The law reports – July 2018

July 1st, 2018
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Heinrich Schulze BLC LLB (UP) LLD (Unisa) is a professor of law at Unisa.

May 2018 (1) South African Law Reports (pp 1 – 330); [2018] 2 All South African Law Reports April (pp 1 – 309)

This column discusses judgments as and when they are published in the South African Law Reports, the All South African Law Reports and the South African Criminal Law Reports. Readers should note that some reported judgments may have been overruled or overturned on appeal or have an appeal pending against them: Readers should not rely on a judgment discussed here without checking on that possibility – Editor.

Abbreviations

CC: Constitutional Court

ECM: Eastern Cape Local Division, Mthatha

GJ: Gauteng Local Division, Johannesburg

GP: Gauteng Division, Pretoria

KZD: KwaZulu-Natal, Local Division

NCK: Northern Cape Division, Kimberley

SCA: Supreme Court of Appeal

WCC: Western Cape Division, Cape Town

Administrative law

District Director must act within powers when placing learners at schools: The facts in Governing Body, Hoërskool Overvaal and Another v Head of Department of Education Gauteng Province and Others [2018] 2 All SA 157 (GP) were as follows: The second applicant (the school) was an Afrikaans-medium public school. The first applicant was the school’s governing body (the SGB). The first four respondents were the relevant provincial and national government officials. In essence, the school sought the reviewing and setting aside of an instruction issued by the District Director (the second respondent) to the school to admit 55 English-speaking Grade 8 learners for the 2018 school year.

The school was located in the Vereeniging District in which there were five other high schools in relatively close proximity to each other. The applicants alleged that the school was operating beyond its capacity, while the respondents contended that the school had not yet reached full capacity and could accommodate more learners in 2018. One of the main areas of dispute related to the number of learners per class, which ought to be accommodated. There were currently 36 learners per class, but the respondents contended that there should be 40.

Regulations relating to the admission of learners to public schools (the Regulations) were promulgated under the Gauteng Schools Education Act 6 of 1995 (the Act).

Prinsloo J pointed out that in terms of the Regulations, the second respondent, in placing a learner at a particular school, had to consider the proximity of the school from the learner’s home, and the capacity of the school to accommodate the learner, relative to the capacity of other schools in the district. Of all the high schools in the area in this case, only the second applicant and one other were single-medium Afrikaans schools.

Relevant to the dispute regarding capacity, was evidence that neighbouring English-medium schools (the sixth and seventh respondents) had capacity to accommodate more than 55 Grade 8 English-speaking learners for 2018. In addressing the subject of capacity, the court had regard to the Regulations. Regulation 5(8) provides that notwithstanding the school’s admission policy, where a learner has not been placed at any school within 30 days after the end of the admission period, the District Director may place such learner at any school, which has not been declared full and in respect of which there are no remaining unplaced learners on a waiting list. It was found that the first respondent, who was the only official authorised to determine the objective entry level learner enrolment capacity, never determined such capacity. The court reasoned that the school had reached its capacity and ought to be declared full. The first and second respondents had also not considered the capacity of the school relative to other schools in the district.

The court considered a number of issues regarding language policy and legality. Suffice it to mention here that the court held that the second respondent’s decision, in forcing the single-medium Afrikaans school to place the 55 English-speaking learners at short notice and in the face of compelling evidence that the school was full to capacity, was found to have ignored the general norms and standards pertaining to language policy in terms of s 6 of the South African Schools Act 84 of 1996.

There was no authority on which the second respondent could justify having overridden the school’s language policy. In doing so, she had exceeded her powers, and her decision was in conflict with the constitutional principle of legality and thus illegal. The respondents’ instruction to the school was unlawful and set aside.

Because of the manner in which the respondents chose to litigate this matter, the court made a punitive costs order against them.

 

Ministerial authorisation necessary for future financial commitment: The interpretation of two provisions of the Public Finance Management Act 1 of 1999 (the Act) was at the centre of the appeal in Waymark Infotech (Pty) Ltd v Road Traffic Management Corporation 2018 (3) SA 90 (SCA). These sections are:

  • Section 66, which deals with the restrictions on borrowing, guarantees and other financial commitments by government, an organ of state or a public entity listed in sch 3 to the Act.
  • Section 68, which governs the consequences of unauthorised transactions.

