustalso be had to this statute whenaction is taken under section 22(1)of the Act. The wording of thesubsection contains no express ornecessary exclusion of theoperation of the ExpropriationAct. Therefore, the public-law

protection of compensation forexpropriation by juristic personsother than the state found in theExpropriation Act also applies toaction taken under section 22(1).

Even if the City did have section25 rights, there was no evidencethat Link Africa’s intendedactions amount to substantialinterference with the itsinfrastructure. There was also no

evidence of arbitrariness. Thedeprivation was in fact entirelyreasonable. This was because ofthe landowner’s multiplesafeguards, both substantive andprocedural. The statute providednot only sufficient reason for thedeprivation, but afforded acompelling basis showing thatthe provisions at issue wereneeded.

The real issue is whether s 22 is consistent with s 25(1) of the Constitution. Wefollow a two-stage enquiry in determining this issue. 35 First, we need to considerwhether there is a limitation of the rights in s 25(1). If there is, we must determinewhether the limitation is justified. Put differently, we must decide whether s 22permits deprivation of property and whether that deprivation is justified.

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PEEN N.O. v THE WESTVILLE COUNTRY CLUB

A JUDGMENT Y CHETTY JKWAZULU NATAL HIGHCOURT, DURBAN30 JULY 2015

2015 SACLR 267 (KZD)

THE FACTSIn June 2007 the Westville

Country Club entered into anagreement of sub-lease withProproyale Developments CC interms of which it leased certainpremises for a period of 40 years.The Club held its rights in theproperty in terms of a 99-yearlease concluded with themunicipality. When Proproyaleentered into the sub-lease, thepremises were being constructed,and Proproyale expended R1,8mon the construction of the portionof the premises in respect ofwhich the sub-lease wasconcluded.

In order to sub-let the premises,the Club obtained a permit fromthe municipality. This providedthat in consideration for theconsent to sub-let, from 2011 theClub would have to pay themunicipality a rental of R2 088per month. The permit wasannexed to the sub-leaseconcluded with Proproyale.

Proproyale ceded and assignedits rights and obligations underthe sub-lease to the Indigo DawnTrust, in consideration for whichthe trust paid Proproyale R1.8m.Peen and the other applicantswere trustees of the trust.

Clause 10 of the sub-leaseprovided that the sub-lessee wasobliged to pay all charges leviedby any competent authority forelectric current, water and allother municipal services for thepremises. The sub lessee would beresponsible for the payment of allmunicipal rates and chargespayable to the local authority in

respect of the premises over andabove the rental due.

The Club rendered accounts tothe trust including the rental ofR2 088 per month as provided forin the permit. It described this as‘rates’. The trust contended that itwas not obliged to pay thisamount as it was not provided forin clause 10 of the sub-lease. TheClub contended that it wasproperly considered ‘charges’ asreferred to in clause 10, and wastherefore payable by the trust.

THE DECISIONThe rental referred to in the

permit could not be considered acharge as referred to in clause 10.Despite the Club having describedthe amount charged to the trustas ‘rates’ this was not rates butthe rental referred to in thepermit.

There was no basis upon whichthe obligation to pay the rentalreferred to in the permit could beimposed on the trust.

The context of the businessrelations between the partiessupported this interpretation: theinvestment of R1,8m which theTrust paid to Proproyale at thetime when it entered into thecession of the sub-lease,represented a benefit whichwould ultimately inure in favourof the Club. The trust could nothave been expected to pay itsrental of R3500 plus rates,services such as electricity andwater, membership fees to theClub as well as the amountsbilled to it as ‘rates’.

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FEDGROUP PARTICIPATION BOND MANAGERS (PTY) LTD vTRUSTEES OF THE CAPITAL PROPERTY TRUST

JUDGMENT BY NAVSA ADPAND SALDULKER JA(MHLANTLA JA, PILLAY JA ANDWILLIS JA concurring)SUPREME COURT OF APPEAL30 JUNE 2015

2015 SACLR 294 (SCA)

A party whose property hasencroached on that of another partyhas no right to claim subdivision ofthat other party’s propertyincluding the area encroached upon.

THE FACTSOn 31 July 2006 Fedgroup

Participation Bond Managers(Pty) Ltd and the CapitalProperty Trust (CPT) entered intoan agreement in terms of whichCPT acquired from Fedgrouptwenty-seven income producingproperties and associatedbusinesses, as letting enterprises,for R308 035 000. One of theproperties acquired by CPT waserf 990 situated in SunninghillExtension 85 Township.Registration of the property intoCPT’s name took place on 15December 2006.

Fedgroup retained ownership ofan adjoining property, erf 989. Onit was an incomplete structurewhich partially encroached onCPT’s property. In 2008, Fedgroupdiscovered that there was suchan encroachment. The structurehad been erected unlawfully byFedgroup’s predecessor in title.

Fedgroup brought anapplication for an order directingCPT to allow the subdivision oferf 990 in accordance with asubdivision plan, and allow thetransfer of the newly-createdportion of the property, includingthe area encroached upon, toFedgroup. This portion includedland additional to that on whichthe partially erected structurewas situated because Fedgroupneeded the additional vacant landfor optimal development of itsown property. It alleged that CPTwould have no use for thisundeveloped additional piece of

land and that without it, thetransfer it sought would beworthless. It is uncontested thatthe land sought by Fedgroupconstitutes 20 per cent of the totalextent of the property owned byCPT. Fedgroup undertook to bearthe costs of subdivision and payCPT R1 950 000.00.

THE DECISIONThere is no basis on which an

encroacher may, as of right, claimthe transfer of ownership into hisor her name of another person’sland. An encroacher might be ableto defend an action or applicationfor removal on the basis that it isunjust and unfair to orderdemolition and removal.However, this is a defensiveposition. In exercising thediscretion to award compensationinstead of ordering removal,courts do so on the basis of policyconsiderations such asunreasonable delay on the part ofthe landowner, or on the basis ofwhat might be viewed asacquiescence. However, anencroacher does not have anindependent cause of action, andcannot offensively compel anotherperson to part with rights ofownership.

In any event, adjudication inrelation to encroachment was amatter fraught with complexities,including the determination of thevalue of use and occupation of theland in question.

The application was dismissed.

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ZIETSMAN v DIRECTORATE OF MARKET ABUSE

A JUDGMENT BYAVVAKOUMIDES AJ(TUCHTEN J concurring)GAUTENG DIVISION, PRETORIA1 OCTOBER 2015

2016 (1) SA 218 (GP)

A person who deals in shares,despite knowing of insideinformation regarding a loan whichwill affect the value of the shares,commits the offence of insidertrading.

THE FACTSin 2010, Zietsman purchased the

first acquisition of 15 000 sharesin a company with the intentionof retaining the shares inpursuance of a strategy to acquirea controlling share in AfricanCellular Towers Ltd (ACT) andaccess certain operationalcapabilities within ACT. Laterthat year, Zietsman purchasedmore shares in 23 trades totalling835 805 shares. He and the secondappellant continued to acquireACT shares until March 2011.

On 24 January 2011 theIndustrial DevelopmentCorporation addressed a letter toACT advising it that it wouldmake available to it a totalfunding package of R99m. Laterthat month,a meeting was held between theDirectorate of Market Abuse andmembers of the board of ACT. Atthe meeting, a director of ACT, DeVilliers, alleged that ACT hadsecured a possible loan facility ofR99m from the IDC on an‘approval in principle basis’. TheACT representatives indicatedthat contracts had not beenconcluded for the facility, and nosubstantiating information wasmade available in support of thegranting of such funding. Duringthis meeting, nothing in writingwas presented in confirmation ofthe alleged funding, and DeVilliers did not inform thosepresent what the conditionsprecedent were, whether ACTwas capable of complying withany conditions precedent, whatthe repayment terms were andwhat any of the other terms of thealleged funding were.

Between 26 January 2011 and 9February 2011 Zietsman came toknow that the IDC granted ACTthe loan facility. The amount ofthe loan and the fact that thelender was the IDC were detailswhich were not known to thepublic

A Stock Exchange News Service(‘SENS’) announcement waspublished by ACT in whichshareholders and the marketwere informed that the companywas successful in securing debtfunding and was in the process offinalising the terms of the debtfacility with the potential funderwhich, when successfullyconcluded, could affect the price ofthe company’s shares. Theannouncement did not disclosethe amount and other details ofthe facility to the market, nor thedetails of the funder, as a decisionwas taken by the board of ACTthat, although ACT had receivedthe approval letter, those detailsought not to be disclosed beforethe agreements with the IDC wereconcluded. The publication of thefirst SENS announcement had noeffect on the share price of ACT.

Zietsman continued to acquireshares in ACT with the intentionof acquiring a controlling share inthe company. During the period15 February 2011 to 10 March2011, Zietsman purchased 19 491977 ACT shares at a total price ofR2 096 517.

The agreements with the IDCwere signed in March 2010. On 11March 2011 ACT published afurther SENS announcementadvising shareholders that theagreement had been entered intowith the IDC in respect of a R99mfunding facility. The ACT shareprice increased by 54%, from 11cents to 17 cents.

Charges were brought againstZietsman and the secondappellant that they hadcontravened the provisions ofsections 73(1)(a) and 73(2)(a) ofthe Securities Services Act (no 36of 2004). The enforcementcommittee determined thatinformation pertaining to theamount of the IndustrialDevelopment Corporation (‘IDC’)loan facility constituted insideinformation as defined in the Act

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and that Zietsman and the secondappellant were guilty of insidertrading as charged. Theenforcement committee finedthem the sum of R1m. Theycontended that they were notaware at the time of the trades inquestion that a loan had in factbeen granted to ACT, but onlyhad limited, vague and unreliableinformation in respect of apossible future loan, and that theenforcement committee ought tohave found that the informationavailable to them at the time ofthe trades in question did notconstitute ‘inside information’ asdefined in section 72 of the Act.

THE DECISION Zietsmans argued that he had

not had knowledge that wouldaffect the trading price of theshares in ACT. He argued that atthe time that he came to knowabout the loan, there were no

details of the loan to showwhether ACT would be able topay the loan and neither were theterms of the loan known.

Inside information, as defined insection 72(b) of theAct refers toinformation which, if it weremade public, ‘would be likely tohave a material effect on the priceor value of any security listed ona regulated J market’. The word‘likely’ has been interpreted tomean ‘less than a probability butmore than a mere possibility.’The 11 March 2011 SENS Bulletin,which made public the IDC loanof R99m, in fact had an impact onthe share price by increasing itfrom 11 cents to an average I of17 cents per share. This in itselfwas an ex post facto indicatorthat the information was price-sensitive.Therefore theinformation was price-sensitive.Not only did it have the capacity

to materially affect the shareprice, but the spike in the shareprice after disclosure of theinformation confirmed that theinformation was price-sensitive.Zietsman had knowledge of theidentity of the lender and theamount of the loan, and thebreakdown of the fundingpackage.

Zietsman’s belief that theinformation was not pricesensitive was not based onreasonable grounds. However,the provisions of section 73(2)(a)of the Act merely requireknowledge of the insideinformation at the time of dealingin the relevant shares. Despite,knowing of the inside informationregarding the IDC loan of R99m,Zietsman dealt in ACT shares,thereby committing the offence ofinsider trading.

Having heard and considered the arguments raised and considered the papers beforeme I am persuaded that:(a) The enforcement committee is an administrative tribunal that determines theprobabilities on documents serving before it. In this regard I am of the view that therule in Plascon-Evans does not apply B to the proceedings before the enforcementcommittee.(b) The information that the IDC had approved a loan of R99 million to ACT wasspecific and precise.(c) The information was not available to the public and was price-sensitive.(d) The appellants knew they had inside information on ACT when they dealt inACT shares between 26 January 2011 and 11 March 2011.(e) There is no basis for setting aside the determination.

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FIRSTRAND BANK LIMITED v NKATA

A JUDGMENT BY WILLIS JA(MAYA, CACHALIA, MAJIEDT,and SALDULKER JJA concurring)SUPREME COURT OF APPEAL26 MARCH 2015

2015 SACLR 242 (SCA)

In order for a consumer to re-instate a credit agreement, thedebtor need not pay the fullaccelerated debt but merely thearrear instalments. However, oncea sale in execution has taken place,no such reinstatement is possible.

THE FACTSIn 2010, Nkata fell into arrears in

repaying loans advanced to herby Firstrand Bank Ltd. The loanswere secured by two mortgagebonds. In July of that year, thebank invoked its right toaccelerate repayment of the fulldebt and issued summons againsther. The following month, sheconsulted a debt counsellor andmade an application for debtreview. The following month, thebank took default judgmentagainst her.

The parties concluded asettlement agreement in terms ofwhich Nkata undertook to paythe bank R10 000 per month andsell the property. The settlementagreement was not made anorder of court.

On two occasions following thesettlement agreement, Nkata paidthe full arrear amount owing tothe bank. In February 2013, sheagain fell into arrears. The bankthen sold the property inexecution. Nkata agree to pay arental for her continuedoccupation of the property.

Nkata applied for rescission ofthe judgment given against her.The court rejected thisapplication but raised thequestion whether, because Nkatahad on two occasions paid the fullarrear amount owing to the bank,section 129(3) of the NationalCredit Act (no 34 of 2005) applied.This provides that a consumermay (a) at any time before thecredit provider has cancelled anagreement re-instate a creditagreement that is in default bypaying to the credit provider allamounts that are overdue,together with the creditprovider's permitted defaultcharges and reasonable costs ofenforcing the agreement up to thetime of re-instatement, and (b)after complying with paragraph

(a), may resume possession of anyproperty that has beenrepossessed by the creditprovider pursuant to anattachment order.

The court held that the mortgageloan agreements were reinstatedby not later than when thearrears were cleared for the firsttime. Firstrand appealed.

THE DECISIONIn order for a consumer to re-

instate a credit agreement, thedebtor need not pay the fullaccelerated debt but merely thearrear instalments. Section129(3)(b) read with 129(3)(a), andsection 129(4) of the NationalCredit Act give the consumer theright to ‘re-instate’ a creditagreement and ‘resumepossession’ of the property inquestion (the equivalent of‘redemption’ at common law) bypaying the credit provider allamounts that are overdue,together with ‘default charges’and ‘reasonable costs of enforcingthe agreement’. This does not alterthe common law consequence of asale in execution. At common lawone could, up to the time of thesale, redeem ownership andpossession by discharging the fullamount of the debt. Now, underthe Act, ownership andpossession can be redeemedmerely by paying the amountoverdue, together with chargesand costs. The point at which thisis no longer possible is the pointwhen the sale in execution takesplace. The National Credit Acthas not changed this. In fact, ithas expressly provided that aconsumer may not ‘re-instate’ acredit agreement after theexecution of a court orderenforcing the agreement.

After the sale in execution butbefore registration of transfer hastaken place, redemption cannottake place by paying the full

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amount of the debt. No suchinference is possible from readingthe Act. This is also contrary tothe common law.

The provisions of s 129(4)(b) ofthe NCA are peremptory. In clearterms they provide that aconsumer may not re-instate acredit agreement after theexecution of any court order

enforcing that agreement.Reinstatement can only occurprior to a sale in execution at apublic auction. Nkata fell foul ofthis provision. In order to avoidit, she would have had totimeously re-instate the creditagreement and apply for andsuccessfully obtain a rescission ofthe judgment and the setting

aside of the writ of attachmentand a stay of execution beforethat sale had taken place.

Accordingly, the high court’sconclusion that execution onlytakes place when the proceeds ofthe sale in execution are paid overto the judgment creditor waswrong. The appeal succeeded.

Section 129(3)(b) read with 129(3)(a), together with s 129(4) of the NCA give the consumerthe right to ‘re-instate’ a credit agreement and ‘resume possession’ of the property inquestion (the equivalent of ‘redemption’ at common law) by paying the credit provider allamounts that are overdue, together with ‘default charges’ and ‘reasonable costs of enforcingthe agreement’, but does not alter the common law consequence of ‘the axe falling’ upon thesale in execution. At common law one could, up to the time of the sale, redeem ownershipand possession by discharging the full amount of the debt. Now, under the NCA,ownership and possession can be redeemed merely by paying the amount overdue, togetherwith charges and costs. The Rubicon has been and remains the sale in execution. The NCAhas not changed this. On the contrary, it has expressly provided that a consumer may not‘re-instate’ a credit agreement after the execution of a court order enforcing the agreement.

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ABSA BANK LIMITED v KEET

JUDGMENT BY ZONDI JA (MAYAJA, BOSIELO JA, WALLIS JA ANDMEYER AJA concurring)SUPREME COURT OF APPEAL28 MAY 2015

2015 SACLR 313 (SCA)

A claim based on rights conferred inan instalment sale agreement whichreserve ownership in the thing soldto the creditor until all amounts dueunder the agreement have been paiddoes not prescribe in the periodapplicable to an ordinary debt asprovided for in the Prescription Act(no 68 of 1969). Such a claim is avindicatory claim so that the periodof prescription relevant to it isthirty years.

THE FACTSKeet bought a motor vehicle

under an instalment saleagreement. In September 2003,Absa Bank Ltd took cession of theseller’s rights under theagreement. The agreementprovided that ownership in thevehicle would only pass to Keetafter he had paid all amounts due.If Keet failed to comply with anyprovisions of the agreement, orfailed to make any payment interms thereof, Absa would beentitled to the return andpossession of the vehicle. In thatevent Absa would also be entitledto demand payment of any arrearinstalments.

In November 2011, Absainstituted action against Keet. Italleged that the respondent wasin breach of the agreement in thathe had defaulted in paying theinstalments due and that it hadcancelled the agreement.

Keet raised a special plea thatthe agreement would have cometo an end on 1 November 2007,the date on which the amountalleged to be outstanding becamedue and payable. Keetcontendedthat in terms of section 11 of thePrescription Act (no 68 of 1969),‘any claim for arrears’ againsthim pursuant to the agreementprescribed on 31 October 2010.Consequently, Absa could notcancel the agreement and recoverpossession of the vehicle.

Absa contended that its claimwas a vindicatory claim being aclaim to ownership in a thing andnot a claim for payment of a debt,and therefore did not prescribeafter three years.

THE DECISIONThe issue was whether or not

Absa’s claim for the repossessionof its vehicle was a ‘debt’, whichfor the purposes of thePrescription Act prescribes afterthree years. In Staegemann vLangenhoven 2011 (5) SA 648(WCC) it was held that a claim ofthis kind is a vindicatory claimbeing a claim to ownership in athing and not a claim forpayment of a debt, and thereforedoes not prescribe after threeyears. However, this judgmentwas not followed in other courts.

Staegemann correctly statedthat the solution to the problemwas to be found in the basicdistinction between a real rightand a personal right. The mannerin which the Prescription Act isstructured, reflects thisdistinction - acquisitiveprescription of real rights is dealtwith in Chapters 1 and 2 and theextinctive prescription ofobligations is dealt with inChapter 3. The view that thevindicatory action is a ‘debt’ ascontemplated by the PrescriptionAct which prescribes after threeyears is contrary to the scheme ofthe Act. It would undermine thesignificance of the distinctionwhich the Prescription Act drawsbetween extinctive prescription,and acquisitive prescription. Toequate the vindicatory actionwith a ‘debt’ would have theresult that by way of extinctiveprescription the debtor acquiresownership of a creditor’sproperty after three years insteadof 30 years. This is not a sensibleinterpretation of the PrescriptionAct.

Absa’s contention was upheld.The special plea was dismissed.

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Property

BLAIR ATHOLL HOMEOWNERS ASSOCIATION vTSHWANE CITY

A JUDGMENT BY CACHALIA JA(LEWIS JA, TSHIQI JA, PILLAY JAand DAMBUZA JA concurring)SUPREME COURT OF APPEAL1 DECEMBER 2015

2016 (2) SA 167 (SCA)

A municipality is not bound torelate the level of rates imposedon property to the level ofservices provided to propertyowners.

THE FACTSA property development, known

as the Blair Atholl Estate was anupmarket residentialdevelopment with a golf course,located 50 kilometres west ofPretoria. The City of TshwaneMunicipality approved thedevelopment as a township,subject to specific conditions,under the Town-Planning andTownships Ordinance (no15 of1986). The relevant area felloutside the City’s priority areasfor the establishment of newtownships, and had no water andsewerage services. Approval wasgiven on condition that thedeveloper installed these services.

In order to do so, the developerand the City concluded an‘Engineering Services Agreement’in terms of which the developerundertook to install allengineering services for whichmunicipalities are usuallyresponsible. The services includedwater, electricity, seweragenetworks, stormwater drainagesystems, and road infrastructure.The Blair Athol HomeownersAssociation, whose establishmentwas one of the conditions in theagreement, became responsiblefor the maintenance of theservices inside the estate. Theresidents, who were obliged to bemembers of the association, paida monthly levy to it to cover thesecosts. The City maintained theservices outside the estate,including the supply of water, forwhich the residents paid, but itdid not raise sewerage charges.

The agreement specificallyprovided for rates to be leviedaccording to the City’s policiesonce the township wasproclaimed. It made no provisionfor the township to be treated as adifferent category of rateableproperty. Rates were to be leviedas usual, as with other residentialproperty.

On 4 May 2011 the City’sCouncil met to approve the draftrates policy and draft bylaws,and after considering theAssociation’s submissions,resolved to reject its demand for aseparate category of rateableproperty in its rates policy. Ittook the view that property taxwas not related to the servicesrendered by the Council.

The Association complained thatthe City’s rates policy wasinequitable, and thus unlawful,because it imposed the sameliability for rates on propertyowners of the estate as for otherdifferently situated ratepayers. Itcontended that it was entitled tobe treated differently from otherproperty owners in the City’sjurisdiction because the propertyowners provided and maintainedtheir own services and thusqualified for an exemption, areduction, or a rebate in rates.

THE DECISIONThe Association contended that

the rates policy adopted on 4May 2011 did not meet thethreshold requirement ofequitability in section 3(3)(a) ofthe Rates Act (no 6 of 2004)because it imposed a rates burdenon the property owners of BlairAtholl that other differentlysituated ratepayers did not bear.It also contended that theimposition of this additionalburden was irrational because itwas not rationally connected tothe objectives of the Rates Act.

The power of municipalities tolevy rates on property is anoriginal power derived fromsection 229(1)(a) of theConstitution. Rates are levied onthe value of property to cover therunning costs of a municipality,and to achieve its objects. Thestatute regulating the exercise ofthis power is the Rates Act. Arates policy must determine

49

criteria if the council leviesdifferential rates for categories ofproperties; exempts, reduces orgrants a rebate to any category;or increases or decreases rates. Itmust also provide criteria fordetermining categories ofproperties liable for differentrates.

The adoption of a rates policy istherefore a political decision thatinvolves balancing the interestsof various parties. It isunderpinned by the principle ofequitability in section 3(3)(a).

The Association’s essentialcomplaint was that property

owners in Blair Atholl should notbe made to pay equivalent ratesto other differently situatedcommunities as they provide andpay for their own basic services,while not having access to othercommunal services because of itsgeographic location. However,this failed at its first hurdle, for itassumed there was, or ought tobe, a fair relationship between theservices a municipality providesits ratepayers and the rates theyare liable to pay. Section229(1)(a)13 of the Constitutiondistinguishes between rates and

surcharges: the latter may beimposed for services themunicipality provides, while theformer bears no such constraint.

Furthermore, there is noprovision in the Rates Act thatsupported the Association’scontention. In fact, the contrarywas true. Ratepayers who havethe means are required to bear anadditional burden to subsidisethose who cannot afford to payfor their services. Rates alsosupport local social and economicdevelopment, unrelated to theprovision of services.

The appeal was dismissed.

Property

Stripped of the verbiage the essential complaint is that property owners in Blair Athollshould not be made to pay equivalent rates to other differently situated communities as theyprovide and pay for their own basic services, while not having access to other communalservices because of its geographic location.[27] But this challenge fails at its first hurdle, for it assumes there is, or ought to be, a fairrelationship between the services a municipality provides its ratepayers and the rates they areliable to pay. In this regard the court a quo observed correctly that s 229(1)(a)13 of theConstitution distinguishes between rates and surcharges: the latter may be imposed forservices the municipality provides, while the former bears no such constraint. In addition wewere referred to no provision in the Rates Act that supports the appellants’ contention. Infact, the contrary is true. Ratepayers who have the means are required to bear an additionalburden to subsidise those who cannot afford to pay for their services. Rates also support localsocial and economic development, unrelated to the provision of services.

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HERITAGE HILL DEVCO (PTY) LTD v HERITAGEHILL HOMEOWNERS ASSOCIATION

A JUDGMENT BY RABIE J(LEGODI J and BAQWA Jconcurring)GAUTENG DIVISION, PRETORIA24 APRIL 2015

2016 (2) SA 387 (GP)

A developer is to be considered theowner of unsold erven, and as suchwill be liable for levies imposed bya homeowners’ association ofwhich the developer is a member.

THE FACTSHeritage Hill Devco (Pty) Ltd

obtained transfer of the propertyknown as Portion 53 of the farmBrakfontein 390, RegistrationDivision JR, Province of Gauteng,on 6 January 2005 in terms ofdeed of transfer No T/82544/05registered as such on 30 June 2005by the Registrar of Deeds,Pretoria.

The land described in the titledeed was subdivided into atownship known as Extension 48and a general plan in respect ofthe township was registered bythe Registrar of Deeds on 7February 2006. After theregistration of the plan andcompliance with all theformalities, Heritage as developerproceeded to sell and transfersome of the erven to individualowners.

Heritage was a member of theHeritage Hill HomeownersAssociation. Clause 9 of thearticles of association of thatcompany empowered thedirectors of the Association, fromtime to time, to determine thelevies payable by the membersfor the purpose of meeting allexpenses which it had incurred orwhich the directors reasonablyanticipated the Associationwould incur in the furtherance ofits objects. Clause 9.2 providedthat members were to be liable inrespect of any levy determinedfrom time to time in equal shares,in respect of each property ownedby such member.

The Association sought paymentin the sum of R2,5 million whichit alleged was due by Heritage aslevies in respect of aits ownershipof the various erven situatewithin the Heritage Hill Estate.Heritage contended that it wasno more than the owner of theremainder of the township, andthat it was not the owner of theindividual erven situated in thattownship.

THE DECISIONThe question was whether

Heritage was, subsequent to theestablishment of the townshipand for the purposes of thearticles of association of theAssociation, the registered ownerof individual properties in thetownship? If so, it would be liableto pay the levies. Put anotherway, the question was whetherHeritage was the registeredowner of the remaining extent ofthe township and not theregistered owner of the individualerven in the township. If so, itwould not be liable for levies.

