Current Commercial Cases

2010

ISBN 978-1-920569-38-9

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

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Contents

Index......................................................................................................................................................... 4DU PLESSIS N.O. v GOLDCO MOTOR & CYCLE SUPPLIES (PTY) LTD 8LEGATOR McKENNA INC v SHEA 9FREDDY HIRSCH GROUP (PTY) LTD v CHICKENLAND (PTY) LTD 11CLADALL ROOFING (PTY) LTD v SS PROFILING (PTY) LTD 13VOLVO (SOUTHERN AFRICA) (PTY) LTD v YSSEL . 14DUET AND MAGNUM FINANCIAL SERVICES CC (IN LIQUIDATION) v KOSTER 15CITY OF JOHANNESBURG v RENZON AND SONS (PTY) LTD 16CITY OF CAPE TOWN v REAL PEOPLE HOUSING (PTY) LTD 17KOVACS INVESTMENTS 724 (PTY) LTD v MARAIS 18HOOFAR INVESTMENTS (PTY) LTD v MOODLEY 19AGRI SOUTH AFRICA v MINISTER OF MINERALS AND ENERGY; VAN ROOYEN v MINISTER OF MINERALS AND ENERGY 20AMRICH 159 PROPERTY HOLDING CC v VAN WESEMBEECK 21RAQA v HOFMAN 22ABSA BROKERS (PTY) LTD v RMB FINANCIAL SERVICES 23EX PARTE BOUWER AND SIMILAR APPLICATIONS 24INVESTEC BANK LTD v MUTEMERI .. 25VERIMARK HOLDINGS LTD v BRAIT SPECIALISED TRUSTEES (PTY) LTD 26CLIPSAL AUSTRALIA (PTY) LTD v GAP DISTRIBUTORS (PTY) LTD27CUNINGHAME v FIRST READY DEVELOPMENT 249 28CARTER TRADING (PTY) LTD v BLIGNAUT .. 30NELSON MANDELA BAY METROPOLITAN MUNICIPALITY v NOBUMBA N.O. 31DEMPA INVESTMENTS CC v BODY CORPORATE, LOS ANGELES 33MATHENJWA N.O. v MAGUDU GAME CO (PTY) LTD 34MILLS N.O. v HOOSEN35PINZON TRADERS 8 (PTY) LTD v CLUBLINK (PTY) LTD 36POCOCK v DE OLIVIERA . 37REFLECT-ALL 1025 CC v MEC FOR PUBLIC TRANSPORT, ROADS AND WORKS 38HIDRO-TECH SYSTEMS (PTY) LTD v CITY OF CAPE TOWN 40MICROSURE (PTY) LTD v NET 1 APPLIED TECHNOLOGIES SOUTH AFRICA LTD 41MUNICIPAL MANAGER: QAUKENI LOCAL MUNICIPALITY v FV GENERAL TRADING CC 43STANDARD BANK OF SOUTH AFRICA LTD v HUNKYDORY INVESTMENTS 188 (PTY) LTD 44POLARIS CAPITAL (PTY) LTD v REGISTRAR OF COMPANIES 45KEBBLE v GAINSFORD46LASKARIDES v GERMAN TYRE CENTRE (PTY) LTD 48MOMENTUM GROUP LTD v VAN STADEN N.O. ... 49LOMBARD INSURANCE CO LTD v LANDMARK HOLDINGS (PTY) LTD 50ABSA BROKERS (PTY) LTD v RMB FINANCIAL SERVICES 51SPEARHEAD PROPERTY HOLDINGS LTD v E&D MOTORS (PTY) LTD 52PAPPALARDO v HAU 53ROCKBREAKERS AND PARTS (PTY) LTD v ROLAG PROPERTY TRADING (PTY) LTD 54SWANEPOEL v NAMENG . 55GIBBS v VANTYI . 56YST PROPERTIES CC v ETHEKWINI MUNICIPALITY 57VOSAL INVESTMENTS (PTY) LTD v CITY OF JOHANNESBURG 58KIEPERSOL POULTRY FARM (PTY) LTD v PHASIYA59THEART v MINNAAR N.O. 60SENEKAL v WINSKOR 174 (PTY) LTD 60MANITOBA INVESTMENT HOLDINGS LTD v LIPCHIN61EX-TRTC UNITED WORKERS FRONT v PREMIER, EASTERN CAPE PROVINCE 62ESPAG v HATTINGH .. 63LOGISTA INC v VAN DER MERWE65JACOBS v IMPERIAL GROUP (PTY) LTD 66NICOR IT CONSULTING (PTY) LTD v NORTH WEST HOUSING CORPORATION 67ROBCON CIVILS/SINAWAMANDLA 2 JOINT VENTURE v KOUGA MUNICIPALITY 68MOOSA N.O. v HASSAM N.O. 69STRATGRO CAPITAL (SA) LTD v LOMBARD N.O. .. 70RONBEL 108 (PTY) LTD v SUBLIME INVESTMENTS (PTY) LTD 71McCARTHY LTD v ABSA BANK LTD 72CONSOLIDATED NEWS AGENCIES (PTY) LTD v MOBILE TELEPHONE NETWORKS (PTY) LTD 73BLAKES MAPHANGA INC v OUTSURANCE INSURANCE CO LTD 75KING v ATTORNEYS FIDELITY FUND BOARD OF CONTROL 76MEC FOR ECONOMIC AFFAIRS, ENVIRONMENT AND TOURISM, EASTERN CAPE v KRUIZENGA 77BP SOUTHERN AFRICA LTD v MAHMOOD INVESTMENTS (PTY) LTD 78VIKING PONY AFRICA PUMPS (PTY) LTD v HIDRO-TECH SYSTEMS (PTY) LTD 79SOUTHERNERA RESOURCES LTD v FARNDELL N.O. 81BEDFORD SQUARE PROPERTIES (PTY) LTD v LIBERTY GROUP LTD 82NYANDENI LOCAL MUNICIPALITY v HLAZO 83

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ICS PENSION FUND v SITHOLE .... 85BONHEUR 76 GENERAL TRADING (PTY) LTD v CARIBBEAN ESTATES (PTY) LTD 87NORTHVIEW SHOPPING CENTRE (PTY) LTD v REVELAS PROPERTIES JOHANNESBURG CC 88SP & C CATERING INVESTMENTS (PTY) LIMITED v THE BODY CORPORATE OF WATERFRONT MEWS 89ST PAUL INSURANCE CO SA LTD v EAGLE INK SYSTEM (CAPE) (PTY) LTD 90THE MIEKE91CLASSIC SAILING ADVENTURES (PTY) LTD v REPRESENTATIVE OF LLOYD’S 91STARITA v ABSA BANK LTD. 92LEEUW v FIRST NATIONAL BANK 93BAYLY v KNOWLES ... 94HENDRICKS N.O. v CAPE KINGDOM (PTY) LTD... 95BURNETT v DELOITTE & TOUCHE 96SIMCHA PROPERTIES 6 CC v SAN MARCUS PROPERTIES (PTY) LTD 97DUET AND MAGNUM FINANCIAL SERVICES CC (IN LIQUIDATION) v KOSTER 98FIRSTRAND BANK LTD v DHLAMINI . 99Rossouw v Firstrand Bank Ltd 100STANDARD BANK OF SOUTH AFRICA LTD v KRUGER 101NAIDOO v ABSA BANK LTD... 102STANDARD BANK OF SA LTD v ROCKHILL.. 103GROENEWALD NO v M5 DEVELOPMENTS (CAPE) (PTY) LTD 104MOSEME ROAD CONSTRUCTION CC v KING CIVIL ENGINEERING CONTRACTORS (PTY) LTD 105FEDBOND PARTICIPATION MORTGAGE BOND MANAGERS (PTY) LTD v INVESTEC EMPLOYEE BENEFITS LTD 106MAREE v BOOYSEN ... 108MITCHELL v BEHEERLIGGAAM RNS MANSIONS 109MKHIZE v UMVOTI MUNICIPALITY .. 110OFFIT ENTERPRISES (PTY) LTD v COEGA DEVELOPMENT CORPORATION (PTY) LTD 111STANDARD BANK OF SOUTH AFRICA v MASTER OF THE HIGH COURT 112ABSA BANK LTD v BERNERT. 114VILVANATHAN v LOUW N.O. 115AFRICAN BANK LTD v MYAMBO N.O. ..... 116BMW FINANCIAL SERVICES (SA) (PTY) LTD v MUDALY 117ABSA BANK LTD v HAVENGA AND SIMILAR CASES 119JMV TEXTILES (PTY) LTD v DE CHALAIN SPAREINVEST 14 CC 120VOLTEX (PTY) LTD v CHENLEZA CC 121SWINBURNE v NEWBEE INVESTMENTS (PTY) LTD .. 123CALIBRE CLINICAL CONSULTANTS (PTY) LTD v NATIONAL BARGAINING COUNCIL FOR THE ROAD FREIGHT INDUSTRY 124NKENGANA v SCHNETLER125DELPHISURE GROUP INSURANCE BROKERS CAPE (PTY) LTD v DIPPENAAR 126JOHANNESBURG METROPOLITAN MUNICIPALITY v GAUTENG DEVELOPMENT TRIBUNAL 127SWARTLAND MUNICIPALITY v LOUW NO ... 129

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IndexApportionment of damages

joint wrongdoers 23, 51Arbitration

award to be set aside before claiming relief 96Attorney

settling litigation, authority of 77Attorney's fee

set off 75Attorney's trust account

money paid into 76

Bankand customer contract 72assuring customer 93collecting bank 72international customs 114paying bank 72

Cessionknowledge of 49substitution of ceded asset 49

Companiesclass of shareholder 26disposal of major asset 44external company as purchaser of land 61external company deregistered 61mortgaging of company property 44scheme of arrangement 26service of winding up application 95shareholder alleging unequal treatment of 94winding up, liquidator entitled to conduct enquiry 46

Companyas organ of state 67association not for gain 28formed to promote public purpose 111lifting corporate veil 27name, objection to 45separate legal person 27winding up - liquidator’s duties 112winding up, just and equitable ground 28

Constitutionarrest tanquam suspectus de fuga 21land use regulation 127organ of state, company as 67sale in execution without judicial oversight 110

Constructionguarantee, when payable 50

Contempt of courtrequirements to prove 27

Contractconstitutionality of implementation 83contra bonos mores 83counter-offer 54disclaimer 11disclaimer on notice board 66

fictional fulfilement of obligation 8goods supplied not to specification 13indemnity clause, interpretation of 123interpretation of multiple contracts 78payment under protest 57restraint of trade clause 65right to cancel 119set off 75signed on behalf of close corporation

authority of non-member of corporation 88specific performance compared with claim for debt 67standard terms 13suspensive condition, fulfilment 81tacit waiver 18tender, obtained on fraudulent basis 40, 79tender of performance 125terms not apparent to reasonable reader 11terms stated in notice 66variation of, non-variation clause 18writing, deviation from 82written agreement not varied tacitly 106written, must be annexed to summons 69

Credit Transactionnotice to debtor 92

Credit Transactionsconsent to judgment 116consumer debarred from applying for debt review 117creditor must set out right to cancel 119deferred payment as 121nominal purchaser and 22rescission of judgment 115supply of goods on credit 120

Creditor and debtornominal purchaser and 22

Creditor and debtroarrest tanquam suspectus de fuga 21

Curatorauthority to act 9validity of agreement concluded by 9

Debtor and creditoracknowledgment of debt 30

Delictjoint wrongdoers 23, 51misstatement leading to economic loss 126negligent mistatement not made to plaintiff 114

Employeecontracting through labour broker 14fiduciary duty to employer 14

Estoppelbank assuring customer of cheque 93

Evictionunlawful occupier 60

Expropriation

5

of minteral rights 20of property by private company 111

Fiduciary dutyof employee 14

Fixed depositceded as security, substituted 49

Indemnity clauseinterpretation of 123

Insolvencyabandonment of claim 71cession of claim 71disposition, when debt arises 15friendly sequestration 24interrogation, Master’s decision to issue subpoena 48liquidator, duty of 112notice to debtor of sequestration proceedings 102voidable disposition 73voidable disposition, when claim arises 98

Insurancebasis of repudiation of claim 91interpretation of 'contamination' 90life insurance, broker's right to commission 108life insurance, insured's right to cancel 108not underwritten 126repudiation of claim by insurer 91

Insurance policycession of as security 49

Interpretation of statutesejusdem generis rule 28

Investmentparticipation bonds 106

Leasehuur gaat voor koop 52option to purchase 8, 52

Liquidationconstruction guarantee, when payable 50interrogation, Master’s decision to issue subpoena 48liquidator entitled to conduct enquiry 46of association not for gain 28of company on just and equitable ground 28

Liquidatorduties of 112enquiry conducted by 46

Locus standiof unincorporated association 62

Mandament van spolieassociated property 36conditions for remedy 41

Mineral rightsexpropriation of 20registration of cession of rights 81

Municipalityrates and taxes 17, 19

rates entitlement 57, 58

National Credit Actacknowledgment of debt 30consent to judgment 116debt counsellor’s right to intervene 25debt review 117debt review proceedings, termination of 101deferred payment not a credit transaction 121incidental credit agreement 120municipal provision of services 31municipal rates not subject to Act 31notice to consumer 99, 100notice to debtor, delivery at domicilium 92sequestration proceeding and 25sequestration proceedings not requiring notice 102

Ownershiptransfer of ownership 34wild animals, transfer of 34

Parole evidence ruleinvestment contract 106

Partnershipdissolution of 63misconduct by partner 63

Pension funddefined benefit fund

defined contribution fund 85Possession

restoration of, mandament van spolie 41Prescription

claim by liquidator, voidable disposition 98commencement of, disposition 15debt, meaning of 15municipal charge on property 16

Propertyauthority to sign sale agreement

compliance with Alienation of Land Act 88co-owner, right to deal in share 87constitutional rights, expropriation 38eviction of occupier 59, 60eviction of unlawful occupier 60expropriation of 111failure to deliver guarantee 81land use regulation 129land use, regulation of 127municipal charges and 16nieghbour, flow of water 53option to purchase 52ownership, transfer of 34paired properties, no notarial tie 37rates and taxes 17, 19rates clearance 57restrictive condition 37sale in execution, no judicial oversight 110sale of by company, authorisation 97sale of, compliance with Alienation of Land Act 35sale of land rectified 55

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sale of land to be in writing 54sectional title 109sectional title, appointment of administrator 33sectional title, extension of rights 89tenant's rights on sale 52validity of agreement concluded by 9water flow on adjoining land 53

Restraint of tradeinterpretation of clause 65

Salemerx, whether to specification or not 13

Sale in executionnotice to debtor 58, 70without judicial oversight 110

Sale of landauction sale, compliance with Act 56external company as purchaser 61lapsing by non-fulfilement of condition 18rectification of sale agreement 55suspensive condition 18writing - addendum to be signed 54writing - incorrect description of land 55

Sale of propertycompliance with Alienation of Land Act 35

Sale of sharesrestrictive condition 65

Scheme of arrangementclass of shareholder, meaning of 26

Sectional titleappointment of administrator 33interest on arrear levies 109

Servicedelivery of winding up application 95notice to consumer under National Credit

Act 99, 100, 102, 103short service, result of 103

Set offattorney's fees against collected money 75

Shareholderunequal treatment of 94

Sharesvaluation of 96

Tendercourt to take into account result of declaration o 105failure to disclose to tenderer 68process, fairness of 68unsuccessful tenderer 104

Tendersfailure to comply with formalities 43municipal services 43obtained on fraudulent basis 40, 79

Trade unionnot an administrative body 124

Trustfiduciary position of one on whom reliance is made 14

Trust account

whether paid into 76

Unincorporated associationseparate legal persona 62

Voluntary surrenderfactors in application for 24

Words and phrasescontamination 90

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DU PLESSIS N.O. v GOLDCO MOTOR & CYCLESUPPLIES (PTY) LTD

A JUDGMENT BY LEWIS JA(NAVSA JA, SNYDERS JA andKROON JA concurring, GRIESELAJA dissenting)SUPREME COURT OF APPEAL29 MAY 2009

2009 (6) SA 617 (A)

An obligation which a party to acontract deliberately fails to perfomin order to frustrate the rights ofthe other party may be consideredto have been fictionally fulfilled inorder to preserve the other party’srights.

THE FACTSDu Plessis, the trustee of

Prosperitas, concluded anagreement with Goldco Motor &Cycle Supplies (Pty) Ltd in termsof which Du Plessis leased certainpremises to Goldco. Included inthe lease was clause 5 whichconferred on Goldco the option topurchase the premises for R4m.The option was made subject tothe condition that a sectional titleregister was opened within 24months, that Goldco exercise theoption within 24 months bynotice to Prosperitas’ attorneys,and that the sale agreement bedrawn up after a sectional titleplan was delivered describing thepremises as a sectional title unit.

Within the 24-month period,Goldco notified Prosperitas that itwished to exercise the option. Thesectional title plan was completedand delivered. However, theattorneys did not draw up asectional title plan and noagreement of sale was concluded.

Goldco contended that it hadexercised the option created inclause 5 and sought enforcementin terms thereof. Du Plessiscontended that no option wascreated in the clause, but only anagreement to agree, and that inorder to exercise the option, merenotification thereof would beinadequate and the agreement ofsale would have had to have beendrawn up.

THE DECISIONAn option is a right exercisable

by the option holder. It isconferred in terms of agreementand obliges the giver of the optionto keep an offer open for a fixed

period. The terms of clause 5expressly obliged Prosperitas todo so and therefore created anoption. The question was whetheror not the exercise of the optionrequired fulfilment of theconditions specified in the clause.

The option could not beexercised simply by Goldconotifying Du Plessis of theexercise: the conditions forexercise were clearly specified inclause 5. Proper exercise of theoption did require fulfilment ofthe conditions. As there had notbeen fulfilment - the saleagreement not having beendrawn up - the question thenbecame whether or not there hadbeen deliberate frustration of thecondition such that fictionalfulfilment should be seen to havetaken place.

It was important to note that thecondition that a sale agreement bedrawn up was not a condition inthe strict sense of the word. OnceGoldco had notified its exercise ofthe option, it cast an obligation onDu Plessis to draw up the saleagreement. Failure to honour thatobligation would allow Goldco toapply the doctrine of fictionalfulfilment and exercise its rightson the assumption that theobligation had been honoured.The application of that doctrine inthese circumstances would be away of compelling Prosperitas tohonour that obligation.

As Prosperitas had deliberatelyfailed to draw up the saleagreement, Goldco couldeffectively exercise its option as ifProsperitas had not done so.Goldco was entitled to enforce theoption.

Contract

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LEGATOR McKENNA INC v SHEA

A JUDGMENT BY BRAND JA(HARMS ADP, CLOETE JA,PONNAN JA and LEACH AJAconcurring)SUPREME COURT OF APPEAL27 NOVEMBER 2008

2010 (1) SA 35 (A)

The authority for actionsundertaken by a curator derive fromthe court order appointing thecurator. The validity of anagreement concluded by a curatormay depend on the issue of lettersof curatorship, but a curator mayconclude agreements subject to thesuspensive condition that suchstatutory requirements arecomplied with.

THE FACTSIn February 2002, Shea wasinvolved in a motor accident thatleft her unconscious for a monthand immobile thereafter. InMarch 2002, the seconddefendant, an attorney in the firmLegator McKenna Inc, wasappointed as curator bonis toadminister and take control of herestate. Her estate included certainfixed property. The court orderappointing him made the exerciseof his powers subject to theapproval of the Master of theHigh Court.Later in March, the curatorsigned a sole mandate in favour ofWakefields Estate Agents to sellthe fixed property for R550 000. InApril 2002, the agents presentedan offer to purchase the propertyfor R540 000 to the curator. Thecurator signed the document,adding the words ‘subject toapproval of Master of the HighCourt’. A week after the sale, thecurator obtained a bond ofsecurity to enable him to put upsecurity to the Master of the HighCourt in terms of section 77 of theAdministration of Estates Act (no66 of 1965). In June 2002, thecurator received letters ofcuratorship from the Master ofthe High Court. The curatorrequested the consent of theMaster to the sale of the propertyand this was given in July 2002.The property was thentransferred into the name of thepurchaser.In March 2003, an order wasgranted declaring Shea to beincapable of managing her ownaffairs. She brought an actionagainst Legator McKenna, thecurator and the purchaser,claiming an order that thetransfer of the property wasinvalid and setting aside thetransfer, alternatively directingthe transfer of the property to heragainst payment of R540 000.

THE DECISIONSection 71(1) of theAdministration of Estates Actprovides that no person who hasbeen appointed as a curator shalltake care of or administer anyproperty belonging to the personconcerned unless he is authorisedto do so under letters ofcuratorship granted under theAct. The curator contended thatthe sale agreement did notcontravene this provision becauseit was made conditional on theapproval of the Master of the HighCourt. The approval was given inJuly 2002, after the letters ofcuratorship had been granted,and it was only at that point thatthe sale became complete.It is important to note thatsection 71(1) does not require theauthorisation of the Master. Theauthorisation under which thecurator acted when selling theproperty was not that of theMaster, but the authorisation ofthe court order appointing him ascurator in March 2002. That ordermade the exercise of his powerssubject to the approval of theMaster. The question then waswhether when the curator signedthe offer, a conditional saleagreement was concluded or acounter-offer was made.The offer made for the purchase ofthe property was unconditional,but the curator’s agreement wasto a conditional agreement. Thecurator therefore did not acceptthe offer but made a counter-offer.The offerors did not accept thecounter-offer. Therefore nobinding sale agreement came intoexistence and no contravention ofsection 71(1).The fact that no valid agreementwas concluded did not however,result in the invalidity of thetransfer of the property. This isbecause the requirements for thetransfer of ownership do notdepend on the validity of the

Contract

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underlying agreement, but on themutual intention that theproperty in question should betransferred. It was true that bothparties were mistaken in regardto the sale agreement, but whilethis rendered the agreementinvalid their mistake did notaffect their mutual intention. Thatintention had been followed withthe registration of transfer of theproperty, and the effect thereofwas to transfer ownership of the

property to the purchaser.The argument was also put thatthe sale was contrary to statute inthat section 71(1) required theprior issue of letters ofcuratorship, and as a consequencethe sale was illegal. However, thesignature of the curator to theoffer had not resulted in a sale,and the real agreement wasconcluded later, after the letters ofcuratorship were issued.The action failed

The intention of the Legislature in enacting section 71(1) of the Act was not to protect theinterests of third parties, but to protect the interests of the de cujus. In consequence,measures intended for the protection of the de cujus, such as the need for the curator bonis tofind security to the satisfaction of the Master as a necessary precursor to the issue of lettersof curatorship, were intended by the Legislature to be of cardinal importance and acts inconflict therewith are not valid acts.The purported acceptance of the offer to purchase by the curator, in circumstances where hewas not in receipt of letters of authority in terms of section 71(1) of the Act, constitutedconduct in direct prohibition of that provision. The agreement of sale purporting to havebeen concluded between the curator and the purchaser was therefore a nullity. It did notprovide a valid underlying causa for the subsequent transfer in pursuance thereof into thename of the purchaser.Although the transfer of ownership in our law did not depend on a valid underlying causa,as is required by a causal theory of transfer of ownership, the real agreement by whichtransfer of the property did take place was a power of attorney which itself referred to theunderlying agreement of sale. This being an agreement affected by invalidity, the power ofattorney provided no basis for the transfer of the property to the purchaser.The agreement of sale was therefore null and void and the transfer of the property to thepurchaser was set aside.

Contract

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FREDDY HIRSCH GROUP (PTY) LTD vCHICKENLAND (PTY) LTD

A JUDGMENT BY BLIEDEN JSOUTH GAUTENG HIGH COURT27 MAY 2009

2010 (1) SA 8 (GSJ)

An insertion of a qualification tothe terms of a written contract byone of the parties is binding on theother if a the qualification is clearto the reasonable reader.

THE FACTSIn 2003, Freddy Hirsch Group

(Pty) Ltd supplied Chickenland(Pty) Ltd with spices which wereintended to be used byChickenland in sauces it was tosell to its customers worldwide.The spices supplied by FreddyHirsch all contained cayennepepper which was contaminatedwith a colourant known as Sudan1. The colourant was notpermitted as an additive to thespices in terms of the Foodstuffs,Cosmetic and Disinfectant Act (no54 of 1972).

The supply of the spices waseffected in terms of an agreementconcluded between the parties inNovember 1994. The agreementwas entitled ‘Application forcredit facilities’ and was headed‘standard conditions of sale andcredit’. Clause 4* of the agreementprovided that Freddy Hirschwould not be liable for defectivegoods unless certain conditionswere met, and that FreddyHirsch’s liability would belimited to re-supplying the goods

* The wording of clause 4 is set outbelow

or passing a credit for the goodsand would not be liable forconsequential damages.

The agreement was signed onbehalf of Chickenland by a MrsSmit, a financial controlleremployed by Chickenland. Beforesigning, she notified thecompany’s financial director thatthe agreement contained termsand conditions which she did notunderstand. The financialdirector was then overseas, andhe instructed Mrs Smit to insertwords to indicate that thecompany did not agree to theseterms. Mrs Smit inserted thewords ‘ std conditions notchecked’ and signed theagreement.

Freddy Hirsch brought an actionfor payment of R1 368 861,69 inrespect of goods supplied toChickenland. Chickenland raiseda counterclaim which exceededthis sum claiming damagesarising from the supply of thedefective spice. Freddy Hirschcontended that the effect of clause4 was to prevent Chickenland’scounterclaim.

4. LIMITED LIABILITY 4.1 The Company shall not be liable for any defect in the goods by reason of faulty production, workmanship,quality of raw H materials or otherwise unless: 4.1.1 It is established that the goods were correctly installed and properly cared for and used; and 4.1.2 the Customer notifies it in writing of the defect within seven days of the delivery of the goods.I 4.2 The Company’s liability shall be limited, at its option, to: 4.2.1 Repairing such goods free of charge; or 4.2.2 supplying the Customer with similar replacement goods free of charge; or 4.2.3 passing a credit for the purchase price of the goods, provided that the Company shall under nocircumstances whatsoever be responsible for any consequential J or other damages whatsoever. 4.3 Notwithstanding anything to the contrary contained or A implied in these conditions the liability of the Companyarising out of any defect in the goods shall not exceed the purchase price of the goods concerned. 4.4 Save as set out herein all conditions, terms, warranties or representations (express or implied, statutory orcommon-law) as to quality, fitness, performance or otherwise in relation B to the goods are excluded. 4.5 When the Customer purchases the goods for resale, the Customer shall ensure that the purchaser of the goodsis appraised of these conditions so as to ensure that the purchaser’s claims (if any) against the Company are limited tothe extent stated herein. C 4.6 The Customer indemnifies and holds the Company harmless against all claims, loss, damage, expense orproceedings of whatsoever nature against or on the part of the Company arising out of the sale or distribution of thegoods whether defective or not for any reason whatsoever’.

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THE DECISIONAccepting the position that a

person who signs an agreementthereby signifies his assent to thecontents of the document, thequestion to be answered waswhat would the reasonablerecipient of the application in thepresent case understand by thewords inserted by Mrs Smit?

The plain words meant that theperson signing the document hadnot considered the standardconditions at the time ofsignature. The other party,Freddy Hirsch, aware that thesewords formed part of theagreement, must be understoodto have accepted, by its ownsignature, that Chickenland didnot accept that it was bound bythe standard terms andconditions of the agreement.

Freddy Hirsch contended thatthe added words should only beseen to affect unusual andunexpected terms in theagreement, but even if this wasaccepted, the added words wouldapply to clause 4 because noreasonable person would expectto find its provisions in theagreement. Unless its provisionswere drawn to the attention ofthe reader of the standardconditions, who has given noticethat it has not ‘checked’ them,such a clause could not beanticipated by anyone dealingwith Freddy Hirsch.

Freddy Hirsch could thereforenot rely on the provisions ofclause 4. Chickenland wasentitled to set off any claim foundto be due to it in terms of itscounterclaims.

The contract between the parties was in regard to the manufacture and sale of spices andspice mixtures by the plaintiff for the defendant at the latter’s special instance and request.In the case of contaminated or poisonous products being sold by the plaintiff and later usedby the G defendant, the results could be catastrophic to thousands, if not millions, of peoplethroughout the world. It is for this reason that the zero-tolerance attitude of worldgovernments, including the South African government, exists. It is against this backdropthat counsel’s submission must be tested. In my view for a company that sources spices fromall H over the world and thereafter packs and manufactures spice mixtures, well knowingthat they are to be used in the manufacture of food products for human consumption, tocontract out of all liability which may arise from such products, save for the replacement ofcontaminated products, is, to say the least, surprising, if not mind-boggling. Even in aworld as cynically materialistic as our present one is, such clauses, in I such circumstances,are unexpected.

Contract

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CLADALL ROOFING (PTY) LTD v SSPROFILING (PTY) LTD

A JUDGMENT BY NAVSA JAAND VAN HEERDEN JA(MTHIYANE JA, HEHER JA andWALLIS AJA concurring)SUPREME COURT OF APPEAL14 SEPTEMBER 2009

2009 SACLR 386 (A)

A contractual provision that aparty has inspected goods suppliedto it by the other party and issatisfied that they confirm to thequality and quantity ordered offersno basis upon which the supplyingparty can assert that goodssupplied in terms thereof compliedwith the specifications of the order,if the goods supplied deviate fromthe specifications to the extent thatthe goods supplied are not thegoods ordered.

THE FACTSCladall Roofing (Pty) Ltd

ordered 13 000 square metres of0.5mm FH Z275 galvanised IBRroofsheeting material from SSProfiling (Pty) Ltd. Cladall madethe order after obtaining a quotefrom SS which recorded thespecifications for the materialgiven by Cladall.

In terms of clause 6.4 of thestandard terms of agreementagreed to by the parties Cladallconfirmed that the goods on anytax invoice issued dulyrepresented the goods or servicesordered by it at the prices agreedto and, where delivery/performance had already takenplace, that the goods wereinspected and Cladall wassatisfied that they conformed inall respects to the quality andquantity ordered and were freefrom any defects.

In terms of clause 7.3, no claimunder the agreement would ariseunless Cladding had, within 3days of the alleged breach ordefect occurring, given SSProfiling 30 days written noticeby prepaid registered post torectify any defect or breach ofAgreement.

SS supplied the material, butCladall alleged that the materialdid not comply with the requiredspecifications. It brought anaction against SS claiming

resulting damages and refused topay the balance of the purchaseprice still outstanding.

SS contended that it was entitledto rely on clauses 6.4 and 7.3notwithstanding any allegeddeficiency in the material, andcounterclaimed for payment ofthe balance of the purchase pricestill outstanding. For thepurposes of deciding the matter,the parties accepted that thematerial did not comply with therequired specifications.

THE DECISIONIt was clear from Cladall’s order

that what it purchased was avery specific product which hadto comply with particularspecifications. None of thespecifications had however, beenmet. In consequence, what SSsupplied was not the item whichCladall had ordered.

Clauses 6.4 and 7.3 related to thesupply of defective goods, notgoods which had not beenordered. They therefore providedno grounds upon which SS couldbe excused from performingproperly in terms of the parties’agreement. SS had not suppliedthe goods Cladall had orderedand in these circumstances, theseprovisions were inapplicable tothe case.

Cladall was therefore entitled towithhold full payment of thegoods it had ordered.

Contract

14

VOLVO (SOUTHERN AFRICA) (PTY) LTD v YSSEL

A JUDGMENT BY NUGENT JA(STREICHER JA, JAFTA JA, MAYAJA and HURT AJA concurring)SUPREME COURT OF APPEAL20 AUGUST 2009

2009 SACLR 396 (A)

A person stands in a position oftrust when another person relies onhim and that reliance is justifiablein the circumstances. Secretcommissions made in breach of thattrust to the other person must berepaid.

THE FACTSIn 2000, Yssel was appointed

manager of the informationtechnology division of Volvo(Southern Africa) (Pty) Ltd. Hisemployment was effectedthrough the intermediary of alabour broker, HighveldPersonnel (Pty) Ltd, whichinvoiced Volvo for Yssel’sservices and then remuneratedYssel.

In 2004, Yssel took steps tochange similar arrangementsthen in place between otheremployees and Volvo byarranging the substitution oftheir labour brokers for HighveldPersonnel. All the affected partieswere agreeable to the change, andthereafter Highveld invoicedVolvo for the services of the otheremployees and paid them forservices rendered.

At the time when this changetook place, Yssel agreed withHighveld that he would be paid acommission for having broughtabout the substitution. This wasnot however, disclosed to Volvo.In the period 2004 to 2005, Ysselwas paid a total of R775 107 byway of commission.

When Volvo discovered thatYssel was being paid acommission, it sought repaymentof the amount paid and broughtan action in the High Courtclaiming payment. It alleged thatthe commission had been earnedin breach of a fiduciary duty thathe owed to Volvo to act in itsinterests and not in his own.

THE DECISIONYssel had concluded no

employment agreement withVolvo, but the question remainedwhether or not Yssel owed afiduciary duty toward Volvo, andhad, by arranging theamendment of the serviceagreements and earning acommission, breached that duty.In determining whether afiduciary relationship existedbetween the parties, it isnecessary to determine whetheror not one party’s reliance on theother party was justified in thecircumstances.

In the present case, Yssel hadbeen appointed to his position byVolvo in order to serve itsinterests. This was so irrespectiveof the fact that the company hadnot actually employed him.Having been placed in thatposition, the company wasentitled to expect him not toadvance his own interests at itsexpense in whatever manner thismight have taken place. It wasonly because Yssel had theposition of manager that he wasable to do so. He was therefore ina position of trust vis-a-vis Volvoand was under a duty not tobreach that trust.

Yssel was therefore obliged torepay the commissions he hadearned as a result of the breach oftrust. The action succeeded.

Contract

15

DUET AND MAGNUM FINANCIAL SERVICES CC (INLIQUIDATION) v KOSTER

A JUDGMENT BY PRELLER JTRANSVAAL PROVINCIALDIVISION4 FEBRUARY 2007

2010 (1) SA 312 (T)

Prescription begins to run against aclaim which is conditional on proofthat the debtor is liable under somestatutory provision as soon as thecreditor is aware of the identity ofthe debtor and the facts giving riseto the claim, and not when thecreditor has proved the condition.

THE FACTSThe liquidators of Duet and

Magnum Financial Services CCbrought an action against Kosterto set aside a disposition of R459446,71 made to him.

Koster defended the action onthe grounds that the claim hadprescribed, the dispositionhaving been made, at the latest,by March 2002. Summons wasserved in July 2005.

The court was asked todetermine whether or not thedisposition was correctlycharacterised as a ‘debt’ andaccordingly a claim to whichprescription did apply, it beingcontended that the debt couldonly arise after an order for thesetting aside of the dispositionhad been made.

THE DECISIONThe term ‘debt’ has a wide

meaning which includes theobligation to do something orrefrain from doing something. Itcould therefore include theobligation to make payment ofR459 446,71 as claimed by theliquidators. However, the factthat a prerequisite to the successof such a claim is an order thatthe disposition was liable to beset aside did not prevent theobligation from arising in the firstplace.

It followed that prescriptionwould commence to run as soonas the creditor was aware of theidentity of the debtor and thefacts giving rise to the claim. Theliquidators’s claims weretherefore debts as provided for inthe Prescrption Act, andprescription had already runagainst them.

Prescription

16

CITY OF JOHANNESBURG v RENZONAND SONS (PTY) LTD

A JUDGMENT BY JAJHBAY JWITWATERSRAND LOCALDIVISION7 JUNE 2005

2010 (1) SA 206 (W)

A municipality’s claim for chargesarising from services rendered to aproperty under empoweringlegislation is a tax and accordinglya debt arising out of it prescribesafter thirty years as provided for insection 11(a)(iii) of the PrescriptionAct (no 58 of 1969).

THE FACTSRenzon and Sons (Pty) Ltd

owned property in the municipalarea controlled by the City ofJohannesburg. The City leviedassessment rates and seweragecharges on the property underthe Local Authorities RatingOrdinance (no 11 of 1977) andSewerage By-Laws. Theseincluded the period up to andincluding 21 May 2003, andamounted to R126 347.54.

Renzon paid all amounts due upuntil February 1999. After thatdate, it paid assessment rates butnot sewerage charges.

On 29 July 2003, the Citycommenced action againstRenzon claiming payment of allamounts due to it includingsewerage charges arising fromFebruary 1999. Renzon defendedthe action on the grounds that theclaim for sewerage charges hadprescribed in terms of thePrescription Act (no 58 of 1969)within three years.

The City contended that section11(a)(iii) of the Act applied and asits claim was a ‘debt in respect ofany taxation imposed or leviedby or under any law’ the periodof prescription was thirty years.

THE DECISIONThe question to be determined

was whether the sewerage chargewas a ‘debt in respect of anytaxation, imposed or levied by orunder any law’. The real nature ofthe charge had to be determined.

The sewerage charge was leviedirrespective of whether or not theproperty owner used the service.It was ‘compulsory’ in the sensethat it was a compulsorycontribution in support ofgovernment, and levied onpersons, property, income,commodities, and so on. It was acharge levied under empoweringlegislation and was to beconsidered a benefit to theproperty owner on which a taxhad been levied.

It followed that the applicableprescription period was thatprovided for in section 11(a)(iii), aperiod of thirty years.

Prescription

17

CITY OF CAPE TOWN v REAL PEOPLE HOUSING (PTY) LTD

A JUDGMENT BY NUGENT JA(HARMS DP, MALAN JA, HURTJA and TSHIQI AJA concurring)SUPREME COURT OF APPEAL30 NOVEMBER 2009

[2009] ZASCA 159

A municipality is obliged to issue acertificate in terms of section 118(1)of the Local Government MunicipalSystems Act (no 32 of 2000) if theproperty owner has paid allamounts owing in the two yearspreceding the issue of thecertificate, irrespective of whetheror not earlier debts have been paid.

THE FACTSThe City of Cape Town collected

money owed to it for propertyrates and taxes and the provisionof services. It did so in terms ofthe Local Government MunicipalSystems Act (no 32 of 2000) whichimposed on it the obligation to doso.

Section 118(1) of that Actprovided that a Registrar ofDeeds could not register thetransfer of property except uponproduction of a certificate issuedby a municipality that all suchmoney becoming due to it in theprevious two years had beenpaid.

In the collection of the money,the City applied a debt collectionpolicy which included the rulethat payments made to it wouldbe first allocated to the oldestdebt progressing to the latestdebt. The rule was provided for ina bye-law promulgated by theCity.

Real People Housing (Pty) Ltdowned a property in respect ofwhich money was owing interms of section 118(1). Some ofthe money had been owing forlonger than two years. The Cityrefused to issue the certificaterequired for transfer of theproperty unless all money owingto it was paid.

Real People offered to pay only

money owing in the last twoyears and claimed that afterhaving done so, it was entitled toa certificate in terms of section118(1).