Section 66(1) read with s (3)(c) provides that only with ministerial authorisation may an institution enter a transaction binding itself to a future financial commitment. The appellant (Waymark), was the successful bidder in a public tender process administered by the respondent, the Road Traffic Management Corporation (RTMC), to develop and install an ‘Enterprise Resource Planning System’. The RTMC is an entity listed in sch 3 to the Act and is thus bound by the provisions of the Act. The parties concluded a contract on 31 March 2009. It made provision for various services to be rendered over a three-year period, and included a schedule for the payment of remuneration, the full contract sum being some R 33,7 million.

RTMC later repudiated the contract and Waymark sued for damages. RTMC counterclaimed that the agreement was unenforceable, because of non-compliance with s 66 of the Act. The High Court held that because the contract was not authorised, it was invalid.

On appeal to the SCA, RTNC argued that since only the financial year in which the contract was concluded (2008/2009) had a specified budget allocation, any undertaking to pay for services in a later year amounted to a future financial commitment. The RTMC relied on Putco Ltd v Gauteng MEC for Roads and Transport (GP) (unreported case no JDR 0756, 2016), in which the court endorsed the view of arbitrators that if a transaction is concluded in one financial year, but only comes into effect in a subsequent financial year, it is a future financial commitment.

Lewis JA rejected this argument and pointed out that the Putco case did not concern procurement. The court reasoned that one should rather consider the design and purpose of ss 66 and 68 of the Act. It held that it is plain that s 66 does not apply to procurement contracts that follow on a proper process, and that do not embody loans, guarantees or the giving of security, even though they extend beyond one fiscal year. The contract in question did not amount to ‘any transaction that binds or may bind that institution … to a future financial commitment’. It was a present commitment to pay for professional services as they were rendered, albeit over a three-year period.

The court concluded that the agreement did not involve a future financial commitment to pay for Waymark’s services, continuing over three years.

The appeal was accordingly upheld and the High Court order set aside, and substituted with an order dismissing RTM’s counterclaim.

 

Scope of powers: In June 2017 the Public Protector (the PP) issued a final report in which she prescribed certain remedial actions regarding the recovery of R 3,2 billion, which the South African Reserve Bank (the SARB) during the 1980s had lent, but improperly failed to recover from Bankorp Ltd/Absa. The remedial actions prescribed by the PP in para 7.1 of her report included that the matter be referred to the Special Investigating Unit (SIU) to approach the President to re-open and amend proclamation R47 of 1998 (‘Special Investigating Units and Special Tribunals Act (74/1996): Referral of matters to existing Special Investigating Unit and Special Tribunal: South African Reserve Bank: Maladministration’ (GNR 46 GG18893/7-5-1998)) to recover the misappropriated public funds given to Absa. However, the matter concerning the possible recovery of the alleged misappropriated fund had already been investigated in 1998 in terms of the above proclamation by the Heath Commission. The Heath Commission had recommended that the money could not be recovered.

The PP’s report came under judicial scrutiny in ABSA Bank Ltd and related matters v Public Protector and Others [2018] 2 All SA 1 (GP). The first applicant (Absa), as well as the other three applicants, namely SARB, the Minister of Finance and the National Treasury, instituted review proceedings, challenging paras 7.1.1, 7.1.1.1 and 7.1.2 of the PP’s report. The applicants brought the present application for review under the provisions of the Promotion of Administrative Justice Act 3 of 2000 (PAJA), in the alternative in terms of the principle of legality.

Absa’s grounds of review were based, first, on the argument that the PP was not authorised, either by the Public Protector Act 23 of 1994 (the PP Act) or any other law, to make the referral to the SIU in terms of para 7.1 of her report. Secondly, they argue that her conduct was illegal, and finally, the process she followed in making her recommendations was procedurally unfair. In short, the first two grounds of review relate to the unlawfulness of the remedial action and the third pertains to the procedure followed by the PP.

The court, in a joint judgment, held that conduct by an organ of state (such as the PP) does not need to ‘adversely affect’ someone’s right for it to qualify as an administrative action under PAJA. PAJA also applies where an organ of state ‘determines someone’s rights’. Further, the language in which the remedial action is formulated is peremptory, which emphasises its administrative nature.

Judicial review is in essence the judicial detection and correction of maladministration. Section 6(4)(c) of the PP Act merely empowers the PP to bring a matter to the attention of the SIU. It does not empower her to be prescriptive or to instruct the SIU as to how to deal with the matter she brings to its attention. The PP thus acted in a manner inconsistent with the provisions of the Constitution and the PP Act by placing a duty on the SIU to re-open the investigation and to recover the misappropriated public funds from Absa.