The Deeds Registries Act (no 47of 1937) defines ‘erf’ as ‘everypiece of land registered as an erf,lot, plot or stand in a deedsregistry, and includes any definedportion, not intended to be apublic place, of a piece of land laidout as a township, whether or notit has been formally recognised,approved or proclaimed as such.Section 46(1) of the Act providesthat if land has been sub-dividedinto lots or erven shown on ageneral plan, the owner of landsub-divided shall furnish a copyof the general plan to theregistrar, who shall, subject tocompliance with requirements ofthis section and of any other law,register the plan and open aregister in which all registrabletransactions affecting therespective lots or erven shown onthe plan shall be registered.

These provisions show that thesubstratum for registrabletransactions is the general plan,and that substratum comes intobeing once the general plan isregistered in the deeds registry.On the other hand, section 47enables an owner of land inrespect of which a register hasbeen opened to transfer the wholeor a portion of such land,provided that if a portion only issought to be transferred, the

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transfer shall be passed inaccordance with a diagram fromwhich shall be excluded all ervenon the land which have alreadybeen transferred, and secondlythe boundaries of such portionshall coincide with one or more ofthe lines of division shown on thegeneral plan and shall notintersect any of the erven shownthereon.

The purpose of the provisions ofsections 46 and 47 is thus toensure the recognition of theexistence of each and everyindividual erf depicted on the

general plan and adherence tothat plan in regard to allregistrable transactions.

If one has regard to theprovisions of section 46 of the Actthen it is clear that theregistration of the general planhad the effect of creating separateerven, the ownership of whichcould only have vested in thetownship developer , ie Heritage.

Heritage was therefore theregistered owner of the unsolderven within the context of thearticles of association.

Property

For the purposes of the articles of association the defendant was in fact the ownerand indeed the registered owner of the various erven in the township that cameinto existence upon the registration of the general plan and the subdivision ofthe township. It must follow that if the various individual erven depicted on thegeneral plan vested in the defendant, the answer to the question as to who theregistered owner of those erven were for the purposes of the articles and theimposition of levies could only be that it was the defendant.’I concur with the reasoning and the conclusion reached by the court a quo

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NELSON MANDELA BAY METRO vGEORGIOU

A JUDGMENT BY GOOSEN JEASTERN CAPE LOCALDIVISION, PORT ELIZABETH20 OCTOBER 2015

2016 (2) SA 394 (ECP)

A local authority cannot, indeciding whether or not approve arezoning application, ignore therights conferred by a restrictivecondition of title.

THE FACTSGeorgiou was the owner of three

adjacent properties situatedalong the Kragga Kamma Road inPort Elizabeth. He conducted aboutique hotel and spa frombuildings situated on theproperties. The properties wereadjacent to one another and werelocated in a residential urbanarea. They were all zoned asresidential 1 properties in termsof the Port Elizabeth zoningscheme which applied to the area.

Each of the erven was subject tocertain restrictive conditions oftitle. In the case of one, erf 1756,its use was restricted toresidential purposes only. Allthree properties were burdenedwith restrictions regarding thenature and extent of buildingswhich could be erected on themand the area within which suchbuildings could be erected. Theyhad not been consolidated into asingle erf, although Georgiou usedthem as a single property.

In 2007, Georgiou applied for therezoning of one property, erf2787, from residential 1 toresidential 3. On 18 February2009 the executive mayor refusedthe application andsimultaneously refused anapplication for special consent touse the property to operate ahotel. Special consent was,however, granted for theoperation of a 12-bedroomedguesthouse on the property. On18 August 2010 the executivemayor again refused anapplication for special consent tooperate a health spa on the thirdproperty, erf 2318, but grantedspecial consent to operate a 4-bedroomed guesthouse on theproperty.

Georgiou built a gymnasiumand chapel on erf 2787 withoutapproved building plans. Thechapel encroached upon the rearbuilding line as specified by a

restrictive condition applicable tothe erf. A sunroom and enclosedpatio were erected on erf 1756without approved building plans.Georgiou operated a boutiquehotel and spa from the properties.Applications were broughtagainst Georgiou, and theseactivities were found to beunlawful.

On 9 December 2013 Georgioumade application for the rezoningof the subject properties fromresidential 1 to business 1 zoning.The purpose of the applicationwas to facilitate the developmentof ‘a 5-star hotel . . . spa,conference centre & gift shop’. Theexecutive mayor decided that therezoning of the three properties,from residential 1 to residential 3should be granted, subject to therestrictive conditions applicableto the properties being removed,and that they should beconsolidated. The application fora Council Special Consent (EC 300/2014), to permit a Licensed Hotel,and a place of worship (Chapel)on the properties was approved,subject to the Chapel beinglimited to the existing footprint.

The Nelson Mandela Bay Metrosought to review and set asidethese decisions. It contended thata ‘conditional rezoning’ wasprohibited by clause 1.6.5 of theZoning Scheme Regulations andwas in conflict with the common-law principles applicable to thestatus of restrictive conditions oftitle.

THE DECISIONThe rezoning of the subject

property to residential 3purported to confer primary-userights which were in conflictwith the restrictive conditionregistered against the title deed.The primary uses of a residential3 property include dwellingunits, residential buildings andguesthouses, and its secondary

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uses included licensed hotels,medical uses, places ofamusement, public assembly,worship, assembly andinstruction, institutions, specialuses and parking.

The principal issue was whetherthe granting of a consent or arezoning in conflict with arestrictive condition of title waslawful when it was grantedsubject to the condition that therestrictive condition of title beremoved or varied. Two decisionspertinent to the issue, SouthAfrican Broadcasting Corporation vTransvaal Townships Board 1953 (4)SA 169 (T) and Enslin v VereenigingTown Council 1976 (3) SA 443 (T),were distinguishable.

Section 42 of the Land UsePlanning Ordinance 15 of 1985(Western Cape) deals withconditions which may beimposed when an application forrezoning, subdivision or adeparture is approved by thelocal authority. It provides thatwhen the Administrator or acouncil grants authorisation,exemption or an application, he

may do so subject to suchconditions as he may think fit.The concept of a ‘condition’ is notdefined by LUPO. In order todiscern its ambit, and whether aparticular ‘condition’ is onelawfully imposed in terms of thesection, it is necessary to considerthe type of approval given andthe type of conditions whichordinarily are relevant to suchapproval. It is also necessary toexamine the interplay betweensections 42 and 39 in order tounderstand the character andefficacy of such conditions.

Rezoning refers to the ‘categoryof directions’ given by the localauthority to define the purposefor which land may be used andthe land-use restrictions whichare to apply. The act of zoningtherefore is the determination ofthat set of directions. Each usezone is subject to defined land-use restrictions dealt with in thedevelopment parametersprovided for in the zoningscheme. These applyautomatically unless a departure,by way of the imposition of a

condition in terms of section 42 isauthorised.

A local authority cannot, indeciding whether or not approvea rezoning application, ignore therights conferred by a restrictivecondition of title. Section 39obliges the local authority toenforce compliance withconditions imposed in terms ofthe Ordinance and conditionsimposed in terms of inter alia theTownships Ordinance 1934.Section 39(1) also pertinentlyrequires that a municipality ‘notdo anything the effect of which isin conflict with the intention’ ofthe subsection. On this basis too,administrative decision-makingwhich purports to circumventthe effect of a restrictive conditionof title by deferring decision-making in relation to it to anotheradministrative decision-maker,would be unreasonable andirrational.

This pointed ineluctably to theconclusion that a conditionalrezoning such as that whichoccurred in the present instancewas unlawful. It followed that ithad to be set aside.

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WERNER v FLORAUNA KWEKERY BK

A JUDGMENT BY MPATI P(MAJIEDT JA, PILLAY JA,SCHOEMAN AJA and VAN DERMERWE AJA concurring)SUPREME COURT OF APPEAL26 MARCH 2015

2016 (2) SA 282 (SCA)

Conditions imposed by a localauthority for the development ofproperty are not binding on thatproperty if the development is notproceeded with.

THE FACTSFlorauna Kwekery BK, and Mr J

Horn were the originaldevelopers of adjacent properties.They engaged the same towndeveloper to bring about thedevelopment. Permission inrespect of each development wasgranted during 1996, with certainconditions. One of the conditionsimposed by the provincialauthority was that provision hadto be made for an access roadfrom the development to theprovincial road between Pretoriaand Brits.

According to the sketch plan, theonly permissible access to theBrits road was through Horn’sproperty. In order to fulfil thecondition relating to the accessroad a subdivisional diagramme,indicating a servitude area overHorn’s property, was registeredin the office of the Surveyor-General. Horn did not proceedwith his planned development - afilling station and shoppingcentre on his property - butcaused a certificate ofregistration of title in respect ofthe property concerned to beissued in his name.

The conveyancer had omitted tohave the servitude over theproperty, as indicated on thesubdivisional diagram, registeredin the deeds office, but made anentry on the back of the cover ofthe file in the deeds office that theservitude on the subdivisionaldiagramme would be registeredon transfer to a third party. Acaveat was accordingly noted on10 December 2003, that ontransfer of the property to a thirdparty there was to be a conditionin the transfer deed confirmingthe servitude.

In 2005 Horn sold the propertytoWerner, who had it registeredin the names of his two minorchildren. No servitude was,however, registered over it,

although the caveat was stillrecorded in the deeds office. Atthe time the registration oftransfer of ownership waseffected into the names ofWerner’s minor children aservitude note on thesubdivisional diagram had beencancelled.

Florauna brought an applicationfor an order confirming theservitude over the property.Werner brought a counter-application declaring that noservitude existed over theproperty and that any ‘caveat’ inrespect of the property beremoved or deleted from theregister.

THE DECISIONWerner contended that Florauna

was not entitled to the order itsought as it did not rely on anyagreement in terms of which aservitude had been created, that acaveat is merely an internalcautionary note for officials in theDeeds Office and does not by itselfestablish any rights orobligations on owners of land andthat Florauna did not rely onprescription or any other originalform of acquisition of rights forthe registration of a servitude.

Because Horn did not proceedwith the development, thebusiness rights he had obtainedhad lapsed and so had thecondition attached thereto, ofhaving to provide access in theform of a servitude to hisproperty where the businesseswere to be established. The merefact that a servitude area wasdepicted on the subdivisionaldiagram of the Surveyor-Generalrelating to the property did notconvert what had been atemporary access road into aservitude of right of way infavour of the public.

Florauna had therefore notshown that it was entitled toconfirmation of the servitude.

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RANDBURG MANAGEMENT DISTRICT v WESTDUNES PROPERTIES 141 (PTY) LTD

A JUDGMENT BY LEACH JA(TSHIQI JA, THERON JA, WILLISJA and MATHOPO JA concurring)SUPREME COURT OF APPEAL30 SEPTEMBER 2015

2016 (2) SA 293 (SCA)

The imposition of CityImprovement District leviesamountd to ‘the imposition of ratesand other taxes, levies and duties’as envisaged by section 160(2)(c) ofthe Constitution. This is therefore afunction which cannot not bedelegated by a municipal council toa body such as a mayoralcommittee.THE FACTS

After the formation of theRandburg city improvementdistrict (CID), levies under theGauteng City ImprovementDistricts Act (no 12 of 1997) wereimposed on properties owned byWest Dunes Properties 141 (Pty)Ltd. They were situated withinthe geographical area of theRandburg Management District.

West Dunes refused to paycertain of these levies. In duecourse the City of Johannesburgbrought actions seeking paymentof the amounts it contended WestDunes owed.

In order to prove its case, theCity was obliged to prove that apetition relating to the formationof the Randburg CID undersection 3(2) had been properlyapproved in terms of theseprovisions. The petition was totake the form of a CID plan.

For the formation of theRandburg CID, the necessarypreliminary requirements ofpublic consultation had beenfulfilled. Thereafter, a letter dated18 October 2004 was sent to thecompany that had lodged thepetition for the establishment ofthe Randburg CID stating that itsapplication for the establishmentof a city improvement district inthe Randburg area to be called theRandburg Improvement Districtwas approved by the mayoralcommittee. It confirmed that allthe requirements in terms of theAct had been complied with.

THE DECISIONIt was startling that neither the

City nor the RandburgManagement District was able toproduce any further direct ordocumentary proof relating to theapproval and formation of theRandburg CID. The Randburg CIDhad probably been made by themayoral committee and not bythe municipal council itself. TheRandburg Management District

contended however, that theassumption in the letter of 18October 2004 had been correctand the municipal council musthave duly delegated the mayoralcommittee to deal with thepetition. Accordingly, the latter’sapproval of the petition was validand binding.

The first obstacle to thisargument was that there was noproof, documentary or otherwise,that the municipal council had infact delegated authority to themayoral committee to deal withthe approval of the Randburg CIDpetition. But, assuming that sucha delegation did take place, thatdelegation was unlawful.

Section 60(1)(a) of the LocalGovernment: MunicipalStructures Act (no 117 of 1998)provides that if a municipalcouncil has more than ninemembers, its executive mayormay appoint a mayoralcommittee from amongst themunicipal. However, althoughsection 59(1)(a) of the LocalGovernment: Municipal SystemsAct (no 32 of 2000) provides that amunicipal council may delegatecertain of its powers, section59(2)(a) goes on to provide thatany such delegation ‘must notconflict with the Constitution’.Section 160(2) of the Constitutionprovides that a municipal councilmay not delegate ‘the impositionof rates and other taxes, leviesand duties’. Consequently theimposition of a levy is a functionthat the City was not permittedto delegate to its mayoralcommittee. The delegation uponwhich the RandburgManagement District reliedwould be invalid.

In these circumstances it cannotbe said that the levy which aratepayer becomes obliged to payunder the Act, albeit after havingbeen subjected to debate in thepublic participation process, was

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not determined and imposed bythe municipality. Even if themonthly sum is reflected onproperty owners’ accounts as aseparate item from other ratesand taxes, and is collected by themunicipality before being paid tothe management board of a CID, itis clearly imposed by themunicipal council and is not anamount merely collected by themunicipality.

The alternative argument wasthat even if the monthly amounta ratepayer became due to payunder the CID was to be regardedas a levy, it does not fall withinthe category of ‘rates and othertaxes, levies and duties’, theimposition of which, undersection 160(2)(c) of theConstitution, may not bedelegated by a municipal

council.The argument was thatCID levies were intended neitherto provide revenue to the statenor unilaterally imposed uponproperty owners but were,rather, ‘payable by the propertyowners to their own privatemanagement body consequentupon their majority decision toform an improvement district’. Itwas also argued that as thepersons who benefited from theCID levies formed only a portionof the populace of the largermunicipal area, the levies couldnot be regarded as being requiredfor municipal services.

Neither of these contentionscould be accepted. Section160(2)(c) of the Constitutionclearly seeks to impose alimitation upon a municipalcouncil’s power to delegate, so as

to ensure that the council, andonly the council, is responsible forthe function of raising municipalrevenue. Undoubtedly this wassuch a function. The imposition ofCID levies amounted to ‘theimposition of rates and othertaxes, levies and duties’ asenvisaged by section 160(2)(c) ofthe Constitution. As theimposition of such levies istherefore a function which couldnot be delegated by a municipalcouncil, any delegation to themayoral committee to decideupon the approval of a CID planunder section 3 of the Act wasinvalid. Consequently a decisionof the mayoral committee toapprove such a plan lackedlegality

In these circumstances it cannot be said that the levy which a ratepayer becomes obliged to payunder the Act, albeit after having been subjected to debate in the public participation process,was not determined and imposed by the municipality. Even if the monthly sum is reflected onproperty owners’ accounts as a separate item from other rates and taxes, and is collected by themunicipality before being paid to the management board of a CID, it is clearly imposed by themunicipal council and is not an amount merely collected by the municipality.

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LAND AND AGRICULTURAL DEVELOPMENTBANK OF SOUTH AFRICA v CHIDAWAYA

A JUDGMENT BY BAQWA JGAUTENG DIVISION, PRETORIA11 SEPTEMBER 2015

2016 (2) SA 115 (GP)

If proper notice of intention torecover a debt is not made in termsof section 129 National Credit Act(no 34 of 2005), the defect cannot beremedied by annexing the relevantnotice to a summons in whichrepayment of the debt is claimed.

THE FACTSThe Land and Agricultural

Development Bank of SouthAfrica brought an action againstChidawaya for repayment of R11582 245,22, being an amountalleged to be due in terms of aloan secured by a mortgage bond.

Notice of demand for repaymenthad been made in terms of section129 National Credit Act (no 34 of2005) but the notice had beenreturned to sender. The bankannexed the notice to itssummons in the action.

Chidawaya defended the action.The bank brought an applicationfor summary judgment.Chidawaya admitted hisindebtedness but opposed theapplication on various grounds,one of which was that there hadnot been compliance with section129 of the National Credit Act.

THE DECISION A section 129 notice may be

attached to a summons as proofof compliance with the Act butnot as constituting compliance. Itis clear from the wording of theAct that it is a pre-litigation stepand must accordingly precedelitigation. If litigation is embarkedupon without compliance withsection 129 then s 130(4) providesthe procedural mechanism toremedy this defect. To holdotherwise would render section130(4) irrelevant and would

ignore the directives of thelegislature, as well as underminethe purpose of the Act as set outin section 3. This is to addressissues such as overindebtednessand debt-restructuring. Thesewould be undermined if the pre-litigation notice were dispensedwith.

Attachment of a section 129notice to a summons should notbe taken as proper service asintended by the Act. This isbecause by the time summonswill have been issued theguillotine would have fallen andthe service provider would havecommenced with judicialenforcement.

In the circumstances, the bankdid not comply with therequirements of section 129 of theAct as defined in Sebola v StandardBank of South Africa Ltd 2012 (5) SA142 (CC).

Despite the technical defencesChidawaya had attempted toraise, he did not deny that he wasin arrears. The procedure to befollowed where there is non-compliance with therequirements in serving a section129 notice is set out in section130(4). Applying this provision,application for summaryjudgment was postponed sine die.The bank was directed to servesection 129(1)(a) notices onChidawaya and the otherdefendants.

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KGOMO v STANDARD BANK OFSOUTH AFRICA LTD

A JUDGMENT BY DODSON JGAUTENG DIVISION, PRETORIA10 JUNE 2015

2016 (2) SA 184 (GP)

Strict compliance with notice ofdefault in terms of section 129 ofthe National Credit Act (no 34 of2005) is necessary.

THE FACTSThe Standard Bank of South

Africa Ltd lent money to Kgomo,the loan being secured by amortgage bond. Kgomo defaulted,and the bank sent notices ofdefault to him in terms of section129 of the National Credit Act (no34 of 2005). Kgomo’s address onthe notice was given as 353Sterling Street, Ormonde View,2091. This was not in fact theaddress of Kgomo. The error cameabout as a result of the erfnumber having been substitutedfor the street number. Theiraddress was 40 Sterling Street,Ormonde View. As a result, thenotice did not reach Kgomo beforethe bank issued summons.

The bank obtained defaultjudgment for payment of R276278,15, together with interest, anorder declaring certainimmovable property to bespecially executable, an orderauthorising the Registrar to issuea warrant of execution againstthe property, and costs on theattorney and client scale.

Kgomo applied for rescission ofjudgment. The basis for theapplication was that thejudgment was erroneouslysought and granted because of thebank’s failure to comply withsection 129(1) read with section130 of the National Credit Act.

THE DECISIONThe question that arose was

whether non-compliance withsection 129(1) and the relevantparts of section 130 was merely adilatory defence that did not giverise to an erroneous seeking orgranting of default judgment. Ifso, rescission of judgment had tobe refused.

In Kubyana v Standard Bank ofSouth Africa Ltd 2014 (3) SA 56 (CC)the court held that the bank wasnot required to prove that thenotice had in fact come to thesubjective attention of the debtor,a debtor must respondreasonably when the creditor hasproperly taken steps to bring thenotice to his or her attention andnot bothering to respond to anotice requiring him or her to goto the post office and collect aregistered item did not amount toreasonable conduct on the part ofa debtor.

Based on Kubyana, strictcompliance with section 129(1)remained necessary. Strictcompliance required that wheresection 129(1) was not compliedwith, section 130(4)(b) came intoplay. It peremptorily requiresthat the court ‘must . . . adjournthe matter . . . and make anappropriate order setting out thesteps the credit provider mustcomplete before the matter maybe resumed’.

The bank pleaded delivery of thenotice to Kgomo in its particularsof claim. Yet it was clear that itspleading was erroneous and thatthere was no such delivery. Interms of section 129(1)(b), thebank was precluded fromcommencing any legalproceedings without delivering asection 129(1) notice beforehand.In terms of section 130(1)(a), 10business days had to haveelapsed after any notice, beforelegal proceedings werecommenced. That too was notcomplied with. The judgment wastherefore erroneously sought.Rescission of judgment had to begranted.

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LAND AND AGRICULTURAL DEVELOPMENT BANKOF SOUTH AFRICA v FACTAPROPS 1052 CC

A JUDGMENT BY MSIMEKI JGAUTENG DIVISION, PRETORIA9 SEPTEMBER 2015

2016 (2) SA 477 (GP)

A special notarial bond should beincluded in the definition of‘mortgage bond’ in the PrescriptionAct (no 68 of 1969).

THE FACTSIn May 1999, the Land And

Agricultural Development Bank ofSouth Africa lent R250 000 toFactaprops 1052 CC. In terms ofthe loan agreement theindebtedness of Factaprops hadto be discharged by way of fiveinstalments. These became due on15 June of each year commencing2000 and ending 2004.

In terms of the loan agreement,should Factaprops fail to makepayments of the amount due andowing on the various paymentdates, the full amount due andowing under the loan agreementwould immediately become dueand payable. The amount lentand advanced by the bank toFactaprops, taking intoconsideration interest levied andpayments received amounted toR491 203,05. This amount wassubject to interest at the rate of14% per annum calculated from31 August 2010 to date ofpayment, the interest to becalculated and capitalizedmonthly.

In terms of a special notarialbond registered on 18 April 2000,Factaprops hypothecated certainmoveable property in favour ofthe bank as continuing coveringsecurity for the benefit of thebank in respect of theindebtedness.

Factaprops did not makepayment of the loan agreementwhen required. The bank claimedpayment of R491 203,05 togetherwith interest at 14% per annumfrom 31 October 2010 to date ofpayment with the said interest tobe calculated and capitalizedmonthly.

The bank’s summons wasserved on Factaprops on 3November 2010. This was morethan three years from the dateson which the debts arose asprovided for on the 15th June ofthe relevant years. Factaprops

defended the action on thegrounds that the bank’s claimhad prescribed in terms of section11(d) of the Prescription Act (no68 of 1969). In the alternative, andto the extent that it is alleged thatthe claim arose from the specialnotarial bond Factapropscontended that the bank’ssummons was served on a datemore than six years from thedates on which the debts arose.

THE DECISIONThe question was whether the

applicable period of prescriptionwas thirty years in terms ofsection 11(a) of the PrescriptionAct (ie on the basis that the debtis secured by a mortgage bond) ascontended by the bank, or ascontended by the defendants, sixyears as provided for in section11(c) (ie on the basis that theindebtedness is secured by anotarial contract) or three yearsas provided for in section 11(d) onthe basis that the debt is one thatarose from the loan agreement.

Section 11(a)(i) of thePrescription Act provides thatthe period of prescription of adebt shall be thirty years inrespect of any debt secured by amortgage bond. A special notarialbond should be included in thedefinition of ‘mortgage bond’ inthe Prescription Act.

In Land and AgriculturalDevelopment Bank of South Africa vBoeke GP 12506/07 it was heldthat the period of prescription, inrespect of a debt secured by aspecial notarial bondcontemplated in section 1 of theSecurity Act, was 30 years. This isthe correct interpretation ofsection 11(a)(i) in the PrescriptionAct, ie that special notarial bondsare included in the reference to‘mortgage bond’. A reading ofsection 11(a)(i), together withsection 2 of the Insolvency Act,and section 1 of the Security Act,

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makes this even clearer. TheBoeke judgment was correct infinding that reference to a‘general’ mortgage bond in thestatutes referred to ‘obviouslyrefers to a mortgage bond relating

to movables’, and in finding thatthe period of prescription inrespect of a debt secured by aspecial notarial bondcontemplated in section 1 of theSecurity Act is 30 years.

Prescription

Having regard to what I say above it is clear that the correct H interpretation of s 11(a)(i) inthe Prescription Act seems to be that the legislature intended to include special notarialbonds in the reference to ‘mortgage bond’. The reading of s 11(a)(i), together with s 2 of theInsolvency Act, and s 1 of the Security Act, makes it even clearer. Having said this in myview it also becomes clear that Rabie J in his judgment was correct when he found thatreference to a ‘general’ mortgage bond in the statutes referred to herein ‘obviously refers to amortgage bond relating to movables’ (para 17 of his judgment). He was also correct in findingthat the period of prescription in respect of a debt secured by a special notarial bondcontemplated in s 1 of the Security Act is 30 years. There is therefore no reason why hisjudgment ought not to be followed.

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MIRACLE MILE INVESTMENTS 67 (PTY) LTD vSTANDARD BANK OF SA LTD

A JUDGMENT BY GAIBIE JGAUTENG LOCAL DIVISION,JOHANNESBURG11 JULY 2014

2016 (2) SA 153 (GJ)

The date on which a debt is duedetermines the date on whichprescription of the debt begins torun. In consequence, prescription inrespect of a debt arising when adebtor defaults in paying a creditoron a specific date begins to run fromthat date, whether or not thecreditor has demanded payment onthat date.

THE FACTSThe Standard Bank of SA Ltd

granted Mr Nicolas a ‘liberatorfacility’, pursuant to which anaccount was opened for him inthe books of the bank and a line ofcredit was granted to him to themaximum amount of R13 984 600.In terms of the facility, the bankundertook, during the currency ofthe agreement, to lend andadvance sums of money on behalfof Nicolas and it would for thatpurpose debit his account withsuch sums. It was a requirementof the facility that Nicolas’ debt tothe bank be secured by collateralor suretyships. Miracle MileInvestments 67 (Pty) Ltd and thesecond applicant executedsuretyships in favour of the bankand they registered bonds assecurity pursuant to thesuretyships they signed.

Nicolas agreed to pay theprincipal debt with interest in240 monthly instalments. Heaccepted that the bank would beentitled to levy its usual andcustomary charges and to debithis account with such charges;and accepted liability to pay forall legal costs and expenses whichthe bank might incur inconnection with the enforcementof its rights in terms of theagreement.

In paragraph 9 of the letter ofgrant, the primary obligation ofNicolas for the purposes ofrepayment was provided for asfollows: ‘The interest payable byyou is calculated on a daily basison the outstanding balance, ischarged monthly on the last dayof the month and is due andpayable immediately. Anyinterest which is unpaid on thedue date, will be capitalised onthat date.’