THE DECISIONThe implication o f Mkontwana v

Nelson Mandela MetropolitanMunicipality 2005 (1) SA 530 (CC) isthat a property owner is entitledto a certificate in terms of section118(1) even if the municipality isowed money in respect of debtswhich are older than two years, ifthe property owner has paid alldebts arising within the last twoyears.

A municipality has anobligation to issue the certificaterequired for transfer of theproperty, and the terms of section118(1) make it clear that thecondition under which thatobligation arises is that allamounts becoming due in theprevious two years have beenpaid. There is no qualification tothat condition. Once it is fulfilled,the obligation arises and themunicipality must issue thecertificate. This means that itmust issue the certificateirrespective of the fact that earlierdebts are still owed to it.

Real People was entitled to thecertificate it sought.

Property

18

KOVACS INVESTMENTS 724 (PTY) LTD v MARAIS

A JUDGMENT BY MPATI P(BRAND JA, LEWIS JA, MAYA JAAND BOSIELO AJA concurring)SUPREME COURT OF APPEAL20 AUGUST 2009

2009 SACLR 361 (A)

Although it is possible for partiesto tacitly agree on a method ofcompliance with obligationsprovided for in their agreement in amanner different from that providedfor in such an agreement, a waiverof rights will not be understood tohave taken place unless it is clearhow the alternative method ofcompliance was to be performedand the variation constitutes onlythe temporary suspension of theoriginal obligation.

THE FACTSMarais sold to Kovacs

Investments 724 (Pty) Ltd thecommercial section of a buildingknown as ‘Sanbel’ for R18 454041. The price was payable byway of a deposit of R8 304 319which was payable in twoinstalments—R7 627 444 on orbefore 15 August 2005, and R676875 on or before the possessiondate—and the balance by way ofa loan from a bank or financialinstitution to be granted by 15August 2005.

The sale was subject to asuspensive condition that Kovacsbe granted a loan for the balanceof the purchase price by 15August 2005. It was providedthat the suspensive conditioncould only be waived by mutualagreement between the twoparties.

The sale was subject to a secondsuspensive condition that Kovacswas to obtain written approval ofthe terms and conditions of theagreement from investorsnominated by InterneuronProperty (Pty) Ltd, such approvalto be obtained on or before 15August 2005.

The deposit was not paid in fullby due date but was paid on 19August 2005. On that date,Kovacs confirmed fulfilment ofthe first and second suspensiveconditions. However, the loanactually obtained by that date fellshort of the balance required byR499 722.

The agreement also providedthat no variation of its terms andconditions or any purportedconsensual cancellation thereofwould be of any force or effectunless reduced to writing andsigned by the parties.

Marais contended that theagreement had lapsed due to non-fulfilment of the suspensiveconditions. Kovacs contendedthat there had been substantial

compliance with the suspensiveconditions and that Marais hadwaived strict compliance withthem.

Marais applied for an order thatthe agreement was of no force oreffect.

THE DECISIONKovacs contended that the

parties had reached informalconsensus on the acceptability ofa lower amount having beengranted as a loan for payment ofthe balance of the purchase price,and that this did not constitute avariation of the agreement whichwould be affected by the non-variation clause.

The established rule in thesecircumstances is that providedthe obligations under a writtenagreement are to be compliedwith in full, performance of one ofthe obligations in a mannerdifferent from that stipulated inthe written agreement, andaccepted by the other party, isconsidered to be sufficientcompliance and the obligation ashaving been discharged. Theagreement for a different mannerof performance does not have tobe in writing.

This rule however, did not assistKovacs in the present casebecause acceptance of the loweramount granted as a loan couldnot be seen as a waiver but as avariation of the terms of theagreement. This was so because itwas not a temporary suspensionof the enforcement of anobligation but, in the absence ofany indication of how theshortfall was to be made up, anamendment of the terms ofagreement. Such an amendmentwas contrary to the non-variation clause, and also notpermissible in terms of theAlienation of Land Act (no 68 of1981).

The application was granted.

Property

19

HOOFAR INVESTMENTS (PTY) LTD v MOODLEY

JUDGMENT BY LEVINSOHN DJP(NILES-DUNER J and KRUGER Jconcurring)KWAZULU NATAL HIGHCOURT18 MAY 2009

2009 (6) SA 556 (KZP)

The obligation to pay propertyrates and services rests on theowner of the property concernedand not the purchaser of theproperty.

THE FACTSHoofar Investments (Pty) Ltd

sold certain fixed property toMoodley for R425 000. Clause 7 ofthe agreement provided thatMoodley was obliged to pay thecosts of and incidental to transfer.

An amount of R87 979.52 wasowing on the property in respectof property rates and services.The municipality refused to issuea certificate in terms of section118(1) of the Local Government:Municipal Systems Act (no 32 of2000) until this amount was paid.

Hoofar contended that in termsof clause 7, Moodley was obligedto pay this amount. It refused togive transfer of the property untilMoodley paid R87 979.52 inrespect of the property rates andservices.

Moodley brought an applicationto compel Hoofar to give transferwithout the requirement that hepay the R87 979.52.

THE DECISIONIn the context of clause 7,

‘incidental’ could not refer toproperty rates and services, butto costs associated with theconveyancing process.

The obligation to make paymentfor this was enforceable in termsof section 118(1) which effectivelyconferred a hypothec over theproperty in preference to amortgage bond. This was anobligation placed on the presentowner of the property, in this caseHoofar, and not on a third partysuch as a purchaser, in this caseMoodley.

In terms of the Act, it wasHoofar’s obligation to obtain thecertificate and there was no basisupon which this obligation couldbe transferred to Moodley.

The application was granted.

The hypothec created in this case in terms of s 118 cannot in my view bedistinguished from the statutory hypothec referred to in both Sauerlander ‘scase and Abdullha ‘s. I find that it was incumbent upon the respondent to haveobtained the s 118 certificate. In the circumstances C it would have beenrequired to pay the amount claimed, albeit under protest. Its dispute with themunicipality is of no concern to the applicant and there is no basis upon whichthe applicant’s right to claim transfer can be thwarted or delayed by this issue.

Property

20

AGRI SOUTH AFRICA v MINISTER OF MINERALSAND ENERGY; VAN ROOYEN v MINISTER OFMINERALS AND ENERGY

A JUDGMENT BYHARTZENBERG JNORTH GAUTENG HIGH COURT6 MARCH 2009

2010 (1) SA 104 (GNP)

An owner of unused mineral rightsexisting before the promulgation ofthe Mineral and PetroleumResources Development Act (no 28of 2002) may bring a claim arisingfrom loss of those rights based onthe allegation that its rights wereexpropriated by virtue of the effectof section 5(4) of the Act read withSchedule II of the Act.

THE FACTSAgri South Africa and Van

Rooyen held coal and clay rightsover certain fixed properties. InMay 2004, the Mineral andPetroleum ResourcesDevelopment Act (no 28 of 2002)came into operation. Section 5(4)provided that no person couldprospect for or remove, mine,conduct exploit mineral rightswithout (a) an approvedenvironmental managementprogramme or approvedmanagement plan, (b) areconnaissance permission,prospecting right, permission toremove, mining right, miningpermit, retention permit,technical co-operation permit,reconnaissance permit,exploration right or productionright, and (c) notifying andconsulting with the land owneror lawful occupier of the land inquestion.

Schedule II of the Act providedfor the preservation of existingunused mineral rights, allowingthe owner of such rights, the rightto apply for a prospecting ormining right within one year.Failure to bring such anapplication resulted in the lapsingof such rights.

Agri and Van Rooyen contendedthat the effect of the section wasto expropriate their mineralrights. Both lodged claims forcompensation but both wererejected. They brought actionsagainst the Minister of Mineralsand Energy for payment ofcompensation. The Ministerexcepted to the claims on thegrounds that section 5(4) does notexpropriate rights.

THE DECISIONIn order to determine if the

parties’ mineral rights wereexpropriated, it would benecessary to compare those rightsbefore and after the promulgationof the Act and ascertain that theexpropriation in question wasconsistent with section 25 of theConstitution.

Prior to the promulgation of theMineral and Petroleum ResourcesDevelopment Act, it was possiblefor an individual to own mineralrights. It was not necessary forthat person to exploit such rightsand it was possible for them tosell such rights to other parties.The Act changed this position,providing that the State is thecustodian of the mineral rights ofthe country. The Act makes noacknowledgement of existingrights of mineral right owners.But for Schedule II to the Act,those that have not beenexploited disappear. Henceforth,the only way to obtain mineralrights is to obtain them from theState.

The object of Schedule II to theAct is to afford owners of existingunused mineral rights, theopportunity to comply with theAct. Failure to comply with theschedule’s requirements however,results in the owner losing thoserights. The owner must make thenecessary applicationaccompanied by the motivatingdocumentation if the rights are tobe preserved. However, approvalof the application does notnecessarily follow after theapplication is made. Such is theeffect of the provisions of theSchedule that they really affordthe individual mineral rightowner no more than anopportunity to mitigate itsdamages. The Act in effect admitsthat the owners will lose theirrights and this constitutesexpropriation of their rights.

It follows that owners of old-order mineral rights may provethat their rights have beenexpropriated and it is open tosuch an owner to claim and provethat his rights have beenexpropriated. This is what Agriand Van Rooyen were doing andintended to do in the action theyhad brought against the Minister.The exception brought against theclaims was therefore withoutfoundation.

The exception was dismissed.

Property

21

AMRICH 159 PROPERTY HOLDING CC v VANWESEMBEECK

A JUDGMENT BY MATHOPO JSOUTH GAUTENG HIGH COURT21 AUGUST 2009

2010 (1) SA 117 (GSJ)

An arrest tanquam suspectus defuga depends on proof that thedebtor intends to leave the countrywith the intention of evading ordelaying payment of his debt. Suchan arrest is inconsistent withconstitutional rights if made at atime when the creditor had othermeans to secure payment of hisclaim.

THE FACTSOn 25 June 2009, Amrich 159

Property Holding CC arrestedVan Wesembeeck tanquamsuspectus de fuga. It alleged thatVan Wesembeeck intended toleave the country in order toevade payment of his debt toAmrich.

The parties had concluded a saleagreement in terms of which VanWesembeeck had purchasedcertain fixed property fromAmrich. Van Wesembeeck hadtaken occupation of the propertyand paid a deposit. In May 2009,the deposit was repaid to VanWesembeeck’s attorneys, as wellas occupational interest payableby Van Wesembeeck in terms ofthe sale agreement. Amrichissued summons to enforce itsrights and Van Wesembeeckentered an appearance to defendthe action. He also counterclaimedfor reduction of the purchaseprice. Van Wesembeeck madearrangements to return toBelguim, but before his departureAmrich arrested him and he wasdetained at the Sandton policestation.

Van Wesembeeck applied for thedischarge of the order of arrest.

THE DECISIONThe arrangements for departure

made by Van Wesembeeck didnot constitute sufficient groundsfor his arrest. The sole purpose ofarrest is to prevent departurewith the intention of evading ordelaying payment of one’s debt.Van Wesembeeck had alreadyindicated his intention tocounterclaim against the actionbrought by Amrich and hadthereby indicated what hisintention was. The arrangementsfor departure themselves did notindicate a different intention.

The arrest of a person in order tosecure payment of a debt is alsoconstitutionally unacceptable.Since there is no legal justificationfor detaining a person whose civilliability has been proved, there isless legal justification fordetaining a person whose civilliability has not yet been proved.Amrich should have used lessrestrictive measures to ensurethat Van Wesembeeck would beanswerable to its action againsthim.

The order arresting VanWesembeeck was discharged.

Credit Transactions

22

RAQA v HOFMAN

A JUDGMENT BY BINNS-WARDAJ(SALDANHA J concurring)WESTERN CAPE HIGH COURT29 MAY 2009

2010 (1) SA 302 (WCC)

A person who purchases an itemunder an instalment sale agreementand then gives delivery to a thirdparty on the understanding that thethird party will be liable for allamounts due under the instalmentsale has only a monetary claim inrelation to the item, and no locusstandi to sue a person who hascaused damage to it.

THE FACTSHofman bought a car under an

instalment sale agreement withthe intention that Ngceza wouldtake delivery of the car and payall amounts due in terms of theagreement. Hofman wouldremain the credit receiver underthat agreement.

Hofman and Ngceza agreed thatin the event of Ngceza failing topay any amounts due in terms ofthe instalment sale agreement,Hofman would be entitled torequire payment from Ngcezaand if necessary, recoverpossession of the vehicle fromhim.

After Ngceza had taken deliveryof the vehicle, it was involved in acollision. In an action to recoverdamages resulting from thecollision, Hofman alleged that hewas the owner, alternatively thebona fide possessor, of the vehicle.

Raqa, the defendant in theaction, contended that Hofmandid not have locus standi to bringthe action as he was neither theowner, nor the bona fidepossessor, of the vehicle.

THE DECISIONHofman’s right to obtain

possession of the vehicle was acontingent right in that itdepended on Ngceza defaulting interms of their agreement. Hofmannever had any intention of takingpossession of the vehicle or ofusing it for his own benefit. Hisposition was in effect that of aguarantor of payments due underthe instalment sale agreement.

Hofman’s interest in relation tothe vehicle was a money claim forpayment of the amounts dueunder the instalment saleagreement. He did not have anyclaim for damages sustained bythe vehicle as damage to thevehicle had no effect on his claimfor payment.

It followed that there was nobasis in law for a claim byHofman in respect of damagesustained by the vehicle. Theaction was dismissed.

Credit Transactions

23

ABSA BROKERS (PTY) LTD v RMBFINANCIAL SERVICES

A JUDGMENT BY MHLANTLA JAAND NUGENT JA (MLAMBO JA,LEACH JA AND BOSIELO AJAconcurring)SUPREME COURT OF APPEAL20 AUGUST 2009

2009 SACLR 377 (A)

A joint wrongdoer should be joinedin an action in which its joint andseveral liability to the plaintiff maybe relevant, even if the plaintiff hasmade no allegations as to the jointwrongdoer’s liability.

THE FACTSThe Claasen Family Trust

brought an action against AbsaBrokers (Pty) Ltd claimingdamages arising from theinvestment of some R1m in aninvestment product known as theRMB Guaranteed CashflowInvestment. Absa settled theaction by paying the TrustR585 686.56.

Absa then brought an actionagainst RMB Financial Servicesand the other respondentsclaiming that they were jointwrongdoers and liable to pay acontribution in respect of thedamages paid to the Trust.

RMB excepted to the claim onthe grounds that section 4 of theApportionment of Damages Act(no 34 of 1956) applied and nonotice of the Trust’s action hadbeen given to it in terms of section2. Section 2 provides that where itis alleged that two or morepersons are jointly or severallyliable in delict to a third personfor the same damage, suchpersons may be sued in the sameaction. Section 4 provides that if ajoint wrongdoer is not sued in anaction instituted against anotherjoint wrongdoer and no notice isgiven to him, the plaintiff shallnot thereafter sue him exceptwith the leave of the court.

Absa contended that notice ofthe Trust’s action need not havebeen given to RMB because in that

action, it had not been allegedthat RMB and the otherrespondents were jointly andseverally liable in delict to Absafor the same damage, as providedfor in section 2.

THE DECISIONIt was true that no allegation

was made in the Trust’s actionthat others were jointly orseverally liable in delict to theTrust in respect of the loss it hadsuffered. However, the allegationreferred to in section 2 need not bean allegation actually made atsome time. The provision allowsfor the bringing of an actionagainst a joint wrongdoer on thebasis that that party either is infact a joint wrongdoer, or isalleged to have been one. It is aprocedural provision and doesnot impose conditions for thebringing of actions against jointwrongdoers.

The purpose of the Act as awhole is to avoid the bringing of amultiplicity of actions. Wherejoint wrongdoers, alleged oractual, are relevant to a matter,they are to be sued in the sameaction. In the event that this hasnot taken place, they are to benotified of the action in order tobe given an opportunity of joiningin it.

Absa was given leave to amendits particulars of claim in order tocomply with the Act.

Credit Transactions

24

EX PARTE BOUWER AND SIMILAR APPLICATIONS

A JUDGMENT BY MAKGOKA JNORTH GAUTENG HIGH COURT9 MARCH 2009

2009 (6) SA 382 (GNP)

An application for voluntarysequestration must be made uponclear and full evidence that theapplicant is insolvent, the reasonstherefor, and an accurate valuationof the applicant’s assets.

THE FACTSBouwer and the other applicants

applied for the voluntarysequestration of their estates.Various aspects of the affidavitsfiled in support of the applicationraised concern as to whether theapplications should be granted.

THE DECISIONA court will not give an order

sequestrating a person’s estatemerely on the strength of anallegation that the person’sliabilities exceed his assets. Theaffidavits in support of anapplication for sequestrationmust give a court sufficientevidence to show thatsequestration will be to theadvantage of creditors and thatthey will receive a non-neglibledividend.

In the present cases, theaffidavits failed to give detailedreasons for the insolvency, failedto state what movable assets the

applicants had, and failed to statetheir income and expenditure.The valuation certificates givenby the estate agents weredeficient in a number of respects.They failed to indicate the marketprice to be expected on a sale ofthe debtors’ properties based onsimilar sales in the area. Since thecertificates were all stated in thesame terms, this raised doubt asto whether or not the agent hadproperly examined each propertyto assess their value, and basedthe valuation on personalknowledge of market prices.Other certificates statedconclusions which could not havebeen based on any facts whichcould warrant them.

In one application, the applicanthad left out of account an allegedliability arising from a loanrequired for the payment of legalfees in the application itself. Thissuggested a lack of candour withthe court.

The applications were refused.

Insolvency

25

INVESTEC BANK LTD v MUTEMERI

A JUDGMENT BY TRENGOVE AJSOUTH GAUTENG HIGH COURT25 SEPTEMBER 2009

2010 (1) SA 265 (GSJ)

An application for sequestration isnot a proceeding for enforcement ofpayment of a debt and thereforecannot be stayed on the basis ofsection 129(1) and 130(1)(b) of theNational Credit Act (no 34 of 2005).A debt counsellor does not have theright to intervene in a sequestrationapplication as he has no direct andsubstantial interest in theapplication.

THE FACTSInvestec Bank Ltd brought an

application for the sequestrationof Mutemeri and his wife towhom he was married incommunity of property. TheMutemeris owed Investec someR2m on loans secured bymortgage bonds over their fixedproperty, as well as R118 723.47on a credit card account.Investec’s application wasbrought after giving theMutemeris notice in terms ofsection 129(1)(a) of the NationalCredit Act (no 34 of 2005).

While the application was stillpending, the Mutemeris appliedto a debt counsellor for a reviewof their debts in terms of section86 of the National Credit Act. Inthat application, they alleged thatthey had debts of R17.8m andassets of R4m, including threefixed properties. The applicationwould not be heard for anotheryear.

Investec continued with itsapplication for sequestration,alleging that the Mutemeris hadcommitted acts of insolvency. Itdid not submit any valuation inrespect of their fixed propertiesbut contended that sequestrationwould be to the benefit ofcreditors.

Mutemeri opposed theapplication on the grounds thatthe effect of section 129(1) and130(1)(b) of the National CreditAct was to stay the applicationfor sequestration. The debtcounsellor to be appointed in theapplication for debt reviewapplied for leave to intervene inthe matter.

THE DECISIONSection 130(1)(b) provides that a

credit provider may approach thecourt for an order to enforce acredit agreement only if, at thattime, the consumer is in defaultand has been in default under

that credit agreement for at least20 business days. If a notice to thedebtor has been issued in terms ofsection 129(1) then the consumermust not have responded to it orrejected the credit provider’sproposals.

Assuming that the effect of theseprovisions was to bar Investecfrom proceeding againstMutemeri for an order to enforcetheir credit agreement, thequestion was whether theapplication for sequestration wassuch an application. Whereas themotive of an applicant forsequestration may well be toobtain payment of a debt, thequestion remains whether or notthe application is intended toenforce a credit agreement will beapparent from the nature of therelief sought.

An application for sequestrationis not in itself an application foran order enforcing payment of aclaim. Its purpose and effect is tobring about a convergence ofclaims so that all claimants maybe treated equally in the orderlywinding up of the insolventestate. An order sequestrating adebtor’s estate is not an orderthat a particular debt be paid. Anapplication for sequestration istherefore not an application forenforcement of the sequestratingcreditor’s claim and is not subjectto the requirements of section130(1).

As far as the debt counsellor’sapplication for leave to intervenewas concerned, considering therole to be played by a debtcounsellor under the Act, it wasclear that he had no legal interestof his own and acted only asmediator and facilitator. He didnot have a direct and substantialinterest in the application andthat his application forintervention should accordinglyfail.

The application was granted.

Insolvency

26

VERIMARK HOLDINGS LTD v BRAIT SPECIALISEDTRUSTEES (PTY) LTD

JUDGMENT BY MALAN JWITWATERSRAND LOCALDIVISION28 AUGUST 2009

20009 SACLR 351 (W)

A scheme of arrangement in termsof section 311 of the Companies Act(no 61 of 1973) should not besanctioned if the compromiseproposed is between the proposerand a class of shareholder and aseparate meeting of that class ofshareholder is not held to considerand vote on the proposal.

THE FACTSThe Van Straaten Family Trust

proposed a scheme ofarrangement in terms of section311 of the Companies Act (no 61of 1973) under which it wouldobtain all of the shares ofminority shareholders ofVerimark Holdings Ltd at 50cents per share. The trust was amajority shareholder inVerimark.

A scheme meeting was held andvoting on the proposed schemetook place. 80.06% of schememembers voted in favour of it and19.93% voted against it. Thosevoting included shareholderswhose shares would not bepurchased at the offer price of 50cents per share in terms of thescheme of arrangement. Theseshareholders, defined as‘excluded members’, were thetrust, which held 46% of theshares in Verimark, and threeothers, which held 17% of theshares in Verimark.

Brait Specialised Trustees (Pty)Ltd and the other respondentsopposed the sanctioning of thescheme of arrangement. Theycontended that the excludedmembers were a class ofshareholder different from theremaining shareholders, andshould not have been permittedto vote.

THE DECISIONThe excluded members and the

other members were all ordinaryshareholders of Verimark.However, for the purposes ofdetermining classes ofshareholder, it was necessary todetermine firstly between whomthe compromise or arrangementwas proposed. After that, it couldbe determined whether separatemeetings of different classes ofshareholder should be held.

The offer made by the trust was,on a true analysis, made to theminority shareholders, ie the‘scheme participants’. It was notmade to the proposer, nor to the‘excluded members’. Only the‘scheme participants‘, as defined,were entitled to accept or reject it.It followed that only they shouldhave been allowed to vote on it.

The scheme of arrangementtherefore could not be sanctioned.

Companies

27

CLIPSAL AUSTRALIA (PTY) LTD v GAPDISTRIBUTORS (PTY) LTD

A JUDGMENT BY MALAN JWITWATERSRAND LOCALDIVISION25 SEPTEMBER 2009

2009 SACLR 405 (W)

The corporate veil will be lifted incircumstances in which a companyhas been established in order toevade the consequences of a courtorder.

THE FACTSClipsal Australia (Pty) Ltd

obtained an order interdictingtwo firms owned by GapDistributors (Pty) Ltd frominfringing its registered design incertain electrical sockets. Theorder was obtained in March2007 after a successful appeal tothe Supreme Court of Appeal. Theinterdict also applied to GapDistributors.

After the interdict was granted,Gap’s controller, a certain MrBotbol, registered Lear Imports(Pty) Ltd. That company beganimporting and selling electricalproducts in South Africa,including electrical sockets.

Clipsal brought an applicationfor an order that GapDistributors was in contempt ofthe order given by the SupremeCourt of Appeal. Gap opposed theapplication on the grounds thatthe order given by the SupremeCourt of Appeal was not givenagainst Lear, a company separatefrom Gap.

THE DECISIONWhile there were differences

between the Lear electricalsockets and those referred to inthe Supreme Court of Appeal’sorder, these were immaterialdifferences. The Lear electricalsockets were sufficiently similarto the Gap sockets to beconsidered identical to them. Inorder to show that Gap was incontempt of the court order, itwas necessary to show only thatthe order existed, that it had beenserved on Gap and Gap had failedto comply with it. Having shownthis, an evidential burden wasthen cast on Gap to establish thatits failure to comply was neitherwilful nor mala fide. Gap had notdischarged this burden.

Lear Imports could not beconsidered to be a legal personaseparate from Gap. Bothcompanies were controlled byBotbol. Lear Imports was a shamestablished by Botbol to evade theeffect of the court order. In thesecircumstances, the corporate veilcould be lifted.

The application was granted.

Companies

28

CUNINGHAME v FIRST READY DEVELOPMENT 249

A JUDGMENT BY BRAND JA(MAYA JA, MHLANTLA JA,HURT JA AND TSHIQI AJAconcurring)SUPREME COURT OF APPEAL28 SEPTEMBER 2009

2009 SACLR 426 (A)

A company incorporated as anassociation not for gain cannothave as its object any objectinconsistent with the kind ofobjects referred to in section21(1)(b) of the Companies Act (no61 of 1973). Conflict of interestsbetween members of the company isinconsistent with the idea ofcommunal or group interestsprovided for in that section.

THE FACTSWimbledon Lodge (Pty) Ltd

purchased a sectional title unit ina development which was aconference hotel known as VillaVia situated in Gordon’s Bay. Thesectional title units of thedevelopment were rooms in thehotel, as well as commercial areasconsisting of parking space,restaurants and a conferencecentre. Wimbledon’s purchasewas of room units.

The room units were purchasedfor investment purposes. To thisend, a management company wasestablished to manage the lettingof all units, the formation of arental pool, and the distributionof rentals received to participantsaccording to an agreed formula.After that company was placed inliquidation, its functions werefulfilled by the body corporate.The body corporate’s membersthen agreed to arrange thetransfer of the performance of itsfunctions to First ReadyDevelopment 249, an associationincorporated in terms of section21 of the Companies Act (no 61 of1973). First Ready ultimately alsoassumed the functions ofconducting the hotel business,and its objects were amended torecord that it conducted its mainbusiness on behalf of the ownersof the furnished hotel apartments,conference facilities andrestaurant facilities. Its mainbusiness recorded that itmanaged, operated, administered,let, marketed and leasedfurnished hotel apartments,conference and restaurantfacilities.

Units comprising thecommercial areas had been soldand transferred to variousentities and were ultimately soldand transferred to Meridian Bay(Pty) Ltd. Meridian became amember of First Ready, as didCuninghame, the sole owner ofWimbledon Lodge.

Because the commercial areasdid not form part of the commonproperty of the sectional titlescheme, rental paid to Meridianwas an operating expense in thecommercial exploitation of theseareas. The result of this was thatevery increase in the rental for thecommercial areas brought abouta decrease in the netaccommodation revenueavailable for distributionamongst the rental pool owners.

Cuninghame alleged thatMeridian and others who weremembers of First Ready hadcaused the company to take onthe function of commercialoperator of the hotel, and it wasconducting the hotel business forthe benefit of Meridian Bay andagainst the interest of the rentalpool owners.

Cuninghame contended thatFirst Ready was operating incontravention of section 21(1)(b)and section 21(2)(a) of theCompanies Act. He brought anapplication for an order that thecompany be wound up on thegrounds that it was just andequitable that it be wound up.

THE DECISIONSection 21(1)(b) provides that an

association not for gain is acompany having as its mainobject the promotion of religion,arts, sciences, education, charity,recreation, or any other culturalor social activity or communal orgroup interests.

When First Ready wasestablished, and in the initialstages of its operation, its objectswere consistent with thoseprovided for in this section.However, when its main objectchanged from managing a rentalpool on a non-profit basis to themanagement of the hotel businessas a whole, and its actualbusiness effectively changed overtime, its objects were no longerconsistent with those described

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in this section. Whereas thesection did not prevent acompany incorporated in terms ofit from making a profit, it didrequire that whatever its mainobject, it should be an object of akind referred to therein, ie itshould be one like that ofpromoting religion, arts, scienceand so on. The object adopted byFirst Ready could not be said tobe of such a kind.

The phrase ‘association not forgain’ also indicates that acompany falling within theprovisions of the section cannotbe one established for commercialor material benefit or advantage.For this reason too, First Ready’scommercial hotel business felloutside the ambit of what theobject of a section 21 associationmay lawfully be.

It was also clear that the‘communal or group interests’referred to in the section did notexist in the present case as theinterests of the companymembers were in conflict witheach other. The rental received inrespect of the commercial unitsbeing a subtraction from the netaccommodation revenue,Meridian as the owner of theseunits had interests which were indirect opposition to those of theother members.

As the objects of First Ready andits business operations wereinconsistent with the provisionunder which it was incorporated,the company had to be wound upon the grounds that this was justand equitable. The applicationsucceeded.

Companies

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CARTER TRADING (PTY) LTD v BLIGNAUT

JUDGMENT BY VAN DER BYL AJEASTERN CAPE HIGH COURT14 MAY 2009

2010 (2) SA 46 (ECP)

An acknowledgement of debt whichdefers the obligation to makepayment to a creditor is a creditagreement subject to the NationalCredit Act (no 34 of 2005).

THE FACTSCarter Trading (Pty) Ltd sold

goods to Blignaut on credit.Blignaut signed anacknowledgment of debt in whichshe agreed to pay CarterR107082.30 of her indebtednessby 24 December 2008. She agreedthat in the event of default, shewould also be liable to pay legalfees and collection commission.After she failed to pay, Carterbrought an action against her toenforce payment. Blignautdefended the action on thegrounds that theacknowledgment of debt was acredit agreement as provided forin section 8(4)(f) of the NationalCredit Act (no 34 of 2005) andCarter had failed to comply withsections 129 and 130 of that Act.

Carter contended that theacknowledgement of debt was asettlement agreement, andtherefore a novation of the creditagreement originally concluded,and therefore not subject to theAct. It applied for summaryjudgment.

THE DECISIONSection 8(4)(f) of the Act provides

that a credit agreement includesany other agreement, other than acredit facility or credit guarantee,

in terms of which payment of anamount owed by one person toanother is deferred, and anycharge, fee or interest is payableto the credit provider in respect ofthe agreement, or the amountthat has been deferred.

The acknowledgement of debtobliged Blignaut to pay a sum ofmoney to Carter. By havingsigned the acknowledgment ofdebt, she intended toacknowledge that she wasindebted to Carter in the sum ofR107 082.30, that she would paythat sum on 24 December 2008,and undertook the obligation topay legal fees and collection feesin the event of default. Thoseterms were exactly what the Actenvisaged to be a creditagreement, ie an agreement interms of which payment isdeferred and at least a fee orcharge is payable in respect of theacknowledgment of debt, andinterest and legal fees are payablein the event of a failure by thedefendant to pay the amount asagreed therein.

The acknowledgment of debtclearly fell within the ambit of theprovisions of section 8 of the Actand therefore constituted a creditagreement as envisaged in theAct.

Credit Transactions

31

NELSON MANDELA BAY METROPOLITANMUNICIPALITY v NOBUMBA N.O.

A JUDGMENT BY PLASKET J(VAN DER BYL AJ concurring)EASTERN CAPE HIGH COURT,GRAHAMSTOWN5 NOVEMBER 2009

2010 (1) SA 579 (ECG)

The National Credit Act (no 34 of2005) does not apply to proceedingsto enforce the payment of municipalrates. The Act does not apply to amunicipality’s action to enforce thepayment of services only if theservice provision agreement fallswithin the exemption of section4(6)(b) of that Act.

THE FACTSThe Nelson Mandela Bay

Metropolitan Municipality suedthe third respondent for R28708,45 in respect of outstandingrates, and R40 099,21 foroutstanding service charges andinterest. It applied for summaryjudgment but the matter wasstruck from the roll on thegrounds that in bringing theaction, the municipality failed tocomply with sections 129 and 130of the National Credit Act (no 34of 2005).

Section 129(1)(b) provides that acredit provider may not instituteproceedings to recover a debtbefore giving notice to theconsumer, as provided for insection 129(1)(a). Section 130provides that a credit providermay only enforce a creditagreement if certain conditionsare met, including that theconsumer has not responded tothe section 129(1) notice or hasresponded by rejecting the creditprovider’s proposals.

The municipality appealed onthe grounds that these provisionsdo not apply to a municipality.

THE DECISIONThe provisions of sections 4 and

8 of the National Credit Act showthat the Act only applies toagreements falling within thedefinition of a credit agreement. Acredit agreement is defined so asto include an arrangement orunderstanding between or amongtwo or more parties, whichpurports to establish arelationship in law between thoseparties. A credit agreement istherefore a contract formed byconsensus between two or morepeople.

Rates are a tax imposed by amunicipality. Section 2(1) of theLocal Government: MunicipalProperty Rates Act (no 6 of 2004 )empowers a municipality to levy

rates on property. The obligationon the part of a property owner topay arises from this source, notfrom an agreement. As theNational Credit Act is onlyconcerned with creditagreements, it consequently doesnot apply to proceedingsinstituted by a municipality torecover due but unpaid rates.

Amounts due for servicessupplied by a municipalitycannot however, be treated in thesame way as rates. Whether ornot the provision of services issubject to the National Credit Actdepends on an interpretation ofsection 4(6)(b) which provides foran exemption from the operationof the Act in the case of the supplyof utilities under which thesupplier agrees to defer paymentby the consumer until thesupplier has provided a periodicstatement of account for thatutility, and will not impose anyinterest on amounts due unlessoverdue.

In order to determine whetheror not the provision of services bya municipality falls within theexemption created by thisprovision, it is necessary toexamine the bye-laws of themunicipality and determinewhether or not it is providedinterest will be charged onoverdue accounts where the duedate is at least 30 days after thedate on which a periodicstatement is delivered to theconsumer. Because themunicipality had not given anyindication of what its standardform service agreement was, itwas not possible to determinewhether the exemption applied toits provision of services.Therefore, it could not beconcluded that the Act did notapply to the municipality’sprovision of services.

As far as the municipality’sclaim for interest was concerned,

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32

this was not subject to the Actbut to section 14 of the CustomerCare and Revenue ManagementBy-laws which provide thatinterest becomes payable when

the due date has passed.Summary judgment for

payment of the outstanding rateswas granted.

Credit Transactions

Does the NCA apply to claims for due but unpaid rates?[28] It is evident from the provisions of ss 4 and 8 that the NCA only applies toagreements that fall within the definition of a credit agreement. The word ‘agreement’ isdefined in s 1 of the Act to include ‘an arrangement or understanding between or amongtwo or more parties, which purports to establish a relationship in law between thoseparties’. It consequently bears the ordinary meaning of the reaching of consensus by two ormore people in such a way that a contract is formed....Scholtz et al take a different view. They say that the section applies to an ‘agreement interms of which the supplier of the utility or continuous service agrees to defer payment bythe consumer until the I supplier has provided a periodic statement of account, and not toimpose any interest unless the consumer fails to pay the full amount due within theagreed period’, provided the consumer is given at least 30 days after the date on which theperiodic statement of account is delivered in which to pay. Guide to the National CreditAct (n 13), para 4.3 (p 4-6).[40] I am in agreement with this interpretation of the section, and I conclude that theinterpretation of Steytler and De Visser is not correct. It is clear from the structure of thesection, the fact that subparas (i) and (ii) are joined by the word ‘and’ and by the referenceback in subpara (ii) to the deferred payment referred to in subpara (iii), that therequirements for exemption created by s 4(6)(b) are cumulative: in order for a supplier of autility to be exempted, the agreement in terms of which utilities are supplied must complywith both subpara (i) - that payment by the consumer is deferred until periodicalstatements of account are rendered - and subpara (ii) - that no interest is charged on thedeferred payment unless the consumer, having at least 30 days in which to pay, fails to doso. If these conditions are present, then the agreement is neither a credit facility nor anincidental credit agreement, but interest charges in terms of ss (ii) will be incidentalcredit.

33

DEMPA INVESTMENTS CC v BODY CORPORATE, LOS ANGELES

A JUDGMENT BY GAUTSCHI AJWITWATERSRAND LOCALDIVISION27 MARCH 2009

2010 (2) SA 69 (W)

An administrator may be appointedto administer a sectional titlescheme in replacement of trusteeswho have been appointed to do so ifit is clear that specialcircumstances or good cause existfor the removal of the trustees.

THE FACTSIn terms of a court order

obtained pursuant to an ex parteapplication, Messrs Kaye-Eddieand Dibakwane were appointedas joint administrators of thesectional title scheme known asLos Angeles. The order alsoprovided that a general meetingof the body corporate was to takeplace, at which trustees were tobe elected. The meeting took place,and a number of people wereelected as trustees. A subsequentcourt order confirmed the electionof the trustees for a period of oneyear.

The administration of thescheme was conductedchaotically and without properfinancial controls. Anindebtedness to the municipalityin respect of rates exceeded R1mand individual unit owners wereasked to pay amounts to themunicipality in respect ofelectricity and water supplied tothem. Conflicts between thetrustees developed. One the unitowners, Dempa Investments CC,then decided that the appropriatecourse of action was to apply forthe appointment of anadministrator to the sectionaltitle scheme in terms of section 46of the Sectional Titles Act (no 95 of1986).

THE DECISIONThe fact that the trustees were

willing and able to act as trusteesof the scheme did not prevent theappointment of administrators interms of the Act. A trustee who isunable to properly control,manage and administer thescheme should not be seen aswilling or able to administer thescheme. Therefore, even if thetrustees are properly in office,whether duly elected or not, andeven if they declare themselves tobe willing and able to act, anadministrator may still beappointed in terms of section 46 ofthe Act.

The appointment ofadministrators once trusteeshave already been appointedshould only be allowed if therehave been breaches of duty by thetrustees. In the present case, itwas clear that specialcircumstances or good causeswarranted the removal of thetrustees. The trustees were notmanaging the affairs of the bodycorporate in a proper manner,and were acting to thesubstantial detriment of ownersof units. This constituted groundfor the appointment of anadministrator.

The application succeeded.

Property

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MATHENJWA N.O. v MAGUDU GAME CO (PTY) LTD

A JUDGMENT BY KROON AJA(STREICHER ADP, NUGENT JA,LEWIS JA and PONNAN JAconcurring)SUPREME COURT OF APPEAL28 MAY 2009

2010 (2) SA 26 (A)

Transfer of ownership may beunderstood to have taken placewhen it is clear that parties to anagreement intended that ownershipwould pass upon delivery of theitem.

THE FACTS The Emwokweni Community

Trust, representing a communityin the Magudu area of Vryheid,became the owner of certainfarms which neighbouredproperty owned by MaguduGame Co (Pty) Ltd.

Before the Trust became theowner of the land, the previousowner, a certain Mr Bouwer, hadconcluded agreements intendedto include the land in a gamereserve formed from anamalgamation of its neighbouringproperties. These agreementsconferred Bouwer’s right toshares in Magudu and obligedhim to allow his property tobecome part of the game reserve.The fences between Magudu’sland and the Trust’s land werethen removed and this land andgame was added to the Maguduproperty which became a gamereserve. Magudu added game tothe reserve. Prior to transfer ofthe land to the Trust, Bouweralleged that the agreements hadbecome void and he claimedrestitution.

Magudu claimed that it was theowner of all game on the Trust’sproperty and was entitled toenter the property for thepurpose of removing the gameand relocating them to its ownproperty. It sought an orderconfirming its entitlement.