Further, the remedial action referred to in para 7.1 was also ultra vires the Special Investigating Unit and Special Tribunals Act 74 of 1996 (SIU Act). The PP placed a duty on the SIU to approach the President in terms of s 2 of the SIU Act to reopen the investigation in terms of the proclamation. But s 2 of the SIU Act does not provide for the SIU to approach the President with such a request. The SIU is thus not authorised by statute to do so, and the PP cannot instruct the SIU to perform an ultra vires function.

The remedial action prescribed by the PP was also illegal, because the President has in any event no power under the SIU Act to reopen a completed investigation. The PP, had therefore, imposed remedial action on the President and the SIU that was unlawful. The remedial action was, therefore, reviewed and set aside under s 6(2)(d) and 6(2)(f)(ii)(bb) of PAJA.

The court made different costs orders in respect of each of the four applications. Suffice to mention here that the PP, in her official capacity was ordered to pay 85% of the costs of the application by the SARB on an attorney and client scale, and the balance of 15% in her personal capacity.

  • See also ‘Banking law’ 2018 (Jan/Feb) DR 41 for the matter of South African Reserve Bank v Public Protector and Others 2017 (6) SA 198; [2017] 4 All SA 269 (GP).

Attorneys

Validity of contract of articles of clerkship: In Ndinga v Cape Law Society [2018] 2 All SA 250 (ECM) the applicant entered into a contract of articles of clerkship with an attorney in Mthatha. She completed the requisite period of articles. Thereafter, she sought to be admitted as an attorney of the court. Her application was opposed by the respondent (the provincial law society). It argued that the attorney with whom the contract had been entered was not in possession of a Fidelity Fund Certificate on that date, and he was thus not entitled in law to practise.

The crisp issue was whether the contract of articles was valid or whether it was void by virtue of the circumstances in which her principal was practising when the contract was entered into.

Brooks J pointed out that the Attorneys Act 53 of 1979 regulates the requirements for practise as an attorney. The issue at stake concerned the effect of non-compliance by an attorney with one or more of the relevant rules of the provincial law society, which has the effect of denying the attorney a qualification for the issue of a Fidelity Fund Certificate. There is an important distinction between a person who purports to act as a practitioner, on the one hand, and a practitioner who practises without being in possession of a Fidelity Fund Certificate, on the other hand. The distinction recognises that although it constitutes an offence, the practice by a practitioner of his profession without a Fidelity Fund Certificate does not have the effect of invalidating that practice. It further does not reduce the attorney to the status of one who purports to act as a practitioner. The Act does not provide for the automatic suspension or invalidation in any way of the practice of an attorney where such practice is conducted without a Fidelity Fund Certificate.

The applicant had followed all the steps required of her for her admission to the profession. Her registration of her articles of clerkship was not objected to by the provincial law society, and objections were only raised after she had completed her period of clerkship.

The court granted an order admitting the applicant as an attorney of the court. As a mark of the court’s censure of its conduct, the provincial law society was directed to pay the costs of the application on an opposed basis and on the scale as between attorney and client.

Civil procedural law

Common-law grounds for rescission application: In Moshoeshoe and Another v FirstRand Bank Ltd and Others [2018] 2 All SA 236 (GJ) the applicants, a married couple, sought condonation for the late filing of their application for rescission of a court order obtained against them by default of their appearance in court, when their case was called. In addition, they sought to have the order rescinded. The order concerned a loss of their primary residence which was situated in Benoni.

The case has a long and tortuous history. In 2006 the applicants concluded a loan agreement with the first respondent bank (FirstRand) in order to purchase a home. The property was pledged as security for the loan, but the address was incorrectly recorded in the loan agreement. The applicants alerted both FirstRand and the conveyancing attorney (which was appointed by FirstRand) of this error. The attorney advised them that the error was of no consequence since the property was correctly described on the title deed issued by the Registrar of Deeds. The error later proved to have a serious practical consequence for the applicants. They fell in arrears with the repayment of the loan, and they successfully applied to have themselves declared over-indebted in terms of the National Credit Act 34 of 2005 (the NCA). In June 2010, an attorney of FirstRand issued notice in terms of s 129 of the NCA, which notice came to the attention of the applicants. They informed the attorney that they were under debt review. Notwithstanding, FirstRand issued a summons against the applicants. The summons was sent to the wrong address and never reached the applicants. They were thus unaware that FirstRand obtained default judgment against them.