In terms of clause 12.2 of theiragreement, in the event of default,the bank had the right toterminate the facility and claim

immediate repayment of theoutstanding balance by givingwritten notice. It would beeffective immediately or from adate stated in the notice. If thefacility was cancelled anyamounts owing would becomepayable immediately, if stated inthe notice, or on the dates statedin the notice.

Nicolas did not draw on theliberator facility nor did he makeany payments to the bank inconsequence of the facility after21 October 2008. Because nopayments were made after thatdate and the bank failed to takeaction against Nicolas for a periodin excess of three years, Miraclecontended that the debt owed byNicolas to the bank wasextinguished by prescription.Consequently, the accessory debtsowed as surety for Nicolas’facility had also beenextinguished by prescription.Miracle contended that Nicolas’debt to the bank prescribed on 22October 2011 by virtue of theprovisions of section 11 of thePrescription Act (no 68 of 1969).

THE DECISIONSection 12(1) of the Prescription

Act provides that prescriptionshall commence to run as soon asthe debt is due.

Whether the debt incurred byNicolas in terms of the liberatorfacility became prescribeddepends on whether the debtbecame ‘due’ within the meaningof that word in section 12(1) of theAct. If the debt became due fromthe date of Nicolas’ default on orabout 22 October 2008,prescription would havecommenced running from thatdate and the bank’s claim wouldhave prescribed on 22 October2011.

Prescription runs from the datethat the bank had the right toenforce payment of the full

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amount due to it, even though itdid not do so and was preparedto wait longer. To adopt theapproach suggested by the bankwould mean that the bank couldeffectively delay prescriptionfrom running, depending onwhether or not it issued a writtennotice requiring the remedy of abreach or confirmation of thetermination of the facility and theimmediate claim for repayment ofthe outstanding balance. In thisway prescription would bedependent on the bank’s electionand communication to Nicolas,rather than on an interpretationof the provisions of sections 11

and s 12 of the Act.The bank also contended that

the applicable period ofprescription was thirty yearsbecause the period of prescriptionof a debt secured by a mortgagebond is thirty years in terms ofsection 11 of the Act.

It was apparent from the termsof the letter of grant and fromNicolas’ obligations articulated inthat letter that the suretyshipsand the mortgage bonds werecollateral for the principal debtoffered to Nicolas by the bank. Inthe absence of the principal debt,neither the suretyships nor themortgage bonds would have

existed. The applicants registeredthe bonds as security for theirobligations as sureties and co-principal debtors. They clearlytherefore did not undertake aseparate independent liability asa principal debtor and their debtremained accessory to theprincipal debt. The bonds thatwere passed were essentiallypassed to secure their liabilityand to secure the liability ofNicolas as the principal debtor. Inthe circumstances, theprescriptive period of Nicolas’debt therefore remained threeyears in terms of section 11 of theAct.

Prescription

Prescription runs from the date that the bank had the right to enforce payment of the fullamount due to it, even though it did not do so and was prepared to wait longer.To adopt the approach suggested by the bank would mean that the bank could effectively delayprescription from running, depending on whether or not it issued a written notice requiringthe remedy of a breach or indeed confirmation of the termination of the facility and theimmediate claim for repayment of the outstanding balance. In this way prescription would bedependent on the bank’s election and communication to Nicolas, rather than on aninterpretation of the provisions of s 11 and s 12 of the Act

63

NAIDOO v KALIANJEE N.O.

A JUDGMENT BY LEACH JA andMAYAT AJA(MPATI P, PETSE JA and WILLISJA concurring)SUPREME COURT OF APPEAL29 JUNE 2015

2016 (2) SA 451 (SCA)

As section 69 of the Insolvency Act(no 24 of 1936) only requires awarrant to be executed and notissued ‘in a like manner as awarrant to search for stolenproperty’, the provisions relating tothe issue of warrants in criminalproceedings are of no relevance to asection 69 warrant.

THE FACTSNaidoo was the sole member of

M & M Hiring SA CC. He was alsothe sole member of two similarlynamed close corporations and aprivate company which sharedthe same business address. M &M was placed in liquidation.

On the strength of informationforthcoming from Mr Naidoo’sformer business partner and atan insolvency inquiry, as well asreports from an employee ofNaidoo and a private investigatorappointed by the petitioningcreditors, the liquidatorssuspected that the terms ofcertain interdicts obtainedagainst Naidoo had beenbreached, as assets of M & M wereeither being used B by certain ofMr Naidoo’s associated corporateentities or had been dissipated.The liquidators had a reasonablesuspicion that assets of M & Mhad been concealed. On thestrength of that suspicion theyapproached a magistrate for awarrant under section 69 of theInsolvency Act (no 24 of 1936).Subsection 2 provides that if thetrustee has reason to believe thatproperty, a book or document isconcealed or otherwiseunlawfully withheld from him,he may apply to the magistratehaving jurisdiction for a searchwarrant. Subsection 3 providesthat if it appears to a magistrateto whom such application ismade, from a statement madeupon oath, that there arereasonable grounds forsuspecting that any property,book or document belonging to aninsolvent estate is concealed uponany person, or at any place orupon or in any vehicle or vessel orreceptacle of whatever nature, orotherwise unlawfully withheldfrom the trustee concerned,within the area of themagistrate’s jurisdiction, he mayissue a warrant to search for and

take possession of that property,book or document. Subsection 4provides that such a warrantshall be executed in a like manneras a warrant to search for stolenproperty, and the personexecuting the warrant shalldeliver any article seizedthereunder to the trustee.

Naidoo challenged the issue ofthe warrant on the grounds thatwhen the liquidators had appliedfor it, they did so without givingnotice of their intention to do so.

THE DECISIONOn the undisputed fact that Mr

Naidoo dissipated M & M’s assets,there was a reasonable suspicionthat those assets had beenconcealed. That being so, theliquidator had been entitled toapply for the warrant withoutnotice.

As far as Naidoo’s contentionthat there had been an abuse ofprocess was concerned, therewas a reasonable suspicion thatassets of M & M had beenconcealed. That being so, theliquidators were entitled to applyfor a warrant. The magistrate hadbeen fully entitled to issue it.

Naidoo contended that the issueof the warrant did not constituteadministrative action but that itinvolved the exercise of a judicialdiscretion. That discretion, hesubmitted, was not akin to civilproceedings, so that it wasneither proper to grant a costsorder nor to issue a warrantprovisionally. In thesecircumstances Naidoo contendedthat the warrant had been issuedbeyond the provisions of section69 of the Act.

This could not be accepted. Onehad to accept that the warrantmight have been awkwardlyphrased, but it was clearly notissued in the process of civillitigation.

Relying upon the provisions of

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section 69(4) of the Act, Naidooargued that, as the sectionrequired the warrant to be‘executed in a like manner as awarrant to search for stolenproperty’, the warrant was infact one issued under theprovisions of the CriminalProcedure Act (no 51 of 1977) andthat had been envisaged by themagistrate who, in issuing thewarrant, referred to section 69‘read together with section 21 ofthe Criminal Procedure Act’ asauthority for doing so. On thestrength of this Naidoo contendedthat the warrant did not matchup to the strict requirements of acriminal warrant and should beset aside.

Accepting that a warrant issuedunder section 69 has, at the very

least, the potential to infringe therights of others, there isnevertheless a fundamentaldistinction between it and acriminal warrant. The underlyingpurpose of a seizure under section69 of the Act is, as stated in CooperN.O. v First National Bank of SA Ltd2001 (3) SA 705 (SCA), ‘to disablethe insolvent and anyone elsewho may be physically inpossession of such assets fromalienating or encumbering themto the prejudice of creditors. Thatpurpose is achieved by, inter alia,providing for the trustee to havephysical possession of them in thecase of movables or, in the case ofmovables under attachment orimmovables, by having therelevant functionaries placecaveats against the assets’.

In the light of these fundamentaldifferences, a warrant undersection 69 can neither beconstrued as being akin to awarrant issued under section 21of the Criminal Procedure Act,nor necessarily subject to thesame limitations and restrictionsattendant upon criminalwarrants. In any event, adistinction must be drawnbetween the issue of a warrant,on the one hand, and itsexecution, on the other. As section69(4) only requires a warrant tobe executed and not issued ‘in alike manner as a warrant tosearch for stolen property’, theprovisions relating to the issue ofwarrants in criminal proceedingsare of no relevance to a section 69warrant.

The challenge was dismissed.

Insolvency

Section 21 of the Criminal Procedure Act requires a warrant issued under that section to ‘beexecuted by day, unless the person issuing the warrant in writing authorises the executionthereof by night’ and that H the police official executing the warrant shall, upon the demandof an affected person, hand over a copy of the warrant. Clearly, then, the reference to s 21 ofthe Criminal Procedure Act in the warrant issued by the magistrate meant no more thanthat it was to be executed in such a manner, and not that it was a warrant issued under theprovisions of the Criminal Procedure Act or fell to be regarded as such.

65

UNICA IRON AND STEEL (PTY) LTD vMIRCHANDANI

A JUDGMENT BY LEACH JA(LEWIS JA, SHONGWE JA, ZONDIJA and BAARTMAN AJAconcurring)SUPREME COURT OF APPEAL1 OCTOBER 2015

2016 (2) SA 307 (SCA)

An agreement which is prefacedwith the words ‘subject toagreement’ may be construed asindicating that its terms will formthe subject of the agreement whenthe parties sign it. The fact that theparties proceed to implement anagreement indicates that theyconsidered the agreement to be finaland binding upon them.

THE FACTSMirchandani was employed by

Unica Iron and Steel (Pty) Ltd,and was also a director of thecompany. The company had beenestablished by Mirchandani andthe second appellant for thepurpose of conducting a steel-manufacturing and smeltingoperation involving theproduction of certain steelproducts from the recycling ofmetallic waste.

As a result of a breakdown inpersonal relations, the partiesagreed to record the terms ofMirchandani’s termination ofemployment. After having doneso in documentary form, theparties signed the agreement. Theagreement provided that it was‘subject to signing of agreement’.It also provided that Mirchandaniwould receive a golden handshake of ‘R1 420 000 (net)’ uponsigning of agreement. The amounthad been recorded after it wasagreed that Unica and notMirchandani would pay anyapplicable tax on the payment.

Unica later determined that thetax liability applicable to thetermination agreement wasapproximately R1m. It proposedthat a termination agreement bedrafted by attorneys.Mirchandani refused to sign thatagreement as it deviated from theterms already recorded. Hebrought an action for specificperformance of the originalagreement.

Unica defended the action on thegrounds that the originalagreement contained a suspensivecondition that had never beenfulfilled, that it did not constitutea binding agreement and that asMirchandi had failed to performhis reciprocal obligations, hecould not claim specificperformance.

Contract

THE DECISIONThere was no reason to conclude

that the phrase ‘subject to’necessarily connoted that afurther agreement needed to besigned before it became binding.The agreement was written by abusinessman, not a lawyer skilledor trained in the drafting ofcontracts, and allowance had tobe made for that in construing itsterms. This was especially so inthe present case where thelanguage in which the documentwas drafted was not their mothertongue. In these circumstances thephrase ‘the agreement’ couldreadily be understood as meaningno more than ‘this agreement’,particularly in the light of ithaving been signed by the parties.Had the agreement been intendedto be no more than a memorial ofwhat was later to be incorporatedin a formal agreement, signatureby the parties would have beenentirely superfluous. But it was sosigned by all of the relevant roleplayers. This was a clearindication that they intended it tobe binding.

Importantly, immediately afterthe agreement was signed, Unicaproceeded to implement its terms.This indicated that Unicaregarded the agreement asbinding on it. This wasirreconcilable with the agreementhaving been conditional upon asubsequent, formalised agreementbeing concluded and signed. Theinference was irresistible that itwas only once Unica realised thatit had underestimated therespondent’s tax liability that itsought to evade its contractualobligations.

The agreement was therefore notsubject to a suspensive conditionand was binding between theparties.

66

HALSTEAD-CLEAK v ESKOM HOLDINGS LTD

A JUDGMENT BY BAQWA JGAUTENG DIVISION, PRETORIA1 JUNE 2015

2016 (2) SA 141 (GP)

In terms of section 61(1) of theConsumer Protection Act (no 68 of2008), Eskom Holdings Ltd may beheld liable for injuries sustained asa result of the supply of electricity.

THE FACTS On 11 August 2013 Halstead-

Cleak, whilst riding a bicycle,came into contact with a low-hanging live power line spanninga footpath adjacent toBokmakierie Road in theNooitgedacht area, Gauteng.During the incident he sustainedsevere full-thickness electricalburns to the right forehead andburn wounds to the chest, armsand both thighs. Upon learningof the incident Eskom rectified thesituation by causing theelectricity to be switched off andthe lines dismantled.

Eskom Holdings Ltd was alicensee in terms of and forpurposes of the ElectricityRegulation Act (no 4 of 2006) andwas responsible for the powerline in question, through which itconducted electricity. In terms ofthe Consumer Protection Act (no68 of 2008), Eskom was both theproducer and the distributor ofthe electricity generated throughthe power line.

In an action brought byHalstead-Cleak, the courtdetermined whether or notEskom was strictly liable in termsof the provisions of section 61 ofthe Consumer Protection Act.

Section 61(1) provides theproducer or importer, distributoror retailer of any goods is liablefor any harm caused wholly orpartly as a consequence of (a)supplying any unsafe goods, (b) aproduct failure, defect or hazardin any goods, or (c) inadequateinstructions or warningsprovided to the consumerpertaining to any hazard arisingfrom or associated with the use ofany goods, irrespective ofwhether the harm resulted fromany negligence on the part of theproducer, importer, distributor orretailer, as the case may be.Section 61(2) provides that asupplier of services who, in

conjunction with theperformance of those services,applies, supplies, installs orprovides access to any goods,must be regarded as a supplier ofthose goods to the consumer, forthe purposes of the section.

THE DECISIONEskom contended that the

Consumer Protection Actconcerned consumerism and theprotection of consumers and that,had Halstead-Cleak suffered theelectrical burns that he did in thecourse of utilising the supply ofelectricity to his home, orotherwise in the course of his useof electricity, then the Act mightwell have applied. Section 61 wasnot intended to apply tocircumstances such as the presentcase.

In terms of section 5(1) the Actapplies to every transactionoccurring within the Republicand the promotion of any goodsor services, or the supplier of anygoods or services, within theRepublic There could be no doubtthat electricity constitutes ‘goods’for purposes of the Act, as it isclear from sub-section (e), whichincludes goods, water andelectricity as part of thedefinition. It could therefore beaccepted that the electricitywhich caused Halstead-Cleak’sinjuries were ‘goods’ for purposesof section 61 of the Act.

Section 53(1) provides thatdefect, ‘when used with respect toany goods, component of anygoods, or services’, refers to anyaspect ‘that renders the goods orresults of the service lessacceptable than persons generallywould be reasonably entitled toexpect in the circumstances; . . .’.In the context of electricity beingconducted along a line which isnot required or used to supplyany other consumer, thisconstitutes ‘goods or results of

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67

the service less acceptable thanpersons generally would bereasonably entitled to expect inthe circumstances’.

It was common cause thatEskom allowed the presence of

electricity in the lines spanningthe footpath used by Halstead-Cleak on the day of the incident.Upon learning of the incidentEskom rectified the situation bycausing the electricity to beswitched off and the lines

dismantled. Its actions after theincident reinforced the notionthat it had introduced the sourceof danger which led to Halstead-Cleak’s injuries, for which itshould be held liable.

Contract

68

EX PARTE CONCATO

A JUDGMENT BY BOZALEK JWESTERN CAPE HIGH COURT18 SEPTEMBER 2015

2016 (3) SA 549 (WCC)

An application for voluntarysurrender must disclose that theapplicant intends to re-purchaseestate assets on instalment salefollowing the acceptance of such anapplication.

THE FACTSAn application for voluntary

surrender was brought byConcato and other applicants.Each application as similar inmany respects, including in theexpectation of the dividend to bereceived (16% or 17%) bycreditors.

In each case, the applicant hadentered into an arrangement inwhich he or she would purchaseback the estate assets oninstalment sale, after acceptanceof the voluntary surrenderapplication. The same valuer wasused to value estate assets andthese were valued on theassumption of a forced sale of theasset.

The court raised the questionwhether the applications wereacceptable.

THE DECISIONIt was by no means clear that

‘buy-back’ arrangements were inthe interests of the body ofcreditors. Many creditors wouldnot trouble to prove a claim.There were other reasons why the‘buy-back’ arrangements raiseddoubt as to whether they servedthe interests of creditors. Theassets were valued on a forced-sale basis and yet, without anyauction being held, the insolventinvariably purchased them backat this value and, in mostinstances, by way of instalmentpayments over an extendedperiod. Life proceeded virtuallyunchanged for the insolvent.None of his household goods wereremoved and he/she continued toutilise and enjoy all his/herhousehold goods and assets, until,in due course, he reached anarrangement with the trustee topurchase them back, almostalways by way of instalments.During this period the debtor wasimmune from his existingcreditors by virtue of the

voluntary-surrender order whichhad been granted.

One of the primaryrequirements for a voluntary-surrender application to besuccessful is that it must be madebona fide. The facts which hadbeen brought to light led to theconclusion that the buy-backarrangements were largelypreordained. In none of theapplications was any mention ofsuch an arrangement made by theapplicant. On this ground alone itcould be concluded that the bonafides of the applications was opento serious doubt. At the least anapplicant could be expected todisclose that he had been advisedof the likelihood of such anarrangement and that heintended to take advantagethereof, if circumstancespermitted. Such disclosure,together with an explanation ofhow the applicant would financesuch a repurchase, would affordthe court an opportunity torealistically consider whether anorder was in the interests ofcreditors or whether theapplication for voluntarysurrender was merely a self-serving exercise.

In the present matters it also didnot inspire confidence that thesame valuator was used in eachinstance and that his valuationsfollow the same format, namely apro forma affidavit, a table of thehousehold goods and furniture,their estimated value and theircondition being described aseither ‘average’, ‘fair’ or ‘good’.

The most likely outcome, shouldorders of voluntary surrender begranted, would be that theapplicants would purchase backtheir assets at the forced-salevaluation. Where they are unableto pay off this sum in onepayment they would be affordedan opportunity to do so by wayof instalments. The probabilitieswere overwhelming that the

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applications were brought by theapplicants with just such anoutcome in mind. The result, in alllikelihood, would then be that theapplicants would continue toenjoy the possession and use oftheir assets, but they woulddivest themselves of theircreditors. In each case asubstantial portion of eachapplicant’s patrimony would be

reduced by the fees which theattorneys will earn in each suchapplication, together with the feesof the other professional partiesinvolved, including the valuator.

Whether this outcome wouldserve the interests of the creditorswas most unlikely. Theapplications were neither bonafide nor would orders ofvoluntary surrender be to theadvantage of creditors.

It is by no means clear to me, however, that such ‘buy-back’ arrangements are always, oreven in the majority of cases, in the interests of the body of creditors. Firstly, manycreditors will not trouble to prove a claim. This is borne out by Mr Genis’ report, which in3 instances reveals that, of the moneys recovered, portions thereof were paid into theGuardian’s Fund because an ‘insufficiency of claims’ was proved.In another 5 cases, the entire proceeds recovered, in many cases quite substantial, werepaid into the Guardian’s Fund because no claims at all were proved.There are other reasons why these ‘buy-back’ arrangements, carried out on the scale revealedin these applications, raise serious doubt as to whether they serve the interests of creditors.The assets are valued on a forced-sale basis and yet, without any auction being held, theinsolvent invariably purchases them back at this value and, in most instances, by way ofinstalment payments over an extended period. Life goes on virtually unchanged for theinsolvent. None of his household goods are removed and he/she continues to utilise andenjoy all his/her household goods and assets, until, in due course, he reaches anarrangement with the trustee to purchase them back, almost always by way ofinstalments. During this period the debtor is immune from his existing creditors by virtueof the voluntary-surrender order which has been granted.

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GRIFFITHS v JANSE VAN RENSBURG N.O.

A JUDGMENT BY GORVEN AJA(SHONGWE JA, PILLAY JA andSALDULKER JA concurring)SUPREME COURT OF APPEAL26 OCTOBER 2015

2016 (3) SA 389 (SCA)

A disposition is not made in theordinary course of business if suchdisposition is made in terms of anillegal and void agreement.

THE FACTSGriffiths lent a total of R200 000

to the Ushapho Trust. The loanswere repaid, with interesttotaling R24 000. Within sixmonths, the estate of the trustwas sequestrated.

The parties accepted that thepayments were dispositions bythe trust, and had the effect ofpreferring Griffiths above othercreditors. After each of thepayments was made, theliabilities of the trust exceeded itsassets.

It was also accepted that thebusiness being carried on by thetrust prior to its sequestrationwas that of a pyramid scheme.The investments were occasionedby the false and fraudulentrepresentations of persons whoacted on behalf of the trust. Theseincluded representations to theeffect that the scheme was viable,lawful, not in contravention ofany statutory or regulatoryprovisions, not a pyramid schemeand that the deposits would beutilised by the trust to purchasefrom certain estate agents theirrights to commissions which hadbeen earned but not yet paid.These rights would be purchasedfrom the estate agents at apremium relative to thecommissions to be earned. Thetrust would thus earn sufficientprofits to enable it to repay theinvestments and the agreedinterest at rates which were, incertain cases, usurious. Thosecontrolling the trust were awarethat the investments would beused to fund repayment to otherinvestors together with interestthereon. It was admitted that thescheme was unlawful as being apyramid scheme, that thebusiness contravened theprovisions of section 11(1) of theBanks Act and that it constituteda harmful business practice asenvisaged in para 2 read with

para 1.1 of the notice 6 in terms ofs 12(6)(iii) of the Consumer Affairs(Unfair Business Practices) Act.

The trustees in insolvencybrought an action for repaymentof the amounts paid to Griffithson the grounds that this wasrequired by section 29(1) of theInsolvency Act (no 24 of 1936).The section provides that everydisposition of his property madeby a debtor not more than sixmonths before the sequestrationof his estate which has had theeffect of preferring one of hiscreditors above another, may beset aside by the court ifimmediately after the making ofsuch disposition the liabilities ofthe debtor exceeded the value ofhis assets, unless the person inwhose favour the disposition wasmade proves that the dispositionwas made in the ordinary courseof business and that it was notintended thereby to prefer onecreditor above another.

Griffiths defended the action onthe grounds that he was acreditor with an enrichmentcause of action against theUsapho Trust for repayment ofcapital moneys paid to such trustin terms of an illegal and voidagreement, and that therepayment had been made to himin the ordinary course ofbusiness.

THE DECISIONAssuming that a payment under

the condictio would qualify asone which was made in theordinary course of business, hadGriffiths made claims under thecondictio, they would have beenenforceable. Such claims wouldhave arisen at the time that hemade each of the investments.

If the capital and interest hadbeen paid together in a singlepayment, a single dispositionwould have been made whichwould not have been enforceable

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under the condictio. However, itwas not open to Griffiths to arguethat, if he had invoked thecondictio, the payments wouldhave been made in the ordinarycourse of business. On a factuallevel he did not do so. Hedemanded the full amounts dueunder the void investments,which happened to be paid infour, rather than two, sums. Thepayments, and hence thedispositions, were made by thetrust as payments due in respectof the repayment of the

investments, not under thecondictio.

If, immediately before thepayments were demanded andmade, Griffiths had becomeaware of the illegality anddemanded and received paymentof only the capital on the basis ofthe condictio, he would have beenin a different position. Thebusiness relationship betweenhim and the trust would thenhave been one arising from thecondictio. But it is impermissibleto apply an ex post facto,theoretical overlay to the

dispositions. The ‘transactions’arising from the businessrelationship between Mr Griffithsand the trust at the time arosefrom the void agreements, notfrom the condictio.

Applying the broad, objectivetest to the facts of this matter, therepayments of the capitalamounts did not take place in theordinary course of business.Therefore, not only thedispositions relating to interest,but also those relating to capital,were correctly set aside. Theappeal had to fail.

If, immediately before the payments were demanded and made, Mr Griffiths hadbecome aware of the illegality and demanded and received payment of only thecapital on the basis of the condictio, he would have been in a different position. Thebusiness relationship between him and the trust would then have been one arisingfrom the condictio. But it is impermissible to apply an ex post facto, theoreticaloverlay to the dispositions. The ‘transactions’ arising from the business relationshipbetween Mr Griffiths and the trust at the time arose from the void agreements, notfrom the condictio.

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LAGOON BEACH HOTEL (PTY) LTD v LEHANE N.O.

A JUDGMENT BY LEACH JA(NAVSA JA, CACHALIA JA,TSHIQI JA and WILLIS JAconcurring)SUPREME COURT OF APPEAL21 DECEMBER 2015

2016 (3) SA 143 (SCA)

A South African court has adiscretion whether or not torecognise a foreign trustee ininsolvency, and whether or not togrant an interim interdict topreserve assets in respect of whichthe trustee has established a primafacie right.

THE FACTSIn 2013, when Mr S Dunne was

resident in the United States ofAmerica, he was declaredbankrupt in that country by acourt order obtained at hisinstance. Later that year, theDublin High Court appointedLehane as the official assignee inbankruptcy of Mr S Dunne’sestate.

Some eight years earlier, Dunnehad concluded agreements withhis wife in which he undertook totransfer certain of his property toher, including his interest in theLagoon Beach Hotel (Pty) Ltd.That company owned property inCape Town.

Lehane’s investigations led himto believe that Mr Dunne hadbeen insolvent both at the time heconcluded these agreements andmade the dispositions to whichthey refer to his wife. He alsoheard that a third party, lateridentified as Great Africa 999Investment (Pty) Ltd was in theprocess of acquiring the LagoonBeach Hotel. On learning of thisLehane applied ex parte to theCape Town High Court for relief,including an order recognisinghim as the official asssignee andinterdicting the proposedtransaction. Lehane also sought adeclaration in the High Court ofIreland that the purportedtransfer of Dunne’s interest in theLagoon Beach Hotel madepursuant to the agreementbetween Dunne and his wife wasvoid and of no effect.

Lagoon appealed theconfirmation of these orders.

THE DECISIONLagoon’s argument was that no

right had been established andthat Lehane had also failed toshow that he had locus standi. Itcontended that Dunne’sbankruptcy fell to be dealt withby the trustee appointed in the

United States and in accordancewith the bankruptcy laws of thatcountry, rather than pursuant tothe laws of Ireland, the standardposition being that the insolventestate will fall into thejurisdiction of the first courtwhich grants a sequestrationorder.