THE DECISIONSince transfer of ownership does

not depend on a valid underlyingagreement, the question waswhether there was a mutual

intention that ownership of thegame would be transferred fromthe Trust to Magudu and deliverythereof had taken place.

The provisions of theagreements concluded betweenthe parties could only beinterpreted to mean that Maguduwas to acquire ownership of thegame. There were no provisionsin the agreements inconsistentwith Magudu acquiringownership of the game. Theycould not be interepreted asconferring merely personal rightsto exploit resources found on theland, such as the game.

Magudu acquired ownership ofall the game in the reserve in thatit and the Trust had the commonintention that ownership of thegame on its land would pass toMagudu, and subsequently therespondent and Bouwer had thecommon intention thatownership of the game on theland of Bouwer would pass to therespondent. Actual delivery of thegame took place when theinternal fences were removed,alternatively constructivedelivery took place by virtue ofthe fences being removedfollowed by the then possession ofgame by the landowners onbehalf of the respondent.Ownership of the further gameintroduced into the reserve byMagudu was acquired by itindependently. The progeny of thegame on the reserve accrued toMagudu.

Magudu was therefore entitledto the order it sought.

Property

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MILLS N.O. v HOOSEN

A JUDGMENT BY MASIPA J(BORUCHOWITZ J and LAMONTJ concurring)WITWATERSRAND LOCALDIVISION19 DECEMBER 2008

2010 (2) SA 316 (W)

A sale of fixed property does notcomply with section 2(1) of theAlienation of Land Act if the agentof one of the parties signs the saleagreement without identifying theprincipal for which that party signsas agent.

THE FACTSMills, the executor of a deceased

estate, appointed one Kitshoff ashis agent to administer andliquidate the deceased estate.Acting in terms of the writtenpower of attorney whichappointed him, Kitshoffinstructed Cahi Auctioneers tosell certain fixed property in theestate.

After the failure of the sale of theproperty by public auction,Kitshoff and Hoosen signed a deedof sale which recorded the sale ofthe property for R430 000.

Mills repudiated the agreement.He contended that the agreementfailed to comply with section 2(1)of the Act, as the true seller of theproperty, the appellant in hiscapacity as executor of thedeceased estate, was notidentified or identifiable from thesale agreement or by admissibleevidence. Mills contended that onthe face of the agreement, Kitshoff,as the purported executor, isreflected as the seller, and therewas nothing to indicate that heaccepted the offer in arepresentative capacity.

THE DECISIONIf an agent purports to act on

behalf of one of the parties to anagreement, the existence of theagency may be proved byevidence outside of the documentrecording the agreement. If it isclear from the agreement who thetrue seller or purchaser is, the factthat the agent has not qualifiedhis signature does not render thedocument invalid.

In the present case, Mills asexecutor of the estate and trueseller of the property should havebeen identified in the saleagreement. Although Kitshoff wasauthorised to enter into and signthe agreement of sale on behalf ofthe appellant, he did not disclosethe fact of such agency. He wasobliged to qualify his signaturewith reference to his principal’sname and to indicate that he wassigning qua agent. As recourse toparol evidence was necessary inorder to establish the identity ofthe true seller, the agreement ofsale did not comply with theprovisions of section 2(1) of theAct and was accordingly invalid.

It was not possible to refer to thepower of attorney in order toidentify the seller because thepower of attorney was notreferred to in the sale agreement.

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PINZON TRADERS 8 (PTY) LTD v CLUBLINK (PTY) LTD

A JUDGMENT BY JONES JEASTERN CAPE HIGH COURT,GRAHAMSTOWN29 JUNE 2009

2010 (1) SA 506 (ECG)

It is permissible to prove one has aright of possession in respect ofproperty by showing that access tothat property is inextricably linkedto the right of possession of otherassociated property.

THE FACTSPinzon Traders 8 (Pty) Ltd

leased premises at a shoppingcomplex owned by Clublink (Pty)Ltd. The lease anticipated futuredevelopment of the complexincluding the provision of a newrefrigeration room and butcheryfor use by Pinzon. A loading bayfor Pinzon’s use was constructedin close proximity to the newdevelopments, and Pinzon beganto use the loading bay for thispurpose. Pinzon’s right to use theloading bay was not expresslyprovided for in the lease. Accessto it was gained through aparking area constructed for useof all tenants of the complex.

Other tenants at the complexcomplained that Pinzon’s use ofthe loading bay affected theiroccupation of the premises andcomplained about the manner ofits use specifically in that heavy-duty lorries were accessing theparking area in order to use theloading bay. Clublink constructeda wall to reduce the width of theentrance so as to make itimpossible for larger lorries toenter.

Pinzon brought an applicationfor an order that Clublink restoreoriginal possession of the parkingarea by demolishing the extendedwall.

THE DECISIONAs the thrust of Pinzon’s case

was that it was entitled to reliefunder the mandament van spolie,it had to prove that it (i) had beenin de facto possession of theloading bay and (ii) had beenunlawfully dispossessed.

Pinzon’s use and access to theloading bay was inextricablyconnected to its access to thepremises it leased at thesupermarket. Access to theloading bay was therefore a partof its right of occupation of thepremises leased to it, and was notthe subject of any separatecontractual right. Pinzon’spossession of the loading bay hadbeen demonstrated, as well as itsunlawful dispossession.

Pinzon had also shown that ithad had a clear right to use of theloading bay, and that the righthad been infringed. Accordingly,it was also entitled to an interdictthat Clublink restore possessionon this basis.

The application was granted.

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POCOCK v DE OLIVIERA

A JUDGMENT BY BASHALL AJ(MATHOPO J and JOFFE Jconcurring)WITWATERSRAND LOCALDIVISION12 NOVEMBER 2008

2010 (1) SA 514 (W)

A restrictive condition that onlyone of a pair of adjacent propertiesmay have a building constructed onit cannot be construed as a notarialtie agreement entitling the owner ofone of the properties to ownershipof the other.

THE FACTSPocock was the registered owner

of erf 5554 situated inJohannesburg, and De Olivierawas the registered owner of erf5555 which was adjacent to erf5554. The two properties wereoriginally owned by a certainAlexander in 1907 under separatetitle. They were transferred fromhis deceased estate to a certainVenter, at which time arestrictive condition wasimposed on the properties bymeans of a notarial deed. Thiswas to the effect that only onedwelling with stables andouthouses could be built on thepair of erven.

De Oliviera became the owner ofthe two erven. As a result offailure to pay municipal rates, thelocal authority brought an actionagainst him for payment thereofand in enforcement of a judgmentfor payment, erf 5554 was sold inexecution. The purchaser sold theproperty to Pocock and theproperty was transferred directlyto her.

No separate buildings wereconstructed on erf 5555 andmunicipal services to thatproperty were not supplied toindependently, but through erf5554. Pocock contended that shewas also the owner of erf 5555because the notarial agreement ineffect tied the two properties toeach other. She contended that theeffect of this was to accede erf5555 to erf 5554.

THE DECISIONThe notarial agreement was not

a tie agreement and could not beconstrued as having tied the twoproperties to each other in theway that the usual tie agreementdoes. Even had there been such atie, this would have been no morethan a consensual act and theproperties could have been untiedby agreement. The consensualnature was evident in thecondition relating to theprohibition on alienation to morethan one transferee without thenecessary consent, and wasimplicitly recognised in theattachment sale and registeredtransfer of only erf 5554.

The notarial agreement thereforeprovided no basis for thecontention that Pocock was theowner of erf 5555.

As far as the argument based onaccession was concerned, accessiois the basis upon whichownership may be acquiredthrough any of the usual modes ofaccession. None applied in thepresent case, and did not apply onthe basis of the execution andregistration of the notarialagreement.

Pocock was therefore not theowner of erf 5555.

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REFLECT-ALL 1025 CC v MEC FOR PUBLIC TRANSPORT,ROADS AND WORKS

A JUDGMENT BY NKABINDE J(MOSENEKE DCJ, CAMERON J,MOKGORO J, NGCOBO J,O’REGAN J, SKWEYIYA J andVAN DER WESTHUIZEN Jconcurring)CONSTITUTIONAL COURT27 AUGUST 2009

2009 (6) SA 391 (CC)

A limitation on the rights of aproperty owner is not in violationof section 25(1) of the Constitutionif it does not amount to an arbitrarydeprivation of rights. Even if theeffect of such a limitation isextensive, the test for determiningwhether or not the property ownerhas been arbitrarily deprived of itsrights is whether the means used toachieve the objects of the provisionin question is disproportionate.Expropriation of the propertyowner’s rights will not be seen tohave taken place if the limitationdoes not involve a transfer of theowner’s property to the State.

THE FACTSReflect-all 1025 CC and the other

applicants were all owners ofland which was to be affected byroads proposed to be constructedby the MEC for Public Transport,Roads and Works. The propertieswere to be affected either byrezoning restrictions being placedupon them or expropriation tosome extent. This was done interms of notices issued in terms ofthe Gauteng TransportInfrastructure Act (no 8 of 2001).

The Act, which came into forcein 2003, was enacted toconsolidate the laws relating toroads and other types oftransport infrastructure inGauteng and to make provisionfor provincial roads and othertransport infrastructure inGauteng. The Act replaced theTransvaal Roads Ordinance.Section 10(1) provides that anyroute within the Province whichhas been accepted as such by therelevant authority under theOrdinance before thecommencement of the sectionshall be deemed to have beendetermined and published interms of section 6 as soon as theMEC has published a notice in theProvincial Gazette to the effectthat the centre line thereof hasbeen determined, from whichdate the relevant provisions ofsections 5 to 8 apply to such aroute as though it has beenpublished in terms of that section.

Section 6 provides for theprocedures to be followed prior tothe publication of a route, andsections 7, 8 and 9 provide for theimplementation of theconstruction of the route. Theeffect of these sections is toprevent any use of the affectedproperty other than for itsdesignated purpose asdetermined by the MEC.

Section 10(3) provides that everypreliminary design of a provincial

road within the Provinceaccepted as such by the relevantauthority under the Ordinancebefore the commencement of thesection shall be deemed to havebeen accepted by the MEC forimplementation in terms ofsection 8, and section 9 shall beapplicable to such preliminarydesign.

Reflect-all contended that theeffect of sections 10(1) and 10(3)was to deprive it of propertycontrary to section 25(1) of theConstitution and amounted toexpropriation without just andequitable compensation contraryto sections 25(2) and 25(3) of theConstitution. Reflect-all appliedfor an order that sections 10(1)and 10(3) were invalid.

THE DECISIONThe effect of sections 10(1) and

10(3) was to prevent theconstruction of servicesinfrastructure over or below aroute, except with the writtenpermission of the MEC or in termsof a registered servitude. Ownerscan only apply for certainchanges to affected land if theapplication is accompanied by areport by a civil engineer. Thesections also prohibit thegranting of applications for theestablishment of townships orany change of land use in terms ofany law or town-planningscheme. This adversely affectedthe applicants and to some extent,deprived them of the use,enjoyment and exploitation oftheir properties.

For this to be contrary to section25(1) it would have to be anarbitrary deprivation.Procedurally however, sections10(1) and 10(3) were notarbitrary. The historicalconsultative process undertakento determine routes under thelegislation applicable prior to theenactment of these sections could

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not realistically be revisited. Todo so would not be in the publicinterest and would stultify thebuilding of roads for whichpreliminary work had alreadybeen completed. Similarly, theacceptance of preliminary designsunder the old legislation couldnot realistically be reconsideredas this would involve consultingwith all affected propertyowners, an impractical and costlyexercise.

As far as their substantiveimport was concerned, theenquiry had to be whether or notthe means employed to achievethe purposes of the Act weredisproportionate to thosepurposes. It was true that theeffect of section 10(3) on the rightsof property owners was extensivebut the means employed toachieve the objects of the Actwere not disproportionate. TheAct allowed property owners to

apply for amendments to theplanned routes and did notcompletely restrict their right todevelop and exploit the potentialof their properties. Section 10(3)did not amount to an arbitrarydeprivation of property inviolation of section 25(1) of theConstitution.

The applicants also contendedthat the sections allowedexpropriation of their propertiesin violation of section 25(2) and25(3) of the Constitution.However, none of the applicantswas faced with an attempt totransfer their properties to theState. Furthermore, it was notcertain that the road routingproposals made by thegovernment would beimplemented. Given that therewas only a potential of limitingtheir rights as property owners,the means adopted to do so couldbe considered proportionate.

The application failed.

Property

40

HIDRO-TECH SYSTEMS (PTY) LTD v CITY OFCAPE TOWN

A JUDGMENT BY IRISH AJCAPE PROVINCIAL DIVISION24 DECEMBER 2008

2010 (1) SA 483 (C)

Upon receiving a credible complaintthat a preference has been obtainedon a fraudulent basis, an organ ofState must act in accordance withthe complaint in terms ofPreferential Procurement PolicyFramework Act (no 5 of 2000).

THE FACTSHidro-Tech Systems (Pty) Ltd

competed with the second andthird respondents for contractsawarded by the City of CapeTown for the supply andinstallation of mechanicalequipment for water andsewerage treatment worksrequired by the municipality.

Over a period of five years, thesecond respondent won 80% morecontracts arising from tenderprocesses in which both partiesparticipated, than contracts wonby Hidro. The reason for this wasthat the second respondent scoredhigher than Hidro on pointsbased on the scoring given formembers qualifying ashistorically disadvantagedindividuals (‘HDI’).

Hidro was of the opinion thatthe second respondent hadmisrepresented its true HDIstatus and was operating as afront for the third respondent.Hidro alleged that this was clearfrom the fact that theremuneration of directors of HDIstatus was significantly less thanwhite directors, and thatmanagerial and administrativeresponsibilities were allocatedmostly to the latter. In fact,neither of the non-white directorswas actively involved in themanagement of the secondrespondent or exercised controlover it, to an extentcommensurate with theirrespective shareholdings at thetime when the second respondentsubmitted its tenders in 2006 and2007.

Hidro addressed themunicipality with its concerns. Itrequested a verification agency todetermine and report on Hidro’sallegations. It confirmed that thesecond respondent’s shareholdingwas in line with the proof ofshareholding which hadaccompanied its tender-

registration form.Hidro reiterated its contention

that the second respondent wasinvolved in fronting practices anddemanded that the municipalityinvestigate this. The municipalitydid not do so. Hidro then broughtan application for an order thatthe municipality act against thesecond respondent in accordancewith section 15 of the regulationspromulgated in terms of thePreferential Procurement PolicyFramework Act (no 5 of 2000) andthat the municipality act againstthe second respondent inaccordance with item 9.4 of theProcurement Policy Initiative ofthe City of Cape Town

THE DECISIONRegulation 15 provides that an

organ of State must, upondetecting that a preference hasbeen obtained on a fraudulentbasis, or any specified goals arenot attained in the performance ofthe contract, act against theperson awarded the contract.

Although the State couldinvestigate the position beforetaking action, the action to betaken did not depend on apreliminary investigation havingbeen conducted upon the basis ofwhich the State would satisfyitself that a preference had beenobtained on a fraudulent basis.The regulation intends to cast avery wide net, in order to ensurethat an organ of State beproactive in responding to thereasonable possibility that apreference has been obtainedfraudulently, or that a specificgoal of its preferential policy, interms of which a contract wasawarded, is not being pursued.State has no investigative abilityin terms of the regulations.

The action to be taken by theorgan of State is dependent uponthe nature of the information thatreaches it. If that information

Contract

41

constitutes a credible complaint,seriously advanced, of theobtaining of a preference byfraudulent means, then the organof State must act by requiring thetenderer in question to provideproof of its real and operative HDIstatus. The organ of State mightappoint a forensic accountant toanalyse any proof furnished onits behalf; or to assist it in callingfor such further documentationas might be required.

In the present case, themunicipality’s investigationnever sought to address the

actual issue which was, not theovert shareholding in secondrespondent, but its sham natureand the blurring of the separatecorporate identities of the secondand third respondents. Theinvestigations carried out by theverification agency wereinadequate and did not addressthe real complaint.

The municipality was thereforeordered to act against the secondrespondent in accordance withregulation 15 of the regulationspromulgated in terms of thePreferential Procurement PolicyFramework Act.

MICROSURE (PTY) LTD v NET 1 APPLIED TECHNOLOGIESSOUTH AFRICA LTD

A JUDGMENT BY KOEN JNATAL PROVINCIAL DIVISION22 APRIL 2009

2010 (2) SA 59 (N)

A person seeking reinstatement ofits contractual rights should notassert its rights under a mandamentvan spolie but on the basis of thecontract under which its rightswere established.

THE FACTSMicrosure (Pty) Ltd and Net 1

Applied Technologies SouthAfrica Ltd concluded anagreement which conferred onMicrosure the right to possessequipment used in the payment ofpensions and access their fundswith certain merchants. Theagreement entitled Microsure touse a point of sale terminal, abiometric fingerprint scanner andmerchant cards supplied to it byNet 1, and entitled it to access Net1’s server at its main place ofbusiness by a Telkom line or aGPRS connection. Access to theserver was necessary for alltransactions as one of the server’sfunctions was to verify andauthorise the payment of funds toa beneficiary.

In terms of the agreement,

Microsure was given possessionof a point of sale terminal, abiometric fingerprint scanner anda merchant card.

At a certain point, Net 1deactivated Microsure’s merchantcard at Net 1’s premises. Thismade it impossible for Microsureto access Net 1’s computer.Deactivation did nothingphysically to Microsure’s card, asit only involved a reprogrammingof Net 1’s server. The effect wasthat Microsure’s card was notrecognised or authenticated bythe server and Microsure nolonger had access to and use ofthe Net 1’s system.

Microsure brought anapplication for reinstatement ofpossession (a mandament vanspolie).

Contract

42

THE DECISIONThe merchant card and all the

other equipment held byMicrosure in terms of theagreement was still in itspossession. What had happenedwas that Microsure had beendeprived of certain rights, whichhad been exercised through theequipment situated at therespondent’s premises. But nodispossession of the equipmentheld by Microsure in terms of theagreement had taken place.

In accordance with Telkom SA Ltdv Xsinet (Pty) Ltd 2003 (5) SA 309(A), the facts of the case showedno possession by Microsure ofany item of which it had beendeprived. Microsure sought

specific performance ofcontractual obligations it allegedit was entitled to. But this couldnot be achieved in spoliationproceedings. Its position wasindistinguishable from a contractcustomer in respect of a DSTVcontract or a cellphone seeking tocomply with continued serviceprovision or access via theircards in circumstances wheretheir right to receive such servicemay have been validlyterminated. Its rights werepersonal contractual rights andshould be asserted on that basis,not on the basis of a right ofpossession.

The application was dismissed.

Contract

What the applicants seek to achieve is specific performance of contractualobligations they were allegedly entitled to, and facilitated by the merchant card.This they cannot achieve in spoliation proceedings. Their position isindistinguishable from a contract customer in respect of a DSTV contract or acellphone seeking to comply with continued service provision or access via theircards in circumstances where their right to receive such service may have beenvalidly terminated. That debate is one for the law of contract, not property.

43

MUNICIPAL MANAGER: QAUKENI LOCALMUNICIPALITY v FV GENERAL TRADING CC

A JUDGMENT BY LEACH AJA(MPATI P, BRAND JA, CLOETE JAand MAYA AJA concurring)SUPREME COURT OF APPEAL29 MAY 2009

2010 (1) SA 356 (A)

Contracts concluded with localauthority without complying withprescribed competitive processesare invalid, and a procurementcontract for municipal servicesconcluded in breach of theprovisions of the applicablelegislation is invalid and will notbe enforced.

THE FACTSIn November 2005, FV General

Trading CC submitted a tender tothe Qaukeni Local Municipalityfor the collection of refuse inLusikisiki and Flagstaff. Thetender was accepted, and an oralcontract then concluded forprovision of the service until June2006.

During the currency of thisagreement, the municipal council,without calling for tenders,resolved to reappoint FV as refusecollector for another year. Awritten contract was concludedbetween the parties. It providedfor continuation of the servicebeyond the first year unlessnotice of termination was given,such notice to be given sixmonths prior to the end of thefirst period.

In June 2007, the final month ofthe first period, the municipalitygave FV notice that the contractwould not be renewed but wouldterminate at the end of thatmonth.

FV applied for an order that thecontract continued for anotheryear, and was of full force andeffect for that period as notice oftermination provided for in thecontract had not been given.

THE DECISIONSection 217(1) of the

Constitution provides that anorgan of State in the local sphere,

such as a municipality, whichcontracts for goods and servicesmust do so in accordance with asystem which is fair, equitable,competitive and cost-effective.This requirement is repeated inmore detailed form in both theLocal Government: MunicipalSystems Act (no 32 of 2000) andthe Local Government: MunicipalFinance Management Act (no 56 of2003).

The effect of this legislation is torequire that a municipality actopenly and in accordance with afair, equitable, competitive andcost-effective system, and interms of a supply chainmanagement policy designed tohave that effect. The provisionsare designed to ensure atransparent, cost- effective andcompetitive tendering process inthe public interest. However, theQaukeni Local Municipalityappeared not to have compliedwith them, but to have ignored itsobligation to do so.

Contracts concluded withoutcomplying with prescribedcompetitive processes are invalid,and a procurement contract formunicipal services concluded inbreach of the provisions of theapplicable legislation is invalidand will not be enforced.

Accordingly, FV was notentitled to the order it sought. Theapplication was refused.

Contract

44

STANDARD BANK OF SOUTH AFRICA LTD vHUNKYDORY INVESTMENTS 188 (PTY) LTD

A JUDGMENT BY ROGERS AJWESTERN CAPE HIGH COURT1 JUNE 2009

2010 (1) SA 634 (WCC)

The ‘disposal’ of assets referred toin section 228(1) of the CompaniesAct (no 61 of 1973) does not refer tothe mortgaging of assets.

THE FACTSHunkydory Investments 188

(Pty) Ltd passed two mortgagebonds over its fixed property infavour of the Standard Bank ofSouth Africa Ltd. The propertyover which the bonds werepassed was the company’s mainasset. No resolutions ofshareholders as required bysection 228(1) of the CompaniesAct (no 61 of 1973) were procuredprior to the passing of the bonds.

Standard Bank sued forrepayment of some R2m due byHunkdory and secured by thebonds. In defending the action,Hunkdory contended that asthere had been no propercompliance with section 228(1) ofthe Companies Act, the bankcould not base any claim againstit on the bonds.

Standard Bank contended thatthe passing of the bonds was nota disposal of the company’sproperty as referred to in thesection.

THE DECISIONThe ordinary meaning of the

word ‘dispose’ is to make over orpart with under some transactionsuch as a sale, or to transfer intonew hands or to the control of

someone else. However, atransaction under which a debtoragrees to hypothecate itsproperty is not ordinarilydescribed as a disposal of theproperty to the creditor.Although the creditor may havethe right to sell the debtor’sproperty in the event of default,the passing of the mortgage bondin its favour does not constitutethe sale of the property. A salemay eventuate should thecreditor enforce its rights, but asale in the enforcement of acreditor’s rights may equally takeplace should the creditor have nosecurity in the form of a mortgagebond.

If one were to interpret the word‘dispose’ in the section asincluding a reference to amortgage bond, the word wouldalso apply to other transactionswhich might result in the sale ofthe company’s main asset, such asa loan or the incurring of anyother debt. There were nogrounds for giving the sectionsuch a wide interpretation, even ifthe word ‘dispose’ could be givensuch an interpretation in othercontexts.

Hunkydory’s defence wasrejected.

Companies

45

POLARIS CAPITAL (PTY) LTD v REGISTRAR OFCOMPANIES

A JUDGMENT BY STREICHER JA(BRAND JA, SNYDERS JA, LEACHAJA and BOSIELO AJAconcurring)SUPREME COURT OF APPEAL30 SEPTEMBER 2009

2009 SACLR 445 (A)

A company name is undesirable if itcreates a probability of confusion inthe mind of the public. A companyname will be confusing when, indoing business with the company,the public would be confused intothinking that they are doingbusiness with another company ora company associated with theother company.

THE FACTSPolaris Capital (Pty) Ltd was

originally registered as acompany under the name AfricanHarvest Growth Asset Managers(Pty) Ltd. It carried on thebusiness of equity manager inSouth Africa. In 2003, it passed aresolution to change its name toPolaris Capital (Pty) Ltd. TheRegistrar of Companies changedthe name of the company in termsof the resolution.

Polaris Capital Management Inc,the second respondent, acompany registered in the UnitedStates, objected to the change ofname. In support of its objection,it averred that it was theproprietor of a trademarkapplication using the namePolaris, had common-law rightsto the name Polaris, was theproprietor of the internet domainname www.polariscapital.comand conducted services identicalto those of Polaris Capital (Pty)Ltd. The company had traded inSouth Africa and had secured themanagement of the pension fundsof Iscor and Oasis. The secondrespondent had received inquiriesfrom members of the publicregarding Polaris, from which itwas apparent that they wereconfused as to whether it was thesame as, or associated with, thesecond respondent.

The Registrar of Companiesinformed Polaris and the secondrespondent that he had decidedthat the second respondent’sobjection to the name PolarisCapital (Pty) Ltd was wellfounded and that accordingly thename was undesirable. Pursuantto his powers in terms of section45(2) of the Companies Act (no 61of 1973), the Registrar orderedPolaris to change its name withinsixty days.

Polaris applied for a review ofthe Registrar’s decision orderingit to change its name.

THE DECISIONThe established rule is that a

company name is undesirable ifthere is a serious risk of confusionof the public. This means no morethan there is a probability ofconfusion. A company name willbe confusing when, in doingbusiness with the company, thepublic would be confused intothinking that they are doingbusiness with another companyor a company associated with theother company.

The second respondent hadacquired a reputation in SouthAfrica as an equity manager. Ittherefore had acquired vestedrights which it was entitled toprotect with respect to any othercompany which carried on thebusiness of equity manager.Although Polaris contended thatthe second respondent’s customerbase was a limited and educatedgroup of financial experts, someindividuals did invest with thecompany. Since the name adoptedby Polaris was practicallyidentical to that of the secondrespondent, and both companiesconducted business as equitymanagers, those who knew aboutthe second respondent wouldprobably think there was anassociation between the twocompanies.

The fact that some individualshad confused the secondrespondent with Polarisstrengthened the view that asubstantial number thought thatthere was an association betweenthe two. In these circumstances,the name should be consideredundesirable.

The application was dismissed.

Companies

46

KEBBLE v GAINSFORD

A JUDGMENT BY LEVENBERG AJSOUTH GAUTENG HIGH COURT23 MARCH 2009

2010 (1) SA 561 (GSJ)

A liquidator is normally entitled toconduct an enquiry into the affairsof an insolvent company in order todetermine facts necessary forinstituting proceedings in the nameof the company. The fact that apotential debtor has concluded asettlement agreement with thecompany’s sole or main creditordoes not prevent the liquidator fromproceeding with an enquiry.

THE FACTSKebble and his late son were

directors of BNC (Pty) Ltd untilthe company was placed in finalliquidation in April 2006. Theonly proven creditor in thecompany was Randgold Ltd, witha claim of R169 500 000.

The Master signed an orderappointing the fifth respondent ascommissioner of an enquiry to beconducted into the affairs of thecompany. Kebble signed asettlement agreement withRandgold in which he agreed topay R30m to Randgold and R5mto JCI Ltd. Randgold agreed tostop funding the enquiry to theextent that Kebble might be calledas a witness to it. A secondsettlement agreement was laterconcluded by the same parties inwhich Randgold agreed to requestthat the liquidators take nofurther action against Kebble andcertain other parties. Kebbleacquired the right to purchaseRandgold’s claim against thecompany for R100 000.

The liquidators of the companydeclined to be parties to thesettlement agreements. Theywished to interrogate Kebble atthe enquiry and issued asummons calling on him to attendand testify. Kebble applied for anorder that the summons be setaside. He contended that theenquiry was an abuse of processbecause the only proven creditor,Randgold, had no interest in itscontinuation as it had settled itsclaim, and the liquidators wouldgain nothing from the enquirynecessary for the winding up ofthe company.

THE DECISIONKebble’s position rested on the

contention that the effect of thesettlement agreements was tocompromise Randgold’s claimagainst BNC. However, there wasno indication that this was the

effect of the settlementagreements. The evidence pointedthe opposite way because theretention of the right to purchaseRandgold’s claim for R100 000showed that its claim againstBNC was not affected, but couldbe enforced should Kebble chooseto do so.

Kebble’s position that he hadassumed BNC’s liability towardRandgold also depended on BNChaving participated in theagreement, because anassumption of liability is atripartite agreement involvingthe consent of all three parties.BNC had not been a party to thesettlement agreement andtherefore no enforceabledelegation of liability had takenplace.

Since Randgold’s claimremained and was not affected bythe settlement agreements, BNC’sinsolvency continued irrespectiveof those agreements, even if theireffect was to reduce itsindebtedness to creditors.

Kebble also contended thatpursuing a potential claimagainst him personally in termsof section 424 of the CompaniesAct (no 61 of 1973) would havethe effect of conferring onRandgold greater rights againsthim than it obtained under thesettlement agreements. However,the enquiry would also bedirected at the determination ofwhether or not BNC had claimsagainst other parties which couldbe pursued. There were also otherpotential creditors of thecompany which might benefitfrom an enquiry.

There is nothing improper in aliquidator instituting an enquiryin order to obtain as muchinformation as possible prior toproceeding with the enforcementof a claim. Taking into account allthe relevant factors, it could notbe said that the enquiry

Insolvency

47

instituted by the liquidators inthis case were an abuse ofprocess, especially given the factthat a fraud had been committedwith BNC being a vehicle in the

commission of the fraud. Theliquidators were thereforeentitled to investigate to conductthe enquiry.

The application was dismissed.

There is no language in either of the settlement agreements that suggests that Kebbleassumed the company’s liability to Randgold or that it was ever the intention of theparties to extinguish the company’s liability to Randgold .On the contrary, the language of both settlement agreements negates thiscontention. The first settlement agreement affords Kebble an option to purchaseRandgold’s claim against the company for R100 000. If it was the intention of theparties that the Randgold claim against the company would be extinguished, then itcould not thereafter have been assigned to Kebble....There is another obstacle to Kebble’s contention. An ‘assumption of liability’ is adelegation. That is a tripartite agreement pursuant to which one party agrees toassume the liability of another with the consent of the creditor. In the present casethe liquidators (ie the representatives of the alleged delegating company) were notparty to the ‘assumption’ agreement. Therefore, no legally enforceable assumption ordelegation occurred.

Insolvency

48

LASKARIDES v GERMAN TYRE CENTRE (PTY) LTD

A JUDGMENT BY BHIKA JWITWATERSRAND LOCALDIVISION27 FEBRUARY 2009

2010 (1) SA 390 (W)

The Master may issue a subpoenato attend an interrogation in termsof section 151 of the InsolvencyAct (no 24 of 1936) only afterapplying his mind to whether or notthe evidence may be lawfullyrequired of the interogee. A mereletter from a liquidator requestingthe issue of a subpoena isinsufficient for this purpose.

THE FACTSThe liquidators of German Tyre

Centre (Pty) Ltd requested theMaster of the High Court to issuea subpoena against Laskarides inorder to enable them to make aninformed decision on theprospects of actions brought bycertain creditors of the companyagainst Bandag Inc of SA (Pty)Ltd. Laskarides was themanaging director of Bandag. Oneof the creditors, having a claim ofsome R2m, had ceded its rights tothe proceeds of its action to theliquidators and indemnified theliquidators for the costs of theenquiry.

The liquidators based theirrequest on these facts, whichwere set out in their letter to theMaster, accompanied by a chequefor R75 in respect of witness fees.

On the basis of this, the Masterconsidered that Laskarides mightbe able to give informationmaterial to the protection of theinterests of creditors.Accordingly, he issued thesubpoena.

Laskarides brought anapplication in terms of section151 of the Insolvency Act (no 24 of1936) to review and set aside theMaster’s decision to issue thesubpoena. He contended that thesubpoena was invalid as it didnot specify the documents he hadto bring to the enquiry, and wasdirected at an action not betweenGerman Tyre Centre and Bandagbut between a creditor of theinsolvent company and Bandag, aparty unrelated to it. Theycontended that the cession of therights to the proceeds of theaction was a contrivance, and thiswas evident from the fact that theclaim itself had not been cededbut only the rights to theproceeds of the claim.

THE DECISIONIn deciding whether or not to

issue a subpoena for the purposesof interrogation of a person, theMaster must must apply his mindto what may lawfully andrelevantly be required of aproposed interrogee by way oforal evidence and delivery ofbooks and records and otherdocumentation. However, theletter motivating the issue of thesubpoena did not sufficiently setout this required basis, nor did itdeal with the relevance or ambitof the documents required, nordid it afford an explanation as tohow the documents requestedwould assist the liquidators. Sincethe Master based his decision onthe letter, it could not have beenmade on the proper basisrequired of the Master in makingthe decision.

It was also clear that althoughan interrogation could rangewidely in subject matter, it wasnot to include irrelevant matter,which is what the litigationbetween the creditor and Bandagwas.

Laskarides also contended thatthe amount of R75 paid forwitness fees was insufficient sincethe documentation required wasso extensive, he might incur R525000 in photocopying expensesalone. There was no reason inprinciple why witness feesshould not include so-calledreasonable out-of-pocket costsand expenses, including the costand expenses, both material costsand time expended, in theproduction, compilation, copying,printing and collation of alldocuments.

As the subpoena had beenissued without proper basis, itwas set aside. The applicationwas granted.

Insolvency

49

MOMENTUM GROUP LTD v VAN STADEN N.O.

JUDGMENT BY VAN HEERDEN JA(FARLAM JA, MLAMBO JA,GRIESEL AJA and BOSIELO AJAconcurring)SUPREME COURT OF APPEAL29 MAY 2009

2010 (2) SA 135 (A)

If a ceded asset is encumbered by aparty when it is known that theasset has been ceded, thecessionary retains its right to theasset in preference to the party inwhose favour the asset wasencumbered.

THE FACTSBoland Bank PKS Ltd lent

R750040 to Renbes Family FoodsCC. Retief van Heerden signed asuretyship agreement forrepayment of the loan, and assecurity ceded to the bank a fixeddeposit of R250 000 and any re-investment, renewal orsubstitution thereof.

In August 1999, van Heerdentook out an investment insurancepolicy with Momentum GroupLtd. The initial and only premiumwas R250 000, and this was paidfrom the fixed deposit with theknowledge and consent of thebank and in substitution of itssecurity. The capital value of thepolicy was guaranteed in the sumof R250 000.

In November 2000, Renbes wasliquidated. The following month,Momentum gave an interest-freeloan of R267 891 against thepolicy to van Heerden.

When the bank soughtrepayment of its loan to Renbesand became aware that the loancould not be repaid, it claimedpayment of R250 000 fromMomentum in terms of its rightsas cessionary. Momentumcontended that it was onlyobliged to pay the cash value ofthe policy, an amount of R29 690.

In January 2003, van Heerden’sestate was sequestrated. Thetrustee, van Staden, claimedpayment of the full surrendervalue of the policy, an amount ofR293 911.

THE DECISIONMomentum contended that the

broker consultant and marketing

adviser who arranged thetransfer of the fixed deposit toMomentum did not have theauthority to bind Momentum andtherefore could not have boundMomentum to any obligationtoward the bank in regard to thecession. However, it was clearthat she did have this authorityas she had been appointed to actfor Momentum in the solicitationof policies. Upon the basis of heractions, and the impression givenby them, it was entirelyreasonable for Boland to haverelied on her authority to bindMomentum.

The broker’s authority did havesome relevance to the questionwhether Momentum knew of thecession. Had Momentum notknown of the cession, and hadpaid van Heerden in good faith, itwould not be obliged to makepayment to the bank. Theprobabilities were that the brokerknew of the cession. Given thescope of her authority in relationto Momentum, that knowledgecould be imputed to Momentum.Momentum was therefore notentitled to assert an entitlementto the policy in priority to thebank. The fact that the terms of itspolicy allowed it to make a loanto the insured against thesecurity of the policy could nothave the effect of conferring onMomentum a greater right thanthat of the bank.

The full surrender value of thepolicy was therefore an asset invan Heerden’s sequestratedestate, and the bank was entitledto assert its rights as cessionaryin respect thereof. The claimsucceeded.

Cession

50

LOMBARD INSURANCE CO LTD v LANDMARKHOLDINGS (PTY) LTD

A JUDGMENT BY NAVSA JA(NUGENT JA, LEWIS JA, JAFTA JAand PONNAN JA concurring)SUPREME COURT OF APPEAL1 JUNE 2009

2010 (2) SA 86 (A)

Once it is shown that the eventconditional for liability to ariseunder a construction guarantee hastaken place, the guarantor’sobligations arise, irrespective of themerits of any dispute which mayhave arisen between employer andcontractor.

THE FACTSLombard Insurance Co Ltd

issued a construction guaranteein favour of the South AfricanMaritime Training Academy. Itrelated to a construction contractconcluded between the Academyas employer and LandmarkHoldings (Pty) Ltd as contractor.In terms of the guarantee,Lombard undertook to pay aguaranteed sum upon default byLandmark resulting incancellation or a liquidation orderbeing granted against Landmark.The construction guaranteeexpressly provided that it did notintend to created an accessoryobligation or a suretyshipobligation.

Prior to the issue of the finalcertificate of completion,Landmark was placed inliquidation. The Academy thenasserted its rights under theconstruction guarantee and calledfor payment of R241 429,77, beingthe value of work done after theissue of the final certificate ofcompletion.

Three years prior to the issue ofthe construction guarantee,Landmark and others had signeda Reciprocal Indemnity andSuretyship in favour of Lombardin which they indemnifiedLombard against all claimsincurred as a result of executingany guarantees. They undertookto pay on demand any amountLombard may have been calledupon to pay under the guarantee.

Lombard paid the amountdemanded by the Academy. Itthen demanded payment of thesame amount from Landmarkand the others. Landmark refusedto pay on the grounds that theAgent Principal which had issuedthe certificate of practicalcompletion had perpetrated afraud on it when issuing thatcertificate.

THE DECISIONThe rights and obligations of

Lombard and the Academy wereto be found in the constructionguarantee. That agreement wassimilar to the letters of creditissued by banks for use ininternational trade: its rights andobligations existed independentlyof the underlying contract inrelation to which it was issued. Soin the case of Lombard, itsobligation to pay depended onlyon the satisfaction of theconditions for payment asprovided for in the constructionguarantee. With the liquidation ofLandmark, these conditions hadbeen fulfilled. Lombard did notparticipate in the alleged fraud. Ithad therefore been obliged to payAcademy in terms of theconstruction guarantee.

Lombard’s payment toAcademy had the effect ofbringing about fulfilment of thecondition for the paymentobligation provided for in thesuretyship signed by Landmarkand the others. They thereforebecame liable to make payment interms thereof.