An order was granted against the applicants by the Registrar of the court as a result of their failure to answer to the summons issued against them. They then brought an application for rescission of the order issued by the Registrar. Their application was opposed by FirstRand and the subsequent owners of the property (the second to fourth respondents). They failed to make an appearance when the matter was called in the Opposed Motion Court, and so their application was dismissed. This prompted them to bring the present application to rescind that order.

First, Vally J pointed out that while the court in question had issued a default order, which dismissed the applicants’ rescission application, the order was made without going into the merits of the dispute and without making any findings on the merits. The only avenue open to the applicants was to have the order rescinded.

Secondly, the court considered the question of whether the order should in fact be rescinded. As the applicants relied on the common law, it was necessary to consider whether they had shown good cause for the rescission. To succeed on that basis, they had to at least provide a reasonable explanation of their default, show that the application was bona fide, and show that they had a bona fide case, which prima facie would succeed in setting aside the order of the Registrar.

It held that the application was bona fide. The applicants had done everything that could be expected of them. The order granted by the Registrar had been issued without them ever being given an opportunity to present their case as they were never served with the summons. Further, the execution process took place without any judicial oversight. The CC has held that the Registrar does not have to power to issue an order declaring a person’s home to be executable. The applicants had lost their primary residence, which prima facie appeared to have occurred through unlawful means or to have occurred in unfair and unjust circumstances.

The judgment and order in question was thus rescinded and set aside. FirstRand was ordered to pay the cost of the present application.

Company law

Duration of business-rescue proceedings: In South African Bank of Athens Ltd v Zennies Fresh Fruit CC and a related matter [2018] 2 All SA 276 (WCC); 2018 (3) SA 278 (WCC), the court considered two applications, which concerned the same respondent (Zennies). Each of the applicants (the bank and business partners) sought a declaratory order that the business rescue proceedings in respect of Zennies had ended or lapsed in terms of s 132(2)(c)(i) of the Companies Act 71 of 2008 (the Act). Zennies, in turn, denied that the business rescue proceedings had been terminated and averred that the applicants were not entitled to proceed against it in terms of s 133 of the Act, which section places a general moratorium on legal proceedings against a company in those circumstances.

Although the decision turned on a number of aspects relevant to business rescue proceedings, the present discussion will be restricted to one of these aspects only, namely the duration of business rescue proceedings. Suffice it to mention here that one of the disputes between the parties turned on the question whether a final business-rescue plan had been accepted and approved by all the relevant parties.

In deciding whether the business rescue proceedings had terminated or whether Zennies was still under business rescue, Kusevitsky AJ had to determine whether it was agreed to amend the plan as contemplated in s 152(1)(d)(ii) without rejection of the plan; whether if the plan was rejected, a further step was taken within the ambit of s 132(2)(a)(ii) thereby preventing the termination of the business rescue proceedings; and whether, if a further step within the contemplation of s 132(2)(a)(ii) was taken, the business rescue still automatically terminates if the business rescue practitioner fails in any of his other statutory obligations.

The salient question was whether the fact that no vote was taken to approve the plan at the second meeting justified a conclusion that the plan was rejected as envisaged by s 152(3)(a) of the Act.

The court held that a substantial degree of urgency was envisaged once a company decided to adopt the relevant resolution beginning business rescue proceedings. Although the main aim of business rescue was to avoid liquidation proceedings, it does not mean that an extraordinary amount of time must be allowed to achieve that, at the expense of creditors’ rights. The mechanisms of business rescue proceedings were not designed to protect a company indefinitely to the detriment of the rights of its creditors. Where, as here, the practitioner was not making progress (as far as the court could ascertain) in securing the specific information required to finalise the amended plan for consideration, the practitioner was under a statutory duty to file a notice of termination.

The delay in the finalisation of the business rescue proceedings were unreasonable in the circumstances and the court ordered the termination of the proceedings.