While it could be accepted thatordinarily a foreign trusteeseeking recognition in SouthAfrica must establish that theinsolvent party was domiciledwithin the jurisdiction of theforeign court that appointed him,this is not a law set in stone. It hasbeen accepted that in exceptionalcircumstances the requirement ofdomicile will not be insistedupon. South African courts haverecognised a foreign trustee attimes where the order pursuantto which the trustee wasappointed was issued by a courtother than that of domicile, buthave added the proviso that thosecases ‘are certainly not authorityfor the contention that a SouthAfrican court may simply on thebasis of comity and convenience,grant recognition to a foreigntrustee, regardless of anyconsideration given to theinsolvent’s domicile.

In the present case, even thoughthere appeared to be a prima faciecase that Dunne was domiciled inIreland, there was a degree ofuncertainty about the issue. Butbecause of that uncertainty, andthe fact that the American courtshad invoked the justice system ofIreland to assist in tracing assetsand administering bankruptcyproceedings, there were in anyevent exceptional circumstancespresent that justifed a SouthAfrican court also renderingassistance by taking thenecessary steps to recognise theIrish Official Assignee in order toprotect the interests of Dunne’screditors. This was not simply amatter of comity and convenience

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but was also intimately bound upwith the prima facie case madeout against Dunne for his beingdomiciled in Ireland.

In the light of theseconsiderations there was noreason to interfere with thecourt’s recognition of Lehane. It

had the discretion to exercisewhether or not to do so, and suchdiscretion was properlyexercised. It also properlyexercised its discretion to grantan interim interdict to preserveassets in respect of which Lehanehad established a prima facieright.

In the present case, even though there appears to be a prima facie case that MrDunne must be domiciled in Ireland, the other allegations mentioned are such thatthere is a degree of uncertainty about the issue. But because of that uncertainty, andthe fact that the American courts have invoked the justice system of Ireland to assistin tracing assets and administering bankruptcy proceedings, there are in any eventexceptional circumstances present that justify a South African court also renderingassistance by taking the necessary steps to recognise the Irish Official Assignee inorder to protect the interests of Mr Dunne’s creditors. But it is not simply a matterof comity and convenience to do so. It is also intimately bound up with the primafacie case made out against Mr Dunne for his being domiciled in Ireland.In the light of these considerations I see no reason to interfere with the court a quo’srecognition of Mr Lehane. It had the discretion to exercise whether or not to do so,and in my view such discretion was properly exercised. It also properly exercised itsdiscretion to grant an interim interdict to preserve assets in respect of which Lehanehad established a prima facie right. In broad terms, then, the appeal must fail.

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SAFARI THATCHING LOWVELD CC v MISTYMOUNTAIN TRADING 2 (PTY) LTD

A JUDGMENT BY DAVIS AJGAUTENG HIGH COURT,PRETORIA11 DECEMBER 2015

2016 (3) SA 209 (GP)

A court may exercise its discretionto grant a final order winding up acompany despite the fact thatbusiness rescue proceedings havecommenced, when there is noevidence that anything wouldmaximise the likelihood of thecompany continuing in existence ona solvent basis.

THE FACTS Safari Thatching Lowveld CC

as employer and Misty MountainTrading 2 (Pty) Ltd as contractorentered into a principal buildingagreement for the construction ofa luxury safari camp. The initialcontract price amounted to someR15 m but later escalated to someR19m. Construction took sometime to commence, but from 7February 2014 onwards some 15payment certificates were issuedand certified in respect of thelodge itself and another three inrespect of the construction of staffquarters. At the time when thewinding-up application waslaunched, the last of each of thetwo series of payment certificateswas outstanding, in the amountof R1 533 533,70 and R274 156,53,respectively.

Failures to make paymentoccurred when the constructionwas approximately 82% completeand principally as a result of anapparent irreconcilable disputebetween the two interveningparties, directors and major co-shareholders of Misty Mountain.The dispute centred around adirector, Mr Jeroldi’s failure orrefusal to make payment of analleged balance subscription pricefor shares in an amount ofapproximately R8m.Significantly, Jeroldi refers tohimself as the ‘financier’ of thesafari lodge.

As a result, construction halted,other creditors of Misty Mountainremained unpaid, and, as MistyMountain had no business orassets other than the proposedluxury safari lodge, it becameunable to meet its currentfinancial liabilities. The deadlockbetween its directors andshareholders also resulted in animpasse, which continued toexist.

Safari applied for the liquidationof Misty Mountain on the basis

that it was both factually andcommercially insolvent and thatit was just and equitable that it bewound up. Jeroldi brought anapplication to begin businessrescue proceedings in respect ofMisty Mountain.

THE DECISIONSection 131(1) of the Companies

Act allows an affected person toapply to a court ‘at any time’ foran order placing a companyunder supervision andcommencing business rescueproceedings. Business rescueproceedings begin, in terms ofsection 132(1)(b), when such an‘affected person applies to thecourt for an order placing thecompany under supervision interms of section 131(1)’ or when acourt makes an order placing acompany under supervisionduring the course of liquidationproceedings in terms of section132(1)(c)).

The operative provision forpurposes of the present case wassection 131(6), which providesthat if liquidation proceedingshave already been commenced byor against the company at thetime an application is made interms of subsection (1), theapplication will suspend thoseliquidation proceedings until (a)the court has adjudicated uponthe application; or (b) thebusiness rescue proceedings end,if the court makes the orderapplied for. With reliance on this,it had been suggested that thewinding-up application bepostponed yet again.Howeer, there was no basis forthe proposition that anapplication for the requisite leaveof the court to continue with suchalready commenced proceedingscould not be made during suchproceedings. There was noevidence placed before the courtindicating a ‘reasonable prospect

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of rescue’ of Misty Mountainwhich could lead a court toaccede to the default position ofthe moratorium imposed bysection 131(6) withoutconsidering the timing andprocess of granting of leave toproceed with pendingproceedings as contemplated insection is an unpaid creditor ofthe respondent.

In the present case, there werenumerous similar unpaidcreditors, Misty Mountainappeared to be both factually andcommercially insolvent, therewas an insurmountable deadlockbetween the directors andshareholders of the company,Safari had commenced winding-up proceedings on 6 July 2015, allthe formal requirementspertaining to winding-upapplications had been compliedwith, both the directors andprincipal shareholders of thecompany were parties to theproceedings, an earlier

application for thecommencement of businessrescue proceedings of thecompany by one of the directorswas struck off the roll of thiscourt, withdrawn and notproceeded with, only days priorto the postponed hearing of thewinding-up application, the sameaforementioned director launcheda second application for thecommencement of businessrescue proceedings, there was noapplication for postponement ofthe winding-up application onbehalf of the director who hadlaunched the aforementionedsecond application for thecommencement of businessrescue proceedings, and therewas no separate or freshapplication to yet again intervenein the winding-up applicationbased on the second applicationfor the commencement ofbusiness rescue proceeding, noevidence was placed before thecourt indicating that whatevermight have been proposed in the

second application for thecommencement of business rescueproceedings would be morebeneficial to the creditors thanproceeding with the pendingwinding-up application, noevidence was placed before thecourt that any of the problems orthe financial distress which thecompany faced, as set out in theapplicant’s founding affidavit orin the letter of its attorney reliedon by the attorney for thedirector in his second applicationfor the commencement ofbusiness rescue proceedings, hadbeen addressed, ameliorated orwould ‘maximise the likelihood ofthe company continuing inexistence on a solvent basis’.

In these circumstances therewas no reason why Safari’srequest for leave of the court toproceed with the winding-upapplication should not begranted. The requirements for thegranting of a winding-upapplication had been met. Thecourt could justifiably exercise itsdiscretion to grant a final order.

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ABSA BANK LTD v DE BEER

A JUDGMENT BY LOUW JGAUTENG DIVISION, PRETORIA18 DECEMBER 2015

2016 (3) SA 432 (GP)

A loan given by a creditor whichamounts to reckless credit may beset aside in terms of section 83 ofthe National Credit Act (no 34 of2005).

THE FACTSDuring 2003, De Beer started

borrowing from Absa Bank Ltd,and a bond in the amount of R100000 was registered over his farmproperty in June of that year. Asecond bond in the amount ofR200 000 was registered on 11April 2005. De Beer was notfarming profitably. At the end of2005 he had a cash-flow problem,for he had to make further smallimprovements on the plot andbuy equipment. He had noincome, except for some fromlucerne. He therefore approachedthe bank for a loan which wasgranted in the amount of R651000 and secured by a bondregistered on13 February 2006.The pre-existing loans wereconsolidated and the bonds ofR100 000 and R200 000 werecancelled. In respect of the 2006loan he saw one Ms Du Plooy atthe Pretoria North branch of theplaintiff and stated to her that hehad no fixed income. He was notasked for any statement of incomeand expenses.

De Beer was 65 years old whenthe total loan of R1 150 000 wasgranted. This meant the loan wasto be repaid at the age of 85. DeBeer was then on pension whenthe loan was granted. He had noincome except a monthly annuityof R650.

De Beer entered into a writtenmortgage loan agreement on 14January 2008. To acquire theproperty and to keep the farmingoperation going, De Beer required— • 2002, R640 000 — his pensionlump sum; • 2003, R100 000 — first loanfrom the bank; • 2004, R200 000 — lump sumfrom his wife’s pension; • 2005, R200 000 — second loanfrom the bank; • 2006, R651 000 — third loanfrom the bank;

• 2008, R500 000 — fourth loanfrom the bank.

The bank sued for repayment ofits loans. De Beer defended theaction on the grounds that thebank had given reckless credit.

THE DECISIONSection 81 of the National Credit

Act (no 34 of 2005) provides thatwhen applying for a creditagreement, and while thatapplication is being considered bythe credit provider, theprospective consumer must fullyand truthfully answer anyrequests for information made bythe credit provider as part of theassessment required by thissection. A credit provider mustnot enter into a credit agreementwithout first taking reasonablesteps to assess (a) the proposedconsumer’s (i) generalunderstanding and appreciationof the risks and costs of theproposed credit, and of the rightsand obligations of a consumerunder a credit agreement, (ii)debt re-payment history as aconsumer under creditagreements, (iii) existing financialmeans, prospects and obligations,and (b) whether there is areasonable basis to conclude thatany commercial purpose mayprove to be successful, if theconsumer has such a purpose forapplying for that creditagreement. A credit providermust not enter into a recklesscredit agreement with aprospective consumer.

The first requirement was that‘reasonable steps’ had to be takento assess the proposedconsumer’s existing means,prospects and obligations. Thisalso meant that the assessmenthad to be done reasonably, ie notirrationally. Only a reasonableassessment will comply with thefollowing phrase in the preambleto the Act — ‘to promote

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responsible credit granting anduse and for that purpose toprohibit reckless credit granting’.

It was irrational to have takenthe surety’s, income into accountin coming to the conclusion thatthe ‘existing financial means’existed to pay the instalments. Asurety does not fall within thedefinition of a consumer in s 1 ofthe Act. Furthermore, the suretyremains totally out of the pictureuntil the principal debtors havefailed to comply with theirobligations.

It was impossible to see how, onthe figures provided, an employee

of the bank could conclude thatthe farming might prove to besuccessful. It seemed that moneywas just being poured into abottomless pit. De Beer wassurely idealistic to believe hecould produce the necessaryincome for survival and service ofthe ever mounting debt fromsmall-scale farming, that is,farming with lucerne and poultryon approximately five hectares.Apart from filling in theapplication form, the bank neverrequired proper income/expenditure accounts supported

by the necessary sourcedocuments, not to even mentionaudited accounts.

On these two grounds the loanscould be seen as reckless.Consequently the court’sdiscretion to either set aside theagreement or to suspend the forceand effect of the agreement arose.The following factors weighed infavour of exercising the firstoption, namely the extent of therecklessness, De Beer’s age, andthe fact that the property whichthebank sought to be declaredexecutable was the only and thusprimary home of De Beer and hiswife.

How, on these figures, an employee of the bank could conclude that the farming mayprove to be successful is beyond me. It seems that money was just being poured into abottomless pit. The first defendant was surely idealistic to believe he could produce thenecessary income for survival and service of the ever mounting debt from small-scalefarming, that is, farming with lucerne and poultry on approximately five hectares.Furthermore, we have the first defendant’s evidence that, apart from filling in theapplication form, the plaintiff never required proper income/expenditure accountssupported by the necessary source documents, not to even mention audited accounts.On these two grounds I declare the agreement as reckless.

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ABSA LTD v MOORE

A JUDGMENT BY LEWIS JA(PONNAN JA, PILLAY JA,SALDULKER JA and VAN DERMERWE AJA concurring)SUPREME COURT OF APPEAL26 NOVEMBER 2015

2016 (3) SA 97 (SCA)

If the agreement upon the basis ofwhich property is transferred isinvalid because it is vitiated bylack of consent, then ownership ofthe property does not pass to thetransferee. Any mortgage bond thenpassed by the transferee in favourof a creditor is equally invalid.

THE FACTSIn response to a newspaper

advertisement offering a loan,Moore made inquiries, and wasoffered a loan. Moore and his wife,to whom he was married incommunity of property, ownedfixed property. The lender gavethem three documents to sign.The first was an ‘Offer toPurchase’ in terms of which aperson offered to buy the Moores’home for R686 000, payable ontransfer of the property to him.The second was a ‘Deed of Sale’ interms of which the purchaser, acertain Mr Kabini, sold theproperty back to the Moores, theprice to be paid in instalments.The third was a ‘Memorandum ofAgreement’ between BrussonFinance (Pty) Ltd, the Moores andMr Kabini, that regulated theirtripartite relationship.

An amount of R157 651 waspaid into the Moores bankaccount. They believed this to bethe loan from Brusson that wouldtide them over their financialplight. Brusson informed themthat this amount would berepayable in monthlyinstalments of R6907 that wouldinclude interest.

On 30 June 2009 Kabini appliedto Absa Bank Ltd for a home loan,secured by a mortgage bond overthe property. The loan wasgranted, the property wastransferred to Kabini and amortgage bond over it wasregistered in favour of the bank.Five bonds, all in favour of thebank where the Moores were themortgagors, were simultaneouslycancelled. The Moores wereunaware that the property wastransferred and that a new bondwas registered in favour of thebank.

In July 2010 the Moores receiveda letter from an attorney writtenon behalf of Brusson, advisingthat they were in breach of their

obligation to pay to Brusson themonthly instalment of R6907. Theattorney advised that theinstalments were payable interms of the ‘Offer to Purchaseand Instalment Sale Agreement’with Kabini. The arrears said tobe owing to Brusson at that stageamounted to R43 597.

The Moores stated that they hadapproached Brusson when theyexperienced financial difficulty,and were under the impressionthat Kabini would lend themmoney and that the propertywould be the security for the loan.They stated that when theyreceived the letter from theattorney this was the first timethat they became aware they hadsold their property to Kabini.

Kabini defaulted in hisobligations under the bond. Thebank issued summons againstKabini, and took judgment bydefault on 12 July 2011 forpayment of R500 067 plus interestand costs. The court declared theproperty specially executable. On3 August 2011 the bank issued awrit of execution, and a notice ofattachment of the property wasserved at the property of theMoores.

The Moores applied fordeclaratory orders that the threeagreements be declared invalid,that they were entitled torestitution of the property andthat the mortgage bond over theproperty was invalid and shouldbe set aside.

THE DECISION A valid underlying agreement

to pass ownership of property isnot required for the effectivepassing of ownership, but theremust be a genuine intention totransfer ownership. Thisprinciple was unanimouslyapproved in Commissioner ofCustoms and Excise v RandlesBrothers & Hudson Ltd 1941 AD 369

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and has been followedconsistently since then.

However, if there is anunderlying agreement, and it istainted by fraud or obtained bysome other means that vitiatesconsent then ownership does notpass. The fundamental legalprinciple is that where thetransferor does not intend totransfer ownership theregistration of transfer has noeffect. Therefore, Kabini did notacquire ownership of theproperty. The question thatremained was whether themortgage bond registered tosecure the bank’s loan to him was

also invalid. The answer was thatthe bond also had no effect.Kabini was not the owner. He hadno property to bond. It followedthat the bond was also invalid.

The bank argued that even ifKabini was not the owner of theproperty he had nonethelessintended to register a bond overthe property. But that held norelevance. He did not have thelegal capacity to register thatbond over that property. Hecould not grant a real right inproperty that he did not own.

The Moores were the owners ofthe property and they wereentitled to restitution of it.

If the underlying agreement is tainted by fraud or obtained by some other meansthat vitiates consent (such as duress or undue influence) then ownership does notpass: Preller and Others v Jordaan [1956 (1) SA 483 (A) at 496].’I referred also to Meintjes NO v Coetzer and Others 2010 (5) SA 186 (SCA) para 9and Gainsford and Others NNO v Tiffski Property Investments (Pty) Ltd andOthers 2012 (3) SA 35 (SCA) paras 38 and 39. To these must be addedQuartermark Investments (Pty) Ltd v Mkhwanazi and Another 2014 (3) SA 96(SCA) ([2013] ZASCA 150) paras 21 – 25. These cases all confirm the samefundamental legal principle: where the so-called transferor does not intend totransfer ownership the registration has no effect.The court a quo thus correctly held that Mr Kabini had not acquired ownership ofthe property. The question that remains is whether the mortgage bond registered tosecure the bank’s loan to him is also invalid. It is clear from the decisions referred toabove that the I bond also has no effect. Mr Kabini was not the owner. He had noproperty to bond. And the court a quo correctly held that the bond was also invalid.

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NEDBANK LTD v NORRIS

A JUDGMENT BY GOOSEN J(BESHE J concurring)EASTERN CAPE LOCALDIVISION, PORT ELIZABETH1 MARCH 2016

2016 (3) SA 568 (ECP)

A debt-rearrangement order has asits purpose the rescheduling orrearrangement of the obligations ofthe consumer in such a manner as toenable the consumer to meet itsobligations to the credit provider. Itserves to mitigate the effect of over-indebtedness by making provisionfor payments within the existingmeans of the consumer and over anextended period. A rearrangementorder does not, and cannot,extinguish the underlyingcontractual obligations.

THE FACTSNedbank Ltd advanced an

unsecured personal loanof R120000 to Norris in terms of a creditagreement. It was agreed thatNorris would be charged aninitiation fee, a monthly servicefee, interest on the outstandingbalance of the loan amount at afixed rate of 17,5% per annum,calculated daily on theoutstanding balance andcapitalised, and an amount forcredit life insurance in a monthlysum of R529,80. The total loanamount, inclusive of charges andinterest, would be R220 669,40,repayable by Norris by way of 60equal instalments in the amountof R3674,49. The credit agreementwould terminate on 1 December2016.

In August 2013 Norris applied toa registered debt counsellor, to bedeclared over-indebted in termsof section 86(1) of the NationalCredit Act. In due course the debtcounsellor, havingmade adetermination ofoverindebtedness, applied interms of section 86(7)(c)(ii)(aa)and (bb) for a debt-restructuringorder. This application, broughtin terms of rule 55 of themagistrates’ courts rules,culminated in a debt-restructuring order. The evidenceplaced before the magistrate wasthe assertion that ‘the consumer’srepayments exceed his income’.The order granted by themagistrate held that Norris wasfound and declared to be over-indebted in terms of the NationalCredit Act 34 of 2005, that hisobligations toward the bank berearranged in accordance withthe debt rearrangement paymentproposal. The rearrangement ofNorris’ obligations were set out inan annexure to the order. Inrelation to the bank, it wasconfirmed that the outstandingbalance of the loan was R105

612,15. Provision was made forpayment of a distributableamount to the bank of a monthlyinstalment of R289,15. Therearranged period was to expire260 months after the date of theorder, with interest to be chargedat 0 %.

The bank brought an applicationto rescind this order.

THE DECISIONAn application for debt

rearrangement can only be madeif the debt counsellor makes adetermination that the consumeris over-indebted. A finding thatthe consumer is over-indebtedcan only be made if thepreponderance of all of theinformation available indicatesthat the consumer will be unableto satisfy all of his or herobligations. In the first instance itis the obligation of the debtcounsellor to make such adetermination. Once that is made,application may be made in termsof section 86. This determinationis therefore a prerequisite andmust be established as ajurisdictional fact before a debt-rearrangement order can be madein terms of section 87(1).

In the present case, theevidentiary material placedbefore the magistrate was suchthat the magistrate could notreasonably have come to theconclusion that Norris wasindeed over-indebted. In thisregard, the evidence placed beforethe magistrate was inadequate.An application for debt reliefmust be in accordance with rule55. This means that the applicantmust set out sufficient facts in thefounding affidavit to disclose acause of action. In this instancethe evidentiary material placedbefore the magistrate waswoefully inadequate. On the basisof the evidence placed before themagistrate the jurisdictional fact

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upon which the magistrate wasentitled to exercise his discretionin terms of section 87 was notestablished. Accordingly theorder granted was unlawful.

The difficulty with the order,however, did not end there. Themagistrate rearranged theNorrisaffairs in such manner as torequire payment of a monthlyamount of R289,15 over a 260-month period and ordered thatinterest would be reduced to 0 %.It was obvious from those figuresthat the rearranged paymentswould not satisfy the amountoutstanding to the bank as at thedate of restructuring. The cleareffect of the rearrangement order

was that Norris, as consumer,would not meet all of hisobligations to the bank in terms ofthe credit agreement. Not onlywould Norris not be obliged tomake payment of the fulloutstanding loan, the monthlypayments did not even meet therequirement to reimburse thebank for the monthly payment itwas obliged to make on behalf ofNorris in respect of creditinsurance cover. The orderplainly did not meet the essentialpurposes of the Act. Apart fromthis, the magistrate also orderedthat Norris’ contractualobligations to pay interest on theoutstanding balance of the loan

be reduced from the fixed 17,5%to 0%. Section 86(7)(c)(ii) confersno such power upon themagistrates’ court. A debt-rearrangement order has as itspurpose the rescheduling orrearrangement of the obligationsof the consumer in such a manneras to enable the consumer to meethis/her/its obligations to thecredit provider. It serves tomitigate the effect of over-indebtedness by makingprovision for payments withinthe existing means of theconsumer and over an extendedperiod. A rearrangement orderdoes not, and cannot, extinguishthe underlying contractualobligations.

An application for debt rearrangement can only be made if the debt counsellormakes a determination that the consumer is overindebted. A finding that theconsumer is overindebted can only be made if the preponderance of all of theinformation available indicates that the consumer will be unable to satisfy all of hisor her obligations. In the first instance it is the obligation of the debt counsellor tomake such a determination. Once that is made, application may be made in terms ofs 86. This determination is therefore a prerequisite and must be established as ajurisdictional fact before a debt-rearrangement order can be made in terms of s 87(1)

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FREE STATE PROVINCE v TERRAGRAPHICS (PTY) LTD

A JUDGMENT BY NAVSA JA(PONNAN JA, LEACH JA,SALDULKER JA and ZONDI JAconcurring)SUPREME COURT OF APPEAL10 SEPTEMBER 2015

2016 (3) SA 130 (SCA)

A Province’s inability to pay acontractor as a result of it nothaving properly budgeted for such apayment is no ground forwithholding payment from thatcontractor.

THE FACTS During 2009/2010 the Free State

Province represented by theMember of the Executive Council:Free State ProvincialGovernment: Department ofPolice, Roads and Transport (theMEC), embarked on a road-infrastructure programme, thepurpose of which was to promoteaccessibility, mobility and a saferoad-infrastructure network inthe Province that would beenvironmentally sensitive andwould stimulate socioeconomicgrowth. The programmeencompassed 23 roads locatedthroughout the Province. Inaccordance with its ownprocurement policy and theapplicable regulatory statutoryprovisions, the Department calledfor tenders to be submitted to itfor the provision of, amongstothers, engineering-relatedservices. The secondrespondent,SSI/Tshepega Joint Venture (SSI),submitted a tender and,subsequently, on 19 April 2010,the Department concluded awritten agreement in terms ofwhich SSI was to render services.

The services were to assist theDepartment to manage theimplementation of the roadrepairs and rehabilitationprogramme for the Free Stateroad network.. SSI was theengineering firm that wasappointed the project manager forthe road-repair and rehabilitationprogramme set out in theagreement. The total contractvalue was approximately R69million.

The main agreementcontemplated the appointment,with the approval of the Province,of subconsultants. Environmentalservices were specificallymentioned in the main agreement.When the services of anenvironmental subconsultantwere required the approval of the

Province was obtained andtenders to that end were invited.Terra Graphics (Pty) Ltdsubmitted a bid, andsubsequently a writtenagreement with the approval ofthe Province was concludedbetween TW and SSI. This was asubconsultancy agreement.

The contract value of thesubconsultancy agreement wasR1 593 997,75. Both SSI and TWperformed their obligations interms of the aforesaid writtenagreements. TW received twopayments from SSI in theamounts of R80 925,94 and R76191,60. A total of approximatelyR13,7 million was paid by theDepartment to SSI. However, itrefused to make any furtherpayments. TW and SSI sued forpayment of the balance.

THE DECISIONIn relation to the merits of TW’s

claim, first, it was contended onbehalf of the MEC that the claimfor payment for services renderedlay against SSI and not againstthe Province. It was submittedthat this was so because in termsof both the main andsubconsultancy agreements SSIundertook to pay TW. There wasthus no contractual obligation onthe part of the Province to makesuch or any payment to TW. TW’sclaim was also resisted on thebasis that the Province had madeno budgetary allocation for theroad-rehabilitation programmein respect of which the writtenagreements were concluded. As aconsequence, the Province wasunable to withdraw the requisitefunds from the ProvincialTreasury to meet the financialobligations it had undertaken interms of the agreement with SSI.Reliance was placed by theProvince on sections 21(1)(b)(i)and 24(1)(a)(i) of the PublicFinance Management Act (no 1 of1999) (the PFMA).

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It was clear that both writtenagreements were approved bythe Department. If in fact thefunds appropriated in terms ofthe Appropriation Act wereinsufficient to meet the totality ofthe Province’s obligations inrelation to its roadsinfrastructure programme and itwas therefore unable to pay SSI, itdid not mean that it would be freeto simply avoid its contractualobligations. The outstanding

commitment would then fall to betreated as unauthorisedexpenditure in terms of the PFMAand not irregular expenditure.

In the present case the stanceadopted by the Province was thatit had acted contrary to statutoryprescripts, more particularly,that it had failed to appropriatefunds. However, this was not thecase. The Province failed to takeany subsequent remedial stepsand it completely ignored the

hardships it had caused for thosewith whom it had contracted. Itaccepted and retained theadvantages it gained through thework done and services renderedby those contractors andsteadfastly refused to take anysteps to ensure that they receivedthe compensation that was theirdue.

The Province had shown nogrounds on which it was entitledto withhold payment.