Construction

51

ABSA BROKERS (PTY) LTD v RMB FINANCIAL SERVICES

JUDGMENT BY MHLANTLA JAAND NUGENT JA (MLAMBO JA,LEACH JA AND BOSIELO AJAconcurring)SUPREME COURT OF APPEAL20 AUGUST 2009

2009 SACLR 456 (A)

A joint wrongdoer should be joinedin an action in which its joint andseveral liability to the plaintiff maybe relevant, even if the plaintiff hasmade no allegations as to the jointwrongdoer’s liability.

THE FACTSThe Claasen Family Trust

brought an action against AbsaBrokers (Pty) Ltd claimingdamages arising from theinvestment of some R1m in aninvestment product known as theRMB Guaranteed CashflowInvestment. Absa settled theaction by paying the TrustR585 686.56.

Absa then brought an actionagainst RMB Financial Servicesand the other respondentsclaiming that they were jointwrongdoers and liable to pay acontribution in respect of thedamages paid to the Trust.

RMB excepted to the claim onthe grounds that section 4 of theApportionment of Damages Act(no 34 of 1956) applied and nonotice of the Trust’s action hadbeen given to it in terms of section2. Section 2 provides that where itis alleged that two or morepersons are jointly or severallyliable in delict to a third personfor the same damage, suchpersons may be sued in the sameaction. Section 4 provides that if ajoint wrongdoer is not sued in anaction instituted against anotherjoint wrongdoer and no notice isgiven to him, the plaintiff shallnot thereafter sue him exceptwith the leave of the court.

Absa contended that notice ofthe Trust’s action need not havebeen given to RMB because in thataction, it had not been allegedthat RMB and the otherrespondents were jointly andseverally liable in delict to Absafor the same damage, as providedfor in section 2.

THE DECISIONIt was true that no allegation

was made in the Trust’s actionthat others were jointly orseverally liable in delict to theTrust in respect of the loss it hadsuffered. However, the allegationreferred to in section 2 need not bean allegation actually made atsome time. The provision allowsfor the bringing of an actionagainst a joint wrongdoer on thebasis that that party either is infact a joint wrongdoer, or isalleged to have been one. It is aprocedural provision and doesnot impose conditions for thebringing of actions against jointwrongdoers.

The purpose of the Act as awhole is to avoid the bringing of amultiplicity of actions. Wherejoint wrongdoers, alleged oractual, are relevant to a matter,they are to be sued in the sameaction. In the event that this hasnot taken place, they are to benotified of the action in order tobe given an opportunity of joiningin it.

Absa was given leave to amendits particulars of claim in order tocomply with the Act.

Banking

52

SPEARHEAD PROPERTY HOLDINGS LTD vE&D MOTORS (PTY) LTD

A JUDGMENT BY HURT AJA(MPATI P, MTHIYANE JA andLEWIS JA concurring, MAYA JAdissenting)SUPREME COURT OF APPEAL1 JUNE 2009

2010 (2) SA 1 (A)

A tenant’s collateral rights under alease agreement such as an optionto purchase the leased property donot by the operation of the huurgaat voor koop rule, apply to apurchaser of the property.

THE FACTSQuantum Leap Investments 230

(Pty) Ltd leased its property toE&D Motors (Pty) Ltd. The leasecontained an option entitling E&Dto purchase the portion of theproperty which it occupied, uponsubdivision, within two years ata price of R2m.

Quantum Leap sold theproperty to Spearhead PropertyHoldings Ltd. The sale agreementreferred to the existence of theoption. E&D then exercised itsrights under the option. Itsattorney notified Spearhead byletter that it did so, and tenderedto pay the purchase price of R2m.

Spearhead contended that it wasnot obliged to honour the option,and refused the offer. E&Dbrought an action for specificperformance of the agreement.

THE DECISIONThe rule huur gaat voor koop is a

rule designed to protect a tenantoccupying a property which hasbeen sold, and preserves thetenant’s right of occupation interms of its lease following a sale.However, the rule does not extendto all of the tenant’s rights interms of the lease. The equitableobject of the rule is not served byextending it to a tenant’s rightsestablished by an optioncontained in the lease.

The rights conferred by anoption are purely personal to thegrantee. Assuming that the optionis granted in respect of the leasedproperty, then it would bepossible for the landlord tocircumvent the agreement byselling to a purchaser. Thecommon law would not permit

this, because in terms of thecommon law, if the purchaser hadnotice of the existence of theoption prior to purchasing, hemust be taken to have bought theproperty subject to the tenant’spersonal right against thelandlord to exercise it. If thepurchaser did not have notice ofthe option, there is no rule in thecommon law which would bindhim to an obligation of which hewas unaware. The only basisupon which a purchaser might beso bound would be on the basis ofa development of the huur gaat voorkoop rule. However, no suchdevelopment had taken place.

The obligations arising from anoption to purchase the leasedproperty, granted by the lessor,are not, by the operation of therule huur gaat voor koop ,transferred by operation of law tothe purchaser of the property.Therefore a lessee, seeking toexercise such an option must doso as against the grantor and notagainst the purchaser, but maydo so against the purchaser ifthere has been a transfer of theproperty to the purchaser withnotice of the option.

In the present case, whereas thedoctrine of notice would operatein favour of E&D in respect of theportion of the property itoccupied, its claim to transfer ofthe property was dependent onproof of an extant agreement ofsale complying with theAlienation of Land Act. Thiswould involve proof that the saleto Spearhead included anassignment of Quantum Leap’sobligations under the option.However, the reference to theoption in the sale agreement wasinsufficient to prove this.

The action was dismissed.

Property

53

PAPPALARDO v HAU

A JUDGMENT BY HURT JA(STREICHER JA, HEHER JA,LEACH AJA and GRIESEL AJAconcurring)SUPREME COURT OF APPEAL30 NOVEMBER 2009

2009 SACLR 482 (A)

An owner of higher-lying propertyis entitled to drain rain water ontolower-lying adjoining property butno more than would have beenpossible prior to development of theproperties.

THE FACTS Pappalardo and Hau ownedadjoining properties in Sandtonin a development known asWaterford Estate. Pappalardo’sproperty was approximately onemetre lower than Hau’s.Pappalardo built a house on hisproperty, and in the process,constructed a boundary wallbetween the two properties. Sometime later, Hau built a house onhis property. In 2003, Hau noticedthat rainwater was collecting atthe base of the boundary wall. Hetook the view that the bestmethod of draining the waterwas to install a series of drainagepipes at the base of the wall toallow the water to flow away andonto Pappalardo’s property.Pappalardo refused consent to theinstallation of the drainage pipes.Hau brought an action for adeclaratory order that Hau wasentitled to construct a series ofdrain pipes in the boundary wallto allow the flow of rainwateronto Pappalardo’s property.

THE DECISIONThe basic principle is that

expressed in the actio aquaepluviae arcendae: the lower lyingowner must accept excess naturalwater on the higher-lying

owner’s property. This basicprinciple applies to property inits original and undevelopedstate. When development takesplace, the pattern of flow of thewater changes and this meansthat the owner of the higher-lyingproperty cannot simply dependon this principle, and oblige theowner of the lower-lyingproperty to accept the flow ofwater in a concentrated patternonto his property, but must alsoshow that the water would haveflowed onto the lower-lyingproperty in the same amount,even if no development had takenplace. There is furthermore, a ruleof the common law that if theowner of the higher-lyingproperty can discharge the wateronto a street, then he must do so,unless the situation has made itimpossible to do so. In the presentcase, Hau had given no evidenceof the amount of water whichwould have constituted thenatural flow of water prior to thedevelopment of the properties. Itwas therefore impossible todetermine that the construction ofthe boundary wall had preventedthe flow of water whichPapparlardo would have beenobliged to accept. The actionfailed.

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ROCKBREAKERS AND PARTS (PTY) LTD v ROLAGPROPERTY TRADING (PTY) LTD

A JUDGMENT BY TSHIQI AJA(HEHER JA, PONNAN JA, HURTAJA and WALLIS AJAconcurring)SUPREME COURT OF APPEAL18 SEPTEMBER 2009

2010 (2) SA 400 (A)

An addendum to a sale of fixedproperty must be counter-signed bythe offeree in order to bring aboutbinding obligations between theparties.

THE FACTSRockbreakers and Parts (Pty)

Ltd sold its fixed property toRolag Property Trading (Pty) Ltd.The agreement of sale included anaddendum in manuscript addedby Rockbreakers. It provided thatthe offer was accepted subject tothe seller obtaining registration ofthe subdivision of the property.The addendum was not initialledand was not counter-signed byRolag.

In the course of preparing forregistration of transfer, the localauthority approved thesubdivision of the property, andimposed a condition that nodevelopment was to take place onthe property prior topromulgation of a township.Rockbreakers considered this tobe an unexpected onerouscondition and took the view thatthe offer was not unconditionallyaccepted with the result that novalid sale agreement had beenconcluded.

Rolag claimed specificperformance of the agreement.Rockbreakers defended the claimon the grounds that theaddendum constituted a counter-offer which was not accepted byRolag by its signature inaccordance with section 2(1) ofthe Alienation of Land Act (no 68of 1981).

THE DECISIONIf the manuscript insertion

embodied a material alteration tothe contractual terms and thusconstituted a counter-offer thatwas never accepted in writing,then the contract would beunenforceable.

The contract as initially signedby the respondent made nomention of subdivision. In theabsence of the subdivision theproperty as described in theagreement of sale would not beseparated from the rest of theproperty and consequently couldnot be transferred to therespondent. This would affectRockbreakers’ materialobligations, which would still beobliged to perform its obligationsunder the agreement. Theinsertion of the clause inmanuscript therefore served toprotect Rockbreakers from anaction for damages in the eventthat the subdivision did not takeplace. There was therefore nodoubt that the manuscriptinsertion was material andamounted to a counter-offer.

The counter-offer requiredacceptance in order for it to bebinding on the parties. It was notaccepted by Rolag and thereforeno binding agreement wasconcluded. The claim wasdismissed.

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SWANEPOEL v NAMENG

A JUDGMENT BY MTHIYANE JA(NUGENT JA, PONNAN JA,SNYDERS JA and GRIESEL AJAconcurring)SUPREME COURT OF APPEAL18 SEPTEMBER 2009

2010 (3) SA 124 (A)

A sale of fixed property whichincorrectly describes the propertysold does not fail to comply withsection 2(1) of the Alienation ofLand Act (no 68 of 1981) merely forthat reason as the sale agreementmay be rectified to reflect thecommon intention of the parties.

THE FACTSSwanepoel sold certain fixed

property to Nameng for R470 000,subject to the suspensivecondition that Nameng obtain aloan. Nameng obtained a loan. Itwas then discovered that theproperty was incorrectlydescribed. The parties amendedthe agreement to record theproperty correctly. Namengapplied for a new loan for thepurchase of the correctlydescribed property.

Despite having obtained allsignatures necessary for transferof the property, there was a delayin transfer. Swanepoel assertedhis right to cancel the agreementdue to the delay. Namengcontended that Swanepoel wasnot entitled to cancel theagreement, and brought anapplication for specificperformance of the agreement.

Swanepoel opposed theapplication on the grounds thatthe agreement failed to complywith section 2(1) of the Alienationof Land Act (no 68 of 1981) in thatit had incorrectly described theproperty sold, alternatively onthe grounds that the suspensivecondition had not been fufilledwithin the time allowed for itsfulfillment in the agreement.

THE DECISIONSection 2(1) requires that the sale

of land must be contained in adeed of alienation signed by theparties thereto. In the presentcase, the only question waswhether the sale agreementproperly complied with thissection in its description of theproperty sold. All the essential

elements for the conclusion of avalid agreement for the sale ofland were present. The agreementwas in writing and signed by theparties thereto as required by thesubsection, and it identifiedproperty, albeit in error. Standingalone, the agreement sufficientlydescribed the subject-matter soldto enable identification of it. Therewas certainty on all the formalelements required by thesubsection. On the face of ittherefore, the agreement of theparties complied with thesubsection.

The section creates no bar torectification of an incorrectagreement. The parties hadrectified their agreement. Oncerectified, it properly reflectedtheir intention and constituted avalid and binding agreement.

As far as the alleged non-fulfilment of the suspensivecondition was concerned, whenNameng’s application for a loanwas approved and the bankfurnished its guarantee in relationto the incorrectly describedproperty, the suspensivecondition was fulfilled. This wasthe necessary step to render theagreement complete, and oncethat had occurred the agreementwas valid and enforceable. Theonly remaining obstacle to theenforcement of the agreement wasthe incorrect description of theproperty. But the parties dealtwith that by amending theagreement. The suspensivecondition was not revived by thegranting of a home loan in respectof the correctly describedproperty.

The application was granted.

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GIBBS v VANTYI

A JUDGMENT BY JANSEN JEASTERN CAPE HIGH COURT28 MAY 2009

2010 (2) SA 606 (ECP)

If the terms of a sale of fixedproperty by auction provide foroffers to be made after thecompletion of the auction, theseparate process of bargainingthereby provided for must result ina written agreement of sale if thesale is to be valid in terms ofsection 2(1) of the Alienation ofLand Act (no 68 of 1981).

THE FACTSVantyi put up erf 9182,

Motherwell, for sale on auction.The property was knocked downto Gibbs for R1.6m. Gibbs paidR225 920 as required by the termsof sale. This amount was made upof the auctioneer’s commissionand a deposit of R80 000. Theterms of sale provided that thepurchase was subject to approvalby Vantyi by noon on 19September 2005.

Prior to this time, higher offersfor the property were made, andreferred to Gibbs, as required bythe terms of sale. Gibbs made anoffer orally to increase the price toR3.95m. Vantyi’s representativesaccepted this offer.

Vantyi cancelled the sale. Gibbscontended that the sale wasinvalid in that, as it was notconcluded in writing but orally, itfailed to comply with section 2(1)of the Alienation of Land Act (no68 of 1981). Vantyi contendedthat the sale was valid as section3(1) of that Act applied and theoral offer made by Gibbs formedpart of the public auction atwhich the property wasoriginally knocked down. Section3(1) of the Act provides that theprovisions of section 2(1)requiring the sale of land to be inwriting do not apply to the sale ofland by public auction.

THE DECISIONThe terms of sale provided for a

separate process of bargainingsubsequent to the conclusion ofthe auction. No restriction wasplaced on the bidders entitled tomake an offer for a higherpurchase price: any bidder whomade a higher offer might nothave been present at the originalpublic auction at all. It was notknown whether or not theimproved offer made to Vantyiafter the auction was made by aperson who was present at theauction. It was also not knownwhether or not the party makingthe improved offer was aware ofthe terms of sale. It was thereforenot true that all parties concernedagreed that the auction sale couldbe extended beyond the day onwhich the auction was held.

Since the process of bargainingsubsequent to the conclusion ofthe auction was entirely differentto and separate from the auction,it could not be considered as partof the earlier process. It followedthat any sale of the landconcluded pursuant to thatprocess had to comply with theformalities for the sale ofimmovable property, as providedfor in section 2(1) of the Act.Section 3(1) did not apply.

No valid agreement wasconcluded between the parties.Vantyi was accordingly notentitled to receive the moneyswhich he did, and was liable toreimburse this to Gibbs.

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YST PROPERTIES CC v ETHEKWINIMUNICIPALITY

A JUDGMENT BY SISHI JDURBAN AND COAST LOCALDIVISION19 MARCH 2008

2010 (2) SA 98 (D)

Payment made under protest is nota conditional payment but apayment which discharges a debt.

THE FACTSNinsix Shareblock (Pty) Ltd

owned the remaining extent ofPortion 13 of Erf 793, DunnsGrant, a property situated at1295/1301 South Coast Road,Mobeni, Durban. Ninsix wasplaced in liquidation. Theliquidators concluded a deed ofabandonment with FedbondNominees (Pty) Ltd whichentitled Fedbond to take transferof the property, and whichobliged Fedbond to pay whateverwas owing to EthekwiniMunicipality and to obtain thenecessary rates clearancecertificate

Fedbond sold the property toYST Properties CC. The saleagreement provided that YSTwas liable for all transfer costs,arrear rates and taxes on theproperty. The municipalityassessed the rates liability in thesum of approximately R400m.YST disputed its liability in thisamount but paid it to themunicipality through theconveyancers attending totransfer of the property. Thecovering letter accompanying thecheque in payment was marked‘paid under protest’.

The municipality refused toissue a rates clearance certificateon the grounds that theoutstanding rates had not beenfully paid because payment wasmade ‘under protest’ by acompany that was not liable forthem.

THE DECISION A payment made under protest

is not a conditional payment butconstitutes full payment of thedebt owed. In order to recover anamount paid under protest, aperson who has paid underprotest would have to establish inother proceedings that theamount paid was not in factowing and should be repaid. Untila court gives judgment in favourof the person paying, the partypaid is in the same position asany other person who receivesmoney in discharge of a debt. Thiswas the position of themunicipality in the present case.

YST made payment becausethere was a possibility ofcancellation of the sale agreement,but it did not abandon its right toreclaim over-payment. Themunicipality had always beenaware that the amount paid to itin respect of the property hasbeen in dispute and that thedispute remained unresolved. Ittherefore could not force YST toabandon its right to claim moneyoverpaid by refusing to issue arates clearance certificate.

The municipality was thereforeobliged to issue a rates clearancecertificate to YST.

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VOSAL INVESTMENTS (PTY) LTD v CITY OFJOHANNESBURG

A JUDGMENT BY MAKHANYA J,JAJBHAY J and BEASLEY AJSOUTH GAUTENG HIGH COURT17 JUNE 2009

2010 (1) SA 595 (GSJ)

A municipality’s claim for rates andservices rendered in respect of aproperty must specify these claimsseparately and should not statethem as a single claim.

THE FACTSThe City of Johannesburg

brought an action against VosalInvestments (Pty) Ltd to recoverunpaid rates of R348 000 which italleged was owing on a propertyowned by Vosal. It obtaineddefault judgment against Vosalfor payment of this sum, and thenproceeded to sell the property inexecution.

Vosal did not receive notice ofthe action and sale in execution,but when it came to its noticethat the sale had taken place, itbrought an application to rescindthe judgment taken against it. Itbased its application on thecontention that the City’s claimfor R348 000 was not solely inrespect of unpaid rates, butincluded claims for servicesrendered in the form of electricity,water, refuse removal andsewerage services.

After 1998, accounts rendered inthe years preceding theinstitution of action by the Cityspecified amounts owing inrespect of rates as well as theseservices. As at date of summons,rates charges amounted to R1 772per month.

Vosal contended that it had abona fide defence to the claimbecause the amount of R348 000included amounts owing in

respect of services rendered to theproperty. The summons however,had alleged that the claim wassolely in respect of rates.Judgment given on the strength ofthe summons was thereforeincorrectly given.

THE DECISIONAll of the claims brought by the

City were charges on theproperty. This however, did notmean that these claims wereeffectively merged into one whensummons was issued. Theyremained separate andindependent causes of action. Assuch, they needed to be separatelyquantified and claimed undervarious heads applicable to them.

It was clear from the figuresinvolved, that the sum of R348000 could not have related solelyto unpaid rates which wouldhave amounted to a much lessersum. The sum of R348 000therefore included claims for thevarious services rendered to theproperty, but the summons didnot state that these claims werefor anything other than unpaidrates.

It followed that the judgmentgiven was given erroneously andVosal had a bona fide defence tothe claim. Rescission of judgmentwas granted.

Property

59

KIEPERSOL POULTRY FARM (PTY) LTD v PHASIYA

A JUDGMENT BY MPATI P(VAN HEERDEN JA, JAFTA JA,MAYA JA and SNYDERS JAconcurring)SUPREME COURT OF APPEAL25 SEPTEMBER 2009

2010 (3) SA 152 (A)

An occupier of premises protectedby the Extension of Security ofTenure Act (no 62 of 1997) may beevicted only if it is shown that thegrounds for eviction are just andequitable.

THE FACTSIn terms of his employment

contract with Kiepersol PoultryFarm (Pty) Ltd, Phasiya’s fatherhad the right of occupation of ahouse situated on the farm leasedto the company for its businessoperations. Phasiya and his wifeand children also resided at thehouse.

In 2004, Phasiya’s father’semployment with the companycame to an end as he retired onpension. Kiepersol’srepresentative gave Phasiyanotice to vacate the house. He hadnot done so by the extendednotice date of April 2005.Kiepersol then issued notice ofintention to obtain an order ofeviction in terms of section 9(2)(d)of the Extension of Security ofTenure Act (no 62 of 1997).

Phayisa opposed the applicationthen brought for his eviction onthe grounds that he held his rightof occupation under his father,and not in his own right, and hisfather had never lost the right ofoccupation.

THE DECISIONPhasiya’s father was no longer

an occupier of the house, butPhasiya was. The question

therefore was whether his rightof residence had been terminatedin accordance with section 8(1) ofthe Act on any lawful groundprovided that the eviction is justand equitable. This required adetermination of all relevantfactors referred to in that section,in particular to the fairness of anyagreement on which the companyrelied, the conduct of the partiesgiving rise to the termination, theinterests of the parties, theexistence of a reasonableexpectation of the renewal of theagreement from which the rightof residence arose and the fairnessof the procedure followed by thecompany.

A person who has to vacate landas a result of the right of residencehaving been terminated almostalways experiences hardship. Butthe hardship must be balancedagainst the hardship suffered bythe owner or person in charge ofthe land. Phasiya occupied thehouse without paying any rentalwhile the company was unable tohouse one of its employees interms of its policy. This was aclear case where the interests ofthe owner should takeprecedence.

The application was granted.

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THEART v MINNAAR N.O.SENEKAL v WINSKOR 174 (PTY) LTD

A JUDGMENT BY BOSIELO JA(MPATI P, BRAND JA, SNYDERSJA and MALAN JA concurring)SUPREME COURT OF APPEAL3 DECEMBER 2009

2009 SACLR 497 (A)

Notice of intention to evict in termsof section 4(2) of the Prevention ofIllegal Eviction from and UnlawfulOccupation of Land Act (no 19 of1998) may be effectively given inmagistrates’ court proceedings foreviction by including such notice inthe notice of motion or bysimultaneously issuing such a noticewith the notice of motion.

THE FACTS Theart occupied premisesowned by Minnaar until the rightof occupation was lost throughdefault by Theart. Minnaar gaveTheart notice to vacate. Minnaarissued a notice in terms of section4(2) of the Prevention of IllegalEviction from and UnlawfulOccupation of Land Act (no 19 of1998) and on the same day, issueda notice of motion out of themagistrates’ court for an orderthat Theart be evicted from thepremises.

Theart opposed the application,but after hearing argument, themagistrate issued an order thatTheart be evicted.

Senekal occupied premisesowned by Winskor 174 (Pty) Ltd.Winskor claimed it was entitledto evict her from the premisesand issued a notice of motion outof the magistrate’s court for anorder that she be evicted. Noseparate notice in terms of section4(2) of the Act was issued butnotice in terms of section 4(2) wascontained in the notice of motion.

Senekal opposed the application,but after hearing argument, themagistrate issued an order thatshe be evicted.

Theart and Senekal appealed theorders of eviction on the groundsthat proper notice in terms of theAct had not been given. Theartcontended that notice in terms ofthe Act should not have beenserved on him simultaneouslywith the notice of motion. Senekalcontended that the notice in termsof the Act should have beenserved on her separately from thenotice of motion.

THE DECISIONSection 4(2) of the Act provides

that at least 14 days before thehearing of proceedings for theeviction of an unlawful occupier,the court must serve written andeffective notice of the proceedingson the unlawful occupier and themunicipality having jurisdiction.

In Cape Killarney PropertyInvestments (Pty) Ltd v Mahamba (4)SA 1222 (A) it was decided that anotice in terms of section 4(2) wasto be given in addition to notice ofthe application to evict. However,this judgment applied toproceedings brought in the HighCourt. In the magistrates’ court,an application proceeds with therespondent being informed fromthe start of the relief soughtagainst the respondent, and thedate and time when the order forthis will be sought in court. Thereis no procedure for the set-downof the hearing of the mattersubsequent to the issue of thenotice of motion. Furthermore,section 4(2) does not expresslyrequire that additional notice ofthe eviction proceedings shouldbe given. The essentialrequirement of the section is thatnotice should be given at least 14days before the hearing ofproceedings, and this does notnecessarily mean that separate oradditional notice must be given.

In the present cases, therespondents received notice of theeviction proceedings at least 14days before the applications wereheard. There was thereforeeffective compliance with section4(2) of the Act.

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MANITOBA INVESTMENT HOLDINGS LTD v LIPCHIN

A JUDGMENT BY PRINSLOO JNORTH GAUTENG HIGH COURT8 OCTOBER 2009

2010 (2) SA 612 (GNP)

An external company may concludea valid agreement for theacquisition of fixed property eventhough it is not yet registered as anexternal company in South Africa.

THE FACTSManitoba Investment Holdings

Ltd was incorporated in theBritish Virgin Islands. In 2000, itwas registered as an externalcompany in South Africa. In 2005,unbeknown to Manitoba, thecompany was deregistred as anexternal company in South Africa.

In 2008, Manitoba purchasedfrom Lipchin fixed property inSouth Africa for R5.4m. It paid adeposit of R400 000. Its attorneythen discovered that Manitobahad been deregistered as anexternal company in South Africa.It took the view that as a result,the sale agreement was void.Lipchin took the view that thesale agreement was not void andcalled for execution of the sale.Later, Lipchin notified Manitobahe was cancelling the sale in viewof breach of certain unremediedbreaches of contract by Manitoba.

Manitoba brought anapplication for an order that thesale agreement be declared nulland void and that Lipchin repaythe deposit of R400 000.

THE DECISIONSection 324(2) of the Companies

Act (no 61 of 1973) provides thatno external company shall be

Corporations

capable of acquiring theownership of immovableproperty in South Africa unlessits memorandum has been or isdeemed to be registered undersection 322 of the Act. Withregard to external companies, thescheme of the Act is that such acompany first establishes a placeof business, which it may do byacquiring fixed property, andthen becomes registered as suchin order to acquire ownership ofthat property. The conclusion tobe drawn from this is thatManitoba had been entitled toacquire Lipchin’s fixed propertyand was not prohibited bysection 324(2) from doing so. Itcould then apply the process ofregistration as an externalcompany in order to acquireownership of the property.

The correct interpretation of theword ‘acquisition’ in this contextwas a right to obtain ownership,as opposed to the obtaining ofownership itself.

In any event, the deregistrationof Manitoba did not have theeffect that it lost its legal capacityto act. The company remained aduly registered foreign companywith separate legal persona.

The application was dismissed.

62

EX-TRTC UNITED WORKERS FRONT vPREMIER, EASTERN CAPE PROVINCE

A JUDGMENT BY VAN ZYL JEASTERN CAPE HIGH COURT,BISHO4 JUNE 2009

2010 (2) SA 114 (ECB)

An unincorporated association doesnot have the right to sue for rightsheld by its members if its membersdo not obtain their rights by virtueof their membership of theassociation.

THE FACTSThe Ex-TRTC United Workers

Front (the TRTC) was a voluntaryassociation formed by 572 peopleto represent their interests inrelation to their employment byand the closure of the TranskeiRoad Transport Corporation. Itdid not have a writtenconstitution.

The TRTC and the 572 peoplebrought an action for damages forbreach of contract. It alleged thatthe contract was entered intobetween the Premier, EasternCape Province and the Transportand General Workers Unionwhich represented the personswho were employed by the saidcorporation prior to itsdissolution.

The Premier raised an objectionto the locus standi of the TRTC. Itcontended that the TRTC was notable to sue in its own name. TheTRTC contended that it had locusstandi to sue and that it was ableto do so under Rule 14(2) of theRules of Court. That Rule statesthat a partnership, firm and anassociation, which is defined asany unincorporated body ofpersons, not being a partnership,may sue or be sued in its ownname.

THE DECISION The mere fact that the TRTC had

no written constitution did notmean that it had no locus standi.

There were two possibilities:either the TRTC was a universitasor it was an unincorporatedassociation. A universitas is aseparate legal entity that hasperpetual succession with rightsand duties independent from therights and duties of its members,and it may sue in its own name.Whether or not the TRTC is auniversitas had to be decided byhaving regard to its nature, objectand activities. The object of thefirst plaintiff was to represent its

members with regard to theirrights and interests arising fromtheir previous employment withthe Transkei Road TransportCorporation and to jointlyinstitute legal proceedings toachieve that objective. The rightsand interests referred to are thosethat arose from the contractalleged by the TRTC. It wastherefore clear that the TRTC wasformed for a very limited purposeand that, once that purpose wasachieved, there would be nofurther need for it and it wouldcease to exist. Its very objectnegated an intention that itwould be a separate legal entityhaving perpetual succession withrights and duties separate fromits members. This was notnecessary for the achievement ofits purpose. The TRTCconsequently lacked the requisitesfor a universitas.

As far as the second possibilitywas concerned, in order tocomply with this, it wasnecessary for the TRTC to showthat it was an association ofpeople who had an interest as abody or organisation. However,this was not the case. The TRTCdid not propose to enforce therights of its members which theypossess by reason of theirmembership of the association.The right to claim damages fromthe Premier for the alleged breachof contract was a personal rightvesting in each one of themembers of the associationindividually. The right whichthey pursued in the actiontherefore existed independently oftheir membership of the TRTC,and arose from the fact that theywere the beneficiaries of acontract between the Premier andthe trade union. It did not ariseby virtue of their membership ofthe TRTC. It was also not a rightwhich they could only pursue asmembers of the TRTC because if

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63

any one of them had decided toact alone in enforcing his claimagainst the defendant, any orderthat may have been granted

would not have affected therights of any of the othermembers.

The TRTC did not have locusstandi to sue.

ESPAG v HATTINGH

A JUDGMENT BY LEACH AJA(STREICHER JA and WALLIS AJAconcurring)SUPREME COURT OF APPEAL27 SEPTEMBER 2009

2010 (3) SA 22 (A)

A partner who acts contrary to theobligations of a partner as providedfor in a partnership agreement in amanner that amounts to grossmisconduct is obliged to withdrawfrom the partnership in terms of apartnership provision requiringdissolution of the partnership in theevent of such misconduct arising.

THE FACTSEspag, the second appellant and

Hattingh formed a partnershipfor the purpose of conducting thepractice of a law firm. Theyconcluded a partnershipagreement. Clause 13.4 of theagreement provided that if apartner made himself guilty ofgross misconduct, or didsomething constituting groundsfor dissolution of the partnershipby order of court, then thepartnership could be dissolvedby written notice given by threequarters of the remainingmembers within a stipulatedtime period.

It came to Espag’s notice thatHattingh had performedprofessional services for a clientfor ten years without chargingfees. It also came to his notice thatHattingh had acted in propertytransactions involving theacquisition of property from theState and the re-sale thereof to theState at a large profit, and hadmade payments to his client inrespect thereof. In respect of one ofthe transactions, he held aninterest in one of the partiesconcerned through hisshareholding in a family trust.Hattingh had also obtainedexecutor’s fees in deceased estateshe was winding up without first

obtaining the permission of theMaster of the High Court, and hadissued a certificate in terms ofsection 42(1) of theAdministration of Estates Act (no66 of 1965) in which he affirmedthat the proposed transfer of the afarm was in accordance with thefinal liquidation and distributionaccount of the estate which hadlain open for inspection withoutobjection, a statement which heknew to be false.

Espag and the other partnerstook the view that Hattingh’sconduct amounted to grossmisconduct as envisaged in clause13.4 and requested him towithdraw from the partnership.Hattingh alleged that the requestamounted to a repudiation of thepartnership agreement entitlinghim to cancel, which he did.

Hattingh contended that theeffect of his cancellation of theagreement was that thepartnership should be liquidatedand its assets divided inaccordance with the commonlaw. Espag contended that theagreement had not been cancelledbut dissolved in terms of clause13.4 and accordingly, the assetsshould be divided in accordancewith the provisions of theagreement.

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64

THE DECISIONEspag was not obliged to invite

Hattingh to answer theallegations made against himbefore invoking the provisions ofclause 13.4. It was true thatpartners were to act toward eachother in good faith, but this didnot mean that Espag had to deferenforcement of the provisions ofthe clause until such time as hehad discussed the matter withHattingh. The essential questionwas whether or not enforcementhad been permissible in thecircumstances.

By doing work for clientswithout charging fees over aninordinately long period,Hattingh put himself in a positionof conflict of interest. It was in thepartnership’s interest for fees tobe both charged and collected.

Hattingh failed to act in thatinterest by not charging fees.Furthermore, by reason of hisinterest in his family trust’sshareholding, it was in hispersonal interest to postpone thepayment of fees for as long aspossible. The amount concernedcould not be regarded as trifling.Hattingh thus clearly acted inconflict with the best interests ofthe partnership.

The cumulative effect of hisactions amounted to grossmisconduct entitling Espag toinvoke the provisions of clause13.4 and terminate thepartnership. The partnershipassets were therefore to bedivided in accordance with theprovisions of the partnershipagreement.

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65

LOGISTA INC v VAN DER MERWE

A JUDGMENT BY MOOSA JWESTERN CAPE HIGH COURT23 APRIL 2009

2010 (3) SA 105 (WCC)

All parts of a restraint of tradeclause must be interpreted as awhole and with a view to givingeffect to the intention of the parties.

THE FACTSVan der Merwe was the

founding and principal memberof Logista Inc, a firm ofaccountants. In November 2007,he sold his shares in Logista tothree parties, the otherapplicants.

The sale agreement contained arestraint of trade clause. The firstpart of the clause provided thatVan der Merwe would doeverything in his power to ensurethat existing clients of thecompany would remain with thecompany and he would not dobusiness in competition with thecompany. The clause thenprovided that Van der Merwewould remain a registeredchartered accountant but untilDecember 2009, would notperform any other function. Theclause specified clients who mightuse Van der Merwe’s services inpreference to those offered byLogista. Van der Merwe wasdisallowed from activelymarketing his services beforeDecember 2009 or from carryingon business in competition withLogista. Upon breach of thisrestriction, Van der Merwe wouldlose the right to use Logista’straining area and offices free ofcharge.

Logista alleged that Van derMerwe was in breach of therestraint of trade clause, andbrought an application tointerdict him from performingauditing work in contravention ofit.

THE DECISIONIn the first instance, it was

necessary to interpret therestraint clause. Van der Merwe

Contract

contended that its first part wasmerely preamble and did notprovide for substantiveobligations which would beapplicable to him. However, itwas clear from the language andthe intention of the parties asembodied in the language of theclause that the first partconstituted an integral part of therestraint of trade clause. Theclause had to be read as a wholeto give effect to its true intent.Reading it thus, the first partcould be seen as equallyembodying the rights andobligations of the parties.

If one then examined the natureand scope of the entire clause, itwas clear that the restraint oftrade embodied in it was clearand unambiguous. It restrainedVan der Merwe from doingbusiness in competition withLogista and he was required to doeverything in his power to ensurethat Logista’s clients remainedwith it. Van der Merwe waspermitted to remain registered asa chartered accountant, but hewas not permitted to perform anyauditing functions up toDecember 2009. For the durationof the trade restraint period, hecould consult and give advice,provided it was at the instance ofthe consulting parties. He couldalso provide accountancy servicesto those parties specified in theclause and he could renderaccountancy services to thosethird parties as well as existingclients if the conditions specifiedwere met.

An order interdicting Van derMerwe from doing business incompetition with Logista wasgranted.

66

JACOBS v IMPERIAL GROUP (PTY) LTD

A JUDGMENT BY MLAMBO JA(MTHIYANE JA, LEWIS JA,HEHER JA and MHLANTLA JAconcurring)SUPREME COURT OF APPEAL1 DECEMBER 2009

2009 SACLR 508 (A)

A party displaying a disclaimernotice may rely on the disclaimer ifin so displaying the notice, it actssufficiently reasonably in bringingto the attention of its customers theexistence of the notice.

THE FACTS Jacobs took his motor vehicle forrepairs to a service centre of theImperial Group (Pty) Ltd, thePotchefstroom Cargo ServiceCentre. When he handed thevehicle over to the Service Centre,a notice was displayedprominently at three differentlocations stating that vehicleswere left at the owner’s risk.Jacobs did not pay any attentionto the notices.

When the vehicle was at thepremises, it was stolen. Jacobsbrought an action for damages.He contended that the disclaimerstated in the notice did not applyto the service agreementconcluded between the partieswhen he brought his vehicle in forrepair.

THE DECISIONThe approach to the question

whether Imperial could rely onthe disclaimer stated in the

notices was that established inDurban’s Water Wonderland (Pty) Ltdv Botha1999 (1) SA 982 (A): ifImperial acted sufficientlyreasonably in bringing to theattention of its customers ingeneral, and to Jacobs inparticular, the existence of theowner’s risk notice, then it wouldbe entitled to rely on them.

The owner’s risk notice wasprominently displayed, in clearand unambiguous terms, onnotice boards at the servicecentre. It was displayed in such amanner and at such locations onthe premises to inform anycustomer leaving a motor vehiclethere that its terms applied. Thiswas more than sufficientlyreasonable. The fact that Jacobssaid he did not see it did not assisthim. Imperial was entitled toassume, having displayed thenotice in this manner, that any ofits customers would notice it.

The action failed.

This brings me to the question whether the owner’s risk notice in this case could besuccessfully relied upon by the respondent to escape liability for the loss of the motor vehiclegiven that it was found that Jacobs did not see it. The approach to this question is to enquirewhether the respondent acted sufficiently reasonably in bringing to the attention of itscustomers in general, and to Jacobs in particular, the existence of the owner’s risk notice:Durban’s Water Wonderland (Pty) Ltd v Botha 1999 (1) SA 982 (SCA) at 991H-I‘The answer depends upon whether in all the circumstances the appellant did what was“reasonably sufficient” to give patrons notice of the terms of the disclaimer.’ See also King’sCar Hire (Pty) Ltd v Wakeling 1970 (4) SA 640 (N) at 643H.The evidence is that the owner’s risk notice was prominently displayed, in clear andunambiguous terms, on notice boards at the respondent’s passenger vehicle office, at theentrance to the reception and at the cashier’s window.

Contract

67

NICOR IT CONSULTING (PTY) LTD v NORTHWEST HOUSING CORPORATION

A JUDGMENT BY LEVER AJNORTH WEST HIGH COURT21 MAY 2009

2010 (3) SA 90 (NWM)

Whether or not an entity is to beconsidered an organ of state isdetermined by reference to theConstitution and the legislationunder which that entity wasconstituted. A debt may be confinedto a claim for damages and not aclaim for specific performance undera contract.

THE FACTSNicor IT Consulting (Pty) Ltd

brought an action against NorthWest Housing Corporation,claiming R2m which it allegedwas the balance due undercertain agreements concludedbetween the parties.

North West raised the specialplea that Nicor had failed to givenotice that it intended to bringthe action against it, as requiredby section 3(1) of the Institution ofLegal Proceedings against certainOrgans of State Act (no 40 of2002). The section provides thatno legal proceedings for therecovery of a debt may beinstituted against an organ ofState unless, within six months ofthe debt having become due, thecreditor has given the organ ofState in question notice in writingof its intention to institute thelegal proceedings in question orthe organ of State in question hasconsented in writing to theinstitution of the legalproceedings without such notice.