Consumer law

Removal of debtor’s records of over-indebtedness with credit bureau: The facts, which led to the decision in Phaladi v Lamara 2018 (3) SA 265 (WCC) were as follows: The applicant (Phaladi) applied to a debt counsellor to be declared over-indebted in terms of the National Credit Act 34 of 2005 (the NCA). An application to the magistrate’s court for a debt-rearrangement order did not follow, however, as a voluntary rearrangement was agreed with the creditors pursuant to a recommendation by the debt counsellor in terms of s 86(7)(b) of the NCA. The applicant satisfactorily adhered to the payment arrangement to the extent that he claimed that he was ‘financially sound’, and in a position to demonstrate that he was able to punctiliously fulfil his outstanding obligations. He alleged that it would have been reasonable in the circumstances for his records at the credit bureau to be expunged so that he would be enabled to responsibly incur additional obligations by entering into fresh credit agreements.

The applicant accordingly applied to the High Court for an order declaring that he was no longer over-indebted and that his adverse credit record with the credit bureau be expunged. None of the existing creditors opposed the application.

Binns-Ward J pointed out that a similar application was refused in an unreported matter in the WCC, but allowed in at least three unreported High Court cases in Gauteng. The WCC reasoned that the relief sought was inconsistent with the scheme of the NCA. It held that debt counsellors enjoyed no power under the NCA to release a debtor from debt review proceedings. The court held that s 71 of the NCA did not afford an adequate remedy in the circumstances to expunge the record that the applicant was in debt review.

In the Gauteng decisions the court emphasised that the High Court has ‘wide powers’ to grant the relief sought by the applicants, but without providing any foundation for such powers in the NCA.

In the Phaladi case the court held that its powers do not extend to improving legislation by providing measures or remedies that the statutory enactments do not afford, merely because the court considers it would be just or equitable that they should be afforded. The debt review process under the NCA is provided as a remedy whereby the over-indebted can obtain an opportunity to settle their debt related to a credit agreement in a responsible, dignified and ordered manner. A consumer may apply for a clearance certificate from the debt counsellor, or the National Consumer Tribunal where all debts, bar mortgage debts, have been paid under a debt rearrangement order in terms of s 71 of the NCA.

The court held that this is an administrative process which may be initiated if the consumer meets the requirements of s 71. Section 71 does not provide the courts with any powers to issue such a clearance certificate.

The application was accordingly dismissed.

Contract law

Text of standard form contract too small to read: The decision in Four Wheel Drive Accessory Distribution CC v Rattan NO 2018 (3) SA 204 (KZD) concerned an action for repair costs of a Land Rover Discovery (the vehicle) by Four Wheel Drive Accessory Distribution CC (the plaintiff) based on the non-performance of Rattan (now deceased) of an alleged term in a standard form car-loan agreement. The agreement was printed on one page, had 25 clauses and many subclauses. The text of these clauses was so small ‘the court could not read [it] easily even with the aid of a magnifying glass’. The alleged term was that the vehicle would be insured for 72 hours, whereafter Rattan had to insure it, or be liable for its damage. The car was indeed damaged, when, after 48 hours, Rattan was shot and killed while driving it. The plaintiff then brought the action against Rattan’s estate. The defendant is the executrix representing the deceased’s estate

Pillay J dismissed the action on a number of grounds. The present discussion will focus on one of these grounds. At the heart of the present action was the quality and quantity of the form and content of a written agreement on the basis of which the plaintiff claims payment of an amount of R 559 817,45 as the cost of repairing the vehicle, that was damaged while it was in the possession of the deceased.

The court held that the Consumer Protection Act 68 of 2008 (the CPA) applied to the present agreement, and the form and content of the agreement infringed the rights in ss 22, 40 and 48 of the CPA, namely, the consumer’s right to information in plain and understandable language; not to be subject to unconscionable conduct; and against suppliers entering or administering transactions in an unfair, unreasonable or unjust manner.

The action was accordingly dismissed with costs.

Immovable property – sale

Suspensive condition: The facts in Abrinah 7804 (Pty) Ltd v Kapa Koni Investments CC 2018 (3) SA 108 (NCK) were as follows: On 4 August 2015 Kapa Koni (the purchaser) bought a property from Abrinah (the seller). The sale was subject to a suspensive condition, contained in clause 4 of the agreement, that the purchaser obtain a bank loan for not less than R 5 million within six months of signature. Clause 2 stipulated that the purchase price would be paid in cash or secured by a bank guarantee. On 5 February 2016 the purchaser informed the seller that it had secured a loan of R 4,5 million, but the seller at a meeting held between representatives of the parties on 10 February insisted on the full purchase price of R 5 million. On 15 February the seller’s attorney addressed a letter to the purchaser, which pointed out that the condition in clause 4 had not been fulfilled, that the purchaser was given 14 days to rectify its non-compliance, failing which the seller would cancel the sale. On 26 February (and within the 14-day period afforded by the letter of 15 February) the purchaser tendered payment of the outstanding R 500 000, but on 7 March the seller cancelled the sale, claiming that it was undone by the purchaser’s failure to comply with clauses 2 and 4. The purchaser argued that the cancellation was unlawful in the light of the extension offered in the letter of 15 February.