In the present instance TW performed work for the benefit of the Department, for which itinvoiced SSI, which, in turn, invoiced the Department for the same amount in respect of thesame work. It is perhaps necessary to reiterate that the Province knew that environmentalservices could only be provided by a subconsultant. It approved the appointment of thatparticular subconsultant. In terms of clause 5.1.3 of the main agreement, the Province hadundertaken to SSI to pay the subconsultant’s fees in addition to its (SSI’s) own fees. Itreceived the benefit of the services of TW. It is also not without significance that the MECrepresents a government department which, in terms of constitutional prescripts, is requiredto be accountable. SSI has been joined in these proceedings, which it has chosen not to oppose.All interested parties were therefore before this court. The MEC has failed to raise anyjustification for its failure to pay TW through the conduit of SSI. The court below orderedthe MEC to effect payment of the sum of R 1 540 123,54 to TW (para 1 of its order). And, inpara 2 (albeit wrongly couched as an alternative to para 1) it ordered that such payment beeffected via SSI. There is therefore no reason in principle to interfere with those orders of theHigh Court.

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JOROY 4440 CC v POTGIETER N.O.

A JUDGMENT BY REINDERS JFREE STATE DIVISION,BLOEMFONTEIN28 JANUARY 2015

2016 (3) SA 465 (FB)

A consumer must exhaust all otherremedies available to it beforeproceeding to sue in court in termsof the Consumer Protection Act (no68 of 2008).

THE FACTSJoroy 4440 CC brought an

application for a refund of the fullpurchase price of a motor vehiclethat it bought from a trustrepresented by Potgieter. Theapplication was based on sections55 and 56 of the ConsumerProtection Act (no 68 of 2008)dealing with the consumer’s rightto good-quality goods.

Potgieter objected to theapplication on the grounds thatthe court did not havejurisdiction because of section 69of the Act. It provides that aperson may seek to enforce anyright in terms of this Act or interms of a transaction oragreement, or otherwise resolveany dispute with a supplier, by(a) referring the matter directly tothe Tribunal, if such a directreferral is permitted by this Actin the case of the particulardispute, (b) referring the matterto the applicable ombud withjurisdiction, if the supplier issubject to the jurisdiction of anysuch ombud, (c) if the matter doesnot concern a suppliercontemplated in paragraph (b) (i)referring the matter to theapplicable industry ombud,accredited in terms of section82(6), if the supplier is subject toany such ombud, or (ii) applyingto the consumer court of theprovince with jurisdiction overthe matter, if there is such aconsumer court, subject to thelaw establishing or governingthat consumer court, (iii) referringthe matter to another alternativedispute resolution agentcontemplated in section 70, or (iv)filing a complaint with theCommission in accordance withsection 71, or (d) approaching acourt with jurisdiction over thematter, if all other remediesavailable to that person in termsof national legislation have beenexhausted.

Potgieter contended that asJoroy had not exhausted all otherremedies as referred to in sub-section (d) the court could nothear the application brought byJoroy.

THE DECISIONThe wording of the section was

clear and unambiguous. It wasspecifically stated that theconsumer could approach thecourt if all the aforementionedavenues of redress had beenexhausted. The legislature wasvery specific in prescribing theredress that a customer has interms of this section. No otherinterpretation could be given tothe word ‘if’.

The dispute resolutionmechanisms available to anaggrieved consumer in terms ofsection 69(a), (b) and (c) of the Actincluded referring the matterdirectly to the Tribunal, to theapplicable ombud withjurisdiction, to the applicableindustry ombud, accredited interms of section 82(6), to theconsumer court, alternativedispute resolution and filing acomplaint with the Commission.In the case of the motor industryan ombud in terms of s 82(6) hadbeen accredited. The MotorIndustry Ombudsman of SouthAfrica deals specifically withdispute resolutions betweenconsumers and the motorindustry.

It was held in Chirwa vTransnet Ltd and Others 2008 (4)SA 367 (CC) that where aspecialised framework has beencreated for the resolution ofdisputes, parties must pursuetheir claims primarily throughsuch mechanisms. Accordingly, itwas incumbent on Joroy to havedone so before approaching thecourt of relief.

The application was dismissed.

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TSHWANE CITY v MITCHELL

JUDGMENT BY BAARTMAN AJA(MPATI P, BOSIELO JA andSALDULKER JA concurring)SUPREME COURT OF APPEAL29 JANUARY 2016

2016 (3) SA 231 (SCA)

A municipality may assert its rightsin terms of section 118(3) of theLocal Government: MunicipalSystems Act (no 32 of 2000) if aproperty has been sold in executionand the transferee has takentransfer after obtaining a certificateindicating that the outstandingmunicipal debt for the two yearspreceding the date of applicationtherefor has been paid.

THE FACTSMitchell purchased erf 296,

Wonderboom Township,Gauteng, at a sale in execution.The property was situated withinthe municipal boundaries of theCity of Tshwane MetropolitanMunicipal Council.

The council issued a certificateindicating that the total historicalmunicipal debt, includingmunicipal debts older than twoyears, was R232 828,25. A disputewith regard to the validity of thiscertificate then ensued, and thenthe council issued a newcertificate indicating that theoutstanding municipal debt forthe two years preceding the dateof application for the certificateamounted to R126 608,50. Afterpayment of this amount Mitchelltook transfer of the property. Theoutstanding balance of R106219,75, representing historicaldebts older than two years,remained unpaid.

Mitchell sold the property toPrinsloo. When Prinsloo appliedto the council for an account forthe provision of services to theproperty, the council refused todo so on the grounds that thehistorical debt remained unpaid.It asserted its right under section118(3) of the Local Government:Municipal Systems Act (no 32 of2000). The sub-section providesthat an amount due for municipalservice fees, surcharges on fees,property rates and othermunicipal taxes, levies and dutiesis a charge upon the property inconnection with which theamount is owing and enjoyspreference over any mortgagebond registered against theproperty.

Mitchell contended that thisright could be enforced over theproceeds of the property and/oragainst the previous owner only.He applied for an order declaringthat the council’s statutoryhypothec was extinguished bythe sale in execution and transferof the property into his name.

THE DECISIONIn holding that the council’s

security over the property (thestautory hypothec) had beenextinguished by the sale inexecution and subsequenttransfer of the property, the courta quo distinguished the presentmatter from the decision in Cityof Tshwane v Mathabathe 2013(4) SA 319 (SCA) on the basis thatin that case the property wassold, ‘not at a sale in execution,but by public auction on behalf ofthe mortgagor’.

The distinction was not justified.If a limited duration of thehypothec created by section118(3) was ever contemplated inrespect of property purchased ata sale in execution, the legislaturewould have made provision for it.It did not do so and the exceptioncontained in Voet 20.1.13 couldnot be read into that section. Nodistinction could therefore bedrawn between property soldeither at a sale in execution or in aprivate sale when considering thequestion whether the statutoryhypothec created by section118(3) survives transfer. Itfollowed that the court belowerred in concluding that thecouncil’s statutory hypothec hadbeen extinguished by the sale inexecution.

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VAN DEVENTER v NEDBANK LTD

A JUDGMENT BY ROGERS J(NUKU AJ concurring)WESTERN CAPE HIGH COURT30 MARCH 2016

2016 (3) SA 622 (WCC)

The reference to a company insection 13(1)(g) of the PrescriptionAct (no 68 of 1969) includes areference to a close corporation.

THE FACTSIn August 2006 Van Deventer

and the other appellant signedsuretyships in favour of NedbankLtd for the debts of J and B BiltongCC (JBB). During March 2008 JBBwas placed in liquidation.Nedbank issued summonsagainst the sureties in July 2012.The summons was duly served atthe domicilium citandi etexecutandi on 13 July 2012.Because the sureties had left thataddress they were unaware of it.The bank obtained defaultjudgment on 13 December 2012on claims of R65 249,70, R294788,89 and R163 277,08, togetherwith interest from 5 March 2012.

The sureties alleged that theylearnt of the default judgmentduring a meeting between VanDeventer and a representative ofthe bank on 17 September 2013.On 30 September 2013 theydelivered a rescission application.

They alleged that the debtsagainst them had arisen morethan three years prior to 14November 2008, so that section13(1)(g) of the Prescription Act (no68 of 1969) did not avail the bank.They also alleged that more thanone year had elapsed since therelevant impediment had ceasedas contemplated in section 13(1)(i)of the Prescription Act.

Section 13(1)(g)(i) of thePrescription Act provides that ifthe debt is the object of a claimfiled against a company inliquidation, the relevant period ofprescription would, but for theprovisions of the subsection, becompleted before or on, or withinone year after, the date on whichthe relevant impediment hasceased to exist, the period ofprescription shall not becompleted before a year haselapsed after that date.

To render section 13(1)(g)inapplicable, the sureties had toshow that prescription began torun against JBB, and thus against

them, prior to 26 October 2006.They did not allege any facts insupport of such a conclusion.However, the question arosewhether or not in the light of theauthority of Shackleton CreditManagement (Pty) Ltd v Scholtz[2011] ZAWCHC 494, the sectiondoes not apply to closecorporations.

THE DECISIONShackleton held that the section

does not apply to closecorporations. Close Corporationsas entities did not exist before theenactment of the CloseCorporations Act in 1984. Theytherefore did not exist as entitiesat the time when the PrescriptionAct was passed.

At this time, the legislaturecould not rationally haveintended to exclude corporateentities such as close corporationsfrom the scope of section 13(1)(g).This conclusion was possiblehaving regard to the lawmaker’sintent and purpose as theyappear from section 13(1)(g) andto the absence of any materialdistinction between thesequestration of individuals andliquidation of companies, on theone hand, and the liquidation ofclose corporations, on the other.Close corporations fell within ‘thesame genus of facts’ as those towhich the lawmaker’s expressedpolicy has been formulated. Thefiling of claims against liquidatedclose corporations is not ‘differentin kind or dimension’ from thefiling of claims againstsequestrated individuals andliquidated companies.

In order to avoid irrational andthus unconstitutionaldifferentiation, section 13(1)(g)should be construed as beingapplicable to close corporations ifits language reasonably permits.‘company’ in section 13(1)(g) isindeed capable of beinginterpreted liberally so as toinclude a close corporation.

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AFRICAN BANKING CORPORATION OF BOTSWANA LTD v KARIBAFURNITURE MANUFACTURERS (PTY) LTD

A JUDGMENT BY DAMBUZA AJA(MPATI P, MHLANTLA JA,LEACH JA AND SCHOEMAN AJAconcurring)SUPREME COURT OF APPEAL20 MAY 2015

2015 SACLR 338 (SCA)

A binding offer made in terms ofsection 153(1)(b)(ii) of theCompanies Act (no 71 of 2008)

THE FACTSOn 31 January 2012, the

shareholders of Kariba FurnitureManufacturers (Pty) Ltd resolvedthat Kariba voluntarily beginbusiness rescue proceedings interms of section 129 of theCompanies Act (no 71 of 2008).The second respondent, Mr JPJordaan, was appointed as thebusiness rescue practitioner.

On 17 February 2012, at the firststatutory meeting of creditors ofKariba, the bank’s creditmanager, raised the concern thatthere were no recently auditedfinancial statements relating toKariba. This and other concernswere not resolved at the meeting,but Jordaan undertook to emailKariba’s audited financialstatements for the 2005 financialyear to the bank’s attorneys.

On 26 March 2012, the secondmeeting of creditors was held.Jordaan inquired if any partywished to vote for amendment ofthe rescue plan as provided for interms of section 152(1)(d) of theAct. When none of the affectedparties showed interest in doingso, the practitioner called for avote by the creditors forpreliminary approval of the plan.In terms of the plan, the bank helda voting interest of 63%, whileABSA Bank Limited held 2%, theNorth West DevelopmentCorporation (NWDC), anothercreditor, held 1%, theMunicipality of Hammanskraalheld 1%, and the shareholdersheld the balance. The bank andNWDC rejected the plan. Theshareholders indicated that theywished to make a binding offer onbehalf of the shareholders, topurchase the bank’s votinginterest in terms of section153(1)(b)(ii) of the Act. Jordaanimmediately ruled that it was notopen to the bank to respond to theoffer; that the offer was bindingon the bank and that the bank’s

voting interests had to betransferred to the shareholders.He proceeded to amend the planto reflect the bank as holding 0%interest and the shareholders95%. The representatives of thebank and the NWDC left themeeting. Thereafter, a vote on theproposed business rescue planwas undertaken by thereconstituted creditors excludingthe bank. They voted in favour ofpreliminary approval of the plan.

The bank then applied for anorder that the ‘binding offer’,made at the second meeting ofcreditors, on behalf of theshareholders to purchase itsvoting interest was not bindingon it. It also applied for an orderthat the approval of the proposedbusiness rescue plan be set aside,and that the resolution taken bythe Board of Kariba on 31 January2012 to voluntarily beginbusiness rescue proceedings andto place the company undersupervision be set side.

THE DECISIONThe issue was whether a

binding offer, as provided for insection 153(1)(b)(ii) of the Act, isbinding on the offeree once it ismade. A further issue waswhether reasonable prospects of asuccessful business rescue existed.

The section provides that anyaffected person or a combinationof affected persons, may make abinding offer to purchase thevoting interests of one or morepersons who opposed adoption ofthe business rescue plan, at avalue independently and expertlydetermined, on the request of thepractitioner, to be a fair andreasonable estimate of the returnto that person, or those persons, ifthe company were to beliquidated.

The section should not beinterpreted so as to compel acreditor into acceptance of a

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binding offer, but rather tocompel the offeror to not towithdraw from the offer.Although a binding offer mayhave been made duringconsideration of the rescue plan,finalisation of the aspects relatingthereto, including transfer of thevoting interest, is not necessarilyimmediate. This is consistentwith the established meaning ofan offer. Once a binding offer ismade to purchase a votinginterest, the holder thereof is notsummarily divested of its voting

interest. The holder of the votinginterest in question is notdivested of its interest withoutany determination ofaffordability on the part of theofferor.

In the present case, the offer fellshort of providing theinformation required in terms ofsection 150 of the Act. There wasa failure to provide updatedfinancial statements. The truestate of Kariba’s affairs as atJanuary 2012 and its anticipatedoperations could not be

established without an update ofthe books of account, conductedon sound accounting principles,proper valuation of the companyassets, and substantiatedprospective income andexpenditure. No cogent case wasmade to support an opinion ofreasonable prospects of rescue.Consequently, the resolution tocommence business rescue wastaken without a proper basis andwas to be set aside.

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BSB INTERNATIONAL LINK CC v READAMSOUTH AFRICA (PTY) LTD

A JUDGMENT BY PONNAN JAand SWAIN JA (VICTOR AJA andKATHREE-SETILOANE AJAconcurring)SUPREME COURT OF APPEAL13 APRIL 2016

2016 (4) SA 83 (SCA)

A court has a discretion to orderpartial demolition of a buildingconstructed in contravention of atown planning scheme. Whenmaking such an order, the courtshould be satisfied that theillegality in question is capable ofbeing addressed by such an orderand that it is practically possible todo so.

THE FACTSBSB International Link CC

commenced the construction of abuilding comprising new retailand office space on its property.The property was subject to theSandton Town Planning Scheme,1980. In respect of thedevelopment, the maximumcoverage of the property by abuilding could not exceed 60%.

Readam South Africa (Pty) Ltdalleged that BSB had not obtainedbuilding plans and the coverageof the building exceeded 60%. Itbased the allegation inter alia onthe evidence of a town plannerthat the coverage of the propertyby the building as at April 2013was at least 80%. BSB respondedto this in its answering affidavitby denying the allegation andasserting that the evidence wasinadmissible.

Readam’s evidence was also thatof a land surveyor who measuredthe coverage of the site by thebuilding as at October 2013 andfound this to be 853,58 squaremetres or 86,13% of the total areaof the property.

Readam brought an applicationreviewing and setting aside anyapproval of building plans by theCity of JohannesburgMetropolitan Municipalityinconsistent with the SandtonTown Planning Scheme.

The High Court granted an orderthat the building was beingerected without the priorapproval of building plans by theCity of JohannesburgMetropolitan Municipality interms of section 7 of the NationalBuilding Regulations andBuilding Standards Act (no 103 of1977). It also gave an order thatBSB be directed to partiallydemolish the building erected onthe property so as to ensure thatsuch building shall be fullycompliant with the coverage limitof 60% imposed by the Scheme. It

also dismissed a counter-application brought by BSB inwhich it claimed it wasprejudiced in its defence of themain application, by theinadequate record furnished bythe municipality. The counter-application was dismissed.

On appeal, BSB contended thatthe order of the High Courtshould be set aside and replacedwith one compelling discovery bythe municipality, and the matterthereafter enrolled when themunicipality had complied withthat order.

THE DECISIONBSB submitted that it did have

approved building plans. But, ifthe municipality had purportedto approve the plans despite thefact that the scheme had not beencomplied with in respect of eithercoverage or parking, the approvalwould contravene section 7(1)(a)of the Act, and Readam wouldhave been entitled to an orderreviewing and setting aside theapproval. It followed that thepurported approval of the plansby the municipality should bereviewed and set aside.

In response to the evidencepresented by Readam, nothinghad prevented BSB fromaccessing and placing the recordbefore the court. No basis wasgiven as to why it was contendedthat the evidence, which wasconfirmed by Wilkens in asupporting affidavit, wasinadmissible. The record, such asit was, must have been availableto BSB, consisting, as it musthave, in the main, of documentsthat it would have supplied to themunicipality. It would thereforeamount to an exercise in futilityto accede to BSB’s request that theorder of the High Court be setaside and that the municipalitybe compelled to make discovery.

Given the fact that BSB was

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warned that it was actingillegally and, in spite of suchwarning, deliberately persisted,and attempted to delayfinalisation of the litigation whilepressing ahead with its illegalconduct, the order granted by theHigh Court, which directed thatthe property be demolished to theextent necessary to ensurecompliance with the scheme,could not be faulted.

In a case such as the present one,a court has a broad generaldiscretion to be exercised after

affording due consideration to allthe relevant circumstances.Before granting a partialdemolition order a court wouldhave to be satisfied that theillegality complained of is capableof being addressed by such anorder and that it is practicallypossible to do so. Depending onthe circumstances, this mayrequire evidence to be given byexperts such as engineers andarchitects to ensure that thestructural integrity and safety of

the building are not compromisedwhen partially demolished.Accordingly para 4 of the order ofthe High Court, which declaredthat no partial demolition of thebuilding was to take place unlessand until building plans had beenapproved by the municipality,should be amended to include afurther requirement that anengineer must certify that partialdemolition will not impair thestructural integrity and safety ofthe building or adjacentbuildings.

What tips the scales against BSB is that it was warned that it was actingillegally and, in spite of such warning, it deliberately persisted. If anything, itengaged in obfuscatory behaviour to delay finalisation of this litigation whilepressing ahead with its illegal conduct. Such conduct can hardly be countenancedby a court. To do so will make a mockery of ordered town planning and byextension the law. The order granted by the court a quo, which directed that theproperty be demolished to the extent necessary to ensure compliance with thescheme, can accordingly not be faulted.That conclusion notwithstanding, it is nonetheless necessary to observe that ifthe municipality had properly performed its functions and approached the courtin terms of s 21 of the NBSA, the court would, on the strength of Lester, havebeen obliged to grant an order of total demolition. If Lester is correct, a starkdichotomy would exist between our common law and our statutory law inrespect of substantially the same remedy. For, in terms of the former, a courtwould have a broad general discretion, whilst, in terms of the latter, a courtwould have no discretion. Several important factors appear not to have receiveddue consideration in the interpretive exercise undertaken in Lester.

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PA PEARSON (PTY) LTD v ETHEKWINIMUNICIPALITY

A JUDGMENT BY MARKS AJKWAZULU NATAL LOCALDIVISION, DURBAN2 DECEMBER 2015

2016 (4) SA 218 (KZD)

A municipality is entitled to creditan account for the provision ofservices relating to one propertyfrom money received in anotheraccount for the provision of suchservices which is held by the sameaccount holder in respect of anotherproperty.

THE FACTSPA Pearson (Pty) Ltd owned a

property which was occupied byMicrofinish Manufacturing (Pty)Ltd. Microfinish held an accountwith the Ethekwini Municipalityfor the supply of utilities to thisproperty. It held a second accountwith the municipality for thesupply of utilities to anotherproperty which was owned byCherokee Rose 164 CC.

As at 17 November 2011Microfinish was indebted to themunicipality in the sum of R1 700000 in respect of Pearson’sproperty and R1 400 000 inrespect of the property owned byCherokee Rose. The municipalitycredited payments made byMicrofinish in respect of thePearson property to theindebtedness of Microfinish inrespect of the property owned byCherokee Rose, therebyextinguishing the indebtedness ofMicrofinish in respect ofelectricity services on theproperty owned by CherokeeRose.

The debt owed by Microfinish inrespect of the account for thePearson property was still dueand owing. However, Microfinishwas unable to make payment dueto its liquidation. On 12 March2012 Pearson made payment tothe municipality in the sum of R2742 191,02. This included theamount of R1 431 442,88 that hadbeen previously transferred tothe account of the Cherokee Roseproperty. It paid this amountunder protest. Pearson soughtreimbursement.

The municipality contended thatit had been entitled to credit theaccount relating to the CherokeeRose property with the moneypaid in respect of the Pearsonproperty.

THE DECISIONThe crisp issue between the

parties was whether section102(1)(b) of the MunicipalSystems Act (no 32 of 2000)empowered the municipality tocredit payments made by anindividual account holder to anyother account of that accountholder held with themunicipality.

Section 102(1)(b) of theMunicipal Systems Act providesthat a municipality may credit apayment by a person liable forpayments to a municipalityagainst any account of thatperson.

Section 102 read together withthe other provisions of chapter 9of the Act undoubtedly givespowers to municipalities toenable them to collect all moneysthat are due and payable to themin the most cost-effective manner.There is a clear legislative need forthe municipality to efficientlycollect moneys due to it by meansof the powers afforded to it.

On a plain reading of theprovisions of section 102(1) of theAct the municipality has thepower to consolidate separateaccounts as envisaged by sub-section (a) and to credit apayment made by a person to anyother account held by thatperson, as envisaged by sub-section (b). The section is notambiguous and the meaning ofthe words used is clear. Themunicipality is entitled to creditpayments made to any accountheld by a customer to anotheraccount of the customer.

Pearson argued that the powerconferred upon the municipalityin terms of sub-section (b) couldnot have been intended to allowthe municipality to changecredits as it chooses. However,the contention that the ordinarymeaning of sub-section (b) doesnot authorise the municipality to

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reallocate amounts or chop andchange credits as it chooses isdirectly contradicted by theprovisions of the sub-section. Ifthe municipality is entitled tocredit payments made, that

would by necessity involve themovement of a payment from oneaccount to another account. Thatis precisely what theMunicipality had done in thepresent matter.

Having regard to the language of s 102 of the Act, the following is clearfrom a plain linguistic interpretation: section 102(1)(a) deals with theconsolidation of any separate account of any persons liable to pay themunicipality. The effect of consolidation is that the various accounts of anindividual are consolidated into a single account. The account holder isthen presented with an account which has various components, such aselectricity, water and rates. The account holder is not permitted to paypart of the account but is required to pay the whole account subject to s102(2) of the Act. In other words the account holder cannot choose or opt topay part of an account.

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SINGH v MOUNT EDGECOMBE COUNTRY CLUBESTATE MANAGEMENT ASSOCIATION (RF) NPC

A JUDGMENT BY TOPPING AJKWAZULU NATAL LOCALDIVISION, DURBAN4 FEBRUARY 2016

2016 (5) SA 134 (KZD)

A property owner’s membership ofa property association involves itsagreement to abide by the rulesmade by the directors of thatassociation in accordance with theassociation’s memorandum ofincorporation.

THE FACTSSingh owned property on the

Mount Edgecombe Country ClubEstate. The Mount EdgecombeCountry Club Estate ManagementAssociation was an association ofall the homeowners on the estateand the management associationwhich regulated the affairs of theestate. Being a property owner,Singh was a member of theAssociation and had agreed to besubject to the conditions set outin its memorandum ofincorporation. The memorandumempowered the directors to makerules applicable within the estatein relation to such matters as theuse and maintenance of land,common open spaces,recreational areas, roads, and thedesign and development rules forthe erection of all buildings andother structures.

The directors made rulesempowering nominated personsto carry out the functions oftraffic officers or peace officers asdefined in the National RoadTraffic Act (no 93 of 1996) onpublic roads within the estateand empowering the Associationto enforce the provisions of thatAct. Secondly, they made rulesrestricting which contractorsowners and residents couldutilise in effecting buildingalterations, additions and repairsto their unit, the landscaping oftheir gardens and the ordinarygarden maintenance thereof.Thirdly, they made rulesrestricting the hours of work thatthe domestic workers employedby the owners and residents ofunits within the estate had toadhere to as well as preventingdomestic employees from freelywalking on the public roadswithin the estate. Fourthly, theyrestricted the right of access to theestate by owners and residents.

Singh challenged each of theserules. He contended that the

Association had not beenauthorised to reduce the speedlimit on the public roads withinthe estate to one lower than thegeneral speed limit as prescribedby the Minister of Transport. Healso submitted that theAssociation’s alteration of thespeed limit would only be valid ifan appropriate traffic sign hasbeen erected and that no suchtraffic signs had been put up onthe roads servicing the estate. Inconsequence, the issuing fines topersons caught travelling at aspeed in excess of the prescribed40 kilometres per hour limitwithin the estate, was unlawfullyusurping the functions of trafficand other peace officers under theNational Road Traffic Act.

As far as the second challengewas concerned, Singh contendedthat these rules effectivelyexcluded a resident or ownerfrom choosing his or her serviceproviders, as they were notallowed to utilise contractorswho did not appear on theAssociation’s list of accreditedcontractors.

As far as the third challenge wasconcerned, Singh contended thatconduct rules provided thatdomestic employees are onlyallowed to walk on the roads ofthe estate when the bus serviceprovided for domestic employeesis not available. This bus servicewas provided from Monday toSaturday at set times in themorning and afternoon. Inconsequence, domestic employeescould not otherwise walk on thepublic roads within the estate.

THE DECISION The objects of the Association,

as contained in its memorandumof incorporation were to‘promote, advance and protectthe interests’ of its members, to‘provide a united voice for whichsuch interest may be expressed’,

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to ‘accept the conservation areas,communal facilities and openspaces on the Estate and to makeand enforce regulationsgoverning the use thereof’, to‘preserve the naturalenvironment, vegetation andfauna within the conservationarea’, to ‘provide security withinthe Estate and make and enforceregulations in this regard’ and to‘enforce adherence to the Designand Development Rules andLandscaping Philosophy for theEstate’.