Nicor excepted to the plea on thegrounds that North West was notan organ of State and Nicor’sclaim against it was not for a debtdue but for specific performanceunder the agreements.

THE DECISIONThe Act contained a definition of

‘organ of state’ which was morerestrictive than that contained inthe Constitution in that it did notinclude any functionary orinstitution performing a publicpower or performing a publicfunction in terms of anylegislation. Therefore, in order todetermine if North West was an

organ of state one had todetermine whether it was aninstitution performing a publicpower or performing a publicfunction in terms of theConstitution.

Applying the provisions of theConstitution, the identity of theinstitution and the power itexercised had to be seen as arisingdirectly from the Constitutionitself. North West however, didnot derive its powers from theConstitution but from itsenabling Act, the North WestHousing Corporation Act. It wastherefore not an organ of state asdefined in the Institution of LegalProceedings against certainOrgans of State Act.

As far as the exception based onthe nature of the claim wasconcerned, one had to look to thedefinition of ‘debt’ contained inthe Act. This provides that a debtis any debt (a) arising from anycause of action which arises fromdelictual, contractual or any otherliability, and (b) for which anorgan of State is liable forpayment of damages.

It is clear that para (b) qualifiespara (a) as a whole. This is theordinary and natural meaning ofthe words as they are set out inthe definition of debt in the Act.This meaning does not offendagainst the purpose of the Act. Itmakes fewer inroads into therights of access to courts andequality enshrined in the Bill ofRights in the Constitution. Assuch, it was a meaning to bepreferred, and consequently a‘debt’ for the purposes of the Actis confined to a claim for damages,howsoever such claim arose.

The exception was upheld.

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ROBCON CIVILS/SINAWAMANDLA 2 JOINTVENTURE v KOUGA MUNICIPALITY

A JUDGMENT BY EKSTEEN JEASTERN CAPE HIGH COURT4 MARCH 2010

2010 (3) SA 241 (ECP)

A public body which fails todisclose relevant details of a tenderprocess to a tenderer in disregard ofits constitutional obligations mayhave a costs order awarded againstit.

THE FACTSRobcon Civils acting in joint

venture with Sinawamandla 2submitted a tender for for theconstruction of an access road inOceanview, Jeffreys Bay. AureconSouth Africa (Pty) Ltd wasappointed by Kouga Municipalityto act as its consultants in themanagement and execution of thetender.

Aurecon informed Robcon thatKouga had awarded the tender toAfrican Bulk Earthworks. Robconthen addressed Kouga with therequest that it furnish particularsof the facts and circumstancesupon which the award wasmade. Aurecon requestedagreement to the extension of thetender period to 6 July 2009, andRobcon accepted this. Aureconresponded that the extendedperiod would allow time for thematter to be resolved.

Kouga then responded toRobcon’s request for informationby advising Robcon to follow theprocedures prescribed in thePromotion of Access toInformation Act Act (no 2 of2000).

It was then advertised thatKouga had awarded the tender toAfrican Bulk Earthworks. Robconsought the same information ithad sought when first advisedthat African Bulk Earthworks hadbeen awarded the tender, butKouga failed to respond to this.Robcon applied for an ordercompelling Kouga to supply the

information it had requested.It later transpired that the

original award of the tender toAfrican Bulk Earthworks hadnever been retracted, and acontract between it and Kougawas concluded based on thataward. Robcon then decided thatthe application it had broughthad been rendered largelynugatory by the award of thetender, and sought an order forcosts against Kouga.

THE DECISIONAt all relevant times up to the

launching of the applicationKouga knew of Robcon’s intentionto appeal the decision to awardthe contract to African BulkEarthworks. By its requests for anextension of the tender validityperiod and ambiguouscorrespondence with Aurecon, itgave Robcon the impression thatthe award of the tender to it wasstill possible. It neverthelessproceeded to conclude a finalcontract with African BulkEarthworks on the very day thatit had been requested to give anundertaking that it would not sodo. Kouga’s conduct in theprocurement process was not fair,not equitable and nottransparent.

In view of Kouga’s conduct andits flagrant disregard for itsconstitutional obligations, it wasappropriate that a costs order begiven against it on the attorneyand client scale.

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69

MOOSA N.O. v HASSAM N.O.

A JUDGMENT BY SWAIN JKWAZULU NATAL HIGHCOURT20 NOVEMBER 2009

2010 (2) SA 410 (KZP)

A party relying on a writtenagreement in a claim brought on thebasis of that agreement must annexthe written agreement to itsparticulars of claim. If it is unableto do so, it must give reasons whyit cannot do so.

THE FACTSHassam and others,

representing certain trusts,concluded a written share saleagreement with Moosa and theother applicants. Hassambrought a claim against Moosabased on the agreement. In theparticulars of claim, variousterms of the agreement werealleged, but the agreement itselfwas not annexed. Hassam allegedthat the written agreement wasnot in his possession but was inthe possession of one of thedefendants.

Moosa objected to theparticulars of claim as notcomplying with Rule 18(6) in thatthe agreement was not annexed.He brought an application for anorder setting aside the particularsof claim as an irregularproceeding, alternativelydirecting Hassam to annex theagreement.

THE DECISIONThere is no authority for the

proposition that if a party whorelies upon a written agreementcannot attach a copy thereof to itspleadings, because it is not inpossession of a true copy of thesigned agreement, it is sufficientto allege such lack of possession toexcuse non-compliance with theprovisions of rule 18(6).

Hassam based its cause of actionon a written agreement. Thewritten agreement was anessential link in the chain of itscause of action. In order for thatcause of action to be properlypleaded, it was necessary for thewritten agreement relied upon tobe annexed to the particulars ofclaim. In the absence thereof, thebasis of the cause of action did notappear ex facie the pleadings.

In answer to the applicationbrought by Moosa, Hassam couldhave been expected to have givenreasons why it was not inpossession of the writtenagreement. He had not done so,and therefore provided no answerto the application which had beenbrought.

Contract

70

STRATGRO CAPITAL (SA) LTD v LOMBARD N.O.

A JUDGMENT BY MPATI P(MTHIYANE JA, SNYDERS JA,LEACH AJA and BOSIELO AJAconcurring)SUPREME COURT OF APPEAL23 NOVEMBER 2009

2010 (2) SA 530 (A)

A valid attachment of movableproperty requires notice to theparty whose property wasattached. Failure to give suchnotice means that any sale inexecution following suchattachment may be set aside.

THE FACTSStratgro Capital (SA) Ltd

brought an action againstLombard in his capacity astrustee of the Lombard FamilyTrust for payment of R1m beingmoney alleged to be due under anagreement relating to the sale offixed property. The Trust soughtand obtained an order thatStratgro provide security forcosts of the action and wasawarded costs for thatapplication. Costs were taxed inthe sum of R27 431.24. Stratgrofailed to pay this sum. The Trustthen issued a writ of executiondirecting the sheriff to attach andtake into execution Stratgro’smovable property.

The sheriff executed the writ atStratgro’s registered address butfound that the premises wereoccupied by a party unknownand unrelated to Stratgro. TheTrust then instructed the sheriffto execute the writ againstStratgro’s right of action at thesame address. The sheriff did soby affixing a copy of the writ tothe principal door of the occupierof the premises which wereclosed at the time.

A sale in execution wasadvertised, and Stratgro’s right ofaction against the Trust wasbought by the fourth respondentfor R1 500. When it came toStratgro’s notice that the writ hadbeen issued and executed and thesale in execution had taken place,it brought an application to setaside the attachment and sale inexecution.

THE DECISIONRule 45(8)(c)(i)(a) of the Rules of

Court provides that anattachment shall only becomplete when notice of theattachment has been given inwriting by the sheriff to allinterested parties,and where theasset consists of incorporealimmovable property or anincorporeal right in immovableproperty, notice shall also havebeen given to the registrar ofdeeds in whose deeds registry theproperty or right is registered.

By reason of this rule, anattachment of the right, title andinterest of a litigant in an actionwill only be complete once thesheriff has given notice of theattachment in writing to allinterested parties. This rule isstated in wide terms. Thereappeared to be no reason toregard Stratgro, whose claim inthe main proceedings wasattached, as not being aninterested party as contemplatedtherein. The subrules requirenotice to be given to the executiondebtor whose incorporealproperty or right is the subject ofan attachment in order for suchattachment to be complete.

As Stratgro was clearly aninterested party as envisaged byRule 45(8)(c)(i)(a) in regard to itsclaim against the Trust. Thefailure to give it notice resulted inthe attachment being incomplete.The subsequent sale in executionwas therefore null and void.

The application succeeded.

Contract

71

RONBEL 108 (PTY) LTD v SUBLIME INVESTMENTS (PTY) LTD

A JUDGMENT BY STREICHER JA(NUGENT JA, VAN HEERDEN JA,HURT AJA and GRIESEL AJAconcurring)SUPREME COURT OF APPEAL18 SEPTEMBER 2009

2010 (2) SA 517 (A)

The decision not to submit a claimagainst an insolvent companyamounts to the abandonment ofthat claim if procedures for thecontinuation of an action earlierbrought to enforce that claim havenot been followed in terms ofsection 359 of the Companies Act(no 61 of 1973).

THE FACTSAbsa Bank Ltd brought an

action against SublimeInvestments (Pty) Ltd. Shortlybefore the trial was due to begin,by special resolution, Sublimeresolved that it be voluntarilywound up. The winding-upbegan upon the registration of theresolution, in terms of section352(1) of the Companies Act (no61 of 1973). In consequence, theaction was suspended in terms ofsection 359(1)(a) pending theappointment of a liquidator.

Absa decided not to submit aclaim against the company inliquidation because it anticipatedthat a contribution wouldbecome payable by creditors ofthe company. Some two yearslater and 16 months after theappointment of a liquidator, itceded its claim to Ronbel 108(Pty) Ltd, and Ronbel submitted aclaim against the company inliquidation.

The company contended that theaction brought by Absa should beconsidered to have beenabandoned by it in terms ofsection 359(2)(b) of the Act, andaccordingly the claim should berejected.

THE DECISIONSection 359(2)(a) provides that a

person has begun legalproceedings against a company inliquidation must give notice to theliquidator before continuing withthose proceedings. Theconsequence of not doing soprovided for in section 359(2)(b) isthat those proceedings are to beconsidered to have beenabandoned.

Because no notice ofcontinuation of the legalproceedings was given to theliquidator, the liquidator was notgiven an opportunity to considerand assess the validity of theclaim. In consequence,information available to Absaconcerning the assets andliabilities of Sublime were notmade available to the liquidatorat that time. Absa made aconscious decision not to proceedwith its claim and, since it knewof the provisions of section 359,must be understood to haveabandoned its action.

The claim was properly rejected.

Insolvency

72

McCARTHY LTD v ABSA BANK LTD

A JUDGMENT BY NUGENT JA(LEWIS JA, VAN HEERDEN JA,LEACH AJA and TSHIQI AJAconcurring)SUPREME COURT OF APPEAL3 SEPTEMBER 2008

2009 SACLR 456 (A)

A paying bank may be shown to benegligent in paying a cheque drawnby its customer if in its capacity ascollecting bank, it knows theidentity of the payee and facts inrespect of the payee account whichought to have put it on inquiry as towhether the payment was properlymade.

THE FACTSMcCarthy Ltd held a cheque

account at the Pretoria branch ofAbsa Bank Ltd. Between 1994 and2003, non-transferable chequespayable to Fourie were drawn byMcCarthy and deposited to anaccount in the name of Fourie,another customer with a chequeaccount at the bank.

The cheques were drawn infavour of Fourie, Leathertek. Theycame about as a result of a fraudperpetrated by a McCarthyemployee who had createdfictitious debts in the accounts ofthe company and securedsignatures to the cheques byauthorised signatories insupposed payment thereof. Thecheques were deposited toFourie’s account by Mrs Fourie, atthe request of the McCarthyemployee who then received theamount of the cheques from MrsFourie. Upon depositing a cheque,Mrs Fourie drew on the accountand paid the McCarthy employeea similar amount. In total,cheques to the value of someR15m were deposited in thismanner.

After the fraud was discovered,McCarthy brought an action fordamages against Absa, basing itsclaim on breach of contract. Italleged that Absa’s breachconsisted in a failure to exercisereasonable care to ensure thatFourie was entitled to paymentand had collected the cheques onbehalf of Fourie even though hewas not the named payee. It alsoalleged that the breach consistedin a failure to react to suspiciousfeatures of the transactions ofdeposit and withdrawal.

Absa successfully applied for

absolution from the instance, itbeing held that there was noevidence that as collecting bank,Absa was obliged in contract toact without negligence towardMcCarthy. McCarthy appealed.

THE DECISIONAs paying bank only, Absa

would not be in a position toknow to whom the cheques werebeing paid, and would thereforenot be liable if it made paymentto a party not entitled to them. Somuch was also confirmed bysection 79 of the Bills of ExchangeAct (no 34 of 1964).

However, since Absa was alsothe collecting bank in this case, itknew the party to whom thecheques were being paid. The trueenquiry was therefore notwhether Absa was liable fornegligence in collecting thecheques, but whether, in view ofits knowledge of the payee,acquired in the course ofaccepting the cheques forcollection, Absa was negligent inpaying them.

Given that employees of thebank were aware of facts thatshould have led them to suspectthat Fourie might not be entitledto the cheques, and that theyknew that the cheques had beendrawn by their customerMcCarthy who would have topay them, on the evidence so farpresented, it was possible that acourt might find that Absa oughtto have made further enquirybefore it paid the cheques, andthat its failure to do so wasnegligent.

Absolution from the instancewas therefore incorrectlyordered. The appeal was upheld.

Banking

73

CONSOLIDATED NEWS AGENCIES (PTY) LTD vMOBILE TELEPHONE NETWORKS (PTY) LTD

A JUDGMENT BY NAVSA JA andHURT JA(NUGENT JA and MHLANTLA JAconcurring, HEHER JA dissenting)SUPREME COURT OF APPEAL29 SEPTEMBER 2009

2010 (3) SA 382 (A)

A party relying on section 33(1) ofthe Insolvency Act is not obliged toshow that it abandoned substantialproperty in order to fall within theterms of that section. It is sufficientfor it to show that there wasreciprocity between itself and theinsolvent party in the dispositionalleged to have been made.

THE FACTSIn April 1999, Consolidated

News Agencies (Pty) Ltd (CNA)and Mobile Telephone Networks(Pty) Ltd (M-Tel) concluded anagreement in terms of whichCNA was to stock and sellproducts of M-Tel for a period ofthree years. M-Tel warrantedthat by the sale of the products,CNA would earn discounts tospecified amounts. If the earningswere less than these amounts, M-Tel would pay CNA the differencebetween them and the warrantedamounts. CNA also undertookcertain warranties the purpose ofwhich was to ensure thatminimum targets were reached,and the agreement provided thatmaterial or persistent breach ofthe warranties which materiallyprejudiced the achievement of thewarranties would entitle M-Tel toterminate the agreement.

In the first year, there was ashortfall of the warrantedamount, and M-Tel paid CNA thedifference, an amount of R9.4m, asrequired by the agreement. In thesecond year, a shortfall ofapproximately R40m wasexpected, but before the end ofthis year, the parties concludedan amended agreement whichabsolved M-Tel of theresponsibility of paying CNA anyshortfall. The amended agreementwas concluded because duringthe second year, CNA’s holdingcompany, Wooltru Ltd, sold itsshares in CNA to Gordon Kay &Associates (Pty) Ltd. Thatcompany had been unable to meetits commitments under the saleagreement, and had requested M-Tel to provide the guaranteesrequired of it in favour ofWooltru. M-Tel did so, and in theamended agreement, providedthat it would be entitled torecover any amount it wouldhave to pay under the guaranteesfrom a trust fund into which CNA

would be obliged to pay alldiscounts accruing to it under theinitial agreement.

M-Tel paid Wooltru whatbecame due in terms of theguarantees, a sum of R86m. Thefollowing month, CNA wasprovisionally wound up.

M-Tel and associated companiesbrought an action against theliquidators claiming that CNAwas liable as co-principal debtorwith Gordon Kay & Associates, topay the amount it had paid toWooltru. The liquidatorsdefended the action on thegrounds that the provisions of theamended agreement obligingCNA to make payments werevoidable dispositions.

M-Tel’s replication to thisdefence was that it made thepayments to Wooltru in goodfaith and that section 33(1) of theInsolvency Act (no 24 of 1936)applied, absolving it of anyliability to restore any benefitsreceived under the amendingagreement.

The liquidators brought anaction against M-Tel andassociated companies allegingthat provisions of the amendedagreement were dispositions notfor value in terms of section 26 ofthe Insolvency Act. Theprovisions referred to were (1) thewaiver of the second incomewarranty, (2) the undertaking topay money into the trust account,(3) the undertaking to reimburseM-Tel, (4) the issuing of anundertaking as surety and co-principal debtor in favour of M-Tel,and (5) a cession of the fundsin the trust account in favour ofM-Tel.

M-Tel’s defence to this claim wasalso based on section 33(1) of theAct.

Section 33(1) provides that anyperson who, in return for anydisposition liable to be set asideunder the Act, has parted with

Insolvency

74

any property or security shall, ifhe acted in good faith, not beobliged to restore any property orother benefit received under suchdisposition unless the liquidatorhas indeminifed him for partingwith such property or securityfor losing such right.

THE DECISIONAssuming that the dispositions

alleged to have been made weredispositions as referred to in theAct, and were liable to be setaside, the essential question waswhether or not M-Tel (i) acted ingood faith, (ii) in parting withproperty or security or in losing aright; and (iii) such parting or losstook place in return for theimpugned disposition.

CNA’s position was that inconcluding the amendedagreement, M-Tel gave up noright and parted with noproperty, and so could not fallwithin the provisions of section33(1). However, it was clear that

M-Tel had concluded theamended agreement because ofsubstantial dissatisfaction withthe way in which CNA hadimplemented the initialagreement. In concluding theamended agreement itrelinquished any rights it mighthave had against CNA under theinitial agreement. This wassufficient to show that M-Tel didpart with property or security asreferred to in section 33(1). M-Telwas not obliged to show that itabandoned substantial property -it merely had to show that therewas some reciprocity in theagreement that was concluded.The fact that an associatedcompany, and not M-Tel itself,had undertaken obligations interms of the amended agreementdid not detract from the fact thatM-Tel made them in associationwith that company.

M-Tel was therefore entitled torely on section 33(1). The appealfailed.

If two parties negotiate in their corporate interest, as members of a group ofcompanies, for (what afterwards turns out to be) an impugnable disposition,but only one of them has parted with property or lost a right in return for thatdisposition, can the other rely on the parting or loss to invoke s 33(1)? I thinkthe answer must be ‘no’.

Insolvency

75

BLAKES MAPHANGA INC v OUTSURANCEINSURANCE CO LTD

A JUDGMENT BY MALAN JA(NAVSA JA, SHONGWE JA,TSHIQI JA and MAJIEDT AJAconcurring)SUPREME COURT OF APPEAL19 MARCH 2010

2010 (4) SA 232 (A)

An attorney’s account becomesliquidated upon taxation of theaccount. In the event of a dispute asto the amount of the attorney’saccount, set off of any amountowing to the attorney cannot beapplied against amounts owed bythe attorney.

THE FACTSOutsurance Insurance Co Ltd

instructed Blakes Maphanga Incto act as its attorneys in variouslitigation matters. Accounts forservices rendered as attorneyswere payable thirty days afterthey were raised.

In March 2005, Outsuranceterminated Blakes’ mandate. Atthis time, a number of accountswere in arrears for 180 days.Blakes asserted that it wasentitled to set off what was owingon these accounts against moneycollected for Outsurance, a sum ofR300 471.34. Outsurancecontended that this was aninflated figure because Blakes hadnot adhered to the fee structureand tariff applicable to theaccounts, and that it should havebeen R66 794.78. Blakes acceptedthat Outsurance was entitled tohave its accounts taxed

Outsurance disputed Blakes’claim that it was entitled to applyset off against money collected onits behalf. It sued for payment ofthe balance of the money held byBlakes and collected forOutsurance on its behalf.

THE DECISIONSet off can be applied if two

persons are mutually indebted toeach other. The debt in each casemust be liquidated, and subsistbetween the two in their personalcapacities. In the present case, thismeant that for set off to operate,the fees debited by Blakes andtransferred to its businessaccount had to be liquidated.

Although an attorney may suefor payment of his fee, the clientmay always insist that theaccount by taxed. Upon taxation,the attorney’s claim becomesliquidated. In the present case,there was a dispute about theamount owing by Outsurance,and Blakes was aware of thedispute, having agreed thatOutsurance was entitled totaxation of its accounts. Itfollowed that Blakes’ claim wasnot for a liquidated amount, andset off could not apply.

Outsurance’s claim succeeded.

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76

KING v ATTORNEYS FIDELITY FUNDBOARD OF CONTROL

A JUDGMENT BY MPATI P(BRAND JA, CACHALIA JA,MHLANTLA JA and BOSIELOAJA concurring)SUPREME COURT OF APPEAL12 MAY 2009

2010 (4) SA 185 (A)

Money paid to a firm of attorneysfor the purpose of its investment isnot protected by the Attorneys Act(no 53 of 1979).

THE FACTSKing and the other appellants

paid money to Van Schalkwyk’sAttorneys of Port Elizabeth inorder to participate in a factoringscheme. The scheme involvedpaying estate agents from themoney so paid to the attorneys, adiscounted amount of thecommissions due to the agentsfrom arranging the sale ofproperties. Van Schalwyks wouldlater repay participants in thefactoring scheme the money theyhad deposited into its account,together with interest.

King alleged that the moneypaid to Van Schalkwyks was paidinto its trust account and wasmisappropriated by attorneyswho were members of the firm.He and the other appellantsbrought an action against theAttorneys Fidelity Fund Board ofControl for recovery of the moneyso misappropriated. The actionwas based on section 26(a) of theAttorneys Act (no 53 of 1979)which provides that the fundshall be applied for the purpose ofreimbursing persons sufferingpecuniary loss as a result of theftcommitted by a practitioner ofmoney entrusted to thepractitioner in the course of hispractice.

The Fund defended the actionson the grounds that the paymentswere not entrusted to VanSchalkwyks, and were noteffected in the course of practice ofVan Schalkwyks. It alleged that

the plaintiffs’ instructions werethat Van Schalkwyks receive themoney in trust for the purpose ofinvesting it on their behalf asenvisaged in section 47(1)(g) of theAct. The section provides that thefund shall not be liable in respectof any loss suffered by any personas a result of theft of moneywhich a practitioner has beeninstructed to invest on behalf ofsuch person.

THE DECISIONAll the plaintiffs in the actions

who testified and who made theirmoneys available to VanSchalkwyks, did so in theexpectation that they wouldreceive a return. They thereforepaid the money for the purpose ofits investment.

It was true that the profits andlosses made in the discountingtransactions did not affect theamounts which Van Schalkwykshad to pay to the plaintiffs at theend of the transaction periods.There was no condition that, ifthere were no factoring duringthe investment period, then nointerest would be paid. However,this was of no consequence. Whatmattered was the purpose forwhich the moneys were paid intoVan Schalkwyks’ trust account,which was for investing in thefactoring scheme.

Section 47(1)(g) thereforeapplied. The Fund was entitled torely on it in defence of the actionsbrought against it.

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77

MEC FOR ECONOMIC AFFAIRS, ENVIRONMENT ANDTOURISM, EASTERN CAPE v KRUIZENGA

A JUDGMENT BY CACHALIA JA(HARMS DP, NUGENT JA, LEACHJA and SERITI AJA concurring)SUPREME COURT OF APPEAL1 APRIL 2010

2010 (4) SA 122 (A)

An attorney who concludes asettlement agreement on behalf ofhis client at a Rule 37 conferencebinds his client, unless the otherparty was aware of somerestriction on the ability of theattorney to conclude such anagreement.

THE FACTSKruizenga brought an action for

damages against the MEC forEconomic Affairs arising from analleged negligent failure of theprovincial government’semployees to take preventativemeasures to contain a fire.

In a pre-trial conference held interms of Rule 37 of the Rules ofCourt, the parties’srepresentatives agreed that theMEC had conceded the merits ofKruizenga’s case, but certainheads of damages claimedremained in dispute. On the firstday of trial, the agreement wasplaced before court and an orderwas given in favour of Kruizengain respect of the admittedliability. The hearing of theoutstanding heads waspostponed.

The MEC then applied for therescission of the order on thegrounds that, in accordance withgeneral practice, the Stateattorney had needed his expressauthorisation for the settlementof the matter. Kruizenga resistedthe application.

THE DECISIONThe issue was whether the MEC

could resile from an agreementmade by his attorney, withouthis knowledge, at a rule 37conference.

Attorneys generally do not haveimplied authority to settle orcompromise a claim without theconsent of the client. However, theinstruction to an attorney to sueor defend a claim may include the

implied authority to do so,provided the attorney acts ingood faith. The courts will setaside a settlement or compromisethat does not have the client’sauthority where, objectivelyviewed, it appears that theagreement is unjust and not inthe client’s best interests. Theoffice of the State attorney, byvirtue of its statutory authorityas a representative of thegovernment, has a broaderdiscretion to bind thegovernment to an agreement thanthat ordinarily possessed byprivate practitioners, though it isnot clear just how broad theambit of this authority is.

Accepting that by agreeing tothe settlement, the State attorneynot only exceeded his actualauthority, but did so against theexpress instructions of hisprincipal, this could not assist theMEC in raising an estoppelagainst the claim. The properapproach to the matter was toconsider whether the conduct ofthe party attempting to resilefrom the agreement had led theother party to reasonably believethat he was binding himself. If theattorney acting for the principalexceeds his actual authority, ordoes so against his client’s expressinstructions, this makes nodifference. The consequence forthe other party, who is unawareof any limitation of authority, andhas no reasonable basis toquestion the attorney’s authority,is the same.

The application was dismised.

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BP SOUTHERN AFRICA LTD v MAHMOODINVESTMENTS (PTY) LTD

A JUDGMENT BY LEWIS JA(HARMS DP, MLAMBO JA, MAYOJA and HURT AJA concurring)SUPREME COURT OF APPEAL27 NOVEMBER 2009

2010 SACLR 1 (A)

A contractual provision may beinterpreted in the light of thecircumstances known to theparties at the time of contractingand with a view to giving theprovision a commerciallysensible meaning. Agreementssimultaneously concluded may berelevant in interpreting sucha provision.

THE FACTS Mahmood Investments (Pty)Ltd bought certain fixed propertyfrom BP Southern Africa Ltd, andthen took transfer of the propertyon which it began to conduct thebusiness of a petrol filling station.Mahmood concluded a supplyagreement with BP in terms ofwhich it was to sell exclusivelyBP products. It then leased theproperty to Argyle UmgeniService Station CC with theintention that Argyle wouldassume the rights an obligationsof the supply agreement. Argyledid so, and BP began supplyingits products to Argyle in termsthereof. A third agreement wasconcluded in which BP loanedcertain storage and dispensingequipment to Mahmood for thepurpose of supplying petrol at thefilling station. Clause 10.1 of the saleagreement provided that theproperty was not to be used forany purpose other than that of apetrol filling station. Thisrestriction was registered as aservitude over the property uponregistration of transfer. It came to BP’s attention thatproducts other than its own werebeing sold by Argyle. It thenaddressed Mahmood anddemanded that it remove Argylefrom operating at the premises,failing which it would terminatethe supply agreement. BP then removed its pumpsfrom the property. Mahmood tookthe view that this constituted arepudiation of the supplyagreement. BP tendered theirreturn on condition thatMahmood undertake that itwould comply with itsobligations. Mahmood rejectedthe tender. BP then cancelled theagreements and notified itsintention to apply for Mahmood’seviction and re-transfer of theproperty to it. BP brought an application forMahmood’s eviction and transferof the property.

THE DECISION BP would have the right tocancel the agreements and applyfor consequent relief if Mahmoodwas in breach of the agreements.Mahmood had taken the viewthat it was not in breach becausethere was no positive obligationupon it to conduct the business ofa petrol filling station at theproperty, and the only breachwas that of BP in removing thepumps. Mahmood’s position however,depended on an interpretation ofclause 10.1 to the effect that itimposed on Mahmood only theobligation not to conduct abusiness other than that of apetrol filling station, and did notimpose the obligation to actuallyconduct the business of a petrolfilling station. However, interpreting theclause in the light of thecircumstances known to theparties at the time of contracting,and giving it a commerciallysensible meaning, the provisiondid impose on Mahmood apositive obligation to conduct thebusiness of a petrol filling station.This was also apparent from thefact that the other agreementssimultaneously entered intocontemplated that BP hadinvested a substantial amount ofcapital for the purpose ofexploiting the property as apetrol filling station over thelonger term. Given that Mahmood hadfailed to properly observe theobligations imposed on it inclause 10.1, this constituedrepudiation entitling BP to cancelthe agreement. BP had done soand was accordingly entitled toMahmood’s eviction from theproperty and re-transfer thereofto itself.

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VIKING PONY AFRICA PUMPS (PTY) LTD vHIDRO-TECH SYSTEMS (PTY) LTD

A JUDGMENT BY HEHER JA(MPATI P, MLAMBO JA, BOSIELOJA and SALDULKER AJAconcurring)SUPREME COURT OF APPEAL25 MARCH 2010

2010 (3) SA 365 (A)

Upon receiving a credible complaintthat a preference has been obtainedon a fraudulent basis, an organ ofState must act in accordance withthe complaint in terms ofPreferential Procurement PolicyFramework Act (no 5 of 2000).

THE FACTS Hidro-Tech Systems (Pty) Ltdcompeted with Viking PonyAfrica Pumps (Pty) Ltd forcontracts awarded by the City ofCape Town for the supply andinstallation of mechanicalequipment for water andsewerage treatment worksrequired by the municipality.

Over a period of five years,Viking won 80% more contractsarising from tender processes inwhich both parties participated,than contracts won by Hidro. Thereason for this was that Vikingscored higher than Hidro onpoints based on the scoring givenfor members qualifying ashistorically disadvantagedindividuals (‘HDI’).

Hidro was of the opinion thatViking had misrepresented itstrue HDI status and wasoperating as a front for BunkerHill Pumps (Pty) Ltd, the secondappellant. Hidro alleged that thiswas clear from the fact that theremuneration of directors of HDIstatus was significantly less thanwhite directors, and thatmanagerial and administrativeresponsibilities were allocatedmostly to the latter. In fact,neither of the non-white directorswas actively involved in themanagement of Viking orexercised control over it, to anextent commensurate with theirrespective shareholdings at thetime when Viking submitted itstenders in 2006 and 2007.

Hidro addressed themunicipality with its concerns. Itrequested a verification agency todetermine and report on Hidro’sallegations. It confirmed thatViking’s shareholding was in linewith the proof of shareholdingwhich had accompanied itstender- registration form.

Hidro reiterated its contentionthat Viking was involved infronting practices and demanded

that the municipality investigatethis. The municipality did not doso. Hidro then brought anapplication for an order that themunicipality act against Viking inaccordance with section 15 of theregulations promulgated in termsof the Preferential ProcurementPolicy Framework Act (no 5 of2000) and that the municipalityact against Viking in accordancewith item 9.4 of the ProcurementPolicy Initiative of the City ofCape Town

THE DECISIONRegulation 15 provides that an

organ of State must, upondetecting that a preference hasbeen obtained on a fraudulentbasis, or any specified goals arenot attained in the performance ofthe contract, act against theperson awarded the contract.

The word ‘detect’ connotes thediscovery or awareness of acertain state of affairs notpreviously known to the personwho so detects, and it would bewrong to unduly limit it to aconclusion reached at the end of aprocess of investigation. Ineveryday speech ‘detect’ bears thesense of a provisional orunilateral opinion as to the givenstate which is open tocontradiction rather thancarrying the force of a finaljudgment on the matter.

Although the State couldinvestigate the position beforetaking action, the action to betaken therefore did not depend ona preliminary investigationhaving been conducted upon thebasis of which the State wouldsatisfy itself that a preference hadbeen obtained on a fraudulentbasis. The regulation intends tocast a very wide net, in order toensure that an organ of State beproactive in responding to thereasonable possibility that apreference has been obtained

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fraudulently, or that a specificgoal of its preferential policy, interms of which a contract wasawarded, is not being pursued.State has no investigative abilityin terms of the regulations.

The range of action open to anorgan of State is limited only byits appropriateness to the properaddressing of the fraud detectedby it. The clearer the fraud themore decisive the action is likelyto be. The action to be taken bythe organ of State is dependentupon the nature of theinformation that reaches it. If thatinformation constitutes a crediblecomplaint, seriously advanced, ofthe obtaining of a preference byfraudulent means, then the organof State must act by requiring thetenderer in question to provideproof of its real and operative HDIstatus. The organ of State mightappoint a forensic accountant to

analyse any proof furnished onits behalf; or to assist it in callingfor such further documentationas might be required.

In the present case, themunicipality’s investigationnever sought to address theactual issue which was, not theovert shareholding in Viking, butits sham nature and the blurringof the separate corporateidentities of Viking and BunkerHill. The municipality had in factdiverted Hidro-Tech’s attorney tothe Department of Trade andIndustry, rather than take ameaningful decision.

The order that the municipalityact against Viking in accordancewith regulation 15 of theregulations promulgated in termsof the Preferential ProcurementPolicy Framework Act wastherefore correctly given..

Irish AJ undertook a careful analysis of reg 15(1) with particular regard to its place in thepromotion of the process established by Parliament in order to satisfy the constitutionalimperatives.I do not think I can improve on it. He examined the possible meaning and scope of thephrase ‘upon detecting’ in the context that he had thus identified. I agree with both theprocess of his reasoning and his conclusion that: ‘In my view, in employing the participle detecting, the Minister intended to cast a verywide net, precisely to ensure that an organ of State be proactive in responding to thereasonable possibility that a preference has been obtained fraudulently, or that a specificgoal of its preferential policy, in terms of which a contract was awarded, is not beingpursued.’

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SOUTHERNERA RESOURCES LTD v FARNDELL N.O.

A JUDGMENT BY MPATI P(MTHIYANE JA, LEWIS JA,MHLANTLA JA and Hurt AJAconcurring)SUPREME COURT OF APPEAL27 NOVEMBER 2009

2010 SACLR 24 (A)

An agreement becomes complete assoon as all suspensive conditionshave been fulfilled.

THE FACTSIn September 1995 Farndell, in

his capacity as executor in thedeceased estate of Marjorie Dent,sold mineral rights in the farmDuitschland situated in theNorthern Province toSouthernera Resources Ltd for R1792 269. In terms of theagreement, Southernera wasobliged to furnish bankguarantees for payment of thepurchase price within 30 days.Southernera delived theguarantees but these were laterreturned to it because Farndellwas experiencing difficultiesidentifying the heirs to the estate.

In December 2001, the partiesconcluded an addendum to theagreement which provided thatSouthernera would be obliged todeliver a bank guarantee within14 days of the Master of the HighCourt issuing a certificate interms of section 42(2) of theAdministration of Estates Actconsenting to the sale of themineral rights.

The certificate was issued inApril 2004, but Southernera failedto deliver the guarantee.

Within the 14-day period,section 3(1)(m) of the DeedsRegistries Act (no 47 of 1937) wasrepealed. The section provided,inter alia, that the Registrar ofDeeds was empowered to registercessions of mineral rights.

Farndell alleged thatSouthernera was in breach of theagreement and brought anapplication against Southernera

for an order that it pay thepurchase price. Southerneraopposed the application on thegrounds that as a result of therepeal of section 3(1)(m) it hadbecome legally impossible toeffect registration of cessions ofmineral rights, in consequence ofwhich the agreement had lapseddue to supervening impossibilityof performance.

THE DECISIONThe essential question was

whether or not the agreementwas complete (perfecta) by thetime the repeal of section 3(1)(m)had taken place. Since that eventhad the effect of rendering theagreement impossible ofperformance, if it took placebefore the agreement wascomplete, the agreement wouldindeed have lapsed with theresult that Southernera wouldnot have been obliged to performin terms thereof.

Southernera contended that thefurnishing of the bank guaranteewas a suspensive condition inthat it deferred operation of theagreement until the guaranteewas delivered, and that thismeant the agreement was notcomplete. However, the obligationto furnish the guarantee was itselfdependent on a suspensivecondition, ie that the Master issuea certificate in terms of section42(2). That condition was fulfilled.Accordingly, the agreementbecame complete when thatcertificate was issued.

The application was granted.

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BEDFORD SQUARE PROPERTIES (PTY) LTD vLIBERTY GROUP LTD

A JUDGMENT BY WILLIS JGAUTENG SOUTH HIGH COURT10 DECEMBER 2009

2010 (4) SA 99 (GSJ)

In order to show that there shouldbe a deviation from the basic rulethat agreements are to be honoured,it is necessary to show thatcircumstances exist warranting adeparture from the basic rule.

THE FACTSIn 2001, Bedford Square

Properties (Pty) Ltd entered into anotarial deed of restraint withLiberty Group Ltd and the secondrespondent in terms of whichBedford undertook not toconclude a lease agreement givingeither Woolworths or MicaHardware occupation of anyspace on its property. Therestraint was registered as aservitude on all the propertiesconcerned.

Bedford Square sold a portion ofits property. On the portionwhich it retained, it wished toconclude a lease withWoolworths. It applied for anorder declaring that the servitudecreated by the notarial agreementwas contrary to public policy andunenforceable.

THE DECISIONThe basic rule is that agreements

are to be observed, expressed inthe maxim pacta sunt servanda.It was for Bedford Square to showthat the basic rule was notapplicable because in thecircumstances, the application ofit would be contrary to publicpolicy in that Liberty had nointerest in the agreementwarranting protection, or aweighing of the respectiveinterests of the parties could notjustify it, or the agreement wasinherently unreasonable, or therewas an imbalance in thebargaining position of the partiesraising concerns of oppression ofone against the other.

Bedford had not demonstratedthat any of these circumstancesexisted. There was therefore nowarrant for relaxing the basicrule. The application wasdismissed.

It is indeed well known that it is a regular feature of commercial life that, whenit comes to shopping centres, there are restrictions as to who may or may not betenants in particular buildings. It is also well known that certain tenants areattracted by the presence or absence of other tenants. These are legitimate concernsfor a landlord such as the second respondent. It has a legitimate interest in takingsteps to protect these concerns. I do not profess any skills in the fascinating worldof the marketing of commercial buildings and, in any event, it would be wrongfor me to take too much judicial notice of the intricacies of this world.Nevertheless, in broad outline, the practice of carefully crafted commercialtenancy agreements is a well-established feature of our commercial landscape. I donot intend to upset the apple-cart. The parties to the agreement were bothlandlords and not, in their relationship with one another, employers or employeesor business partners. The applicant, as a landlord, is not, in general terms,restricted in its business of leasing out its premises. It is free to do so. It isrestricted merely in leasing its premises to certain named tenants for a limitedperiod of time.

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NYANDENI LOCAL MUNICIPALITY v HLAZO

A JUDGMENT BY ALKEMA J(PILLAY J and NDENGEZI Jconcurring)EASTERN CAPE12 NOVEMBER 2009

2010 (4) SA 261 (ECM)

A non-variation clause may notoperate in a manner which iscontrary to public policy orconstitutional values.

THE FACTSThe Nyandeni Local

Municipality employed Hlazo asits municipal manager. In termsof clause 16 of the employmentcontract, all disputes arisingfrom the conditions of serviceand/or any municipal policy and/or code of conduct was to beresolved by means of arbitration.It was specifically recorded thatwhere disciplinary proceedingswere initiated against themunicipal manager such disputeswere to be resolved through pre-dismissal arbitration under theauspices of the Commission forConciliation Mediation andArbitration.

In terms of clause 14, novariation, modification or waiverof any provision of the agreement,or consent to any departuretherefrom, would be of any forceor effect unless confirmed inwriting and signed by the parties,and then such variation,modification, waiver or consentwas to be effective only in thatspecific instance.

Following a report on financialirregularities concerning Hlazo,the municipality addressed aletter to him calling on him toshow cause why he should not besuspended as the accountingofficer of the municipality.Thereafter, it gave him notice toappear at a disciplinary hearingto answer charges relating tovarious instances of financialirregularity. A verdict of guiltywas handed down against himfollowing the hearing. Themunicipality’s council thenconfirmed the findings of thehearing and dismissed Hlazowith immediate effect.

Hlazo’s attorney addressed aletter to the municipality inwhich she complained of variousdefects in the procedures of thedisciplinary hearing. Four dayslater, the attorney addressed the

muncipality declaring that adispute existed between it andHlazo and demanding that thedispute be referred to arbitration.

Hlazo applied for an order thatan arbitrator be appointed todecide on the complaints madeagainst him, as provided for inclause 16.

THE DECISIONIt was clear from the history of

the matter, the Hlazo hadconsented to a variation of theprocedures provided for in clause16. However, the question waswhether this could have anybinding effect, given theprovisions of clause 14.

By his conduct, Hlazo agreed toa variation of clause 16, but it didnot necessarily follow that, inlaw, his implied agreement tovary the terms had the lawfulresult of a variation. Anagreement by conduct may beprohibited by application of theprinciple, established in SentraleKo-op Graanmaatskappy Bpk v Shifren1964 (4) SA 760 (A), that a non-variation clause is valid andeffectively entrenches both itselfand all the other terms of thecontract against an oral variation.

This principle may however, beoverriden by public policyconsiderations. In the presentcase, it could not be said thatclause 14 of itself offended againstpublic policy, but the questionwas whether the application of itin the circumstances of the casesdid. It was clear that Hlazo didnot have a defence to the chargeswhich were brought against him.In balancing the principle of pactasunt servanda as expressed inShifren against the right toengage the due process of lawunder the Constitution, and to beprotected against an abusethereof, the appropriateconclusion was that public policyfavoured the rule of law as a

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foundational cornerstone of theConstitution, and accordingly thefacts and circumstances of thecase justified a departure from the

Shifren principle.The application for the

appointment of an arbitrator wasdismissed.

I therefore have no hesitation, on the facts of this case, to support the finding of the court aquo that he, by his conduct, agreed to a variation of clause 16.2 in the respects mentioned. Ofcourse, it does not necessarily follow that, in law, his implied agreement to vary the termshad the lawful result of a variation. An agreement by conduct may be prohibited by theShifren principle, and this is what the municipal manager argued in the court below and inthis court, and this is what the court below held.

It follows that the contention that the municipal manager by his conduct also consented to awaiver or variation of the entrenchment clause 14 under consideration in this case, cannotprevail. For such a variation or waiver to be effective, it must be in writing.

Therefore, and subject to what follows, a contract does not necessarily offend public policymerely because it may operate unfairly. Like the concept of good faith (bona fide), fairnessmay be regarded as an ethical value ‘that underlies and informs the substantive law ofcontract’ (Prof Hutchison (supra)), but it is not an independent constitutional or contractualprinciple in terms of which contracting parties may escape their obligations, includingobligations arising from the Shifren principle ( Brisley (supra) in paras 12 - 22). It followsthat a court does not have a general discretion to decide what is fair and equitable and then toC determine public policy with reference to its views on fairness.

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ICS PENSION FUND v SITHOLE

A JUDGMENT BY RABIE JTRANSVAAL PROVINCIALDIVISION13 JANUARY 2009

2010 (3) SA 419 (T)

The Financial Services Board ofAppeal may not take into accountirrelevant considerations whendetermining whether or not theprovisions of section 15 of thePension Funds Act (no 24 of 1956)have been adhered to by a pensionfund.

THE FACTSPrior to 1 November 1996, the

ICS Pension Fund was a definedbenefit fund, but after that dateadopted a defined contributionsection which enabled employeesto take an alternative option fortheir pension fund entitlements.The former benefit fund is onewhose pension benefits areunderwritten by the employerwhereas a defined contributionbenefit fund is one whose pensionbenefits are determined by thefinancial performance of thepension fund.

At the time, the Fund had builtup an actuarial surplus. Adecision was made that some ofthis would be used to enhance thebenefits of those members whodecided to transfer to the definedcontribution section of the fund,and that some would be allocatedfor the benefit of other membersof the Fund as well as theemployer.

In December 2001, the PensionFunds Act (no 24 of 1956) wasamended to make provision forthe treatment of an actuarialsurplus. Section 15B providesthat the board of trustees of apension fund must submit to theregistrar a scheme for theproposed apportionment of anyactuarial surplus, whichactuarial surplus must includeany surplus utilised improperlyby the employer. Section 15Fprovides for the transfer to theemployer surplus account of all orsome of the credit balance whichexisted in a reserve account of thefund prior to December 2001 andwhich had been earmarked forthe benefit of the employer.

As a result of the amendments tothe Act, the Fund applied to theregistrar to authorise the transferof some of the credit balance in itsexisting reserve account, whichhad earlier been allocated to theemployer, to the employer

surplus account. The registrarrejected the application. The Fundappealed to the Financial ServicesBoard of Appeal. Its appeal wasdismissed. It then applied for anorder reviewing and setting asidethis decision.

THE DECISIONThe purpose of section 15F is to

allow in appropriatecircumstances a surplus allocatedto the employer in terms of therules of the fund to be excludedfrom the surplus to be distributedin terms of the other provisions ofthe surplus legislation. Thequestion was whether or not theFund would act within the ambitof this section were it to effect theproposed transfer.

The board of appeal held that itis implicit in the provisions ofsection 15F(2) that the issue offairness and equal treatment ofmembers and the employer inrespect of the distribution of thesurplus was a relevantconsideration. It also held thatthere was no informed choicemade by the members whoelected to remain in the definedbenefit section since they had notbeen given sufficient informationregarding the making of such achoice and had not been informedthat their benefits wereunderwritten by the employerwhich itself had been allocated anamount. The board held thatthere was no proof of anynegotiations between theapplicant and the members or themember representatives and thatthe enhancement of benefits ofmembers who chose to join thedefined contribution section,indirectly also benefited theemployer due to the transfer ofrisk from the employer to themembers. In this regard theboard of appeal found that whenone group or class of members isdiscriminated against or is

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disadvantaged, such unfairtreatment is a factor that impactsupon the registrar’s discretion interms of section 15F(2) of the Act,and that the registrar ius entitledto take this ground into accountin the interest of fairness.

However, the decision of theboard of appeal was materiallyinfluenced by an error of law, inparticular in respect of what

section15F of the Act entails. Thisresulted in the board of appealtaking into account irrelevantconsiderations and notconsidering relevant ones. Thefindings of the board of appealwere also not rationallyconnected to the informationbefore it.

The decision of the board wasreviewed and set aside.

The last part of the above extract from the Coca-Cola matter reads as follows: ‘Naturally a negotiation envisages an understanding on the part of the negotiators ofthe relevant facts in order for them to reach an informed J conclusion. Accordingly oneof the principles underlying ss 15B and 15C is that the members and pensioners mustbe in possession of A sufficient information of what it is proposed to allocate to theemployer reserve account to enable them to enter into meaningful debate on suchallocation should they hold a view that differs from that of the board.’

As a general proposition the aforesaid holds true. It goes without saying that in orderfor negotiations to take place, the negotiators should understand the relevant issues andpossess the necessary facts. Furthermore, in a situation of collective bargaining, whererepresentatives negotiate on behalf of a larger membership, the membership shouldideally have a full understanding of the issues at stake as well as the relevant facts inorder for them to contribute meaningfully in the interaction between themselves andtheir representatives, and to give their representatives a mandate in respect of therelevant issues at stake. In the classical situation of two bargaining entities beingrepresented by representatives, it is the responsibility of each side to ensure that theaforesaid knowledge and understanding exist in the ranks of its own membership. It isnot uncommon, however, that in cases where, for example, facts relating to bargainingissues or to members of the one side, fall peculiarly within the knowledge of the otherside, such other side has the obligation to make known the relevant information to thefirst side.

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BONHEUR 76 GENERAL TRADING (PTY) LTD vCARIBBEAN ESTATES (PTY) LTD

A JUDGMENT BY VAN EEDEN JSOUTH GAUTENG HIGH COURT10 DECEMBER 2009

2010 (4) SA 298 (GSJ)

A co-owner is ordinarily entitled todeal freely in the undivided share ofhis property and is not obliged toobtain the consent of the other co-owner in doing so.

THE FACTS Bonheur 76 General Trading

(Pty) Ltd was the co-owner of a54% undivided share in Portion 3of Erf 1543, MorningsideExtension 12. The other co-owner,Caribbean Estates (Pty) Ltd, soldits 46% undivided share in theproperty to Wedgeport (Pty) Ltd.After transfer of this undividedshare, without the knowledge orconsent of Bonheur, Wedgeportmortgaged the property to thetwo individuals who controlledCaribbean.

Bonheur contended that it held aright of pre-emption whichwould have entitled it to a rightof first refusal of an offer of salemade by Caribbean in respect ofits undivided share. It alsocontended that any sale toWedgeport should have requiredthat Wedgeport become amember of the MorningsideWedge Office Park OwnersAssociation, thereby obliging it toabide by the rules of theassociation. Bonheur’s contendedthat these obligations wereformed in the course of varioustransactions entered intobetween the parties over theyears.

Bonheur applied for an ordersetting aside the sale of theproperty to Caribbean Estatesand the registration of themortgage bond.

THE DECISIONA co-owner may ordinarily

alienate or encumber his share ofthe jointly owned property. Onlyif some additional considerationapplies would this right beaffected. This might be the case ifthe co-owners have agreed tolimit their rights or if they have

entered into a partnershipagreement. However, in thepresent case, no such agreementwas apparent. Caribbean hadtherefore been entitled to alienateits share of the property andWedgeport had been entitled toencumber it with a mortgagebond.

This right is also recognised insection 34(1) of the DeedsRegistries Act (no 47 of 1937)which provides that once a co-owner has obtained a certificateof registered title reflecting hisundivided share in a piece of land,the transfer of a fraction only ofthe undivided share may beregistered upon productionthereof to the registrar of deeds.The hypothecation or lease of thewhole or any fraction of theundivided share may equally beregistered.

In the present case, there wasnothing to indicate that theknowledge or consent of anyother co-owner was necessary forthe registration of such transfer,hypothecation or lease to be valid,nor that such knowledge orconsent was necessary in respectof the underlying contract. Themortgage bond did not encumberthe property in issue, norBonheur’s 54% undivided share inthe property, but was limited tobinding Wedgeport’s 46%undivided share in the property.The mortgage bond evidenced anincorporeal right, conferring onthe holder no more rights thanany other co-owner of anundivided share in immovableproperty has or may exercise, andwas not dissimilar to theconglomerate of personal rightsexercised by the holder or ownerof a share in a company.

The application failed.

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NORTHVIEW SHOPPING CENTRE (PTY) LTD vREVELAS PROPERTIES JOHANNESBURG CC

A JUDGMENT BY LEWIS JA(HEHER JA, MLAMBO JA,MALAN JA and THERON AJAconcurring)SUPREME COURT OF APPEAL18 MARCH 2010

2010 (3) SA 630 (A)

A person signing a contract onbehalf of a close corporation who isnot a member of the closecorporation must be authorised inwriting to sign such a contract incases where there is a substantiverule of law requiring that anagent’s written authority isrequired for the conclusion of suchcontracts.

THE FACTS Northview Shopping Centre

(Pty) Ltd concluded a saleagreement as purchaser of theproperty of Revelas PropertiesJohannesburg CC. The agreementwas signed by a certain MrChristelis for Revelas. Christeliswas not a member of Revelas andwas not authorised in writing toconclude the sale agreement.

Northview claimed specificperformance of the agreement.Revelas defended the action onthe grounds that Christelis didnot have authority to bind it, inconsequence of which, no bindingsale agreement had beenconcluded. Revelas contendedthat Christelis did not haveauthority to bind it because noauthorisation in writing had beengiven to him as agent, as requiredby section 2(1) of the Alienation ofLand Act (no 68 of 1981). Thesection provides that noalienation of land shall be of anyforce or effect unless it iscontained in a deed of alienationsigned by the parties thereto orby their agents acting on theirwritten authority.

THE DECISIONAn established principle of our

law is that in the case of non-natural persons, the requirementthat authority to act must be inwriting does not apply when afunctionary of such a personsigns a contract for the sale ofland. The principle is based inpracticality, because a non-natural person, such as acompany, cannot give writtenauthority but must act throughofficers appointed to act for it. Thequestion in the present case waswhether or not the principleapplies to an agent of a closecorporation who is not a member.

In the case of companies, theposition is regulated by section 69of the Companies Act (no 61 of1973). There is no equivalent ofthis provision in the CloseCorporations Act (no 69 of 1984)which, in section 54, providesonly for the authority of membersto bind a corporation. Theposition is therefore different forclose corporations in that onlymembers have the automaticpower to bind their corporation.

In view of this, in order to showcompliance with section 2(1) ofthe Alienation of Land Act, therewould have to be evidence thatChristelis was authorised inwriting to conclude the saleagreement on behalf of Revelas.

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SP & C CATERING INVESTMENTS (PTY) LIMITED vTHE BODY CORPORATE OF WATERFRONT MEWS

A JUDGMENT BY HURT AJA(HARMS DP, NAVSA JA,MTHIYANE JA and PONNAN JAconcurring)SUPREME COURT OF APPEAL30 NOVEMBER 2009

2010 SACLR 34 (A)

A developer of a sectional titledevelopment which has stipulatedthe time period for completion of adevelopment in terms of acertificate of registered title maynot extend the time period undersection 25(13) of the SectionalTitles Act (no 95 of 1986).

THE FACTSSP & C Catering Investments Ltd

was the developer under asectional title scheme known asWaterfront Mews. The schemewas initially registered in August1998 under a certificate ofregistered title. In terms of section25(1) of the Sectional Titles Act(no 95 of 1986), the certificaterecorded that the developer wasthe registered holder of the rightto erect a building on theproperty within ten years

Section 25(6) of the Act providesthat if no right is reserved interms of subsection (1) atinception of the scheme or if aright has been reserved but haslapsed, the right to extend thescheme will vest in the bodycorporate.

SP & C applied for an orderextending the period in which toerect the building. It contendedthat the court could order anextension in terms of section25(13) of the Act. The sectionprovides that a developer whichexercises a reserved right referredto in subsection (1) shall beobliged to erect and divide thebuilding into sections strictly inaccordance with the documentsreferred to in subsection (2), dueregard being had to changedcircumstances which would makestrict compliance impracticable,and an owner of a unit in thescheme who is prejudiced by hisfailure to comply in this manner,may apply to the court,whereupon the court may orderproper complianceTHE DECISION

SP & C contended that upon aproper interpretation of section25(13), if a developer has beendelayed through circumstancesbeyond its control, its reservedright does not lapse as providedfor in the certificate of registeredtitle, but may be extended uponapplication to court. This ensuresthat its constitutional propertyrights are not infringed.

This contention could not beaccepted. No constitutionalproperty rights were infringed by‘deprivation’ of property becausethe developer itself stipulated theperiod for which its rights wouldsubsist, the limit being chosen bythe developer itself and notimposed. In any event, the rightto erect the building was not to beconfused with the obligation toperform the work. Section 25(13)referred to the obligation toperform the work, not the right tocomplete it. No interpretation ofthe sub-section allowing thedeveloper an extension of rightscould be drawn from it.

The application was dismissed.

Property

90

ST PAUL INSURANCE CO SA LTD v EAGLE INKSYSTEM (CAPE) (PTY) LTD

A JUDGMENT BY CLOETE JA(FARLAM JA, LEWIS JA,MHLANTLA JA and TSHIQI AJAconcurring)SUPREME COURT OF APPEAL25 MARCH 2010

2010 (3) SA 647 (A)

An exclusion of liability clause thatexcludes liability to indemnify forclaims arising out of liabilitycaused by contamination entitlesan insurer to repudiate liability incases where contamination of theproduct has taken place.

THE FACTSSt Paul Insurance Co SA Ltd

insured Eagle Ink System (Cape)(Pty) Ltd against legal liability topay compensation for claims firstmade against it in respect ofinjury and/or damage arising outof the performance of its business.

An exclusion in the policyprovided that St Paul would notindemnify the insured in respectof any liability caused by orarising from claims for productssold or supplied by it, or fromclaims arising out of liabilitydirectly or indirectly caused byseepage pollution orcontamination, provided that thisexclusion would not apply wheresuch seepage pollution orcontamination was caused by asudden unintended andunexpected event.

A product liability extensionclause excluded liability arisingfrom defective or faulty designformula plan or specification,treatment or advice by or onbehalf of the insured, or arisingfrom inefficacy or failure toperform or conform tospecification or fulfil its intendedfunction as specified orguaranteed.

Eagle Ink supplied ink toNampak Products Ltd, assuring itthat the inks it supplied wereheavy metal free. Some of the inkactually supplied had leadcontent. When this came toNampak’s notice, it claim returnof the price it had paid for the ink,as well as damages. Eagle Inkclaimed indemnity from St Paul.St Paul repudiated liability on thegrounds that the exclusion ofliability applied, in that the claimarose from contamination.

THE DECISION‘Contamination’ was not simply

a reference to contamination bythe ink but could also meancontamination of the ink. Theexclusion provided for, and onwhich St Paul depended, wastherefore applicable, and theinsurer was not liable toindemnify in the circumstances ofthe case.

As far as the exclusion in theproduct liability extension clausewas concerned, while it waspossible that this did not apply,the fact that it did not, did notmean that the earlier exclusioncould not apply.

St Paul was entitled to dependon the exclusion of liability andwas not bound to indemnify.

Insurance

91

THE MIEKECLASSIC SAILING ADVENTURES (PTY) LTD vREPRESENTATIVE OF LLOYD’S

A JUDGMENT BY CLEAVER JCAPE OF GOOD HOPE PROVINCIALDIVISION27 FEBRUARY 2009

2010 SACLR 41 (C)

An insurer which repudiates a claimmust show that the informationgiven to it by the insured wasinsufficient to put it on inquiry asto the extent of the risk it accepted.

THE FACTS Classic Sailing Adventures (Pty)Ltd owned the motorised yachtthe Mieke, and insured it with asyndicate at Lloyds representedby the first defendant.

The Mieke had been constructedas a long line fishing vessel andwas used as such for a period offive years. It was then convertedinto a luxury charter yacht. Theskipper, a certain Mr Hennopremained as skipper of the yachtthereafter.

When the insurance cover forthe Mieke was renewed, Classic’sbroker informed the Lloydsrepresentative, throughintermediaries, that Classic wasexperiencing difficulties obtainingcertification for Hennop asskipper from the South AfricanMaritime Safety Authority(SAMSA).

After the Mieke’s conversion,SAMSA inspected the vessel andgranted interim approval of itsstability book valid until 15 April2004. On 19 October 2004, after ahull survey had been conducted,a Local General Safety Certificatein respect of the vessel wasissued. This reflected the vessel asa class II sailing vesselundertaking charter excursionsor unlimited voyages in theIndian ocean carrying 12 or lesspassengers, and contained acertificate to the effect that theship had been inspected inaccordance with therequirements of variousapplicable regulations.

In September 2005, the Miekesank off the coast of Mozambique.Classic claimed the sum insuredin terms of the insurance policyissued by the underwriters. Theunderwriters repudiated on thegrounds that there was materialnon-disclosure of the fact thatHennop was not qualified as askipper and that stabilityinformation was not accurate and

not in the required form. Theyalso relied on the allegation thatClassic had misrepresented thenature of the dispute withSAMSA and had carried out theadventure in an unlawfulmanner.

THE DECISIONThere was insufficient evidence

to show that the stability bookshowed discrepancies significantenough to have warranted arepudiation of the policy by theunderwriters. There had thereforebeen no non-disclosure in respectof the information shown in thestability book.

As far as Hennop’s qualificationas skipper was concerned,disclosure of the difficulties beingexperienced with SAMSA hadbeen made. This should havealerted the underwriters to thequestions concerning hisqualification and gave them anopportunity to investigatefurther. The fact that they did notdo so could not result in thembeing entitled to repudiate on thisground.

As far as the allegation ofmisrepresentation wasconcerned, the informationconveyed to the underwritersgave a fair presentation of the riskto be undertaken. Although theirmain concern was that Hennopwas not properly qualified as askipper, they had insured thevessel for a number of yearsbefore the sinking took place andthey knew at that time thatHennop was in command of thevessel and there were difficultiesrelating to his qualification whichrelated to SAMSA’s ability toproperly assess his qualifications.This too, gave them anopportunity to investigatefurther.

There were therefore no groundsfor repudiation of the claim. Theclaim succeeded.

Insurance

92

STARITA v ABSA BANK LTD

A JUDGMENT BY GAUTSCHI AJGAUTENG SOUTH HIGH COURT28 SEPTEMBER 2009

2010 (3) SA 443 (GSJ)

A creditor is entitled to depend ondelivery of a valid notice in terms ofsection 129 of the National CreditAct (no 34 of 2005) by service onthe debtor’s domicilium address.

THE FACTSAbsa Bank Ltd gave a loan to

Starita for the purchase of certainfixed property. She was unable tomeet her financial commitmentsunder the loan, and as a result,Absa began proceedings to assertits rights under the loanagreement. It sent a notice toStarita in terms of section 129 ofthe National Credit Act (no 34 of2005) addressing it to her chosendomicilium citandi et executandiby registered mail. Starita allegedthat she did not receive thisnotice.

Absa issued summons againstStarita. As a result of anadministrative relating to aduplicate case number issued bythe registrar, the bank could notobtain default judgment underthat action. It therefore issued asecond summons against Starita.The summons was served at herdomicilium address but notforwarded to her by the personthen in occupation of thepremises. The bank took defaultjudgment against Starita. Afterthe issue of the first summonsand before the issue of the secondsummons, Starita applied for adebt review in terms of section 86of the Act.

Starita then applied forrescission of the judgment on theground that the bank could notproceed against her in the secondaction when it had already doneso in the first (lis pendens), and onthe ground that the notice givenin terms of section 129 could notbe applicable in the second actionbut only in the first.

THE DECISIONThe Act provides for no time

period for the validity of a noticegiven in terms of section 129. Itsvalidity is therefore notconstrained by the effluxion oftime and in the present case, thenotice remained valid at the timeStarita had applied for debtreview and thereafter when thesecond summons was issued.

The only question was what theeffect of delivery of the notice atthe domicilium address was,given the contention that Staritadid not actually receive the notice.Section 96 of the Act provides thatthe creditor must deliver a noticeto the address stipulated in therelevant agreement, or theaddress most recently given bythe recipient. It is not contrary tothe provisions and purpose of theAct to permit a credit provider tosend a section 129(1) notice byregistered mail. The creditor isrequired only to prove, ifnecessary, that it duly sent thenotice in that manner, and that itsent it to the exact address chosenby the consumer for that purpose.The Act requires no more thanthis of the credit provider. This isalso so where the consumer haschosen a domicilium citandi etexecutandi. The purpose ofchoosing a domicilium addressfor the giving of a prescribednotice under a contract, which isthe same as it is for the service ofprocess, is to relieve the partygiving the notice of the burden ofproving actual receipt of thenotice.

It followed that that the section129(1) notice need not actuallyhave been received by Starita. Itwas sufficient that it was sent byregistered post to the domiciliumaddress. The application forrescission failed.

Credit Transactions

93

LEEUW v FIRST NATIONAL BANK

A JUDGMENT BY SNYDERS J(STREICHER JA, HEHER JA,MALAN JA AND LEACH AJAconcurring)SUPREME COURT OF APPEAL30 NOVEMBER 2009

2010 SACLR 14 (A)

An estoppel defence depends onproof that a party negligently madea representation uponwhich the defendant relied to hisprejudice. A bank which assures acustomer that a cheque tobe deposited is regular on the faceof it does not represent that thecheque will be paid andmay be treated as good for cash.

THE FACTS Leeuw sold liquor to Mofokengfor R48 598.69, and deposited acheque given to him in thisamount to his account at FirstNational Bank on 14 May 1999.Before depositingthe cheque, he receivedconfirmation from a bank clerk,that the cheque was not post-dated, that the amount in wordsand figures correspondedcorrectly and there was no stop-payment on the cheque. The bankallowed him to draw R48 000against the cheque three dayslater. At that point, Leeuwrequested that the bank confirmthat funds were available in hisaccount for the withdrawal. Aweek later, Leeuw receivedanother cheque from Mofokeng inpayment for liquor sold to him,and deposited this to his accountat the bank. This cheque was forR89 000. The cheques were drawn byGeneral Food Industries Ltd. On24 May 1999, that companynotified the bank that bothcheques bore forged signatures.The bank reversed the credits inLeeuw’s account and thenbrought an action against Leeuwfor repayment of the R48 000 thenowing by him, basing its claim onthe allegation that Leeuw wasenriched at its expense andconsequently liable to it under thecondictio indebiti. Leeuw defended the action onthe grounds that the condictioindebiti is not competent as aground of action by a bankagainst its customer, and on the

grounds that the bank wasestopped from asserting its claimagainst him. Leeuw supported hisdefence based on estoppel on theallegation that the bank hadrepresented to him that thecheque paid by Mofokeng wasgood, and he had relied on therepresentation when acceptingthe cheque. Leeuw also counterclaimed forpayment of R89 000.

THE DECISION There was no indication thatthe assurances requested byLeeuw when he broughtthe cheque for R48 598.69 fordeposit were any different fromthose requested on previousoccasions. There were thereforeno grounds for accepting thatLeeuw had asked for aguarantee that the cheque wouldbe paid or that the bank hadconfirmed the cheque was goodfor cash. Subsequent events showedthat Leeuw had not relied on thebank’s confirmation at the time ofdeposit of the cheque for anassurance that the cheque wasgood for cash. Leeuw had laterobtained the bank’s assurancethat he could withdraw moneyfrom his account, and thisindicated that his understandingof the earlier confirmation relatedto the regularity of the chequerather than a confirmation that itwould be paid. It followed that Leeuw had notestablished an estoppel againstthe bank’s claim.

Banking

94

BAYLY v KNOWLES

A JUDGMENT BY HEHER JA(HARMS DP , NUGENT JA ,LEACH JA and SERITI AJAconcurring)SUPREME COURT OF APPEAL18 MARCH 2010

2010 (4) SA 548 (A)

A shareholder seeking relief interms of section 252 of theCompanies Act (no 61 of 1973)cannot rely on any allegation ofunequal treatment in circumstanceswhere that shareholder has rejectedan offer for the purchase of hisshares by other shareholders andhas not given any reason for therejection.

THE FACTSBayly and Knowles were co-

shareholders in South AfricanElectronic Tracking Systems Ltd,a company established to marketa vehicle tracking system. Theyinvested in the company in equalamounts and held an equalnumber of shares in the company.They concluded a shareholders’agreement which recorded theirpurchase of their shares in thecompany and made provision forvarious aspects of theirrelationship as co-shareholders.The intention of the parties wasthat each would participate in themanagement of the company.

In due course, the relationshipbetween the two deteriorated andthe mutual trust and confidencebetween Bayly and himself wasdestroyed beyond the possibilityof restoration. Bayly submitted adraft offer for the purchase ofKnowles’ shares. Knowles made acounter-offer. Neither offer wasaccepted.

Knowles then applied for anorder in terms of section 252 ofthe Companies Act (no 61 of 1973)for the sale to him of Bayly’sshares in the company,alternatively an order in theterms of the counter-offer whichhe had made to Bayly.

THE DECISIONKnowles’ rejection of Bayly’s

offer, while possibly justified, hadimportant consequences for himwhen seeking an application interms of section 252. Since hisrejection of the offer was madewithout reasons, he could not relyon any inequity inherent in hisexclusion from participation inthe management of the company.Knowles could have protectedand redeemed his investment inthe company before heapproached the court, butbecause he insisted on his right toretain his shares, he chose not todo so, and thereby abrogated hisright to rely on the inequityinherent in the conductcomplained of.

It was also significant that theeffect of the order sought byKnowles would be to make himthe majority shareholder in thecompany. This would affect othershareholders whose existingposition, together with that ofBayly, was that of majorityshareholders. Since Knowles hadbeen forced out of management ofthe company, the effect of makinghim majority shareholder in thecompany might have hadnegative consequences for thecompany.

The application was dismissed.

Corporations

95

HENDRICKS N.O. v CAPE KINGDOM (PTY) LTD

A JUDGMENT BY SHOLTO-DOUGLAS AJWESTERN CAPE HIGH COURT7 DECEMBER 2009

2010 (5) SA 274 (WCC)

In the winding up of a company,strict compliance with the servicerequirements of section 346 of theCompanies Act (no 61 of 1973) isnot necessary, provided that themethod of service used ensures thatthe purpose of the Act is achieved.

THE FACTSIn 2008, Hendricks, a trustee of

the Cape Biotech Trust which hadprovided funding for the CapeKingdom (Pty) Ltd, brought anapplication for the winding up ofthe company. When the firstattempt to serve the applicationon the company was made, thecompany premises were foundlocked and unoccupied. When thenext two attempts at service weremade, the application was servedon a total of three employees ofthe company.

A provisional winding up orderwas given, and this was servedby the sheriff by delivery thereofto a director of the company, andby sending a copy by registeredpost to the employees of thecompany.

Cape Kingdom opposed thewinding up application on thegrounds that section 346(4A)(a)(ii)of the Companies Act (no 61 of1973) had not been properlycomplied with. This sectionprovides that when a winding upapplication is presented to court,the applicant must furnish a copyof the application to theemployees of the respondentcompany. The section providesthat this may be done by affixinga copy of the application to anotice board to which theapplicant and employees haveaccess, or if there is no access, byaffixing a copy of the applicationto the front gate or front door ofthe company’s premises.

The company also opposed thewinding up application on thegrounds that section 346A of theAct had not been properlycomplied with. This sectionprovides that a provisional

winding up order must be servedon the employees of the companyin the same manner as theapplication for winding up.

THE DECISIONGiven the fact that the premises

were locked and unoccupied, anyattempt to serve the applicationin the precise terms set out in thesection would have been futile.The question was whether or notin these circumstances, strictcompliance with therequirements of section 346 had tobe adhered to.

The employees of the companyno longer attended the premisesof the company. The applicationfor winding up was neverthelessserved on a number of theemployees. To require that servicebe effected on all the employees inthese circumstances wouldpromote no legitimate purpose ofthe statute.

As far as service by the sheriffwas concerned, his return ofservice on the employees recordedthat he made three unsuccessfulattempts at service beforeultimately serving the order onthe director. As he confirmed thatthere were no employees at thegiven address, the sheriff did notaffix the order to a notice board atthe premises or to the front gatethereof, but handed the order tothat director. Furthermore, a copyof the order was sent byregistered post to all of theemployees and service of theapplication papers was effected.The purpose of the section hadtherefore been met and the sectioncomplied with.

A winding up order wasgranted.

Corporations

96

BURNETT v DELOITTE & TOUCHE

A JUDGMENT BY BOZALEKWESTERN CAPE HIGH COURT20 APRIL 2010

2010 (5) SA 259 (WCC)

A determination made pursuant toan arbitration award must be setaside by an aggrieved party beforethat party can establish a right ofaction against a party alleged tohave caused loss as a result of thatdetermination. Prescription of anyclaim against the party alleged tohave so caused loss does not beginto run until that determination hasbeen set aside.

THE FACTSBurnett bought the shares and

loan account in a company forR1m from Mr A Fyfe. A disputearose between them in whichBurnett alleged that certainmisrepresentations had beenmade regarding the company’sfinancial position by Fyfe’sauditors, Deloitte & Touche. Thedispute was settled byarbitration and an ensuingsettlement agreement whichprovided that an independentvaluation of the company’sfinancial position as at the date ofthe sale would be effected.

In November 2004, the valuationwas effected, but Burnettcontended that it wasunreasonable, irregular andwrong. The following month, hebrought an action to set it aside.In 2007, the action was settled,the parties agreeing that thevaluation would be set aside andconducted again by a secondvaluer. In June 2007, the secondvaluation was made. This wasR900 000 less than the firstvaluation. Fyfe disputed thisvaluation. The parties concludeda third settlement agreement andin October 2007, Fyfe paidBurnett R1.5m in terms thereof.

In March 2008, Burnett began anaction against Deloitte & Toucheclaiming damages. The claim wasbased on the allegation thatDeloitte & Touche failed to effectthe first valuation correctly, andas a result Burnett had beenunable to recover from Fyfe thefull amount he would have beenowed had the firm effected thefirst valuation corectly.

Deloitte & Touche raised thedefence that Burnett’s claim hadprescribed in November 2007,three years after the first

valuation had been made, or atthe latest in December 2007, threeyears after Burnett brought hisaction to set it aside.

THE DECISIONIt was true that by December

2004, Burnett had knowledge ofthe alleged breach of theunderlying agreement. However,until such time as Burnett setaside the first valuation, itcontinued to bind him and Fyfe.The continuing existence of thebinding valuation would havebeen a complete answer to anyaction for damages instituted byBurnett. It was an essentialelement of his cause of action thatthe first valuation complained ofhad first to be set aside.

The plea of prescription focussedsolely on Burnett’s rejection of thefirst valuation, based upon thealleged breaches of the underlyingagreement. But the fact remainedthat Burnett had to have the firstvaluation set aside as it was madein terms of an arbitral awardwhich remained valid until setaside. In the absence of sufficientgrounds to set aside the award itremains final and binding on theparties and either partyaggrieved by it could not havesimply treated the other’s allegedmalperformance of any ensuingagreement as a repudiation andterminated the contract. Thatoption was not open to Burnett inDecember 2004.

Prescription therefore did notcommence running until, at theearliest, the first valuation orarbitration award was set asidein 2007. The special plea ofprescription therefore had to fail,since the present action wasinstituted within a period of threeyears from that date.

Corporations

97

SIMCHA PROPERTIES 6 CC v SAN MARCUSPROPERTIES (PTY) LTD

A JUDGMENT BY MLAMBO JA(LEWIS JA, HURT AJA, GRIESELAJA and SERITI AJA concurring)SUPREME COURT OF APPEAL31 MARCH 2010

2010 SACLR 215 (A)

Authority given by a company forthe conclusion of a specifictransaction in terms of section228 of the Companies Act (no 61 of1973) may be understood to havebeen given for anyamendment or reinstatement ofsuch a transaction.

THE FACTS Simcha Properties 6 CC boughtfixed property from San MarcusProperties (Pty) Ltd. The propertywas the sole asset of thecompany.

Prior to signature, San Marcuspassed a resolution in terms ofsection 228 of the Companies Act(no 61 of 1973) that the companydispose of the property andauthorise Mr D.M. Harris to signdocuments required to give effectthereto. Following signature, thecompany ratified the sale andauthorised Harris to sign alldocuments necessary forimplementation.

The agreement lapsed due tonon-fulfilment of a suspensivecondition, but the partiesreinstated it by a later agreement.

Simcha Properties latercontended that the agreementwas void because Harris did nothave the authority to conclude iton behalf of San Marcus, theresolution having related only tothe first agreement and not thesecond. Simcha also contendedthat because section 228 of theCompanies Act had beenamended prior to conclusion ofthe second agreement, theresolution passed in terms of thatsection was ineffective in respectof the second agreement. SanMarcus brought an applicationfor an order compelling Simcha toimplement the agreement andtake transfer of the property.

THE DECISION(per Mlambo JA)

The resolution passed by thecompany prior to signature of thefirst agreement provided thatHarris was authorised to sign allsuch documents and do all suchacts and things as were requiredto give effect to that transaction.The ambit of this resolution waswide enough to include thetransaction under which the firstagreement was reinstated. As thelatter was not a new transaction,but the same one that Harris hadconcluded on behalf of thecompany at the earlier stage, theresolution applied to it andprovided the necessaryauthorisation for its conclusion.(per Hurt JA)

As far as section 228 wasconcerned, this provision appliedto the transaction, but theresolution required by the sectionwas given. To hold that the effectof the amendment of section 228was to render compliance with itin its unamended state ineffectivewould be to give the sectionretrospective effect. The amendedsection could not be interpretedso as to allow it to applyretrospectively.

The application was granted.

Corporations

98

DUET AND MAGNUM FINANCIAL SERVICES CC(IN LIQUIDATION) v KOSTER

A JUDGMENT BY NUGENT JA(HEHER JA , VAN HEERDEN JA ,THERON AJA and SERITI AJAconcurring)SUPREME COURT OF APPEAL29 MARCH 2010

2010 (4) SA 499 (A)

Prescription begins to run against aclaim which is conditional on proofthat the debtor is liable under somestatutory provision as soon as thecreditor is aware of the identity ofthe debtor and the facts giving riseto the claim, and not when thecreditor has proved the condition.

THE FACTSThe liquidators of Duet and

Magnum Financial Services CCbrought an action against Kosterto set aside a disposition of R459446,71 made to him.Koster defended the action on thegrounds that the claim hadprescribed, the dispositionhaving been made, at the latest,by March 2002. Summons wasserved in July 2005.The court was asked to determinewhether or not the dispositionwas correctly characterised as a‘debt’ and accordingly a claim towhich prescription did apply, itbeing contended that the debtcould only arise after an order forthe setting aside of the dispositionhad been made.

THE DECISIONA claim founding a cause of actiondoes not arise only once a courthas given judgment on the claim.It arises once all the conditionsnecessary for its existence havebeen fulfilled. The question only is

whether those conditions havebeen fulfilled.The liquidators’ claim againstKoster arose upon theirappointment as liquidators. Itwas not dependent on adeclaration by a court that theclaim existed. However, theliquidators sought an order thatKoster was a debtor as from thedate on which such a declarationwas to be made. To grant such anorder would be to misconstruethe nature of the right conferredin the Insolvency Act entitlingliquidators to sue incircumstances where a voidabledisposition has been made. Whilethat Act created a new remedy, itdid not also provide that theremedy would only arise once ajudgment affirming that remedyin a particular case had beengiven.Prescription began to run fromthe date of the liquidators’appointment, and had thereforerun by the time summons wasissued.