There was nothing in the ruleswhich provided for anyconsequence flowing from non-compliance with the rules by athird party who had gainedaccess to the estate in a mannerother than through the authorityof a resident. The control of thespeed limit within the estatetherefore fell squarely within theprovisions of the contractconcluded between theAssociation and the owners of theproperties within the estate. Itfollowed that the Association wasnot endeavouring to control theconduct of all persons enteringthe estate or to impose theprovisions of the National RoadTraffic Act upon those persons.The rules themselves providedthat the roads within the estate infact fell within the jurisdiction ofthe National Road Traffic Act. Itfollowed that the authority of thepeace officers, within whoseexclusive domain the enforcementand prosecution of anycontraventions of that Act are

entrusted, was also recognised.Given the objects of the

Association, it could not be saidthat the prescribing of a lowerspeed limit within the estate thanthat prescribed by nationallegislation went beyondpromoting, advancing andprotecting the interests of theAssociation’s members or wasunreasonable. This was especiallyso considering the presence ofchildren, pedestrians and animalsin the immediate vicinity of theroads themselves.

The directors were given theauthority to make reasonablerules for the management,control, administration, use andenjoyment of the estate. Everyaspect of construction orlandscaping undertaken on theestate was controlled by andundertaken with the priorapproval of the Association. Theobvious reason for this was togive effect to the residents’professed desire to ‘live together,reasonably and harmoniously,without interfering with others’lawful use and enjoyment of theenvironment’ within the estate.This control by the Associationensured that the buildings andgardens on the estate wereaesthetically harmonious andthat any alterations or newconstruction will not run counterto what had gone before. Withthis concept in mind there was noreason why the Associationwould not seek to ensure that thestandard of construction and

landscaping that took place onthe estate conformed to theagreed standard. The only way toensure that the required standardwas met was to ensure that thecontractor or landscaperconcerned was competent andable to carry out the worksapproved by the Association in aproper manner. The only way todo this was to ensure that thecontractor or landscaper waseither accredited by a recognisedauthority or had, through priorconduct, shown that it was socompetent.

As far as access by employeeswas concerned, the rules merelyprescribed a set of procedures toensure an orderly ingress andegress of domestic employees ontoand off the estate and efficienttransportation to and from theirplaces of employment. Given theinterpretation placed on the rulesunder consideration, they couldnot be considered to be unlawful.They were there to regulateconduct between neighbours andin so doing must, of necessity, berestrictive in nature so as toalways take into account thecumulative rights of use andenjoyment of the estate by all itsresidents. The rules had beenagreed upon by all the residentsof the estate in order to ‘maintaina structure within whichresidents could feel secure asregards the environment intowhich they had bought.

The rules were not unlawful andhad to be given effect to.

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BUSINESS PARTNERS LTD v TSAKIROGLOU

A JUDGMENT BY LE GRANGE JWESTERN CAPE DIVISION17 SEPTEMBER 2015

2016 (4) SA 390 (WCC)

The main purpose of themoratorium in section 133(2) of theCompanies Act (no 71 of 2008) is toallow business practitioners toformulate a business rescue plan toachieve the purpose of the processin restructuring the affairs of thecompany or close corporation. Thefact that the benefits thereof are notavailable to a natural person istherefore constitutionallyunobjectionable.

THE FACTSTsakiroglou was indebted to

Business Partners Ltd, under adeed of suretyship concluded byhim, for the debts of Target Shelf284 CC. Target Shelf was thesubject of a business rescue planwhich had been rejected byBusiness Partners.

Tsakiroglou’s estate was placedunder provisional sequestration.Tsakiroglou resisted the grantingof a final order by bringing acounter-application in which heclaimed an order that theprovisions of section 133 of theCompanies Act (no 71 of 2008) bedeclared to be unconstitutionaland in conflict with theprovisions of the Constitution ofthe Republic of South Africa, 1996,in that the section precludes legalproceedings against a company orclose corporation during businessrescue proceedings, but does notpreclude legal proceedings,alternatively insolvencyproceedings, against a guaranteeor surety of the same company orclose corporation during suchbusiness rescue proceedings

Tsakiroglou contended that as asurety he was entitled to thebenefit of the statutorymoratorium afforded undersection 133(2) of the CompaniesAct. The section provides thatduring business rescueproceedings, a guarantee orsurety by a company in favour ofany other person may not beenforced by any person againstthe company except with leave ofthe court and in accordance withany terms the court considers justand equitable in thecircumstances.

THE DECISIONThe first enquiry was whether

section 133(2) did differentiatebetween people or categories ofpeople. If it did differentiate, thenin order not to fall foul of theprovisions in section 9 of theConstitution there had to be a

rational connection between thedifferentiation in question and thelegitimate governmental purposeit was designed to achieve.

There was indeeddifferentiation, albeit betweennatural persons and juristicpersons, in a sense that themoratorium in section 133(2) wasavailable only to companies andclose corporations and not tonatural persons. However, thedifferentiation bore a rationalconnection to a legitimategovernment purpose. The mainpurpose of the moratorium wasto allow business practitioners, inconjunction with the creditorsand other affected parties, toformulate a business rescue planto achieve the purpose of theprocess in restructuring theaffairs of the company or closecorporation. The differentiationbetween natural persons andjuristic persons clearly served alegitimate government purpose.The criteria applied by thelegislature to achieve thisdifferentiation were not arbitrarybut served a particular purpose.

This expressed purpose couldnot find any application insofaras natural persons wereconcerned, because the statutorymoratorium in favour of thecompany undergoing businessrescue proceedings was a defencein personam and as such thestatutory moratorium in favourof the company did not avail thesurety.

In any event in terms of thesuretyship, Tsakiroglou boundhimself in favour of BusinessParnters as surety and a co-principal debtor in solidum withTarget Shelf. It was thereforeentitled to proceed againstTsakiroglou the moment thatTarget Shelf defaulted.Tsakiroglou’s liability hadnothing to do with themoratorium imposed by section133(2) of the Act.

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CHILIZA v GOVENDER

A JUDGMENT BY TSHIQI JA(PILLAY JA, SWAIN JA,DAMBUZA JA and TSOKA AJAconcurring)SUPREME COURT OF APPEAL31 MARCH 2016

2016 (4) SA 397 (SCA)

It is necessary to serve aprovisional order of sequestrationon the South African RevenueService prior to applying for a finalorder, although a court mayexercise its discretion to requiresuch service prior to granting suchan order.

THE FACTSOn 17 February 2012 Govender

obtained a provisional order ofsequestration against Chiliza,returnable on 15 March 2012. Acopy of the petition was servedon the South African RevenueService on 16 February 2012 incompliance with the provisions ofs 9(4A) of the Insolvency Act (no24 of 1936). On 9 July 2012 a finalorder of sequestration wasgranted.

Chiliza then brought anapplication for the rescission ofthe final order on the basis thatthe provisional order ofsequestration was not served onSARS as contemplated in terms ofsection 11(2A)(c) of the Act. Thesection provides that a copy ofthe rule nisi must be served onthe South African RevenueService.

THE DECISIONThe provisions of section 11(2A)

are couched in peremptory terms.The Act prescribes the filing of anaffidavit as the most effectiveway to satisfy a court that thepetition has been ‘made availablein a manner reasonably likely tomake [it] accessible’ to the listedparties. It is not surprising thatsection 11(2A) does not contain asimilar requirement because theterm ‘serve’ usually denotespersonal service or ‘legallydelivered, ie delivered inaccordance with the law so as tonotify the person on whom it isserved of its contents’ to theparty itself or its representative,and is usually easy to provethrough a return of service, astamp or a signature of therecipient. It is only in rarecircumstances, usually whenproof of service is not apparent onthe face of the document, that acourt would require an affidavitto prove service. The import of the

requirement of an affidavit in s9(4A) therefore is to provideconclusive proof of compliancewith the provisions of the Act,and the fact that s 11(2A) does notrequire an affidavit to be filed,whilst s 9(4A)(b) does, has nobearing on the peremptory natureof the two provisions.

Section 12 deals with factors tobe taken into account before thecourt grants a final order ofsequestration and thus deals withthe substance of the applicationand not the proceduralrequirements. However, it doesnot set out an exhaustive list of allthe relevant factors, and the factthat it does not explicitly statethat the court should take intoaccount the non-service of aprovisional order of sequestrationwhen it exercises its discretionwhether to grant a final orderdoes not alter the peremptorynature of section 11(2A). The onlyrelevant connection betweensection 11(2A), and itsinterpretation, to section 12 isthat section 12 requires the courtto consider, as one of the factors,whether it is to the advantage ofthe creditors that a final order ofsequestration should be granted.Whether a provisional order wasserved on SARS, which is apreferential creditor in terms ofthe Act, must be one of thosefactors. This must be so becauseany tax for which the insolventwas liable for, in respect of anyperiod prior to the date ofsequestration of the estate, is due.And if a provisional order of animpending sequestration is notserved on SARS, there is a riskthat any amounts due wouldremain uncollected.

The final order of sequestrationwas set aside. The estate wasplaced under provisionalsequestration and a rule nisi wasissued.

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GRAINCO (PTY) LTD v VAN DER MERWE

A JUDGMENT BY PLASKET AJA(PONNAN JA, WALLIS JA, MBHAJA and MATHOPO JA concurring)SUPREME COURT OF APPEAL30 MARCH 2016

2016 (4) SA 303 (SCA)

An interdict cannot be grantedprohibiting a party from tradingwith former customers of acompetitor who have alreadyswitched their business to thatparty, even if the switch occurredpursuant to unlawful canvassing ofthe customers by that party.

THE FACTSVan der Merwe and Kitshoff

established an agriculturaltrading and logistics business inMay 2000 through a companyknown as Old GrainCo. In termsof an agreement signed on 15February 2007, Old GrainCo soldits business and all its assets toBKB Ltd with effect from 1October 2006 (the effective date ofthe agreement). The sale includedthe businesses conducted asdivisions of Old GrainCo as wellas Old GrainCo’s shares in asubsidiary. Goodwill was one ofthe assets listed in the schedule ofassets sold. The purchase pricewas R28 450 430.

BKB immediately on-sold thebusiness and assets to GrainCo(Pty) Ltd on loan account for thesame price. Van der Merwe andKitshoff took up employmentwith GrainCo, although this wasnot mentioned in theamalgamation agreement andwas not a condition to which itwas subject. Service contractswere executed and Van derMerwe was employed asGrainCo’s managing director andKitshoff as the head of its tradingdivision. They were bothappointed as directors ofGrainCo.

In terms of clause 12.2 of theagreement, Old GrainCo, Van derMerwe and Kitshoff agreed withBKB that none of them wouldduring any of the years of therestraint period be interested inany entity which is interested inany competitive activity in theterritory or themselves beinterested in any competitiveactivity in the territory, duringany of the years of the restraintperiod do anything outside theterritory which had the effect ofcausing BKB prejudice in theterritory, during any of the yearsof the restraint period canvassany customer and/or client of BKB

for or on behalf of any entity inwhich they are interested, or ontheir own behalf, or at any timedisclose the confidentialinformation.

The service contracts concludedby Van der Merwe and Kitshoffmade clause 12 of theamalgamation agreementapplicable to their employment.

On 30 April 2013 Kitshoff andothers gave notice of theirresignations. They all joined anew trading venture establishedby Van der Merwe, which beganbusiness on 1 June 2013. Thevehicle for the new business wasPerdigon.

Grainco sought an orderrestraining Van der Merwe andKitshoff and Perdigon fromsoliciting its customers, passingoff Perdigon as being associatedwith GrainCo, unlawfullyinterfering in GrainCo’scontractual relations andpublishing injurious falsehoods.

THE DECISION The seller of goodwill is

prohibited from taking it back bycanvassing for the old business’scustomers was accepted ascorrect in Becker & Co (Pty) Ltd vBecker 1981 (3) SA 406 (A). In thatcase Becker, in his personalcapacity and as a director of hiscompany, A Becker & Co (Pty)Ltd, sold the business of thecompany, inclusive of thegoodwill, and bound himself to arestraint of trade. In terms of thesale agreement, the purchaseracquired the right to the use of thename of the company (ashappened with GrainCo in thepresent case) and the originalseller changed its name, while thepurchaser became A Becker & Co(Pty) Ltd. When the restraint oftrade had expired, Becker beganto approach former customerswith a view to soliciting theirbusiness. It was there held that if

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a seller disposes of the goodwill ofa business he may not thereafteract contrary to the sale.

This principle can only beinvoked in relation to a seller of abusiness. It was clear from theamalgamation agreement that theonly parties to the sale of oldGrainCo were it and BKB. Unlike

in the Becker matter, in whichBecker was a party to the sale ofthe business, both personally andin a representative capacity, Vander Merwe and Kitshoff were notparties to the sale in this case.They could accordingly not bebound by an implied term of theagreement. The appeal had to fail.

During the course of the proceedings in the court below, the implied prohibition against thecanvassing of clients was referred to as the Trego prohibition. This was a reference to theleading English case ofTrego and Another v Hunt in which Lord Macnaghten set out the basis for the prohibitionand its contours when he stated: ‘And so it has resulted that a person who sells the goodwill of his business is under noobligation to retire from the field. Trade he undoubtedly may, and in the very same line ofbusiness. If he has not bound himself by special stipulation, and if there is no evidence of theunderstanding of the parties beyond that which is to be found in all cases, he is free to carryon business wherever he chooses. But, then, how far may he go? He may do everything that astranger to the business, in ordinary course, would be in a position to do. He may set upwhere he will. He may push his wares as much as he pleases. He may thus interfere with thecustom of his neighbour as a stranger and an outsider might do; but he must not, I think,avail himself of his special knowledge of the old customers to regain, without consideration,that which he has parted with for value. He must not make his approaches from thevantage-ground of his former position, moving under cover of a connection which is nolonger his. He may not sell the custom and steal away the customers in that fashion. That,at all events, is opposed to the common understanding of mankind and the rudiments ofcommercial morality, and is not I think to be excused by any maxim of public policy.’

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MAKATE v VODACOM LTD

A JUDGMENT BY JAFTA J(MOGOENG CJ, MOSENEKE DCJ,KHAMPEPE J, MATOJANE AJ,NKABINDE J and ZONDO Jconcurring, WALLIS AJ(CAMERON J, MADLANGA J andVAN DER WESTHUIZEN Jdissenting in part)CONSTITUTIONAL COURT26 APRIL 2016

2016 (4) SA 121 (CC)

A claim that a party comply withits obligation to negotiate in goodfaith cannot be considered to be adebt due by that party, andaccordingly the claim cannotprescribe in terms of thePrescription Act (no 68 of 1969).

THE FACTSMakate and Mr P Geissler, the

director of product developmentand management at VodacomLtd, negotiated and agreed thatVodacom would use Makate’sidea to develop a new productwhich would be put on trial forcommercial viability. If theproduct was successful thenMakate would be paid a share inthe revenue generated by it. Theparties deferred theirnegotiations on the amount to bepaid to Makate to a later date.However, they agreed that in theevent of them failing to agree onthe amount, Vodacom’s chiefexecutive officer would determinethe amount.

Based on Makate’s ideaVodacom developed a newproduct called Please Call Me. Thisproduct enabled a cellphone userwith no airtime to send a messageto the other cellphone user, askingher to call him. The new productelicited excitement at Vodacomand the inventor of the idea onwhich it was built was praisedfor his innovative thinking. Thenew product was regarded byVodacom to be the first of its kindin the world, and declared itssuccess.

Approximately two and a halfyears after the launch of theproduct, Makate left Vodacom’semploy. Vodacom denied that hewas the originator of the PleaseCall Me product. Makateinstituted action to enforce hisagreement with Vodacom, somefour years after the launch of thePlease Call Me product. He soughtan order directing Vodacom tocomply with its obligations underthe parties’ oral agreement,alternatively the development ofthe common law in terms ofsection 39(2) of the Constitutionand to infuse it withconstitutional values of ubuntuand good faith. Flowing from the

alternative claim, the applicant ,Makate sought an order directingVodacom to enter into good-faithnegotiations with him, todetermine a reasonableremuneration payable to him forthe use of his idea in developingthe Please Call Me service.

Vodacom contended thatMakate’s claim had prescribed interms of section 11(d) of thePrescription Act. It alsocontended that in terms ofMakate’s employment contract,the Please Call Me idea wasVodacom’s property for whichMakate was not entitled tocompensation. Vodacom disputedthe existence of the agreement,and contended that Geissler didnot have actual or ostensibleauthority to enter into theagreement on its behalf.

THE DECISION When account is taken of

Geissler’s position as a member ofthe board, it appeared that he hadauthority to negotiate all issuesrelating to the introduction ofnew products at Vodacom. Thoseissues included agreements underwhich the new products wouldbe tested before approval by himand, once approved, theagreement in terms of which thenew product would be acquiredby Vodacom and the amount tobe paid for it. Owing to histechnical skills, he was bestplaced to determine the worth ofa new product.

Makate had established thatGeissler had apparent authorityto bind Vodacom. This findingmade it unnecessary to considerwhether the common law shouldbe developed.

As far as the prescription issuewas concerned, section 10(4) ofthe Prescription Act (no 68 of1969) provides that a debt shallbe extinguished after the lapse ofthe relevant prescriptive period,

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which in the present case wasthree years. The term ‘debt’ is notdefined in the Act, but in thecontext of section 10(1) it has awide and general meaning, andincludes an obligation to dosomething or refrain from doingsomething. On this construction,it could be held that everyobligation, irrespective ofwhether it is positive or negative,constitutes a debt as envisaged insection 10(1). This in turn meansthat any claim that requires aparty to do something or refrainfrom doing something,irrespective of the nature of thatsomething, amounts to a debtthat prescribes in terms of s 10(1).Under this interpretation, a claimfor an interdict would amount toa debt.

It could not be disputed thatsection 10(1) read with sections11 and 12 of the Prescription Actlimits the rights guaranteed bysection 34 of the Constitution.Therefore, in construing thoseprovisions, a court is obliged tofollow section 39(2) of theConstitution, irrespective ofwhether the parties had asked forit or not. This is so because theoperation of s 39(2) does notdepend on the wishes of litigants.The section provides that wheninterpreting any legislation, andwhen developing the commonlaw or customary law, everycourt, tribunal or forum mustpromote the spirit, purport andobjects of the Bill of Rights.

The Constitution in plain termsmandates courts to invoke thesection when discharging their

judicial function of interpretinglegislation. That duty is triggeredas soon as the provision underinterpretation affects the rights inthe Bill of Rights. In the presentcircumstances it was notnecessary to determine the exactmeaning of ‘debt’ as envisaged insection 10 because the claim fellbeyond the scope of the word asunderstood to be an obligation topay money, deliver goods orrender services. Here, Makate didnot ask to enforce any of theseobligations. Instead, he requestedan order forcing Vodacom tocommence negotiations with himfor determining compensation forthe profitable use of his idea. Itfollowed that a debtcontemplated in section 10 of thePrescription Act did not coverMakate’s claim. Therefore, theclaim did not prescribe.

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MONEYWEB (PTY) LTD v MEDIA 24 LTD

A JUDGMENT BY BERGER AJGAUTENG LOCAL DIVISION,JOHANNESBURG5 MAY 2016

2016 (4) SA 591 (GJ)

Section 12(8)(a) of the CopyrightAct (no 98 of 1978) does not applyto original works, even if theseconstitute news of the day.

THE FACTSMoneyweb (Pty) Ltd published

seven articles on the internet. Thecontent of the articles was basedon press releases, statementsmade at press conferences, andmedia visits to and interviewswith parties who were thesubject of the articles.

Moneyweb alleged that Media24 Ltd had copied the articles andpublished them on its owninternet web site.

Media 24 denied the allegationand contended that the articleswere not original. It contendedthat if they were found to havebeen original, it had not copied asubstantial portion of them. Italso contended that Moneywebcould not assert copyright in thearticles because section 12(8)(a) ofthe Copyright Act (no 98 of 1978)applied. The section provides thatno copyright shall subsist inofficial texts of a legislative,administrative or legal nature, orin official translations of suchtexts, or in speeches of a politicalnature or in speeches delivered inthe course of legal proceedings, orin news of the day that are mereitems of press information.

THE DECISIONThree of the articles were

original in that they were notslavish copies of their sources. Asfar as section 12(8)(a) wasconcerned, the exemption itprovides for is not limited toofficial texts of a legislative,administrative or legal nature. Itcovers also speeches of a politicalnature [and] speeches deliveredin the course of legal proceedings,thus extending to literary worksnot produced by government.‘Speeches’ in this context meansspeeches that have been reducedto material form.

‘news of the day’ means currentnews. There is no reason why thephrase should be limited to a 24-

hour news cycle. However, it isclear from the words used that s12(8)(a) is not intended to applyto all ‘news of the day’ but only to‘mere items of press information’.The subsection does not exemptfrom copyright protection allcurrent news articles. Section12(1)(c)(i) of the Act deals withthat issue.

The use of the word ‘mere’ doesnot qualify the ‘items of pressinformation’. According to TheConcise Oxford Dictionary ofCurrent English, the word ‘mere’is an adjective meaning ‘that issolely or no more or better thanwhat is specified’. On this viewthe word does not add or takeaway anything; it simplyunderlines that which is specified.

these ‘items of pressinformation’ that are exemptedfrom copyright protection? In myview this includes all informationcommunicated to the media inmaterial form or subsequentlyreduced to E material form. Thiswould include, but not be limitedto, press statements and pressinterviews concerning ‘news ofthe day’ which journalists, andanyone else, would be free to use,in whole or in part, withoutrestriction and withoutauthorisation being required fromanyone.

Anyone who communicatesinformation to the media intendsthat information to be put intothe public domain. It is in thepublic interest that the generalpublic be easily aware ofinformation communicated to themedia that is either already in thepublic domain or soon will be. Inall of the articles except one, theitems of information were givento the media with full knowledgethat the information would beput into the public domain. Thefundamental issue was whetherany of the Moneyweb articlescould be regarded as ‘news of the

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day that were mere items of pressinformation’. The answerdepended on whether the articlewas an original work or not. If itwas, then the article wouldcontain more than ‘mere items ofpress information’ because theauthor’s contribution would haveconstituted more than merecopying. Section 12(8)(a) would

not apply. On the other hand, ifthe Moneyweb article was not anoriginal work, the article wouldbe no more than a repetition ofthe ‘news of the day that are mereitems of press information’.Section 12(8)(a) would then apply.Accordingly, section 12(8)(a) ofthe Act did not apply to the threeoriginal articles.

Although Moneyweb could get no direct evidence from Ms Schnehage, it has put upmore evidence in relation to Moneyweb 4 than in relation to the three previous articles.It is undisputed that the source of the article was a press release issued by Sotheby’sInternational on 13 September 2012, the day before the article was published, a copy ofwhich has been put up. Ms Schnehage also interviewed Ms Nina Smith of Sotheby’s andsourced additional material. Ms Seggie wrote the headline and subheadline, and alsoedited the article.[39] Although Moneyweb 4 contains more information than the press release, thedifference is insubstantial. Indeed, it is quite trivial. The article is largely a copy of thepress release. In my view, Ms Schnehage has not contributed enough to produce anoriginal work. Accordingly I find that Moneyweb has not established that Moneyweb 4is an original work.

Copyright

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ATTACHMATE CORPORATION v MINISTER OFWATER AND ENVIRONMENTAL AFFAIRS

A JUDGMENT BY BRAND JA(BOSIELO JA, MAJIEDT JA, PETSEJA AND MBHA JA concurring)SUPREME COURT OF APPEAL20 MAY 2015

2015 SACLR 367 (SCA)

An audit clause entitling theprovider of software to determinethe number of computers on whichits software is installed as a meansto obtain evidence

THE FACTSAttachmate Corporation and

Minister of Water andEnvironmental Affairs concludedtwo agreements, a licenseagreement and a maintenanceagreement. In terms of the licenseagreement, the Department wasgiven the capability, by means ofsoftware, for its employees toaccess data on a mainframecomputer. In return, theDepartment was obliged to payAttachmate a fee which wasrelated to the number ofcomputers on which its softwarewas installed. In terms of themaintenance agreement,Attachmate undertook to providemaintenance and supportrequired by the Department inrespect of all licensed units, untilthe end of April 2006, at whichpoint the agreement could, andwas, renewed.

It came to Attachmate’sattention that the Departmentmade and installed additionalcopies of Attachmate’s softwarewithout its consent. Attachmatethen asserted its rights in termsof clause 11 of the licenseagreement. The clause providedthat at Attachmate’s request, anAttachmate representative couldinspect and audit theDepartment’s computers andrecords for compliance with thelicense agreement. If an auditrevealed that the Departmentpossessed unlicensed copies of thesoftware, it would be obliged topay Attachmate the applicablelicense fee for such unlicensedcopies.

As a result of the inspectionwhich took place in terms of thisclause, Attachmate determinedthat there were unlicensed copiesof its software on theDepartment’s computers. Itclaimed payment of its fee inrelation to these, as well aspayment of a maintenance fee in

respect of all the unlicensedcopies, ie 1564, at the rate of R1237 per copy, over a four-yearperiod. This rate was in excess ofthat applicable to the licensedcopies because Attachmatecontended that it would havebeen entitled to the list priceapplicable to purchasers of itssoftware, and not a discountedrate which applied to the licensedcopies.

THE DECISIONThe purpose of clause 11 was to

provide Attachmate with aprocedure to obtain evidence soas to determine whetherunlicensed copies of its softwarehad been made and, if so, howmany. The exact number ofunlicensed copies would in mostcases be peculiarly within theknowledge of the licensee.Without a remedy in the nature ofclause 11, Attachmate wouldpotentially have great difficultyin establishing a claim fordamages based on unlawfulcopying. Once the number hadbeen established, the licenseewould then have to pay the feeapplicable to it. Attachmate neednot prove any damages at all.That, I believe, was the purpose ofclause 11. It was not intended tointroduce a penalty. Thusunderstood, the clause wasintended as a means in favour ofAttachmate to facilitate proof ofits claim for the damages it hadsuffered through unlicensedcopying. It was not intended toenhance the quantum of itsdamages claim.

As far as the claim based on themaintenance agreement wasconcerned, this was in essence aclaim for damages, not a claim forspecific performance.Accordingly, Attachmate wasentitled to payment in respect ofthe computers on which theunlicensed software was

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installed, as much as it wasentitled to payment in respect ofthe computers on which thelicensed software was installed. Ifthe Department had compliedwith its obligations under thelicense agreement, it would havepaid for not only the licensedcopies, but the unlicensed copiesas well. In terms of themaintenance agreement,maintenance fees were to becalculated on the basis of eachlicensed copy. Had theDepartment complied with theobligations under both

agreements, the unlicensed copieswould have become licensedcopies, for which Attachmatewould have received amaintenance fee at the agreedrate.