Prescription

I agree with the conclusion of Nel J in Burley , and with his reasons for that conclusion. Thesame conclusion was reached by Goodey AJ in Barnard NO v Bezuidenhout en Andere ,but for different reasons and in my view they apply as much in this case. I think it is clearthat the sections of the Insolvency Act with which we are concerned give a right to aliquidator, in prescribed circumstances, to have a person declared to be a debtor of the estate,and its complement is a ‘debt’ for purposes of prescription, in that the person concerned isliable to have such a declaration made. This case is distinguishable from Burley only in thisrespect, that under the Insolvency Act the right accrues only in a winding-up. Whether therelevant date for the commencement of prescription is the date that the winding-upcommences, or the date that a liquidator is appointed, is not a matter with which we needconcern ourselves - the effect of s 12(3) of the Prescription Act is that that question willnever arise. It is sufficient to say that prescription ordinarily commences to run no laterthan the date upon which a liquidator is appointed. Whether the commencement ofprescription has been delayed in this case under the provisions of s 12(3) of the PrescriptionAct is not a matter that we are called upon to decide.

99

FIRSTRAND BANK LTD v DHLAMINI

A JUDGMENT BY MURPHY JNORTH GAUTENG HIGH COURT18 NOVEMBER 2009

2010 (4) SA 531 (GNP)

Compliance with section 129(1) ofthe National Credit Act (no 34 of2005) requires that notice of anydefault by the consumer be broughtto his or her actual attention, andthat failure on the part of the creditprovider to do so will bar theinstitution of legal proceedings,with the result that any actioninstituted before then will bepremature.

THE FACTSFirstrand Bank Ltd brought an

action against Dhlamini claimingthat he was in default of the termsof a mortgage bond by havingfailed to pay instalments duethereunder.

Dhlamini defended the action onthe grounds that the bank hadnot given him prior notice of hisdefault in terms of section 129(1)of the National Credit Act (no 34of 2005). This section providesthat if a consumer is in defaultunder a credit agreement, thecredit provider may notcommence any legal proceedingsto enforce the agreement withoutfirst providing the consumerwith a notice of default asprovided for in the Act.

The bank had despatched aregistered letter to Dhlamini’schosen domicilium addressgiving prior notice of his defaultin terms of section 129(1), butDhlamini had not received theletter because the post office towhich it was sent did not sendhim a notice that the letter wasawaiting collection.

The bank took the view thatbecause it despatched the letter toDhlamini’s domicilium address,this constituted sufficientcompliance with section 129(1)and it was irrelevant that theletter did not come to Dhlamini’sattention.

THE DECISIONThe question to ask when

determining whether or not acredit provider has compliedwith section 129(1) is not whetheror not the notice has beendelivered to the consumer, butwhether the credit provider has

drawn the default to the notice ofthe consumer in writing. Theconditions for proper delivery of anotice to a consumer should notbe the determinant of whether ornot notice of the default has beendrawn to the consumer.

The cumulative effect of section129(1) is to require of the creditprovider more than that it merelyeffect delivery in the mannerprescribed by the Act. The creditprovider must ensure that itsnotices to a consumer are servedon the consumer in a mannerwhich brings to the consumer anawareness of the alleged default.The wording of the sectionindicates that mere deliverywithout notice to the consumerwill be insufficient - ‘draw thedefault to the notice of theconsumer in writing’ is to bedistinguished from deliver in atechnical sense. Furthermore, tohold that delivery in that sense issufficient would be to defeat thepurpose of the Act, which is toprovide for a consistent andaccessible system of consensualresolution of disputes arisingfrom credit agreements by meansof a consistent and harmonisedsystem of debt restructuring,enforcement and judgment thatplaces priority on the eventualsatisfaction of all responsibleconsumer obligations undercredit agreements.

Compliance with section 129(1)of the Act requires that notice ofany default by the consumer bebrought to his or her actualattention, and that failure on thepart of the credit provider to doso will bar the institution of legalproceedings, with the result thatany action instituted before thenwill be premature.

Credit Transactions

100

ROSSOUW v FIRSTRAND BANK LTD

A JUDGMENT BY MAYA JA(MPATI P, NAVSA JA, CLOETE JAand EBRAHIM AJA concurring)SUPREME COURT OF APPEAL30 SEPTEMBER 2010

UNREPORTED

If a consumer chooses an address atwhich to accept notices by a creditprovider, then the despatch of sucha notice to the consumer will beconsidered sufficient compliancewith the delivery requirements ofthe National Credit Act.

THE FACTSFirstrand Bank Ltd brought an

action against Rossouw claimingrepayment of a loan due to defaultby Rossouw. It alleged that it haddelivered a notice of default interms of section 129(1)(a) of theNational Credit Act (no 34 of2005) by despatching the notice tothe domicilium address chosen byRossouw.

Clause 21.3 of the parties’agreement provided that acertificate signed on behalf of thebank, stating that a notice hadbeen given, would be sufficientproof thereof. The bank annexedsuch a certificate to its summons.One of the defences raised byRossouw to the bank’s action wasthat he had not received thenotice.

The bank applied for summaryjudgment.

THE DECISIONSection 65 of the Act allows for

delivery of notices by mail, and ifa consumer chooses to acceptdelivery of notices in this manner,as Rossouw had, then despatch inthis manner will constitutesufficient compliance with theAct, whether or not the notice isactually received.

One may conclude from thewording of section 168 of the Actthat sending a document byregistered mail is proper delivery.The certificate issued by the bankwas however, insufficient toestablish that delivery waseffected as it merely alleged thatthe notice was issued.

It appears to me that the legislature’s grant to the consumer of a right to choose themanner of delivery inexorably points to an intention to place the risk of non-receipt onthe consumer’s shoulders. With every choice lies a responsibility and it is after all withina consumer’s sole knowledge which means of communication will reasonably ensuredelivery to him. It is entirely fair in the circumstances to conclude from the legislature’sexpress language in s 65(2) that it considered despatch of a notice in the manner chosenby the appellants in this matter sufficient for purposes of s 129(1)(a) and that actualreceipt is the consumer’s responsibility.

Credit Transactions

101

STANDARD BANK OF SOUTH AFRICA LTD v KRUGER

A JUDGMENT BY KATHREE-SETILOANE AJSOUTH GAUTENG HIGH COURT23 APRIL 2009

2010 (4) SA 635 (GSJ)

A credit provider is not entitled toterminate debt review proceedingswhich have been referred to amagistrates’ court in terms ofsection 86(8)(b) of the NationalCredit Act (no 34 of 2005).

THE FACTSKruger applied for a debt review

in terms of section 86 of theNational Credit Act (no 34 of2005). The debt review was thenreferred to the magistrates’ courtin terms of section 86(8)(b) of theAct. In terms of section 86(10) ofthe Act, the Standard Bank ofSouth Africa Ltd terminated thedebt review due to default interms of the mortgage bond onwhich Kruger was indebted to it.Section 86(10) provides that acredit provider may give notice toterminate a credit agreement thatis being reviewed at least sixtybusiness days after the date onwhich the consumer applied fordebt review.

The bank then brought an actionagainst Kruger for repayment ofthe debt. In summary judgmentproceedings, Kruger contendedthat as the debt reviewproceedings had been referred tothe magistrates’ court and hadnot yet been finalised in thatcourt, the action against him waspremature.

THE DECISIONSection 86(10) refers to a credit

agreement that is being reviewedin terms of that section. A creditprovider’s right to terminatetherefore depends on whether ornot such a review is beingconducted. If the review has beenreferred to the magistrates’ court,then such a review is not beingconducted, because then thereview will be subject to section87 of the Act. Any termination ofsuch a review by a creditprovider will then be ineffective.

The only debt review whichmay be terminated by a creditprovider is one which isundertaken by a debt counsellor.Were it possible for a creditprovider to terminate a debtreview referred to themagistrates’ court, proceedings inthat court could be brought to anend before completion, thusrendering ineffective theprotective measures provided forin the Act. A credit provider isobliged to wait until a magistratehas made a determination interms of section 87 of the Actbefore proceeding to enforce itsclaim.

Summary judgment wasrefused.

Credit Transactions

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NAIDOO v ABSA BANK LTD

A JUDGMENT BY CACHALIA JA(MTHIYANE JA, HEHER JA,SHONGWE JA and TSHIQI JAconcurring)SUPREME COURT OF APPEAL27 MAY 2010

2010 (4) SA 597 (A)

Section 130(3) of the NationalCredit Act (no 34 of 2005) does notapply to sequestration proceedingsand accordingly no notice to thedebtor as referred to in section129(1)(a) of the Act is necessaryprior to the bringing of suchproceedings against a debtor.

THE FACTSNaidoo’s estate was

sequestrated at the instance ofAbsa Bank Ltd, to which Naidooowed money in terms of twohome loans and six instalmentsale agreements. Thesequestration proceedings werenot preceded by a notice ofdefault in terms of section129(1)(a) of the National CreditAct (no 34 of 2005).

Naidoo contended that a noticeof default should have beendelivered to him as the bank’sclaim was based on a creditagreement as referred to insection 130(3) of the Act. Hecontended that even thoughsequestration proceedings are notlegal proceedings to enforce anagreement, this section includessequestration proceedings withinits ambit.

THE DECISIONA sequestration order is a

species of execution, affecting notonly the rights of two parties, butalso affecting third parties. Itinvolves the distribution of theinsolvent’s property to creditors,while restricting those creditors’ordinary remedies and imposingdisabilities on the insolvent. It isnot an ordinary judgmententitling a creditor to executeagainst a debtor.

It follows that an order for thesequestration of a debtor’s estateis not an order for theenforcement of the sequestratingcreditor’s claim, andsequestration is thus not a legalproceeding to enforce anagreement. It is therefore not aproceeding to which the NationalCredit Act applies.

Even though I have held that a credit provider need not comply with the procedureprovided for in s 129(1) (a) before instituting sequestration proceedings against aconsumer (the s 129 notices are therefore immaterial to the outcome of this appeal), itshould be borne in mind that when the High Court granted leave to appeal to this courtthere was no decided case on this question. The Mutemeri judgment was delivered after theHigh Court granted the appellant leave to appeal on this point. So, given the uncertaintyon this legal issue, the respondent in my view acted reasonably by attempting to place thisevidence before this court. The appellant’s opposition to the application on the other handwas not based on whether the evidence sought to be admitted on appeal was relevant.Instead he attempted, without any factual basis, to impugn the respondent’s motives inbringing the application. However, because of the view I have taken on how s 129(1) and s130(3) should properly be interpreted, the further evidence has no bearing on the outcomeof the appeal. In the circumstances I think it is appropriate for each party to pay its owncosts on this aspect.

Credit Transactions

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STANDARD BANK OF SA LTD v ROCKHILL

A JUDGMENT BY EPSTEIN AJSOUTH GAUTENG HIGH COURT11 MARCH 2010

2010 (5) SA 252 (GSJ)

If a credit provider brings an actionfor enforcement of a creditagreement prematurely, it may begiven an opportunity to complywith the conditions necessary foran action against the consumerbefore proceeding with the action.

THE FACTSStandard Bank of SA Ltd

brought an action againstRockhill for repayment of a loan.Clause 14.3 of the mortgage bondupon which the bank’s actionwas based provided that Rockhillchose an address to which noticescould be delivered and acceptedthat any notices posted to theaddress by registered post wouldbe regarded as having beenreceived within fourteen days ofposting.

Section 130(1)(a) of the NationalCredit Act provides that a creditprovider may approach a courtfor an order to enforce a creditagreement if at least 10 businessdays have elapsed since the creditprovider delivered a notice to theconsumer in terms of the Act.

The bank despatched a notice toRockhill on 25 November 2009,and issued summons against himon 17 December 2009. In opposingsummary judgment proceedings,Rockhill alleged that he had notreceived the notices and that anyaction against him was thereforeprecluded.

THE DECISIONSection 129(1)(a) of the Act does

not require that the consumeractually receive the notice ofdefault. However, in clause 14.3,the parties had provided for thedelivery of notices, and theseterms had to be complied with inorder for the bank to succeed inits action against Rockhill.

By virtue of this provision, the10 business days provided for in s130(1)(a) would only commenceafter the fourteenth day from thedate of posting of the letters. Asthe notices are deemed to havebeen received fourteen days afterthey were posted, the 10 businessdays provided for in section130(1)(a) had not elapsed by thetime the summons was issued.The action was thereforepremature.

This did not establish a bonafide defence to the action forsummary judgment purposes,but did result in the applicationfor summary judgment beingpostponed to a later date pendingcompliance with the contractualterms.

Credit Transactions

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GROENEWALD NO v M5 DEVELOPMENTS (CAPE)(PTY) LTD

A JUDGMENT BY LEACH JA(NAVSA JA , CLOETE JA , LEWISJA and MHLANTLA JAconcurring)SUPREME COURT OF APPEAL31 MARCH 2010

2010 (5) SA 82 (A)

An appeal by an unsuccessfultenderer to a municipality must beassessed in relation to that tendereronly and does not entitle otherunsuccessful tenderers to anassessment of their failed tendersas well.

THE FACTSIn 2007, the Overstrand

Municipality invited tenders forthe provision of low-cost housingwithin its area of jurisdiction. Itreceived sixteen tenders,including that of M5Developments (Cape) (Pty) Ltdand of another company knownas ASLA.

A firm of consulting engineersevaluated the tenders, andallocated points to each of them inaccordance with the PreferentialProcurement Policy FrameworkAct (no 5 of 2000). M5’s pointswere the greatest of all thetenderers, and slightly higherthan that of ASLA. Themunicipality’s tenderadjudication committee acceptedthe recommendation of theconsulting engineers and themunicipality awarded the tenderto M5.

ASLA lodged an appeal threeweeks after the deadline forsubmission of an appeal. A newlyappointed municipal manager,Groenewald, decided to reassessthe merits of the various tenders.Groenewald determined that themunicipality’s evaluationcommittee had incorrectlyaccepted the consulting engineer’spoints assessment of the varioustenderers, readjusted theallocated points by increasingthose allocated to ASLA, andawarded the tender to ASLA.

M5 applied for a review of thisdecision.

THE DECISIONThe essential question was

whether the municipality hadbeen entitled to award thecontract to the unsuccessfultenderer, ASLA, which had notappealed against the initialdecision to award it to M5.

Section 62(1) of the Systems Act(no 32 of 2000) provides that aperson whose rights are affectedby a decision taken by amunicipality may appeal againstthat decision by giving writtennotice of the appeal and reasonsto the municipal manager within21 days of the date of thenotification of the decision. Theassessment of an appeal is madein the context of the appealactually brought under thissection and not in the context ofany other potential complaint. Ittherefore authorises noassessment of an appeal whichmight have been brought byother parties such as ASLA in thepresent case. The appeal whichwas before the municipality wasthat of another party and notASLA and there was therefore nobasis in this section upon whichthe municipality could haveawarded the tender to ASLA.

The review of Groenewald’sdecision was confirmed.

Contract

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MOSEME ROAD CONSTRUCTION CC v KING CIVILENGINEERING CONTRACTORS (PTY) LTD

A JUDGMENT BY HARMS JA(NUGENT JA , CLOETE JA , LEWISJA and THERON AJA concurring)SUPREME COURT OF APPEAL15 MARCH 2010

2010 (4) SA 359 (A)

In considering an application to setaside the award of a tender wherethere are no allegations of fraud orcorruption, a court must take intoaccount the possible consequencesof a declaration of invalidity of theaward.

THE FACTSThe Gauteng Department of

Public Transport invited tendersfor the construction of a section ofa dual carriageway. Theadvertisement specified thecategory of civil engineeringcontractors who could tender, iethose capable of performingcontracts having a value in excessof R100m.

King Civil EngineeringContractors (Pty) Ltd submitted atender. When the Departmentfirst advertised for tenders, it wasnot eligible to do so as it did notfall within the category of civilengineering contractors required.However, the tender documentswere later amended so as to allowfor tenders from other categoriesof contractors which includedKing.

King scored the highest pointsunder the PreferentialProcurement Policy FrameworkAct (no 5 of 2000) but MosemeRoad Construction CC wasawarded the contract because itwas considered unfair that theoriginal advertisement hadexcluded contractors whichmight have been unaware of thelater change of tender conditions.Moseme had fallen within thecategory of civil engineeringcontractors required, asoriginally advertised.

Moseme began work on theconstruction of the carriageway,and this work proceeded to thepoint where there were three

more months to run beforecompletion.

King brought an application toset aside the award of the tenderto Moseme, and asked that thecourt award the contract to itself.

THE DECISIONWhen deciding whether or not a

tender award should be declaredinvalid, a court must consider thepossible consequences of such adeclaration. In the present case,the most important factor wasthat when tenders wereoriginally called for, Moseme andnot King, qualified to make thetender. The effect of revoking thetender in favour of Moseme andawarding it to King wouldtherefore be that an innocentparty would be affected.

It was contended that thecontract in question was one inwhich the respectiveperformances were remeasurable,and that this meant that eachcontractor’s work could beassessed to the extent that it hadbeen performed, or would need tobe performed, and remuneratedappropriately after King hadtaken over the work which it wasentitled to do. However, this toodid not take into account the factthat Moseme was an innocentparty and would be unfairlyaffected by having the award ofthe tender taken from it.

King was therefore not entitledto an order setting aside theaward. The application failed.

Contract

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FEDBOND PARTICIPATION MORTGAGE BONDMANAGERS (PTY) LTD v INVESTEC EMPLOYEEBENEFITS LTD

A JUDGMENT BY MLAMBO JA(HARMS DP, MTHIYANE JA,CAHALIA JA and SALDULKERAJA concurring)SUPREME COURT OF APPEAL31 MARCH 2010

2010 SACLR 173 (A)

A manager under a participationmortgage bond scheme is obliged tohonour obligations undertaken interms of investments made byinvestors. No commonunderstanding not reduced towriting entitling a manager toextend investments longer thantheir stated period is binding on theinvestor.

THE FACTS Fedbond ParticipationMortgage Bond Managers (Pty)Limited was the manager of amortgage participation mortgagebond scheme. As manager, itaccepted funds invested forparticipation in mortgage bonds,the investor’s funds beingallocated to lending on thesecurity of identifiable mortgagebonds over a period of five years.This was originally done underthe provisions of theParticipation Bonds Act (no 55 of1981), and then under theprovisions of the successor Act,the Collective InvestmentSchemes Control Act (no 45 of2002).

The terms and conditions ofinvestment were provided for inthese Acts, as well as inregulations promulgated in termsof them, and in Rules issued byFedbond in relation to theinvestments. They included theprovisions that an investmentwas to be for a minimum of fiveyears and that withdrawal of theinvestment was permitted uponthree months’ notice being given.

In 1997, Fedsure Life AssuranceLtd agreed to invest funds inFedbond’s participation bondscheme. From that year and until2002, Fedlife invested a total ofR46 030 000 in the scheme.

In 2001, Fedlife was acquired bythe Investec Group and its namewas changed to InvestecEmployee Benefits Ltd (IEB). In2006, IEB gave three months’notice of withdrawal of the totalinvestment under the scheme. Thefollowing year, IEB transferred toCapital Alliance Life Ltd andChannel Life Ltd portions of theinvestment. Those three partiesthen demanded payment of theinvestment made with Fedbond.

Fedbond refused to repay theinvestments on the grounds thatwhen they were originally made,

there was a commonunderstanding of members of theFedsure Group that investmentwould not be called upsimultaneously, but withdrawalswould be gradual and individualnotices would be required atintervals not shorter than thoseat which those investments hadinitially been made.

An alternative reason forrefusing to repay the investmentswas that no debtor-creditorrelationship between the partiesexisted because the investors’debtor was not Fedbond but thenominee company under whichthe mortgage bonds wereregistered. The nominee companywas Fedbond Nominees(Property) Ltd. It had been formedand registered for the purpose ofholding participation bonds,included in the scheme, in trust asnominee for or representative ofparticipants in the scheme.

IEB, Capital Alliance andChannel applied for an order thatFedbond repay the totalinvestment made.

THE DECISION(per Mlambo JA)

The terms of the commonunderstanding contended for byFedbond implied that theinvestment was to be for a periodlonger than five years and therecould be no lump sumwithdrawal. They thereforedirectly contadicted the termsprovided for in the legislation andin the Rules published byFedbond itself. They wereinconsistent with the agreementso recorded and were thereforeinadmissible as evidence of theinvestment agreement.

It was also evident fromFedbond’s initial reaction to thenotice of withdrawal that nocommon understanding existed.At that stage, it did not raise theobjection that a withdrawal

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could not be effected contrary toany such common understanding,the contention having been raisedonly in its answering affidavitafter the litigation had begun.

As far as the contention basedon the lack of a debtor-creditorrelationship was concerned,Fedbond relied on the terms ofsection 6(1) of the ParticipationBonds Act, which was not alteredby its repeal in the CollectiveInvestment Schemes Control Act.This provides that the debtsecured by a participation bondshall to the extent of theparticipation granted to anyparticipant be a debt owing bythe mortgagor to such participantand not to the nominee company,and the rights conferred by theregistration of any such bondshall, notwithstanding theregistration of the bond in thename of the nominee company, bedeemed to be held by the

participants.This section however, does not

detract from the fact that whenFedbond took investments asmanager of the scheme, it alsoundertook certain obligationstoward investors, including theobligation to repay theinvestment except incircumstances where themortgagor in question had notitself repaid the funds lent to it.(per Harms DP)

Fedbond’s contention that it wasentitled to rely on the commonunderstanding was an attempt toshow that it fell within Rule22(2)(a) of the CollectiveInvestment Scheme Control Act ,which provides that a managermay withhold consent to thewithdrawal of an investmentsubject to the manager furnishingreasons for withholding suchconsent. However, the Ruleapplies where there has been no

agreement concerning theinvestment. In any event, thereason given by Fedbond - thatthere was a commonunderstanding of the kind alleged- was not in fact a reason, but anexcuse.

As far as the contention bases onabsence of a debtor-creditorrelationship was concerned, itwas an over-simplification to saythat the investor’s debtor was thenominee company only. Themanager of the scheme alsounderstook to manage andstructure the investment so that ifan investor gave notice ofwithdrawal, the bond could becalled up for that purpose. Thiscreated an obligation on themanager that it would be liable torepay the funds to the investor ifthe nominee company had notacquired the funds from themortgagor to do so.

The application was granted.

I am of the view that the relationship created when an investment is made in such ascheme is tripartite in nature. Whilst the respondents, as investors, are in fact creditorsvis a vis the mortgagor(s), Fedbond remains in the picture as the administrator of theinvestment scheme. Whilst it is further correct conceptually that Fedbond as manager ofthe scheme does not become a debtor to a participant, the agreement between them providesfor certain obligations by either. The agreement encompasses a relationship betweenFedbond and the respondents in terms of which once they have complied with theagreement and the rules in terms of notice and payment of the relevant fees and charges,Fedbond as manager must honour the withdrawal notice, unless it contends that thefunds are not available which will kick-start the process envisaged in rule 15 and 16.Those rules essentially provide for the procedure to be followed by a participant regardingthe enforcements of its injusts against a defaulting mortgagor.

Contract

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MAREE v BOOYSEN

A JUDGMENT BY NAVSA JA(MLAMBO JA and BOSIELO JAconcurring)SUPREME COURT OF APPEAL31 MARCH 2010

2010 (5) SA 179 (A)

The protective provisions of theLong Term Insurance Act (no 52 of1998) and rules and regulationspromulgated thereunder apply toinsurer, intermediary and insured,and their effect cannot be avoidedby concluding any agreementattempting to do so.

THE FACTSBooysen was Maree’s insurance

broker and financial consultant.In July 2006, Booysen advisedMaree to have his life insurancepolicy with Sanlam paid up andreplace it with a Momentum lifepolicy. Maree did so.

Thereafter, Maree took the viewthat Booysen had advised himwrongly and had been motivatedby a commission which would bedue to him upon Maree taking upthe policy with Momentum. Hetherefore cancelled the policywith Momentum and terminatedBooysen’s services as his broker.

The effect of Maree’s cancellationof the policy was that Booysenlost a commission of R47 738,27which would have been due tohim from Momentum Life.Booysen contended that he andMaree had agreed that Booysenwould be compensated for theadvice he gave Maree, from thecommission due to him fromMomentum Life.

In terms of rule 6.1 of thePolicyholder Protection Rulespromulgated in terms of the LongTerm Insurance Act (no 52 of1998) a new policyholder isentitled to cancel any policyduring a cooling-off period. Thisperiod subsisted at the timeMaree cancelled the policy withMomentum Life. Section 49 of theAct provides that noconsideration shall be offered orprovided by a long-term insureror a person on behalf of the long-term insurer or accepted by anyindependent intermediary forrendering services asintermediary other thancommission contemplated in theregulations and otherwise than inaccordance with the regulations.

Booysen brought an actionagainst Maree for payment of thelost commission. Maree defendedthe action on the grounds that nocommission was due to Booysenas he had cancelled the policy incircumstances that did not entitleBooysen to payment ofcommission in terms of the Act.

THE DECISIONThe agreement concluded

between Maree and Booysen wasnot exempt from the provisions ofthe Act and the Rules. The Actand the Rules apply to allagreements and arrangementsconcluded between parties,whether they be insurer,intermediary or insured. Section49 is not ambiguous in thisregard, and would apply to theagreement concluded betweenMaree and Booysen.

The effect of section 49 was tolimit the consideration to beoffered by a long-term insurer, topersons such as intermediaries, tocommission as contemplated inthe regulations. Furthermore, itrestricts the consideration thatmay be accepted by anindependent intermediary, forrendering services as such, tocommission as contemplated bythe regulations. Since thecancellation of the policy tookplace within the cooling offperiod, no commission waspayable to Booysen, and noagreement between him andMaree could change this. Ifenforcement of Booysen’s claimwas to be permitted, the effect ofthis would be to penalise aconsumer financially forexercising the statutory right tocancel a policy within thecooling-off period.

The action was dismissed.

Insurance

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MITCHELL v BEHEERLIGGAAM RNS MANSIONS

A JUDGMENT BY MURPHY JNORTH GAUTENG HIGH COURT4 JUNE 2010

2010 (5) SA 75 (GNP)

A body corporate of a sectional titlescheme may charge compoundinterest on arrear levies due fromthe owner of a sectional title unit.

THE FACTSMitchell bought a sectional title

unit in the sectional title schemeRNS Mansions at a sale inexecution. The terms of salerecorded that the purchaserwould be liable to pay alloutstanding levies due to thebody corporate. Shortly after thesale, the body corporate deliveredits account of oustanding levies toMitchell. This reflected an amountowing of R180 579.26. Thisamount included interest whichhad been capitalised.

Mitchell contended that as thecapital amount outstanding wasonly R55 061.75, the interestclaimed was unlawful in that itwas contrary to the in duplumrule. He contended that the bodycorporate was not entitled tocharge compound interest on thearrear levies, and brought anapplication for an order declaringthat it was only entitled to chargesimple interest.

THE DECISIONIt would not be necessary for

specific authorisation for thecharging of compound interest tobe given in the Sectional Titles Actbefore the body corporate wouldbe entitled to charge such interest.

Section 37(2) of the Act providesthat any contributions leviedshall be due and payable on thepassing of a resolution to that

Property

effect by the trustees of the bodycorporate, and may be recoveredby the body corporate by actionin any court of competentjurisdiction from the persons whowere owners of units at the timewhen such resolution was passed.Rule 31(5) of the standard rulesapplicable to sectional titleschemes provides that an ownershall be liable for and pay all legalcosts, including costs as betweenattorney and client, collectioncommission, expenses andcharges incurred by the bodycorporate in obtaining therecovery of arrear levies, or anyother arrear amounts due andowing by such owner to the bodycorporate, or in enforcingcompliance with the rules, theconduct rules or the Act.

It is clear from the rule,specifically in its reference to‘other arrear amounts’ , that itrefers to a broader category ofunpaid debts than arrear leviesand therefore would includeinterest on unpaid levies. Thefollowing sub-rules authorisesthe body corporate to chargeinterest on arrear amounts. On aliteral interpretation, this wouldinclude compound interest.

The body corporate wastherefore not prevented fromcharging compound interest bythe Act, and it was entitled to doso.

110

MKHIZE v UMVOTI MUNICIPALITY

A JUDGMENT BY WALLIS JKWAZULU NATAL HIGHCOURT21 MAY 2010

2010 (4) SA 509 (KZP)

If the right to housing is not inissue in a sale in execution of fixedproperty, then the requirement ofjudicial oversight of a court orderthat property be attached and soldin execution falls away.

THE FACTSIn 2003, Mkhize’s house was

attached and sold in execution.The plaintiff was UmvotiMunicipality, the cause of actionbeing unpaid rates and othercharges due to the municipality.Mkhize did not live in the houseat any stage, but resided atseparate property he owned.

The attachment and sale of theproperty and its transfer tookplace prior to the judgmenthanded down in the case of Jafthav Schoeman 2005 (2) SA 140 (CC).The effect of this judgment was torequire that when implementingthe sale in execution of a debtor’sfixed property in terms of termsof section 66(1)(a) of theMagistrates’ Courts Act (no 32 of1944), a court must make an orderfor the sale in execution, afterconsidering all relevantcircumstances.

Mkhize contended that althoughthe judgment in Jaftha had beenhanded down after the sale inexecution of his property, thefailure to comply with thestrictures contained in itrendered the sale void.

THE DECISIONThe judgment handed down in

the case of Jaftha v Schoeman tookeffect from the date on which thenew Constitution began, not fromthe date of the judgment, becauseJaftha interpreted the effect of thenew Constitution from itsinception. It was therefore noanswer to Mkhize’s claim tocontend that it sought relief inrespect of events that had takenplace prior to that judgment.

However, if Jaftha were to beapplied to the attachment andsale in execution of Mkhize’sproperty, those events would notbe affected. If the question wasasked whether the sale inexecution of the propertyinfringed Mr Mkhize’s existingright to adequate housing interms of the Constitution, theanswer would be in the negative.On a proper construction of thejudgment and the orders grantedunder it, there was no ground forconcluding that theConstitutional Court consideredor contemplated the result forwhich Mr Mkhize contended, norwas there the slightest indicationthat the court was intending toinvalidate every sale in executionof immovable property in termsof s 66(1)(a) from the date ofcommencement of theConstitution until the date of itsjudgment.

The Jaftha judgment isambiguous to the extent that it isnot clear whether it applies to allsales in execution which hadhithterto taken place withoutjudicial oversight, or to the casebefore it in which the right tohousing was in question. In thesecircumstances, the properapproach to adopt is to focus onthe issue that was raised in Jafthaand to construe its judgment andthe orders it made in the light ofthat issue. Doing so means that ifthe right to housing is not in issuein the particular case, then therequirement of judicial oversightfalls away.

As the right to housing was notin question in the case of Mkhize,there were no grounds foravoiding the sale in execution.

Property

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OFFIT ENTERPRISES (PTY) LTD v COEGA DEVELOPMENTCORPORATION (PTY) LTD

A JUDGMENT BY WALLIS AJA(HARMS DP, LEWIS JA, MAYA JAand HURT AJA concurring)SUPREME COURT OF APPEAL15 FEBRUARY 2010

2010 SACLR 150 (A)

It is not impermissible forexpropriation of property to takeplace in order to achieve the aims ofa private company which has beenestablished to achieve a publicpurpose.

THE FACTS Offit Enterprises (Pty) Ltd

owned three properties situatedin the Coega IndustrialDevelopment Zone. The Zone wasan area demarcated as part of agovernment initiative to create anindustrial area and newdeepwater harbour north of PortElizabeth. Coega DevelopmentCorporation Ltd was establishedto develop the area, itsshareholders being the EasternCape Provincial Government andthe Department of Trade andIndustry. It did so underprovisional operator permitswhich were extended from timeto time.

In 2000, the parties begannegotiations for the sale of theproperties to Coega. After thenegotiations had not resulted inany conclusion, Coega indicatedthat it intended to expropriate theproperties.

Offit brought an application foran order declaring that anyexpropriation would be unlawful.It contended that the permitsunder which Coega acted wereinvalid and that anyexpropriation would not bepermissible under theExpropriation Act (no 63 of 1975).

THE DECISIONSection 2(1) of the Expropriation

Act empowers the Minister ofPublic Works to expropriateproperty under certainconditions, if the propertyconcerned is required for publicpurposes. In terms of section3(2)(h) if a juristic person hasbeen charged with theadministration of the law andrequires property for theattainment of its purposes, andcannot acquire it on reasonableterms, the Minister mayexpropriate the property onbehalf of the juristic person.

The mere fact that Coega was aprivate company did not in itselfmean that expropriation ofproperty for its purposes couldnot be for a public purpose. Itsshareholders were both squarelyin the public sector and theirresponsibility was to achieve thepublic purpose of industrialdevelopment and employment.Expropriation of Offit’s propertieswould therefore serve a publicpurpose and the conditions ofsection 2(1) were thereforesatisfied.

Property

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STANDARD BANK OF SOUTH AFRICA v MASTER OF THE HIGH COURT

A JUDGMENT BY NAVSA JA(PONNAN JA, MAYA JA andSNYDERS JA concurring, GRIESELAJA dissenting)SUPREME COURT OF APPEAL19 FEBRUARY 2010

2010 SACLR 84 (A)

Liquidators of companies may notplace themselves in a positionwhere their personal interestsconflict with those of the companythey are liquidating, and should notsimultaneously act as liquidators ofcompanies with claims

THE FACTS Mr B.B. Nel and Mr M.L. DeVilliers were the liquidators ofIntramed (Pty) Ltd. The StandardBank of South Africa, a creditor,applied for the liquidators to beremoved from office.

Before being placed inliquidation, Intramed was awholly-owned subsidiary ofMacmed Healthcare Ltd. Shortlybefore Intramed’s liquidation,Macmed purchased certainbusinesses for R400m, andtransferred one of them toIntramed which managed andconducted the business as aviable proposition. To finance theacquisition of the businesses,Macmed arranged a series oftransactions involving theprovision of a loan to Intramedby Peregrine Finance (Pty) Ltdentitling Peregrine to subscribefor shares in Intramed atmaturity date of the loan.Peregrine ceded its rights toWillridge Investments (Pty) Ltdwhich offered to Macmed fixedrate redeemable preference sharesto be issued by LeoridgeInvestments (Pty) Ltd, asubsidiary of Peregrine. Macmedwould make a security depositwith Willridge entitling it towithdraw funds over the next tenyears. Macmed obtained a putoption in respect of the preferenceshares exercisable in the event ofdefault by Leoridge. Macmed alsoobtained a guarantee in respect ofall the Peregrine companies’obligations.

After Intramed was placed inliquidation, Macmed made aclaim against it in the sum ofR325m. Macmed itself was placedin liquidation, its appointedliquidator being Nel. Theliquidators accepted the claimand it was admitted by theMaster.

Macmed’s claim was based onthe implementation of thefinancing arrangements

concluded for the acquisition ofthe businesses. Standard Bankcontended that thesearrangements did not give anybasis for Macmed’s assertion thatit had lent the sum of R325m toIntramed, since the loan toIntramed was made by Peregrineand accounting entries showedthat this is what in fact tookplace. The liquidators took theview that Macmed was entitled tobase its claim on a loan from itselfto Intramed.

The bank claimed that inadmitting a claim without properfoundation and supportingdocumentation showing a loanfrom Macmed to Intramed, theliquidators showed that theywere not fit for office. On the basisof this allegation, and theallegation that the liquidators hadmisappropriated estate funds inthat they had brought expensiveproceedings to review and setaside a decision that their fee asliquidators be reduced. The bankbrought an application for theirremoval as liquidators.

THE DECISIONWhile it was not possible for the

financing structure to be fullyassessed, the manner in whichthe Macmed claim was treated bythe liquidators gave cause fordisquiet. It was their duty asliquidators to act with care anddiligence, and examine allavailable books and documents inconnection with it. Yet, certainaspects were not given sufficientattention. This includedIntramed’s and Macmed’s pre-liquidation accounting records,the concerns expressed byinterested parties and theimplementation of the financialstructure by which Intramed hadreceived its financing. It was clearthat these issues were not giventhe attention they deserved, suchconsideration as was given beingperfunctory and dismissive.

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As liquidator of both Macmedand Intramed, Nel was placed ina conflict situation in regard toMacmed’s claim againstIntramed. As liquidator ofIntramed, he was obliged toassess the competency of theMacmed claim, but as liquidatorof Macmed, was obliged to act inits interests in making the claim.

As far as the allegation ofmisappropriation of estate fundswas concerned, this rested on theallegation that the reviewproceedings were inadvisable and

directed at the promotion of theliquidators’ interests personally.In the bringing of the reviewproceedings, the liquidators hadacted in their own interests, andhad not kept this distinct fromtheir duties as liquidators andhad used Intramed’s funds inreckless disregard of its interests.

The liquidators had not acted inaccordance with the standards tobe expected of the liquidators ofcompanies and were to beremoved as liquidators.

It is clear that once a claim is proved a liquidator is under an obligation to examine allavailable books and documents. The mere admission of a claim does not ratify it ormake it res judicata. The importance of corroborating documents is clear. Thepresiding officer is obliged to deliver every document in support of the claim to thetrustee. In the scheme of things, liquidators are required to examine all available booksand documents for corroboration or comparison. In Estate Friedman v Katzeff 1924WLD 298 the court, in dealing with a similar section in the previous Insolvency Act32 of 1916, said the following at 304:‘In my view there can be no doubt that the word “shall” where used in sec. 43 of theAct is peremptory and not directory, and it is therefore the duty of the Court to seethat the provisions of the Statute are complied with.’The liquidator’s duties in this regard are therefore peremptory.

Insolvency

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ABSA BANK LTD v BERNERT

A JUDGMENT BY NUGENT JA(CACHALIA JA, MALAN JA,TSHIQI JA and MAJIEDT AJAconcurring)SUPREME COURT OF APPEAL29 MARCH 2010

2010 SACLR 192 (A)

A bank is entitled to withdraw astatement recorded in an authoriseddocument of the bank incircumstances where the documentis potentially misleading.

THE FACTS Fawaz Bin Abdullah Al-Khalifaagreed to invest millions ofdollars in a plant for theproduction of vehicles in respectof which Bernert held designrights. As a condition for hisinvestment, the sheikh requiredBernert’s corporation, RotraxInternational CC, to procure aformal undertaking and aguaranteed interest rate forUS$6m from an AAA-rated SouthAfrican banking institution.

Bernert was given tounderstand that compliance withthe condition would entail awritten assurance by a SouthAfrican bank that it would acceptUS$6m on fixed deposit, and thatit would return the money whenthe deposit matured. Incompliance, he obtained fromAbsa Bank a document addressedto Emirates Bank International inwhich Absa confirmed thatRotrax’s financial adviser, acertain Mr Fanjek, would beguaranteed a fixed deposit ofUS$6m at Absa. The document,headed ‘Verbiage of Guarantee’,also contained a number of termsand conditions includingreferences to a guaranteedinvestment and a loan approvedby Emirates Bank. The documentwas signed by an authorisedsignatory of Absa.