In order to place Attachmate inthe position it would haveoccupied, in terms of bothcontracts, if the Department hadcomplied with its contractualobligations, damages would haveto be awarded to it which wouldbe calculated on the basis of 1 564at the agreed rate over a four yearperiod. This entitled it topayment of R7 744 302.40.

According to the court a quo’s understanding, the whole purpose of clause 11 was to provideAttachmate with a procedure to obtain evidence so as to determine whether unlicensed copies ofits software had been made and, if so, how many. I agree with this interpretation. The exactnumber of unlicensed copies would in most cases be peculiarly within the knowledge of thelicensee. Without a remedy in the nature of clause 11, Attachmate would potentially have greatdifficulty in establishing a claim for damages based on unlawful copying. Once the number hadbeen established, the licensee would then have to pay the fee applicable to it. Attachmate neednot prove any damages at all. That, I believe, was the purpose of clause 11. It was not intendedto introduce a penalty. Thus understood, the clause was intended as a means in favour ofAttachmate to facilitate proof of its claim for the damages it had suffered through unlicensedcopying. It was not intended to enhance the quantum of its damages claim. There is no evidenceat all in this instance of deliberate dishonesty on the part of the Department, and Attachmatedid not contend otherwise.

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NOVA PROPERTY GROUP HOLDINGS LTD v COBBETT

A JUDGMENT BY KATHREE-SETILOANE AJA (MAYA AP,MAJIEDT JA, MBHA JA andPLASKET AJA concurring)SUPREME COURT OF APPEAL12 MAY 2016

2016 (4) SA 317 (SCA)

The right of access to informationprovided for in section 26(2) of theCompanies Act (no 71 of 2008) isunqualified. Accordingly, it is notnecessary to show compliance withthe Promotion of Access toInformation Act (no 2000 of 2000)in order to obtain such information,and the motives of the partyseeking such information areirrelevant.

THE FACTSMoneyweb (Pty) Ltd

commissioned Cobbett toinvestigate the shareholdingstructures of Nova PropertyGroup Holdings Ltd and threeother associated companies.Cobbett sent requests to thecompanies for access to theirsecurities registers and to makecopies thereof, in terms of section26(2) of the Companies Act (no 71of 2008). The section provides thata person without a beneficialinterest in a company has theright to inspect or copy thesecurities register of a profitcompany or the register ofdirectors of a company, uponpayment of a prescribedmaximum fee for any suchinspection.

Cobbett’s requests were metwith refusals. Moneyweb thenbrought an application to compelthe companies to provide accessto it for inspection and makingcopies of the securities registers.The companies issued notices, interms of rule 35(12) and rules35(11) – (14) of the Uniform Rulesof Court, in which they soughtdocuments referred to inMoneyweb’s founding affidavitand copies of different sets ofdocuments from Moneyweb. Theysought these documents forpurposes of interrogating the ‘realmotives’ of Moneyweb, as theybelieved that Moneyweb wasacting in furtherance of a ‘sinisteragenda’ directed against Novaand its subsidiaries, includingcertain members of its executive,and that Moneyweb hadembarked upon a vendetta for thesole purpose of discrediting thecompanies and undermining theirintegrity. The companiescontended that the documentssought would enable them toprove that Moneyweb intendspublishing articles in the medianot for any journalistic motive,

but rather in furtherance of the‘sinister agenda’. They assertedthat the documents sought wererelevant to the anticipated issuesin the main application, as theywould provide them with adefence to that application.

The companies then brought anapplication to compel compliancewith the notices.

THE DECISIONThe issue was whether the

documents sought by thecompanies were relevant to areasonably anticipated issue inthe main application. This issueconcerned the properinterpretation of section 26(2) ofthe Companies Act and, inparticular, whether it confers anunqualified right of access to thesecurities register of a companycontemplated in the section.

The companies contended thatsection 26(2) conferred a qualifiedright as access may be refused, onthe grounds set out in Promotionof Access to Information Act (no2000 of 2000) and on the groundsof the motive of the requester.Moneyweb contended that anunqualified right is conferred onany person who meets therequirements of section 26(2).

Section 26(4) provides that aperson may exercise the rights setout in subsection (2) (a) for areasonable period duringbusiness hours, (b) by directrequest made to a company in theprescribed manner, or (c) inaccordance with the Promotion ofAccess to Information Act, 2000(Act 2 of 2000).’ This showedclearly that this Act (PAIA)provides an alternative torequesting access to a company’sshare register in terms of theprovisions of section 26 of theCompanies Act, and did notcreate a qualification. Thecompanies however, contendedthat the right of access in section

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26(2) must be qualified by, andsubject to, the provisions of PAIA,and that the person requestingthe information mustdemonstrate that the informationis required for the purpose ofexercising or protecting a right.But this requirement could not beimported into section 26(2)without doing violence to a rightwhich is expressly intended bythe legislature to be unqualified.Moreover, this reliance on PAIAcould not be sustained in light ofthe clear language of section 26(4).Accordingly, the their reliance onPAIA was unsustainable as itcertainly did not render thedocuments sought in the rule

35(14) application relevant to themain application.

Section 26(2) expressly confers aright of access in respect of thesecurities registers. Section 26(5)then goes further and providesexpressly, and in unqualifiedterms, that where a companyreceives a request in theprescribed form, the company‘must within 14 business dayscomply with the request’. There isnothing in either sub-sectionwhich, in any way, qualifies thisright. Nor is there any referencein these sections to thereasonableness of either therequest or the response.

When a company fails or refusesto provide access, that person is

entitled, as of right, to an ordercompelling access. The question ofthe motive or purpose is simplyirrelevant. The companies hadfailed to demonstrate that thedocuments sought in the rule35(14) notice were relevant to areasonably anticipated issue inthe main application. Thecompanies’ belief, in relation towhat they will purportedlyachieve through access to thosedocuments, did not give rise to adefence to the main application,as Moneyweb’s ‘motive’ forseeking access to the Companies’securities registers was simplyirrelevant.

The application was dismissed.

This means that when a company fails or refuses to provide access, that person isentitled, as of right, to an order compelling access. The question of the motive orpurpose is simply irrelevant. The Companies have, therefore, failed to demonstrate thatthe documents sought in the rule 35(14) notice ‘are relevant to a reasonably anticipatedissue in the main application’. The Companies’ belief, in relation to what they willpurportedly achieve through access to those documents, does not give rise to a defence tothe main application, as Moneyweb’s ‘motive’ for seeking access to the Companies’securities registers is simply irrelevant.The Companies’ construction of s 26(2) would have a negative impact on openness andtransparency

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SMYTH v INVESTEC BANK LTD

A JUDGMENT BY RABIE JGAUTENG DIVISION, PRETORIA17 SEPTEMBER 2015

2016 (4) SA 363 (GP)

A person whose name is notregistered in the register ofmembers of a company has no rightto participate as an applicant in anapplication brought in termssection 252 of the Companies Act(no 71 of 1973).

THE FACTSSmyth and the other applicants

brought an application againstInvestec Bank Ltd and RandgoldLtd in terms of section 252 of theCompanies Act (no 71 of 1973)complaining of unfairlyprejudicial conduct on behalf ofthose who had some control overthe majority shares in Randgold.They sought the purchase ofshares by Investec at a particularprice.

Section 252 of the Act providesthat any member of a companywho complains that anyparticular act or omission of acompany is unfairly prejudicial,unjust or inequitable, or that theaffairs of the company are beingconducted in a manner unfairlyprejudicial, unjust or inequitableto him or to some part of themembers of the company, maymake an application to the courtfor an order under the section.

Seven of the applicants were notregistered shareholders butbeneficial shareholders whoseshares in Randgold wereregistered in the names ofnominees. The main issue indispute was whether a beneficialholder of shares in a companywhich has chosen to have thoseshares held through a nominee, isentitled to bring an applicationunder section 252 for equitablerelief.

THE DECISION It was necessary to decide

whether or not the words‘member of a company’ in section252(1) of the Act mean only theperson in whose name the sharesare registered or whether they arealso capable of meaning theperson who has rights in theshares, ie the person who is thebeneficial owner of the shares.

The Act requires registration inthe company register as a

prerequisite for membership. Thequestion was therefore whetherthe Act contained an exhaustivedefinition of the term ‘member’for all purposes under the Act.The main thrust of the applicants’argument was that a beneficialholder is included in the term‘member’ in section 252. Insupport of this contention it wassubmitted that the terms‘member’, ‘shareholder’ and‘registered shareholder’ wereused indiscriminately in the Act,and that if the legislatureintended to define ‘member’ insection 103 and furthermoreintended that it should mean‘registered shareholder’consistently throughout the Act,it would hardly have employedthe word ‘shareholder’ when itmeant ‘member’ and vice versa.This contention could not besupported. The terms ‘member’,‘shareholder’ and ‘registeredshareholder’ are interchangeableand mean ‘member’ as defined insection 103 wherever they appearin the Act. It was clear that thecompany recognises only itsregistered shareholders and thatit is the policy of the law that thecompany should concern itselfonly with the registered owner ofthe shares.

It was clear that the word‘member’ as referred to in section252 is not capable of being read soas to include a beneficialshareholder whose shares areregistered in the name of anominee. Only a registeredmember has locus standi toapproach the court in terms ofsection 252 and not the personwho owns the ultimate economicinterest in shares registered insomebody else’s name. A personwhose name is not registered inthe register of members has noright to participate as anapplicant in section 252proceedings.

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SHERIFF, JOHANNESBURG NORTH vYELLOW DOT PROPERTY INVESTMENTS

A JUDGMENT BY SIWENDU AJGAUTENG LOCAL DIVISION,JOHANNESBURG4 MARCH 2016

2016 (5) SA 107 (GJ)

A failure to cancel a contractwithin a reasonable time after thebreach may provide evidence of anelection to abide by the contract.

THE FACTSYellow Dot Property

Investments purchased aproperty at a sale in execution.The conditions of sale concludedby the parties required that it paya deposit of 10% of the purchaseprice, and provide the Sheriffwith a guarantee to secure thepurchase price within 21 days ofbeing called upon to do so. Theconditions of sale obliged YellowDot to pay all costs and chargesfor conveyance and transfer of theproperty.

The conditions of sale providedthat all amounts required by themunicipality for the issue of aclearance certificate in terms ofsection 118(1) of the LocalGovernment Municipal SystemsAct (no 32 of 2000), to the effectthat all amounts due inconnection with immoveableproperty or municipal servicesfees, surcharge on fees, propertyrates and other municipal taxes,levies and duties during the 2years preceding the date of theapplication for the certificatewere payable within seven daysof being requested from YellowDot. However, the conditions ofsale did not reflect amounts duein respect of these arrear rates,taxes and charges payable interms of the Sectional Titles Act(no 95 of 1986), or arrears payableto the homeowners’ association.The amounts were entered as aR0,00 (nil) estimate.

Yellow Dot paid the deposit due.However, the guarantee to securethe purchase price, the interestpayable, the municipal ratesclearance amounts as well as thetransfer costs, were outstanding.The guarantee was lodgedapproximately six months afterthe sale.

Payment of the rates clearanceamounts was not made withinthe seven-day period stipulatedin the conditions of sale, but a

month later. The Sheriff allegedthat there were subsequent andadditional breaches by YellowDot which supported a claim forcancellation of the sale. Inaddition it was submitted thatYellow Dot had subsequentlyfailed to pay the further intereston the purchase price andadditional municipal ratesclearance figures presented to it,notwithstanding demand forpayment having been made.

Yellow Dot disputed theSheriff’sright to cancel the sale and raisetwo interrelated defences. Thefirst was that applying Sheriff,Johannesburg East v Chetty[2014] ZAGPJHC 352, estimatedamounts were not sufficient,having regard to the provisions ofsection 118. The second was thedefence of exceptio non adimpleticontractus.

THE DECISIONThe issue for determination was

whether or not the Sheriff wasentitled to cancellation of the sale.

The legal principle is that afailure to cancel a contract withina reasonable time after the breachmay provide evidence of anelection to abide by the contract.In this case this failure was firstevident in the Sheriff’s reluctanceto enforce the time periodsprovided for in the conditions ofsale and the attitude of latitudeafforded to Yellow Dot. By failingto strictly enforce the timeperiods provided for in theconditions of sale, and insteadaccepting inconsistent and/orpartial compliance, the Sheriff’sconduct led to the inference andconclusion that it waived theright to rely on Yellow Dot’sfailure to comply with the timeclauses of the conditions of sale.

Viewed in the context of theconditions of sale and against thelong-standing principle thatwhere a defence is raised against

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a party it is incumbent on theapplicants to prove that theyhave complied with theirobligations the Sheriff had beenobliged to demonstratecompliance.

As far as the rates clearancefigures were concerned, given the

indemnity that the firstapplicant, it was imperative thatthe amounts payable in respect ofthe rates amounts be clearlystated in the conditions of sale.

In the current circumstances, theSheriff was not entitled tocancellation.

Contract

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COCHRANE STEEL PRODUCTS (PTY) LTDv M-SYSTEMS GROUP (PTY) LTD

A JUDGMENT BY PONNAN JA(MBHA JA, ZONDI JA, MATHOPOJA and FOURIE AJA concurring)SUPREME COURT OF APPEAL27 MAY 2016

2016 (6) SA 1 (SCA)

A search by an internet user using akey word which a competitor hasbid for under the Google AdWordssystem resulting in a number ofdifferent advertisements not all ofwhich relate to another party’sproduct does not necessarily resultin confusion on the part of the userthat all such advertisements arethose of that party.

THE FACTSCochrane Steel Products (Pty)

Ltd sold a type of fencing underthe brand name ‘ClearVu’. M-Systems Group (Pty) Ltd beganthe manufacture and sale of asimilar product under the name‘M-Secure’.

M-Systems bid on the word‘ClearVu’ on the Google AdWordssystem. Cochrane alleged that theeffect of this was that a search byan internet user for ‘ClearVu’would result in M-System’sadvertisement being displayedbecause it had selected ‘ClearVu’as a keyword. It contended thatwhenever an internet usersearched via Google for ‘ClearVu’it was because the internet userwould be looking for its product.However, M-Systemsadvertisement for its M-Secureproduct would appear, and beprominent in relation to thesearch results.

Cochrane sought a final interdictrestraining M-Systems fromusing the word ‘ClearVu’ as akeyword in the Google AdWordssystem, or as a metatag. Sincethere was no trade markregistered over ‘ClearVu’ it basedits claim on the common law ofunlawful competition. Cochranecontended that M-Systems’ actionamounted to passing off.

THE DECISIONNot having any registered right

in the name ClearVu, it was forCochrane to show that the namehad acquired such a reputation inrelation to its business that itcould be said to have becomedistinctive thereof. Assuming thatCochrane succeeded inestablishing a reputation in the

name ClearVu, there remaineddoubt as to whether itestablished the second leg of itscause of action, ie that M-Systems’ conduct caused, or wascalculated to cause, the public tobe confused or deceived.

The use of keyword advertisingwould only be considered to bepassing of, and hence prohibited,if it caused confusion. The criticalquestion to be answered in akeyword-bidding case is whetherthe Google advertisement whichappears in response to the searchusing the keyword gives rise tothe likelihood of confusion.

In the present case, a personwho searched for ‘ClearVu’would be confronted with amultiplicity of suppliers. Noreasonable consumer couldpossibly be under the impressionthat all of them related directly toCochrane. It was highly unlikelythat the reasonably observantconsumer would be confused anddeceived into thinking they wereall the advertisements byCochrane. AdWords were afamiliar feature of the internetand consumers were used todistinguishing them from naturalsearch results. This wasparticularly so where thekeyword was used to trigger theadvertisement of M-Systems butthe advertisement and sponsoredlink made no reference, or use of,Cochrane’s mark. In suchcircumstances, there could be noconfusion that M-Systems’ linkrelated to its product, not to‘ClearVu’.

Cochrane had failed to establishone of the fundamental pre-requisites for passing off, that ofconfusion and deception. Theapplication was dismissed.

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FISHER v NATAL RUBBER COMPOUNDERS (PTY) LTD

A JUDGMENT BY MATHOPO JA(LEWIS JA, WALLIS JA, WILLIS JAand SALDULKER JA concurring)SUPREME COURT OF APPEAL24 MARCH 2016

2016 (5) SA 477 (SCA)

Cession of a debt does not have theeffect of changing the underlyingdebt. Any interruption ofprescription against the debtpersists irrespective of the cessionhaving taken place.

THE FACTS On 18 November 2010 Beaton

served a combined summons onFisher, claiming payment of thesum of R1 077 377 for goods soldand delivered to a company forwhich Fisher had stood surety.Fisher filed a plea. On 22 October2013 Beaton ceded to NatalRubber Compounders (Pty) Ltd(NRC) ‘all of its right, title andinterest in and to the claims’ inrelation to its right of actionagainst Fisher. In terms of clause2.3 of the deed of cession, it wasagreed that NRC would apply forits substitution in the stead ofBeaton as the plaintiff and that itwould thereafter prosecute thecase until its final determination.

On 9 December 2013 Beatonamended the summons andparticulars of claim bysubstituting NRC as the plaintiff.On 22 January 2014 Fisheramended his plea in response tothe amended particulars of claimby raising a special plea,contending that, upon cession toNRC after its substitution as theplaintiff, Meranti’s interruption ofprescription against Fisher hadlapsed and that the claim hadbeen extinguished byprescription in terms of section15(2) and (6) of the PrescriptionAct (no 68 of 1969).

Subsection 15(2) provides thatunless the debtor acknowledgesliability, the interruption ofprescription in terms ofsubsection (1) shall lapse, and therunning of prescription shall notbe deemed to have beeninterrupted, if the creditor doesnot successfully prosecute hisclaim under the process inquestion to final judgment or if hedoes so prosecute his claim butabandons the judgment or thejudgment is set aside.

THE DECISION This question was whether the

substitution of NRC for Beatonamounted to the institution offresh proceedings, so that theinterruption of prescription interms of section 15(2), effected byservice of the summons, ceased tobe effective. A positive answerdepended on the proposition thatNRC’s action against Fisher onlycommenced when it wassubstituted as plaintiff inDecember 2013.

By the cession, a claim vested inone legal entity passed byoperation of law to another, andthat party was substituted asplaintiff in the action. There wasan essential continuity inpursuing the claim. It followedthat, since the underlying debtwas not altered, the cessionarywas entitled to proceed with theclaim. As the cessionary, NRC,stepped into the shoes of thecedent,

The debt remained the samethroughout. When the cessionarysues on a ceded claim theunderlying debt does not change.All that happens is that theidentity of the person entitled toenforce the debt changes, but notthe debt itself. It was clear thatthe process under which the debtwas being pursued remained thesame throughout. To suggest thatthe summons operated tointerrupt the running ofprescription when it was initiallyserved but ceased to fulfil thatfunction when there was a noticeof amendment or substitutionwas clearly not consistent withthe Act. Any judgment that isgranted in favour of NRC in thiscase will be granted in terms ofthe original summons andparticulars of claim, not in termsof the application for

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substitution. In the result theoriginal process that interruptedprescription will have beenprosecuted successfully. This iswhat is required by section 15(2)

of the Act.Only the identity of the party

changed. The debt remained thesame and unaffected byprescription.

Prescription

‘At the heart of Silhouette Investments lies the notion that the legal effect of a cession after litiscontestatio is to terminate the proceedings instituted by the cedent, with the corollary that thesubstitution of the cessionary as the plaintiff must be regarded as the institution of newproceedings. As to whether that underlying notion is correct in respect of cessions, is notnecessary to consider in this case. I say that because Sojitz does not rely on a transfer of rights bymeans of a cession. What it relies upon is a universal succession of all Nissho Iwai’s rights andobligations by operation of Japanese law.’That case was no different from the present one. A claim vested in one legal entity passed byoperation of law to another, and that party was substituted as plaintiff in the action. Central tothe court’s rejection of the argument that the claim had prescribed was the finding that there wasan essential continuity in pursuing the claim.[15] It follows that, since the underlying debt was not altered, the cessionary was entitled toproceed with the claim. As the cessionary, NRC, stepped into the shoes of the cedent

113

KLD RESIDENTIAL CC v EMPIREEARTH INVESTMENTS 17 (PTY) LTD

A JUDGMENT BY ROGERS JWESTERN CAPE HIGH COURT24 JUNE 2015

2016 (5) SA 485 (WCC)

The rule that without-prejudicecommunications are inadmissible inevidence also applies where thecommunication is alleged toconstitute an interruption ofprescription.

THE FACTSKLD Residential CC sued Empire

Earth Investments 17 (Pty) Ltd forpayment of commissions italleged it had earned in propertytransactions. It alleged that interms of a written mandate it hadbeen authorised to market ervenin a development and to receivecommission on sales of which itwas the effective cause, suchcommission to be regarded asearned once the relevantpurchaser took transfer. KLD wasthe effective cause of 99 sales setout in a schedule to theparticulars of claim. It was thusentitled to commissions totallingR2,147 million, whichcommissions were earned on theregistration dates specified in theschedule.

Save in one instance, theregistration dates specified inKLD’s schedule ranged fromOctober 2008 to November 2009.KLD issued summons in June2013, and service was effected on26 June 2013

On 29 July 2011 Empire’sattorneys wrote a letter to KLD’sattorneys, in which Empireacknowledged that, pursuant tothe mandate as extended, KLDhad become entitled tocommissions totalling R2 105 960.KLD alleged that this was anacknowledgment interruptingprescription in terms of section 14of the Prescription Act (no 68 of1969).

The letter stated that KLD’sindebtedness to Empire amountedto R1 023 625,45, and stated‘accordingly we includeundercover hereof a cheque for R1082 334,55 including VAT (beingR2 105 960,00 commission less thetotal indebtedness of R1 023625,45) in full and final settlementof any and all claims that [KLD]may have against our client’.

The letter was written withoutprejudice. KLD accepted that the

effect of the concluding paragraphof the letter was that KLD couldnot have presented the tenderedcheque for payment and sued forthe balance of the commission, iethat presentation of the chequewould have resulted in acompromise.

KLD contended that the letterwas admissible in evidence andas such supported the propositionthat its effect was to interrupt therunning of prescription againstits claim.

THE DECISIONKLD’s contention was based on

the proposition that the shield ofinadmissibility afforded without-prejudice communications islimited to evidence relevant to themerits of a matter. However,there were no soundconsiderations of public policy forthe protection to be confined inthat way. The law’s policy ofencouraging full and frankdiscussions without fear ofprejudicial disclosure would behampered by limiting protectionin this manner. KLD’s case wasthat without-prejudice protectiondoes not apply where thecommunication is relied upon asan interruption of prescription.However, the law does notrecognise such an exception.

The letter undoubtedlycontained an acknowledgment ofliability. The acknowledgmentcould not however, be regardedas wholly unconnected to thesettlement proposal. Theacknowledgment was not anindependent admission because itwas clear from what followedthat Empire did not admit that ithad a present liability to paycommissions in the amount thererecorded (R2 105 960) but a lesseramount after deducting its ownclaims. If Empire ‘admitted’anything, it was a residualliability of R1 082 334,55, being

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the amount offered in full andfinal settlement. One could onlyknow this, however, by havingregard to the asserted deductionsand the actual settlement offer.And the manner in which thesettlement offer was arrived atcould not be understood if oneexcluded from consideration theopening amount of R2 105 960.

An admission of part of aliability is sufficient to interruptprescription, but before a creditor

can rely on an acknowledgmentof part of the liability as aninterruption of prescription theremust be admissible evidence ofthe partial acknowledgment. Therule that a partialacknowledgment sufficesnaturally does not mean that onecan cherry-pick parts of awithout-prejudicecommunication.

It followed that the letter wasnot admissible in evidence.

Prescription

The letter undoubtedly contains an acknowledgment of liability. The acknowledgment cannot,however, in my view be regarded as wholly unconnected to the settlement proposal. Theacknowledgment in para 4 was not an independent admission because it is clear from whatfollows that Empire did not, despite the way in which KLD framed its replication, admit that ithad a present liability to pay commissions in the amount there recorded (R2 105 960). The lettercontinued by asserting various deductions which reduced that amount by way of set-off. Certainof the amounts so deducted would almost certainly not have qualified in law to be deducted byway of set-off since they were not liquidated (the estimated legal costs of R284 666,71 andexpenses totalling R35 889), but this does not detract from the stance Empire was adopting.Empire also left out of account, for settlement purposes, its further claim, which was stilladvanced on the pleadings, for damages exceeding R15 million. Be that as it may, if Empire‘admitted’ anything, it was a residual liability of R1 082 334,55, being the amount offered infull and final settlement. One can only know this, however, by having regard to the asserteddeductions and the actual settlement offer. And the manner in which the settlement offer wasarrived at cannot be understood if one excludes from consideration the opening amount of R2105 960

115

EX PARTE FULS *

JUDGMENT BY VAN NIEKERK AJGAUTENG HIGH COURT,PRETORIA23 JUNE 2016

2016 (6) SA 128 (GP)

It is necessary for an applicant inan application for voluntarysurrender to illustrate advantage tocreditors. The applicant musttherefore provide disclosure ofwhether or not the applicantavailed itself of the proceduresafforded in the National Credit Act(no 34 of 2005) for debt review priorto the application being proceededwith, and a comprehensive report ofthe debt counsellor involved,explaining what procedures werefollowed, and whether or not theapplicant complied with any debtrestructuring arrangements.

THE FACTSIn these applications, the

founding affidavits werevirtually identical and the samevaluator was employed to valuefurniture and household goods atvalues which were unrealisticallyoptimistic and intended toachieve a minimum dividendrequirement of 20 cents in therand. In all of the applications, theonly realisable assets consisted ofmovable assets with minimalvalue. Lists of creditors werefurnished, the nature and extentof which objectively illustratedthat the reason for each of theapplicants’ financial situationwas the fact that they too readilyavailed themselves of credit onoffer and did not balance theirbudgets.

Each of the applicants listedcreditors which prima facieappeared to have entered intocredit agreements with therespective applicants which fellunder the provisions of theNational Credit Act (no 34 of2005). No allegations were madein any of the applications toindicate that, in thecircumstances, section 3 of theInsolvency Act (no 24 of 1936)was to be preferred to the benefitof the creditors instead of aproper application of debt relief interms of the National Credit Act.

THE DECISIONSome 80 years after

commencement of the InsolvencyAct, the National Credit Act(NCA) was enacted to promoteinter alia a fair marketplace foraccess to consumer credit, toregulate consumer creditgenerally and to provide for debtreorganisation in cases of over-indebtedness.

In terms of the NCA, a debtor isafforded various remedies whenfaced with a situation where theNCA applies and the consumer is

unable to pay his/her debts. Aconsumer may even becompletely relieved from his/herobligations in terms of a creditagreement if it were to be foundthat the credit was grantedrecklessly. Most importantly,when a consumer is unable tocomply with his/her obligationsin terms of a credit agreement dueto over-indebtedness, amechanism is provided for in theNCA in terms whereof theconsumer may apply for aremedy referred to in the NCA as‘debt review’. In terms of thisprocedure, should it be found thata consumer is indeed over-indebted, a rearrangement of thedebtor’s obligations may beeffected. This includes inter alia apostponement of obligations interms of a credit agreement, arestructuring of payments, oreven an order that a creditagreement is reckless, therebyexonerating the consumertherefrom.

This procedure in terms of theNCA is clearly in the interest ofthe debtor and the creditor, andto be preferred over the remedyin terms of section 3 of theInsolvency Act because thedebtor is relieved from financialstrain but is still required to meethis/her contractual obligations,wholly or in part, and thecreditor on the other hand has abetter prospect of receiving atleast a substantial portion of theoutstanding liabilities owed to itby the debtor, if not all, albeit at alater stage. This is clearly asituation which is objectively farmore advantageous to a creditorthan the situation where thecreditors often would not evenconsider to file a claim against theinsolvent estate for fear of the riskof having to eventuallycontribute to costs.

It is therefore incumbent on anapplicant in an application for

* The judgment considered theapplication of Fuls together withthree other similar applications

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116

voluntary surrender, where it isrequired to illustrate advantageto creditors, to provide: (i) fulldisclosure of at least whether ornot the applicant availed himself/herself of the procedures affordedin the NCA for debt review priorto the application beingproceeded with, and if not, fullreasons for such failure, (ii) acomprehensive report of the debtcounsellor involved, explainingwhat procedures were followed,and whether or not the applicantcomplied with any debt

restructuring arrangements.If an application of this nature

lacks averments in this respect, itdoes not comply with therequirement that the applicantshould satisfy the court that it isin the interest of his/her creditorsthat the estate should besurrendered, and shouldaccordingly be dismissed.

The applicants failed to do so inthe present case, and so failed tosatisfy the requirement ofproving an advantage tocreditors.

Insolvency

In my opinion, it is difficult to foresee how an applicant in an application forvoluntary surrender of his/her estate would be able to convince a court that theproper application and adherence to arrangements in terms of ss 86 – 88 of the NCAare not to be preferred in the interest of creditors, compared to the surrender of his/her estate.Where an application of this nature lacks averments in the respect as set out supra,it does not comply with the requirement that the applicant should satisfy the courtthat it is in the interest of his/her creditors that the estate should be surrendered,and should accordingly be dismissed.

117

BUTTON N.O. v AKBUR

JUDGMENT BY MBATHA JKWAZULU NATAL LOCALDIVISION, DURBAN23 SEPTEMBER 2015

2015 SACLR 421 (KZD)

Dispositions made by a closecorporation which are alleged tohave been made in the ordinarycourse of business will be set asideif the party making the dispositionis unable to prove they were madein the ordinary course of business.

THE FACTSAs at 28 February 2013, Golden

Rewards 698 CC’s liabilitiesexceeded its assets by some R4m.By 1 June 2013, the closecorporation had stopped trading.In the following months, amember of Golden Rewards,Akbur, effected payments fromthe close corporation totallingR2 493 000.00. These were madeto GSC Trading CC and Akbur,and were alleged by Akbur to berepayments of loans and made inthe ordinary course of business.

In September 2013, GoldenRewards was placed underbusiness rescue. In October 2013,it was placed in liquidation.Button and the other applicantswere appointed the liquidators.They contended that the transfersmade constituted voidablepreferences as they were made sixmonths before commencement ofthe liquidation, they preferredAkbur above Golden Rewards’creditors and that such paymentswere made at the time when theliabilities of the corporationexceeded its assets and when itwas deemed unable to pay itsdebts in terms of section 69(1)(a)of the Close Corporation Act (no69 of 1984). They also submittedthat these were collusive dealingsbetween Golden Rewards andAkbur and GSC because all suchdealings were concluded by

Akbur in his personal capacity,that these withdrawals also hadthe effect of preferring one of itscreditors above another provedcreditor, Aveng Trident Steel(Pty) Ltd.

Akbur contended that as thepayments were made in theordinary course of business, theywere not voidable preferences.

THE DECISION There was no compelling

reason for Akbur to have madethe payments at a time when hewas fully aware of the status ofGolden Rewards.

It was clear from thecircumstances of the case that, atthe time of the disposition, thatAkbur paid himself and GSC withthe intention of preferring himselfand GSC and that thesetransactions were not made in theordinary course of business ofGolden Rewards. By 13September 2013, Golden Rewardshad been placed under businessrescue and Akbur was aware thatthe corporation was struggling tomeet its obligations. Despite hisknoweldge, he nevertheless makespayments to GSC. No otherintention could be inferred fromthese facts, other than that heintended to prefer himself or GSC.

Akbur had not discharged theonus of proving that thepayments were made in theordinary course of business.

Insolvency

118

GRIESSEL v LIZEMORE

A JUDGMENT BY SPILG JGAUTENG HIGH COURT,JOHANNESBURG26 AUGUST 2015

2016 (6) SA 236 (GJ)

A director’s resolution undersection 129(1) of the Companies Act(no 71 of 2008), must be taken ingood faith. It will not beconsidered to have been so taken ifit is done without the knowledge ofshareholders.

THE FACTS Mining and Slurry Technologies

(Pty) Ltd, a company whichmanufactured pumps,experienced certain financialdifficulties. As part of arestructuring of the company, itwas agreed that Griessel wouldtake up a directorship of thecompany instead of his father.The effect of the change was thatGriessel and Mr R Zeman held67% of the shares in the company,and Lizemore held the remaining33% of the company’s issuedshare capital.

On taking over, Griesseldiscovered a number ofirregularities relating thecompany. This included theremoval of all drawings relatingto the manufacture of the pumpsand their transfer to a portablehard drive which was taken offsite.

On 2 July 2015 Lizemore passeda resolution on behalf of theboard of directors placing thecompany under business rescue.Mr M Schlechter, was appointedthe business rescue practitioner.Lizemore passed the resolutionwithout the knowledge of theother shareholders and despite ameeting of shareholders, heldthree days earlier which rejectedhis suggestion that businessrescue proceedings be considered.Lizemore contended that he didnot have to notify the othershareholders of his intention topass the directors resolution,since because he had omitted tosign the resolution appointingGriessel a director, at that time hewas the sole director of thecompany and could unilaterallyresolve to begin business rescueproceedings and place thecompany under supervision interms of section 129(1) of theCompanies Act (no 71 of 2008).

After becoming aware that thecompany had been placed under

business rescue Griessel andZeman brought an application foran order (a) declaring that theresolution to begin businessrescue proceedings and to placethe company under supervisionhas lapsed and was a nullity, and(b) setting aside the resolutionpassed by Lizemore in terms ofwhich the company would beginrescue and be placed undersupervision.

THE DECISIONThe primary objective of the

introduction of business rescueproceedings was to afford acompany that is in financialdifficulties a period of time toregain viability by being allowedto formulate and implement arational plan to rehabilitate itself.However the Act alsocontemplates business rescue ifthe company cannot continue inexistence but can obtain a betterreturn for creditors orshareholders than if the companywere immediately liquidated.The primary objective is toprevent a viable company fromclosing down by allowing it anopportunity to regain solvencythrough the mechanism ofbusiness rescue provided it can beachieved within a reasonabletime.

The words ‘or, if it is notpossible for the company to socontinue in existence’ qualifywhen the alternative objective ofproviding a better return may berelied upon. In other words it isfor the person who wishes toplace a company under businessrescue on this alternative groundto satisfy three criteria: (a) thatthe company is financiallydistressed as required undersection 129(1)(a), (b) that it is notreasonably likely for thecompany to be rehabilitated andcontinue in existence on a solventbasis as contemplated in section

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128(1)(b)(iii), and(c) that the development andimplementation of a plan torescue the company would resultin a better return for creditors orshareholders than would occurfrom its immediate liquidation.

The various requirements forplacing a company underbusiness rescue and when it willbe taken out of business rescuepresuppose, in the case of adirectors resolution under section129(1), that the resolution is takenin good faith. It was evident that

the section 129 resolution wastaken behind the backs of the co-shareholders and when Lizemoreknew that they, as majorityshareholders, were entitled tohave a director on the board andwould not have approvedbusiness rescue.

In all the circumstances it wasjust and equitable to set aside theresolution. Each of therequirements to set aside theresolution in terms of section130(5)(a) read with s 130(1)(a) hadbeen met.

The application succeeded.

Companies

The primary objective of the introduction of ch 6 was to afford a company that is infinancial difficulties (and satisfies the threshold I requirement of being ‘financiallydistressed’) a period of time to regain viability by being allowed to formulate andimplement a rational plan to rehabilitate itself. However the Act also contemplates businessrescue if the company cannot continue in existence but can obtain a better return forcreditors or shareholders than if the company were immediately liquidated.

120

KYTHERA COURT v LE RENDEZ-VOUSCAFE CC

A JUDGMENT BYBORUCHOWITZ JGAUTENG HIGH COURT,JOHANNESBURG22 JUNE 2016

2016 (6) SA 63 (GJ)

The general moratorium in section133(1) of the Companies Act (no 71of 2008) does not encompass legalproceedings for ejectment where alease has been validly cancelled andthe company in business rescue isan unlawful occupier.

THE FACTS Kythera Court and Le Rendez-

Vous Cafe CC concluded awritten lease. In terms of the leasecertain premises were leased tothe cafe for a period of six years,commencing in May 2010.

After it had fallen into arrearswith the payment of threemonthly rentals and municipalcharges, the cafe placed itself inbusiness rescue. Kytheracancelled the lease agreement on 7March 2016, but the cafe refusedto vacate the premises.

Kythera alleged that the caféwas misusing the business rescueprocess by unlawfully remainingon the premises and operating itsbusiness without making anyrental payments or paying anyother charges. Furthermore, ithad failed to file a business rescueplan as required under the Actand had reneged on anundertaking to pay rental. Itbrought an application to evictthe café on the ground that thelease agreement between theparties had been cancelled,alternatively that the lease hadexpired

The cafe opposed the applicationinter alia on the grounds that themoratorium envisaged in section133(1) of the Companies Act (no71 of 2008) precluded Kytherafrom cancelling the alleged leaseand bringing the application.

THE DECISIONSection 133(1) of the Act

provides that during businessrescue proceedings, no legalproceedings may be commencedor proceeded with in any forum,except (a) with the writtenconsent of the practitioner, or (b)with the leave of the court. Thequestion which arose waswhether leave was necessary interms of section 133(1)(b) forKythera to bring the evictionapplication.

The moratorium is not anabsolute bar to legal proceedingsbeing instituted or continuedagainst a company underbusiness rescue. It is intended tobe of a temporary nature onlyand cannot be utilised toindefinitely delay satisfaction ofthe claims of creditors; or result inthe extinguishment of the claimsof creditors. Section 133(1) listsfive exceptions when legal orenforcement proceedings may becontinued with or initiated.

It is trite law that on thetermination of a lease, it is theduty of the lessee to vacate theproperty subject only to thelessee’s right to compensation forimprovements. The failure tovacate properties when there isan obligation to do so renders thelessee an unlawful occupier. But,in the context of business rescueproceedings, the right to cancel alease may be affected by theprovisions of section 136(2)(a) ofthe Act. The section provides thatthe business practitioner may —despite any provision of anagreement to the contrary —entirely, partially orconditionally suspend, for theduration of the business rescueproceedings, any obligation of thecompany that arises under anagreement to which the companywas a party at thecommencement of the businessrescue proceedings. By invokingthis section, the businesspractitioner may prevent alandlord from cancelling a leaseand from instituting evictionproceedings.

There was sufficient reason toconclude that the generalmoratorium in section 133(1) doesnot encompass legal proceedingsfor ejectment where a lease hasbeen validly cancelled and thecompany in business rescue is anunlawful occupier. The sectionpresented no bar to enforcementof Kythera’s rights.

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121

SHERIFF, PIKETBERG v LOURENS

A JUDGMENT BY MAHOMED AJWESTERN CAPE HIGH COURT1 AUGUST 2016

2016 (6) SA 110 (WCC)

A purchaser at a sale in execution isobliged to pay VAT on the sale incircumstances where the conditionsof sale state this to be thepurchaser’s obligation and thepurchaser was in a position todetermine that this obligationrested on him.

THE FACTSLourens purchased property as

a sale in execution. Clause 4.7 ofthe conditions of sale placed theobligation to pay ‘transfer dutyor VAT attracted by the sale’ onthe purchaser.

Lourens did not respond todemands for payment of the VAT,an amount of R88 200. He allegedthat the obligation to pay VATwas not disclosed to him prior tothe sale in execution andcontended that as a materialcondition of the contract of sale, iethat VAT was payable on thetransaction, was not brought tohis attention, the seller was guiltyof misrepresentation by failing toinformhim beforehand that VAThad to be paid on the transaction.

The sheriff then brought anapplication for an order that thesale be cancelled.

THE DECISION The two issues in dispute were

whether the sheriff had a duty toestablish the VAT status on theproperty and disclose thisinformation to Lourens, andwhether the sheriff failed tocomply with the provisions of theConsumer Protection Act (no 68of 2008) and regulations underwhich the sale was conducted.

Since the first defendant, asjudgment debtor, was unable topay the VAT to Sars thisobligation fell on the secondapplicant (judgment creditor), asholder of rights over theproperty, to raise the money topay the VAT over to Sars. Thesecond applicant thereforedemanded the VAT amount ofR88 200 from Lourens in order to

effect transfer of the property.The question arose whether

there was a general duty on theapplicants to establish the VATstatus of the owner of theproperty and disclose thisinformation to Lourens. Thesewere issues which Lourens oughtto have investigated and fullyapprised himself of prior to theauction. The sheriff was notrequired in law to extend itsenquiries beyond what the realrights attached to the propertythat was the subject of the sale inexecution were. The sheriff actedin good faith by declaring thatVAT would be payable on the saletransaction, because theconditions of sale clearlystipulated that VAT would bepayable by the purchaser.

Lourens was made aware of theconditions of sale at the time ofthe auction but did not querythem or raise any concerns. Inthese circumstances there was nomaterial basis for Lourens tosuggest that the conditions of salewere not binding on the parties tothe transaction or that he was notliable for the VAT amount. Therewas accordingly no basis for theconclusion that the sheriffviolated any of the consumerprotections afforded Lourens bythe Act and regulations.

All the parties were properlysensitised to the issue of pricing inregard to the property, andparticularly Lourens who carriedthe liability for the VAT amount.Accordingly, the sheriff wasentitled to the cancellation of thesale in execution, in view ofLourens’ failure to comply withhis obligations and pay the VAT.

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MINISTER OF MINERAL RESOURCES v MAWETSE(SA) MINING CORPORATION (PTY) LTD

A JUDGMENT BY MAJIEDT JA(NAVSA ADP, LEACH JA, ZONDIJA AND MEYER AJA concurring)SUPREME COURT OF APPEAL28 MAY 2015

2015 SACLR 380 (SCA)

The Minister of Mineral Affairs mayrequire compliance with BlackEconomic Empowermentrequirements as conditions for thegrant of prospecting rights. Aprospecting right subsists from thetime that it is granted and lapsesafter the period of its effectivenessexpires regardless of whether or notcompliance with such requirementshas been achieved.

THE FACTS In September 2009, Mawetse

(SA) Mining Corporation (Pty)Ltd applied for a prospectingright for various minerals inrespect of various farms,including one named Driekop.This application was rejected interms of section 16(2)(b) of theMineral and Petroleum ResourcesDevelopment Act (no 28 of 2002)because that prospecting righthad already been granted toDilokong Chrome Mine (Pty) Ltd.

Dilokong’s application for aprospecting right on this farmhad been made some three yearsearlier. On 18 July 2007, theDeputy Director General: MineralDevelopment, Department ofMineral Resources had written toDilokong to confirm that it hadbeen granted a prospecting rightfor a four-year period in respectof Driekop. The approval wassubject to Dilokong submittingbefore notarial execution of theright, all outstandingdocumentation, including ashareholder agreement with aBlack Economic Empowermententity holding not less than 26%of the equity in the operation.Dilokong did not comply withthis requirement and, as a result,its prospecting right could not benotarially executed.

On 16 August 2011 the Ministerof Mineral Resources upheld theaward of the prospecting right toDilokong and dismissed an appealbrought against it by Mawetse.Mawetse brought a reviewapplication.

THE DECISIONThe primary dispute was

whether Dilokong could lawfullyhave been required to be BEEcompliant.

Dilokong contended that, oncethe requirements in section 17(1)of the Act had been met, theMinister was legally obliged to

grant the right. It contended thatcompliance with the BEErequirements in section 2(d) wasnot a precondition for thegranting of a prospecting right, asopposed to a mining right, and itcould not be lawfully imposed.

These contentions could not beaccepted. The Deputy DirectorGeneral had plainly andunequivocally attached BEEcompliance as a condition ingranting the prospecting right.Furthermore, the draft notarialdeed in terms of which theprospecting right was to beexecuted, envisaged that Dilokonghad to be BEE compliant.

Dilokong contended that anapplicant for a prospecting rightcould not in law be compelled tobe BEE compliant and that theMining Charter does not apply toprospecting rights. Thiscontention could no be accepted:section 100(2)(a) of the Actprovides for the development ofthe Mining Charter in order to‘ensure the attainment ofGovernment’s objectives ofredressing historical, social andeconomic inequalities as stated inthe Constitution.’

In any event, the period forwhich Dilokong’s prospectingright endured had to becalculated from the date on whichit was informed of the granting ofthe right, ie 18 July 2007. On thatdate Dilokong became the holderof a valid prospecting right,subject to compliance with therequest to prove BEE compliance.It did not matter, for purposes ofcomputing the period of theduration of the right, that theright still had to be executed andthat the right had not yet becomeeffective. Therefore, Dilokong’sprospecting right had expired dueto the effluxion of time on 17 July2011, ie four years after the dateon which Dilokong had beennotified of the granting of theright.

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HAIGH FARMING (PTY) LTD v E.G. ELLIOT REALESTATE CC

JUDGMENT BY MBATHA JKWAZULU NATAL HIGHCOURT, PIETERMARITZBURG2 OCTOBER 2015

2015 SACLR 451 KZP

A company which acts as an estateagent is entitled to commission onproperty sales concluded at a timewhen it so acted.

THE FACTSHaigh Farming (Pty) Ltd entered

into an oral agreement with E.G.Elliot Real Estate CC in terms ofwhich Haigh would provideconsultancy services in respect ofvarious agricultural propertiesthat had been listed with Elliot.Elliot would pay Haigh aconsultancy fee in respect of anyconsultancy services rendered byHaig in respect of such properties.It would also pay a ‘spotting’ or‘listing’ fee in respect ofproperties that had been referredby the Haigh to Elliot and inrespect of which a successful salehad been concluded.

Pursuant thereto, Haighrendered the consultancy servicesin respect of a property known asthe ‘Von Pletzen’ property andlisted a building known as the‘Stockowners’ building withElliot. The two properties weresubsequently sold, and Elliotreceived commission in respect ofthe two sales. The businessrelationship between the partiesthen terminated. The sale of theproperty was later amended, andan addendum to the agreementrecorded the substitution ofanother party as purchaser.

Haigh contended that thoughthe addendum was signed whenhe no longer had a relationshipwith Elliot, the consultancy workwas done and it was still entitledto the consultancy fee of 50%.

Elliot raised a special plea that atall material times, Mr Brad Haighacted as the estate agent and notHaigh Farming (Pty) Ltd, that hedid so without a Fidelity FundCertificate as required by theEstate Agency Affairs Act, andthat as a result, even if HaighFarming (Pty) Ltd proved that itperformed such acts, it was notentitled to a commission.

THE DECISIONThere was no evidence

indicating that Mr Haigh wasemployed by Elliot. This hadnever been raised before by Elliot,which customarily paid thecompany its consultancy fees.Elliot had not given anyexplanation why only one personwould work for him for so manyyears without being in possessionof a Fidelity Fund Certificate.Whether an addendum to the saleagreement was signed later on, itwas still on the same terms aspreviously negotiated andbrought into fruition by Haigh,the company.

The prohibition onremuneration as envisaged insection 34A of the Act is not ablanket prohibition, but one ‘inrespect of or arising from theperformance by such person ofany act’ of selling or purchasingimmovable property or letting orhiring of immovable property.The question was whether thecompany acted as an estate agentin respect of the two properties.In so far as the Stockownersproperty was concerned, thesupplying of a listing was notdefined as an act performed by anestate agent in the definition of anagent. Haigh would therefore notbe barred from receiving anyremuneration in supplying theidentity of the immovableproperty which was up for sale toElliot or referring the seller toElliot.

It was clear from the evidencethat at all times, Mr Brad Haighrepresented the company. Haighthe company, successfully provedthat it was a contracting party,that Mr Haigh was not in theemployment of Elliot and did notact as an agent of Elliot.

The claim succeeded.

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FERRARI v GUNNER

A JUDGMENT BY LEWIS JA(CACHALIA JA, MAJIEDT JA,PILLAY JA AND MEYER AJAconcurringSUPREME COURT OF APPEAL9 MARCH 2015

UNREPORTED

If a party is shown to haveexpressly acceded to the provisionsof an agreement to which hisattention is specifically drawn,there will be no grounds for thatparty to allege and prove that afraudulent misrepresentation hasbeen made to him in respect thereof.

THE FACTSGunner concluded an agreement

with Ferrari and van der Molenfor the purchase of 20 per cent ofthe member’s interest in a closecorporation. The closecorporation was the formalowner of a family business inwhich Ferrari and van der Molenwere members. They alsoconcluded an associationagreement. Both contracts weresigned on 23 July 2012. Gunnerwas employed as a designdirector by Budget and hecommenced working for it on 1September 2012.

Gunner paid the full purchaseprice of R4.67 million for themember’s interest. In February2013 the close corporation wasconverted to a company, BudgetSheetmetal (Pty) Ltd..

The agreements necessary fortheir implementation, theMemorandum of Incorporation(MOI) of the company and theshareholders’ agreement weredrafted by Gunner’s wife,D’Amico, who was an attorney.D’Amico made it clear she wasacting on behalf of Gunner, andsuggested that the other partiesconsult their own attorneyshould they so wish to do so.

A meeting was scheduled todiscuss the MOI and theshareholders’ agreement on 6March 2013. At the meeting,Ferrari informed Gunner andD’Amico that he and othermembers of the close corporationdid not wish to proceed with theimplementation of the saleagreement and would not appointGunner as a director. The reasonthey gave was that, as Gunnerwould enjoy certain rights as aminority shareholder under theCompanies Act (no 71 of 2008)and the family would have to giveup control of the business, whichthey did not want to do. Theyproposed that the investment

made by Gunner be converted toa loan to the company.

Gunner rejected the proposal. Heapplied for an order directing theimplementation of theagreements. Ferrari and the otherappellants opposed theapplication on the grounds thatD’Amico had fraudulentlymisrepresented the meaning ofclause 3.7 in the sale agreement,thus rendering the agreementvoid. The clause provided thatupon the conversion of the closecorporation to a company, theparties could reflect theirshareholding in trusts. Theyalleged that D’Amicomisrepresented to them that theclause meant that there had to beunanimous consent of allshareholders for any one of themto hold their shares in a trust, butin fact asa the clause stood, eachshareholder has the rightunilaterally to transfer his sharesto a trust. In an earlier draft, thepurchaser had been stated to be atrust but Ferrari had objected tothis on the grounds that they didnot want the shareholding to fallinto the hands of a third party.D’Amico had amended the clauseand submitted it to Ferrari forperusal before the agreement wassigned.

THE DECISIONIt was unlikely that Ferrari and

the other appellants asexperienced business people,would have let clause 3.7 standhad he objected to Gunneracquiring the shareholding in atrust. The issue of a trust hadbeen raised earlier and itssignificance considered.

Furthermore, when advised thatGunner wished to register hisshares in a trust Ferrari and theother appellants did not object.At a later stage when D’Amicoreferred to the implementation ofthe agreement involving trusts,

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there was no objection to this.It was also significant that when

Ferrari and the other appellantsfirst indicated they did not wishto abide by the agreement, nomention was made of the allegedfraudulent misrepresentation asto the meaning of clause 3.7. Thedefence was raised for the firsttime in the answering affidavit.

If there was any truth in theallegation that D’Amico had

misrepresented the meaning ofclause 3.7, and if the appellantshad really thought thatunanimous consent was requiredfor any of Ferrari, Van der Molenor Gunner to hold their shares intrusts, then the proper remedywas for them to apply to rectifythe agreement to state that –– toreflect their continuing commonintention.

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ELLIS v CILLIERS N.O.

JUDGMENT BY BLOMMAERT AJWESTERN CAPE HIGH COURT9 OCTOBER 2015

2015 SACLR 436 (WC)

A sale agreement may be cancelledif the seller fails to disclose defectsconcerning the thing sold which thesellers knows the purchaser wouldhave an interest in knowing about.

THE FACTSEllis bought a house from

Cilliers. The sale agreementcontained a voetstoots clausewhich provided that the sellerwould not be liable for anydefects in the house, whetherlatent or patent, nor would theseller be answerable for anywarranties either express orimplied. The purchaser confirmedhaving satisfied himself with thecondition of the property bypersonal inspection.

The house had certain defects,one of which was that one of thefloors was not level. Cilliers hadmade the floor level by adding toit a concrete screed and coveringthis with a fitted carpet. A falseceiling had also been added.

After Ellis had taken occupationof the house, she discovered thatthe floor was not in fact level. Shedetermined that the foundationswere rotten and would have to berepaired. She contended that thisconstituted a defect and claimedthat the defect had been known toCilliers at the time of the sale andhad not been disclosed to her. Sheclaimed that she was entitled tocancel the sale.

THE DECISIONCilliers must have known, or at

least have anticipated, that hadshe informed Ellis of the unlevelfloor, Ellis would not have boughtthe house. At the very least Elliswould have inspected thefoundation which would haverevealed the defect. Even if Cilliersdid not think uneven floors werea defect, it was such an unusualfeature that she should haverevealed it. It was a most unusualfeature which made renovation ofthe house exceptionally difficult.Ellis had an interest in knowingabout the cement screed on thefloors and the false ceiling.

The admitted knowledge of theunlevel floor by Cilliers, and thefailure to inform Ellis of theremedial treatment was a latentdefect. The fact that, as a result ofthe discovery of the remedialtreatment, it was found that thefoundation was rotten, did notchange the fact that an unlevelfloor was a latent defect. In orderto rectify the defect the evidenceestablished that repairs had to bedone to the foundation under thehouse.

Ellis was therefore entitled tocancellation of the sale.

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