When it came to Absa’sattention that the document hadbeen issued, its attorneyaddressed a letter to EmiratesBank in which it asserted that thedocument had been signedwithout authority to do so, and inirregular circumstances, andshould be disregarded. The sheikhwas informed of this and as a

result, withdrew his interest ininvesting in the production plant.

Bernert then brought an actionagainst Absa claiming that as aresult of it having wrongfully andnegligently or intentionallywritten the letter to EmiratesBank, the investment had beenwithdrawn and in consequenceBernert had sustained loss ofprofits in the sum of R187m.

THE DECISIONLiability for negligent

misstatement resulting ineconomic loss depends on proofthat the party making themisstatement, made it to theparty which relied on thestatement. However, in this case,the alleged misstatement wasmade by Absa to Emirates Bankand not to Bernert.

Apart from this however, theessential question was whetherAbsa was obliged to allowEmirates Bank, and any otherthird party, to rely on itsauthenticity. Because thedocument itself was vague, to thepoint that it was meaningless. Itdid not clearly state the rightsand obligations of the interestedparty, but amounted to acompendium of gibberish. Beingrecorded on the letterhead of amajor bank, it was capable ofmisleading people, and Absa wasentitled to take steps to preventthat from happening. This is whatit did when its attorneyaddressed Emirates Bank.

Whatever the authority thesignatory to the document mighthave had to represent Absa, hedid not have the authority to signthe document.

The action failed.

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VILVANATHAN v LOUW N.O.

A JUDGMENT BY THRING J(MOOSA J and BAARTMAN Jconcurring)WESTERN CAPE HIGH COURT19 MARCH 2010

2010 (5) SA 17 (WCC)

A judgment of the High Courtcannot be rescinded simply becauseit has been satisfied in full by thejudgment debtor, and the judgmentcreditor consents to its rescission.

THE FACTSSaambou Bank Ltd sued

Vilvanathan for repayment of aloan. Vilvanathan did not defenedthe action, and in April 2003,judgment by default was grantedagainst him.

Vilvanathan subsequently paidthe judgment debt in full,together with interest and costs.On the strength of having doneso, he brought an application forrescission of the judgment takenagainst him. Saambou’ssuccessor, Firstrand Ltd, affirmedthat it did not oppose theapplication and that it consentedto the rescission of the judgment.

THE DECISIONThere are a number of grounds

upon which a rescission ofjudgment may be ordered, one ofthem being on common lawgrounds and the others beingprovided for in the Rules of Court.

Common law grounds requirethat the applicant for rescissiongive some reasonably satisfactoryexplanation why the judgmentwas allowed to go by default, and

show a bona fide defence which,prima facie, carries some prospectof success. This means that anapplicant must do more thansimply allege that the judgmentdebt has been paid in full andthat the judgment creditorconsents to the rescission of thejudgment. Were a court to allowrescission of judgment simply onthose grounds, this wouldinterfere with the finality ofjudgments and not be in thepublic interest. The applicantmust show sufficient cause forrescission of the judgment.

Rule 31 of the Rules of Courtrequire that rescission of ajudgment may be ordered upongood cause being shown. This hasbeen held to mean that theapplicant must show that he hasa bona fide defence to the claimwhich had been brought againsthim. Vilvanathan had not statedhe had had any defence to theaction which had been broughtagainst him by Saambou. Therewas therefore no basis in thisRule for rescinding the judgment.

The application was dismissed.

Credit Transactions

An application for rescission brought under rule 31 is doomed tofailure unless the applicant can show ‘good cause’ or ‘sufficientcause’, and that means that he must establish, inter alia, that hehas a bona fide defence to the plaintiff’s claim against him.

116

AFRICAN BANK LTD v MYAMBO N.O.

A JUDGMENT BY DU PLESSIS J(MAKGOKA J and POSWA Jconcurring)NORTH GAUTENG HIGH COURT10 DECEMBER 2009

2010 (6) SA 298 (GNP)

The procedure of obtainingjudgment by consent in terms ofsection 58 of the Magistrates’Courts Act (no 32 of 1944) is notcontrary to the provisions of theNational Credit Act (no 34 of 2005).

THE FACTSAfrican Bank Ltd advanced a

loan to the second respondent, ata time when the National CreditAct (no 34 of 2005) had not yetcome into operation. The secondrespondent defaulted in repayingthe loan, as a result of which, thebank issued a demand forrepayment of the loan. Uponreceiving a second demand forpayment, the second respondentconsented to judgment againsthim, and agreed to repayment ofthe loan in monthly instalments.This took place when theNational Credit Act had comeinto operation.

The bank then applied forjudgment in terms of section 58 ofthe Magistrates’ Courts Act (no 32of 1944). The clerk of the courtreferred the application to themagistrate, who refused to grantjudgment on the grounds thatjudgment by consent is contraryto the purposes of the NationalCredit Act. The bank applied foran order reviewing themagistrate’s decision.

The matter was also referred tothe National Credit Regulator.The regulator intervened in thematter by applying for certaindeclaratory orders relating to theapplication of the National CreditAct in the context of applicationsunder consents to judgmentagreed to by debtors.

THE DECISIONThe National Credit Act did not

repeal section 58. This is evidentfrom the fact that the Act makesprovision for a mechanism toresolve any conflict betweensection 58 and its own provisions.The effect of section 58 is to allowa cost-effective and speedy meansof debt collection. It is in theinterests of consumers and creditproviders that it be implementedin appropriate circumstances. Themagistrate was therefore wrong

in holding that it is a provisionwhich is contrary to the purposesof the National Credit Act.

As far as the declaratory orderswere concerned, these were to bedetermined upon the premise thatwhen consent to judgment isgiven, it is given based on thecause of action set out in thesummons. The declaratory ordersapproved by the court were:

The clerk of the court may referan application for consent tojudgment in terms of section 58 tothe court;

A summons upon which anapplication for consent tojudgment is made must complywith the notice requirements ofsection 130(3) of the NationalCredit Act, and must attach acopy of the notice sent to thedebtor in terms of section 129 ofthat Act;

If judgment by consent in termsof section 58 is sought,magistrates are entitled tointerrogate the applicant, andmay require proof by a plaintiff ofany fact or document pertainingto the underlying cause of actionso as to determine whether acredit agreement under theNational Credit Act is at issue;

If clerks of the court have reasonto believe that a particular creditagreement may constitute aninstance of reckless credit asprovided for in section 80 of theNational Credit Act, they mustrefer the request for consentjudgment to the court;

If a plaintiff seeks judgment byconsent in terms of section 58,based on a cause of action arisingfrom a credit agreement underthe National Credit Act, and it isalleged that the defendant is over-indebted, clerks of the court mustrefer the application to the court.In such cases magistrates areentitled to interrogate theapplication for judgment, and inso doing they may require proof

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by a plaintiff of any fact ordocument so as to enable thecourt to determine whether itshould act in terms of the section85 of the National Credit Act;

A credit provider seeking toenforce a credit agreement mustallege that it is registered as suchor that it is, or was when the

agreement was concluded, interms of the National Credit Actnot required to be so registered;

Clerks of court and magistratesmay interrogate the applicationfor judgment as to thecomputation of the admitteddebt.

BMW FINANCIAL SERVICES (SA) (PTY) LTD v MUDALY

A JUDGMENT BY WALLIS JKWAZULU NATAL HIGHCOURT20 AUGUST 2010

2010 (5) SA 618 (KZD)

Once a credit provider has taken allsteps necessary to commence legalproceedings against a consumer forenforcement of a credit agreement,the consumer is debarred fromapplying for debt review undersection 86 of the National CreditAct (no 34 of 2005).

THE FACTSMudaly bought a car from BMW

Financial Services (SA) (Pty) Ltdbut defaulted in paying for it inthe five-year period agreed forpayment.

On 19 May 2009 BMW sent anotice to Mudaly in terms ofsection 129(1)(a) of the NationalCredit Act (no 34 of 2005). On 8June 2009, Mudaly applied to afirm of debt counsellors for debtreview in terms of section 86(1) ofthe Act. A proposal formulatedby the debt counsellor, andcirculated to creditors, includingBMW, was rejected. On 7 October2009 attorneys acting on theinstructions of the debt counsellorlodged an application for an orderfor the rearrangement ofMudaly’s obligations in terms ofsection 86(8)(b) of the Act. Thatapplication was not served onBMW until 4 December 2009.

On 30 October 2009, prior toservice on it of Mudaly’sapplication, BMW gave notice interms of section 86(10) of the Actto terminate the debt review. On2 November 2009, it sent a letter

cancelling the credit agreement.On 11 December 2009, BMWbrought an application forrepossession of the car.

Mudaly opposed the applicationon the grounds that untildetermination of his debt reviewapplication, BMW was notentitled to an order ofrepossession, alternatively thatuntil the court made an order torearrange his obligations, he wasentitled to retain possession of thecar.

THE DECISIONSection 86(2) of the Act provides

that an application for debtreview may not be made inrespect of, and does not apply to,a particular credit agreement if,at the time of that application, thecredit provider under that creditagreement has proceeded to takethe steps contemplated in section129 to enforce that agreement.

The question was whether, as aresult of BMW having sent thenotice to Mudaly on 19 May 2009,the parties’ credit agreement felloutside the process of debtreview.

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The steps contemplated insection 129 are the steps a creditprovider must take in order toentitle it to begin legalproceedings to enforce the creditagreement. Once those steps havebeen taken, the consumer isdebarred by section 86(2) fromapplying for debt review. There isnothing in the Act which wouldsuggest any other interpretationof this section and it wasconsistent with the purposes theAct seeks to achieve.

A consumer may apply for debtreview in terms of a number ofdifferent provisions in the Act,but should the consumer wish todo so under section 86, then theconditions of that provision mustapply. These include the conditionthat the application for debtreview take place prior to theoccurrence of any need to resortto litigation. Accordingly, the

provision cannot be construed soas to create a barrier to legitimaterecovery proceedings.

BMW contended that in anyevent, it had terminated the debt-review process by having givennotice of termination on 30October 2009. Mudaly’s responseto this was that as he had alreadylodged an application for an orderfor the rearrangement of hisobligations in terms of section86(8)(b) of the Act, such atermination was ineffective.However, this application wasnot made timeously, having onlybeen served on BMW on 4December 2009, and couldtherefore not prevent thetermination of the debt-reviewprocess.

There being no grounds foropposition to BMW’s application,an order cancelling the agreementand directing repossession of thecar was given.

Credit Transactions

The correct interpretation of s 86(2) lies somewhere between the views of those who holdthat it is triggered by the giving of notice under s 129(1) (a), and those who contend thatit only operates once legal proceedings have commenced. In my view the properconstruction is that the bar in s 86(2), to the inclusion of a particular credit agreement ina debt-review process, comes into existence when the credit provider under that agreementhas taken all steps necessary to enable it lawfully to commence legal proceedings. If allthe requirements laid down in ss 129 and 130 for the commencement of legal proceedingsto enforce the agreement have been satisfied a debt-review application under s 86(1) willnot extend to that credit agreement.

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ABSA BANK LTD v HAVENGA AND SIMILAR CASES

A JUDGMENT BY HORWITZ AJNORTH GAUTENG HIGH COURT10 AUGUST 2010

2010 (5) SA 533 (GNP)

A creditor bringing an action forenforcement of its rights followingcancellation of a credit agreement,must allege the particular terms ofthe agreement which entitle it tocancel the agreement, alternativelyits common law right to cancel inthe particular case.

THE FACTSAbsa Bank Ltd brought actions

against Havenga and othersalleging default under variouscredit agreements concludedbetween it and them. None of thedefendants defended the actions.

The particulars of claim in eachaction were similar, eachdescribing the motor vehiclewhich was the subject of thecredit agreement, and eachalleging the terms of theagreement, one of which wasalleged to entitle Absa to cancelthe agreement upon breach bythe defendant. The particulars ofclaim affirmed that in the case ofan instalment agreement or lease,the defendant had notsurrendered the property to theplaintiff ‘as contemplated insection 127 of the National CreditAct (no 34 of 2005) [section 130(1)(c) ]’ .

In the Havenga matter, theparticulars of claim alleged thatthe agreement in question entitledAbsa to cancel the agreement.However, the agreement did notinclude a cancellation clause.Upon further enquiry by thecourt, Absa stated that due tolimitations of storage space, itkept only electronic copies of itsagreements and the agreement inquestion only became availableafter the issue of summons. Theparticulars of claim havingfollowed a pro forma, theinconsistency had arisen.

In the other matters, theparticulars of claim contained asimilar allegation, and in eachcase, the agreement in questiondid not include a cancellationclause.

The bank sought defaultjudgment against the defendants.

THE DECISIONIn each case, the bank was

obliged to indicate the provisionof the agreement which entitled itto cancel. In no case had itattempted to do so, relying onlyon hypothetical provisions whichwere not found in the content ofthe applicable agreement. Thisprocedure had been adopted byemploying a computerisedtemplate as a precedent for everymatter in which a debtor haddefaulted, instead of linking theterms of the agreement uponwhich it sued to the rights italleged it was entitled to assertagainst the debtor. In the case ofthe allegation made concerningthe failure to surrender propertyas contemplated in section 127 ofthe Act, the bank had not evenbothered to state the nature of theparticular agreement in issue, butmerely contented itself with ahypothetical statement as towhat the facts should be, whetherthe agreement be an instalmentagreement or a lease. Thejuxtaposing of the two sections ofthe Act in that manner wasunacceptable.

A creditor claiming judgmentagainst a debtor must set out itscase with reasonable clarity sothat the debtor may be informedof the case which it has to meet.Another reason for this is so thatthe court from which relief issought can also know what it isthat the claimant is claiming andthe basis for the claim. It is not forthe court to decipher thecreditor’s claim based on optionswhich the creditor has not takenthe time to select in making itsclaim.

As the bank had not shown thatit was entitled to cancel any of theagreements, default judgmentwas refused.

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JMV TEXTILES (PTY) LTD v DE CHALAINSPAREINVEST 14 CC

A JUDGMENT BY WALLIS JKWAZULU-NATAL HIGHCOURT20 AUGUST 2010

2010 (6) SA 173 (KZD)

An agreement to supply goods oncredit, payment to be made within astated time period, may beconsidered to be an incidentalcredit agreement in terms of theNational Credit Act (no 34 of 2005).

THE FACTSJMV Textiles (Pty) Ltd sold

goods to De Chalain Spareinvest14 CC on credit. It did so in termsof an agreement between themthat included a credit limit andprovided that payment was to bemade within sixty days. Ifpayment was not made withinthat time period, interest at 2%per month would becomepayable on overdue amounts.

JMV brought an action forpayment of the goods, citingsureties for De Chalain as co-defendants. A defence raised tothe action was that JMV Textileswas obliged to be registered as acredit provider in terms of section40 of the National Credit Act (no34 of 2005), and because it wasnot registered, the creditagreement between the partieswas unlawful and void, with theresult that JMV was precludedfrom recovering the purchaseprice of the goods.

In terms of section 40(1) of theAct, a person is obliged to registeras a credit provider if that personis the credit provider under atleast 100 credit agreements, otherthan incidental creditagreements, or the total principaldebt owed to that credit providerunder all outstanding creditagreements, other than incidentalcredit agreements, exceeds thethreshold prescribed in terms ofsection 42(1), an amount of R500000.

JMV contended that theagreement between it and DeChalain was an incidental creditagreement, so that it was notobliged to register as a creditprovider in terms of the Act.

THE DECISIONAn incidental agreement is

defined as an agreement in termsof which an account was tenderedfor goods or services and either orboth of the following conditions

apply: (a) a fee, charge or interestbecame payable when payment ofan amount charged in terms ofthat account was not made on orbefore a determined date; or (b) two prices were quoted forsettlement of the account, thelower price being applicable if theaccount is paid on or before adetermined date, and the higherprice being applicable due to theaccount not having been paid bythat date.

JMV contended that the firstcondition applied. The suretiescontended that section8(3)(a)(ii)(bb) of the Act applied inthat JMV had agreed to bill DeChalain periodically.

In terms of that section anagreement constitutes a creditfacility if, in terms of theagreement: (a) a credit providerundertakes - (i) to supply goods orservices or to pay an amount oramounts, as determined by theconsumer from time to time, tothe consumer or on behalf of, or atthe direction of, the consumer;and (ii) either to - (aa) defer the consumer’sobligation to pay any part of thecost of goods or services, or torepay to the credit provider anypart of an amount contemplatedin subparagraph (i); or (bb) bill the consumerperiodically for any part of thecost of goods or services, or anypart of an amount contemplatedin subparagraph (i); and (b) any charge, fee or interestis payable to the credit providerin respect of - (i) any amount deferred ascontemplated in paragraph (a) (ii)(aa) ; or (ii) any amount billed ascontemplated in paragraph (a) (ii)(bb) and not paid within the timeprovided in the agreement.

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In order to determine if thesureties’ contention was correct,it was necessary to identify thetype of transaction contemplatedin section 8(3)(a). Analysis of theagreement concluded betweenJMV and De Chalain indicatedthat it was not of a typecontemplated in this section. Theagreement was that JMV Textileswould sell goods on credit to DeChalain, and the expectation was

that the price of the goods wouldbe paid each month as it fell due.No fee was to be paid for this andthere was no entitlement to payless than the full amount due eachmonth. The obligation to payinterest would flow from defaultin making timeous payment, notfrom a payment short of the fullamount due.

The agreement was thereforeproperly classified as anincidental agreement.

VOLTEX (PTY) LTD v CHENLEZA CC

A JUDGMENT BY MADONDO JKWAZULU NATAL HIGHCOURT19 MARCH 2010

2010 (5) SA 267 (KZP)

A sale of goods in terms of whichthe seller agrees to deferredpayment of the purchase for a fixedperiod is not a credit transactionsubject to the National Credit Act(no 34 of 2005).

THE FACTSVoltex (Pty) Ltd sold goods to

Chenleza CC following Voltexaccepting an application byChenleza CC for credit facilities.In terms of their agreement,Chenleza was obliged to pay forthe goods within 30 days ofdelivery.

The goods were sold to Chenlezaover a period of six months, thetotal purchase price under thesale agreements amounting toR239 457.57.

Voltex alleged that Chenleza haddefaulted in making payment forthe goods within 30 days ofdelivery, and brought an actionfor payment. Chenleza defendedthe action on the grounds that thesale agreements were creditagreements and therefore subjectto the National Credit Act (no 34of 2005). Since Voltex was notregistered as a credit provider,the sale agreements were void interms of section 40(4) read with

section 89 of the Act.Voltex excepted to Chenleza’s

defence on the grounds that thesale agreements were not creditagreements as defined in the Act,and that accordingly it was not acredit provider and did not needto be registered as such.

THE DECISIONThe relevant provisions of the

Act defining a credit transactionare found in section 8(1), (3) (4)and (5). That most directlyrelevant to the present case wassection 8(3) which provides thatan agreement constitutes a creditfacility if, in terms of thatagreement a credit providerundertakes to supply goods orservices or to pay amounts, asdetermined by the consumerfrom time to time, to theconsumer, and either to defer theconsumer’s obligation to pay anypart of the costs of goods orservices, or to repay to the credit

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provider any part of the payableamount or bill the consumerperiodically for any part of thecost of goods or services, or anypart of the payable amount, and acharge, interest or fee is payablein respect of the deferredobligation or amount payable.

This section does not only applyto a credit card transaction orbank overdraft and can apply toother transactions. In the presentcase, Voltex deferred theChenleza’s obligation to pay thewhole purchase price for 30 days.However, in terms of the creditfacility agreement, Chenleza’s

obligation was to pay the amountowed in full. Since the wholeamount owed was payable on orbefore the specified date or period,this could not be construed asdeferring Chenleza’s obligation topay the purchase price, in themanner contemplated in section8(3). The sale agreements weretherefore not credit transactionsas defined in this section.

The sale agreements clearly didnot fall within any of the othersubsections of section 8.Accordingly, they were notsubject to the Act and the defenceraised by Chenleza was withoutsubstance. The action succeeded.

Credit Transactions

Since the agreements of sale in question do not satisfy all the criteria set out in ss8(1), (3), (4) and (5) of the Act, they cannot be said to be credit agreements as definedin the Act. In the premises, there was no obligation at all on the plaintiff to registeras a credit provider. Accordingly, it follows that all the defences raised by thedefendants in their plea fall away.

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SWINBURNE v NEWBEE INVESTMENTS (PTY) LTD

A JUDGMENT BY WALLIS JKWAZULU NATAL HIGHCOURT, DURBAN22 APRIL 2010

2010 (5) SA 296 (KZD)

An indemnity clause must beconstrued in the context of thecontract in which it exists. If thecontext indicates a limitation onthe scope of the clause, then theindemnity must be understood tohave the limited scope so indicated.

THE FACTSSwinburne was a tenant in a

property owned by NewbeeInvestments (Pty) Ltd.

Clause 17 of the lease providedthat Newbee was responsible forthe maintenance and repair of theproperty but would not beresponsible for any loss ordamage which the Swinburnemight sustain by reason of anyact whatsoever or neglect on thepart of Newbee, or by reason ofthe premises at any time fallinginto a defective state of repair.Clause 26 provided that Newbeewould not be responsible for losssustained as a result of any theft,burglary or fire on the premisesor for any damage suffered as aresult of any negligent act oromission on the part of Newbee.

Swinburne was injured at thepremises, when he was climbinga flight of stairs. He slipped on astair on which sand hadaccumulated following heavyrains, and fell. There was nohandrail at the flight of stairs,and if there had been, Swinburnecould have used this to preventhis fall.

Swinburne claimed ensuingdamages from Newbee. Newbeecontended that it was protectedby the provisions of clause 17 andclause 26.

THE DECISIONClause 17 provided for Newbee’s

obligations in regard to themaintenance and repair of thebuilding, and had to be construedas referring to acts or neglectrelating to obligations of repairand maintenance. They did notextend to the provision of a basicsafety feature such as a handrailfor the stairs on which Mr

Swinburne fell, and therefore didnot assist Newbee in its defence ofthe action.

As far as clause 26 wasconcerned, this provision was tobe construed against thebackground of the general contextof the lease. The lease wasgenerally concerned withregulating the ordinary andnatural consequences of therelationship between landlordand tenant and there was noindication that it was directed ataccidents causing personalinjuries. It also did not dealexpressly with questions ofpossible negligence, except forclause 17.

Clause 26 was to be taken asreferring to loss arising fromdamage to property and not toperson. A reasonable personreading the clause would notunderstand the reference to ‘anydamage’ as extending to a claimfor damages arising frompersonal injury. It appeared in aclause that in other respects wasclearly dealing only with loss ordamage to physical property.There was no word that referredin clear terms to harm to theperson, as would have been thecase had the word ‘injury’ or‘personal injury’ been used. Whilea negligent act or omission maycause both damage to propertyand physical injury to the person,the true question in construingthis clause was whether thereference to ‘any damage’extended to the latter. The clausewas capable of a constructionthat confined its scope to damageto property.

Newbee was therefore not ableto rely on either of these clausesin defending the action fordamages.

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CALIBRE CLINICAL CONSULTANTS (PTY) LTD vNATIONAL BARGAINING COUNCIL FOR THE ROADFREIGHT INDUSTRY

A JUDGMENT BY NUGENT JA(LEWIS JA, PONNAN JA,CACHALIA JA and LEACH JAconcurring)SUPREME COURT OF APPEAL19 JULY 2010

2010 (5) SA 457 (A)

A body does not undertakeadministrative action susceptibleto judicial review when the actionsit undertakes cannot be categorisedas the exercise of a public power orthe performance of a publicfunction.

THE FACTSThe National Bargaining Council

for the Road Freight Industry wasa bargaining council establishedunder the Labour Relations Act(no 66 of 1995). It decided toextend an existing anti-AIDSprogramme by the establishmentof a ‘Wellness Programme’ whichwas intended to provide anti-retroviral treatment to itsmember. It called for tenders forthe submission of proposals forthe implementation of theprogramme.

Calibre Clinical Consultants(Pty) Ltd and Thebe Ya BopheloHealthcare Administrators (Pty)Ltd in partnership, and othersacting as a joint ventureconsortium submitted a tender.In June 2008, the Council notifiedCalibre and other tenderers thatno appointment was to be madeas it had decided not to appoint aservice provider for theprogramme. Two of the reasonsfor the Council’s decision werethat it had been determinedThebe was factually insolventand its primary service provider,a certain Dr Grietjie Strydom,was subject to a restraint of tradeagreement which prevented herfrom performing the requiredservices. The Council hadappointed a firm of auditors toconduct a due diligence report inrespect of all of the tenderers. Thefirm had determined that theconsortium was heavilydependent on Strydom and thatboth its tenure at its premises andits income source were tenuous.The Council had considered thatthe consortium’s reply to this, aswell as a report by a second firmof auditors, had beenunsatisfactory.

Following the rejection ofCalibre’s tender, by a process ofrestricted invitation, andexcluding Calibre, the Councilappointed HIV Managed Care

Solutions (Pty) Ltd to implementthe Wellness Programme.Cailbre brought an application toreview and set aside the Council’sdecision in June 2008 not toappoint a service provider, itsdecision to exclude it from thelater determination of a serviceprovider, and its decision toappoint HIV Managed CareSolutions as its service provider.

THE DECISIONThe decisions of the Council

would be susceptible to reviewonly if they constitute‘administrative action’ as referredto in the Promotion ofAdministrative Justice Act (no 3of 2000) and as appears from thenature of the decision concerned.In essence, this meant that theenquiry in the present case waswhether the council, in makingthe decisions attacked by Cailbre,was ‘exercising a public power orperforming a public function’, orin other words, its conductexhibited features which weregovernmental in nature.

An important indication in suchan enquiry is whether the exerciseof the power or the performanceof the function entails publicaccountability, of the kindapplicable to a functionary orbody which has no specialrelationship with the partiesaffected by it, other than thatthey are adversely affected by itsconduct. The question waswhether the body can properlybe said to be accountable,notwithstanding the absence ofany such special relationship.

A bargaining council, like atrade union and an employers’association, is a voluntaryassociation that is created byagreement to perform functionsin the interests and for the benefitof its members. It cannot be saidto be publicly accountable for theprocurement of services for a

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project that is implemented forthe benefit of its members. Thewellness programme was such aproject. In introducing andimplementing it, the council wasnot performing a function thatwas woven into a system ofgovernmental control or

integrated into a system ofstatutory regulation. Governmentdid not regulate, supervise andinspect the performance of thefunction.

It followed that the council’sdecision was not susceptible toreview. The application wasdismissed.

NKENGANA v SCHNETLER

A JUDGMENT BY BY GRIESELAJA (MPATI P, MHLANTLA JA,SHONGWE JA AND TSHIQI JAconcurring)SUPREME COURT OF APPEAL7 MAY 2010

2010 SACLR 278 (A)

A tender of performance of the fullamount due entitles the tenderer tocounter-performance by the otherparty, even if the tender waspreceded by an insufficient tender.

THE FACTSNkengana and Schnetler

concluded an agreement for thesale of Schnetler’s fixed property.The agreement provided that thepurchase price of R260 000 waspayable in five instalments.

Shortly after conclusion, theparties orally agreed to avariation of the payment terms.Nkengana was obliged to pay thepurchase price by payingamounts due to the bondholderover the property, the StandardBank. Nkengana did so, and thenclaimed he was entitled totransfer of the property againstpayment of a balance of R21945.17.

Schnetler alleged that furtheramounts were due arising fromvarious causes. In response, in hisreplying affidavit, Nkenganaincreased his tender of paymentto cover all amounts due toSchnetler.

Schnetler refused to givetransfer of the property,contending that the tenderoriginally made by Nkenganawas insufficient to entitle him totransfer.

THE DECISIONA valid tender entitling the

tenderer to counter-performancemust be a tender in the fullamount due. The tender originallymade by Nkengana wasinsufficient. Accordingly,Schnetler was entitled to reject it.

However, by the time the finaltender was made in the replyingaffidavit, Nkengana had madesufficient tender to entitle him tospecific performance because thetotal amount tendered thenexceeded the purchase price.Notwithstanding the fact thatthere were past disputesregarding the amount due, thisentitled Nkengana to transfer ofthe property.

Schnetler was obliged to givetransfer of the property toNkengana.

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DELPHISURE GROUP INSURANCE BROKERSCAPE (PTY) LTD v DIPPENAAR

A JUDGMENT BY LEACH JA(MPATI P, NUGENT JA, MALANJA and SERITI AJA concurring)SUPREME COURT OF APPEAL31 MAY 2010

2010 (5) SA 499 (A)

An insurance broker marketing aninsurance product as superior toother insurance products knowingthat the product has not beenunderwritten by any insurer makesa misstatement which may result indamages for economic loss.

THE FACTSDelphisure Group Insurance

Brokers Cape (Pty) Ltd was aninsurance brokerage and anaccredited agent of theinternational insurer, Lloyd’s ofLondon on whose behalf it wasmandated to market a range ofshort-term insurance policies.

Delphisure devised a newinsurance product known as‘Farmsure’ which was intendedto provide cover for farmers inthe event of crop failure. It beganmarketing this product withfarmers. At this time, Lloyds hadnot approved the product norundertaken to insure in the eventof any proposal being made underit. This fact was not made knownto Bexsure, the company withwhich Delphisure had arrangedto undertake the marketing of theproduct.

Dippenaar and the secondrespondent applied to Bexsure forinsurance cover under theFarmsure terms for the 2004season. At the same time, theycancelled the crop insurancecover they had with Mutual andFederal.

Lloyd’s decided not tounderwrite the Farmsureproduct. Delphisure attempted tosecure an alternative underwriterbut was unsuccessful.Dippenaar’s crops failed. When hediscovered that he was withoutcover, he brought an actionagainst Delphisure and Bexsure,claiming that he had suffereddamage as a result of theirmisstatement that the Farmsureinsurance cover was available tohim when in fact it was not.

THE DECISIONDelphisure contended that a

reasonable person would nothave foreseen that farmers whoapplied for the Farmsureinsurance cover would canceltheir applications in respect ofthat cover with other insurers or,at the very least, would only have

foreseen that those who hadalready applied for insurancewould only cancel suchapplications once they hadapplied for and been grantedFarmsure insurance. However,the selling point for the Farmsurecover was that it was superior toother insurance cover. This beingthe case, a reasonable personwould have foreseen that farmerswould cancel their existinginsurance cover in favour of thesuperior product being offered byDelphisure.

The misstatement made byDelphisure could be classified aswrongful considering thefollowing aspects: • whether Dippenaar wasvulnerable to the risk or hadaccepted it under a contractualdisclaimer; • whether the extension ofliability would impose anunwarranted burden on aninsurance broker such asDelphisure or whether it wouldnot unreasonably interfere withits commercial activities; • the nature of therelationship between the parties,contractual or otherwise; • whether the relationshipbetween the parties was one of‘proximity’ or closeness; • whether the statement wasmade in the course of a businesscontext or in providing aprofessional service; • the professional standing ofthe maker of the statement; • the extent to whichDippenaar was dependent uponDelphisure for information andadvice; and • the reasonableness ofDippenaar relying on theaccuracy of the statement.

Taking into account the factorscausing the loss, Delphisure wasliable in delict for the loss sufferedby Dippenaar. Bexsure however,was not liable, since it had notknown that Lloyds had refused tounderwrite the Farmsureproduct.

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JOHANNESBURG METROPOLITAN MUNICIPALITY vGAUTENG DEVELOPMENT TRIBUNAL

A JUDGMENT BY JAFTA J(NGCOBO CJ, MOSENEKE DCJ,CAMERON J, FRONEMAN J,KHAMPEPE J, MOGOENG J,NKABINDE J, SKWEYIYA J, VANDER WESTHUIZEN J andYACOOB J concurring)CONSTITUTIONAL COURT18 JUNE 2010

2010 (6) SA 182 (CC)

A development tribunal actingunder the powers given to it by theDevelopment Facilitation Act (no67 of 1995) may not approveapplications for the grant oralteration of land-use rights whichfall under the heading of ‘municipalplanning’, and may not exclude anybylaw or Act of Parliament fromapplying to land forming thesubject-matter of an applicationsubmitted to it. Developmenttribunals must consider theapplicable integrated-developmentplans, including spatial-development frameworks andurban-development boundaries ofmunicipalities when determiningapplications for the grant oralteration of land-use rights whichare legitimately made to it.

THE FACTSIn November 2003, the owner of

Portion 229 of the farmRoodekrans No 183 IQ, applied tothe Gauteng DevelopmentTribunal under section 31 of theDevelopment Facilitation Act (no67 of 1995) for the establishmentof a land development area, ie atownship to be known asPoortview Extension 19,consisting of twenty one erven. Ofthese, nineteen were proposed tobe residential, one agriculturaland one special for purposes ofaccess. At the time when theapplication was lodged, the landwas zoned agricultural under theapplicable town planning scheme.That zoning did not allowresidential development ortownship establishment. Theproperty fell outside the urbandevelopment boundary of theJohannesburg MetropolitanMunicipality.

The Tribunal approved theestablishment of the landdevelopment area in respect ofPoortview.

On 17 May 2004 the owners ofPortion 228 of the farm RuimsigNo 265 IQ, made a similarapplication to the GautengDevelopment Tribunal undersection 31 of the DevelopmentFacilitation Act for theestablishment of a landdevelopment area, a township tobe known as Ruimsig Extension59. The property was then zonedagricultural and was situatedoutside the municipality’s urbandevelopment boundary.The Tribunal approved theestablishment of the landdevelopment area in respect ofRuimsig.

The municipality refused torecognise the Tribunal’s decisionsand brought an application toreview them and set them aside.It contended that the Tribunal’sdecisions were not authorised by

the Development Facilitation Act,violated the fundamentalrequirement of legality, andusurped its town planningpowers and functions asconferred on it under the LocalGovernment: Municipal SystemsAct (no 32 of 2000).

THE DECISIONThe Development Facilitation

Act has a very wide reach. Itapplies to all land-developmentapplications, irrespective ofwhere the land is located andregardless of whether some otherlaw governs development on it.The question which arose waswhether, by conferring thepowers it did on developmenttribunals, the provisions of thisAct were consistent with theprovisions of the Constitutionregulating the allocation ofpowers and functions tomunicipalities.

Section 156(1) of theConstitution confers powers onmunicipalities including powersrelating to municipal planning. If‘municipal planning’ wasunderstood to include the powerto authorise land-rezoning andestablish townships, then thepowers alleged to be within thecomptence of the Tribunal in factfell within the executiveauthority of municipalities.

The term ‘municipal planning’was not defined in theConstitution. But ‘planning’ inthe context of municipal affairs isa term which has assumed aparticular, well-establishedmeaning. This includes the zoningof land and the establishment oftownships. In that context, theterm is commonly used to definethe control and regulation of theuse of land. Nothing in theConstitution indicated that theword carried a meaning otherthan this commonly understoodmeaning.

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In consequence, the powerssought to be exercised by theTribunal fell under the heading of‘municipal planning’ andtherefore fell outside of thepowers conferred on it under theConstitution. This included thepower of urban and ruraldevelopment which wasconferred on the Tribunal by theConstitution, but which was notbroad enough to include powersforming part of ‘municipal

planning’. It followed that theexpansive interpretationcontended for by the Tribunalwas to be rejected.Those provisions of theDevelopment Facilitation Actunder which the Tribunalpurported to act wereconstitutionally invalid.Development tribunals wereordered to consider the applicableintegrated-development plans,

including spatial-developmentframeworks and urban-development boundaries ofmunicipalities when determiningapplications for the grant oralteration of land-use rights. Itwas also ordered that nodevelopment tribunal establishedunder the Act was entitled toexclude any bylaw or Act ofParliament from applying to landforming the subject-matter of anapplication submitted to it.

Property

The term ‘municipal planning’ is not defined in the Constitution. But ‘planning’in the context of municipal affairs is a term which has assumed a particular, well-established meaning which includes the zoning of land and the establishment oftownships. In that context, the term is commonly used to define the control andregulation of the use of land. There is nothing in the Constitution indicating thatthe word carries a meaning other than its common meaning which includes thecontrol and regulation of the use of land. It must be assumed, in my view, thatwhen the Constitution drafters chose to use ‘planning’ in the municipal context,they were aware of its common meaning. Therefore, I agree with the Supreme Courtof Appeal that in relation to municipal matters the Constitution employs‘planning’ in its commonly understood sense. As a result I find that the contestedpowers form part of ‘municipal planning’.Does the Constitution allocate the same powers to the provincial sphere ?The question that arises is whether the same powers are also part of ‘urban and ruraldevelopment’ under Part A of Schedule 4, as contended for by the respondents. Toconstrue any of the functional areas allocated to provinces as encompassing thecontested powers will not only be inconsistent with the constitutional Scheme asrevealed in the schedules, but also with ss 41.

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SWARTLAND MUNICIPALITY v LOUW NO

A JUDGMENT BY LE GRANGE JWESTERN CAPE HIGH COURT21 DECEMBER 2009

2010 (5) SA 314 (WCC)

There is no conflict between theland use provisions of the Land UsePlanning Ordinance 15 of 1985(Cape) and the Mineral andPetroleum Resources DevelopmentAct (no 28 of 2002). A municipalityis entitled to regulate land usage byrestricting the performance ofmining activity.

THE FACTSThe Hugo Louw Trust owned

property situated within the areaof jurisdiction of the SwartlandMunicipality. The property waszoned as agricultural land.

Elsana Quarry (Pty) Ltd heldmining rights over the land,obtained under the Mineral andPetroleum ResourcesDevelopment Act (no 28 of 2002).It began mining granite on thefarm. A neighbouring ownerobjected to the mining activity,alleging that it had a detrimentaleffect on production ofagricultural goods.

Elsana applied to the SwartlandMunicipality for the rezoning ofits property under the Land UsePlanning Ordinance 15 of 1985(Cape) but later withdrew theapplication, following advice thatit was unnecessary for it to havedone so. Elsana contended that itwas entitled by virtue of themining right which had beenissued to it to continue its miningactivities on the property. Themunicipality contended that,until the property was zonedIndustrial III, Elsana was notpermitted to conduct miningactivities on the property.

THE DECISIONSection 23(6) of the Act provides

that a mining right is subject toany relevant law. This would

include the Land Use PlanningOrdinance whose existence musthave been known to thelegislature at the time the Act wasenacted. Under the ordinance,municipalities assume the powerto act in relation to propertyfalling within their jurisdiction,and it would be incorrect tointerpret the Act so as to preventthe proper functioning of amunicipality in the exercise ofthat power.

The question arose whetherthere was any conflict betweenthe provisions of the Act and theprovisions of the ordinance, inwhich case section 146 of theConstitution would apply. Theordinance regulated land use. Itdid not regulate mining activityor the exercise of mining rights.The competency of themunicipality was therefore notaffected by the provisions of theAct. Rezoning cannot be regardedas a matter connected to theissuing of mineral rights to suchan extent that it is also regulatedthereby, and in fact rendersprovincial and municipalplanning legislation, as providedfor constitutionally, superfluous.The Act is silent on the issue ofrezoning and can therefore not beread as impliedly having repealedlegislation with LUPO’s characterand aim.

The trust was therefore notentitled to permit mining activityon its property.

Property