The court a quo held that the seller’s letter of 15 February had, by granting the 14-day extension to comply with clause 2, breathed new life into the sale. It constituted an election by the seller to waive its right to cancel. And because the purchaser obtained financing for the full purchase price within the 14-day period, equity required that the property be transferred to it. Leave to appeal to a Full Bench was, however, granted.

Olivier J held that the result of the non-fulfilment of a suspensive condition was that the contract had to be regarded as if it never existed. The non-compliance with clause 4 meant that the sale never came into operation. The finding of the court a quo that the letter of 15 February constituted a 14-day extension of the period for the fulfilment of clause 4, was thus incorrect. In any event, after having lapsed, the sale could not have been ‘revived’ by waiver in the manner held by the court a quo. Any ‘new’ agreement based on the letter of 15 February would have had to have been in writing and signed by both parties. There was no allegation that the alleged acceptance of the ‘offer’ contained in the letter of 15 February was also in writing. In fact, on all indications the acceptance was not made in writing.

Equity played no role in circumstances such as the present, the only relevant consideration being the intention of the parties at the time of contracting, which was that the purchaser would obtain a loan for the full purchase price within the stipulated period. Since the purchaser did not comply, the sale had failed, and the court a quo should on this basis have dismissed the application.

The appeal was thus upheld with costs.

Lease

Effect on validity of lease where building plans were not approved: The facts in Wierda Road West Properties (Pty) Ltd v Sizwe Ntsaluba Gobodo Inc 2018 (3) SA 95 (SCA) were as follows: The appellant (Wierda) owned a building and leased it to the respondent (Gobodo). Wierda had no approved building plan or occupancy certificate for the building and, as a result, failed to comply with ss 4(1) and 14(1)(a) of the National Building Regulations and Building Standards Act 103 of 1977 (the Act). Gobodo failed to pay the rent and Wierda instituted action against Gobodo, for the amount of R 7,8 million in respect of rentals and municipal charges for the lease of a property in Houghton, Johannesburg (the property). The High Court dismissed the action with costs and held that the lease was valid, but unenforceable.

On appeal to the SCA Majiedt JA held that the lease was valid and enforceable. The court reasoned that ss 4(1) and 14(1)(a) did not apply. First, s 4(1) applies to a person who erects a building. And the penalty provision in s 4(4) also refers to any person erecting any building. Wierda did not ‘erect’ the building in question, within the definition of the word ‘erection’ in s 1.7. This much was common cause. Secondly, s 14(4)(a) deals with instances of occupancy without an occupancy certificate, but where there are approved plans in place. Because there were no approved plans in the present case, s 14(4)(a) was not applicable.

Further, so the court reasoned, even if these provisions of the Act did apply, the absence of an approved building plan and certificate did not invalidate the contract. It pointed out that the legislature did not intend a further sanction of invalidating agreements, which contravene the provisions of the Act over and above the penal sanction contained in s 4(4). This conclusion is supported by the nature of the penalty in s 4(4). Provision is made for a maximum fine of ‘R 100 for each day on which [a person] was engaged in so erecting such building [without plans]’. The longer the period of transgression, the harsher the penalty. And this is something, which cannot be achieved through invalidating a private contract.

The High Court’s order was thus set aside, and substituted with an order that Gobodo had to pay the rental and municipal charges.

Sale of land – eviction of squatters

Duty on seller to evict squatters: The decision in Cradle City (Pty) Ltd v Lindley Farm 528 (Pty) Ltd 2018 (3) SA 65 (SCA) concerned the reciprocity of performances in terms of a sale of land. The facts were as follows: In March 2009 the respondent (the seller) sold land to the appellant (the purchaser) for R 112 million. In terms of the agreement the purchaser, who had already paid a non-refundable sum as deposit, would pay a balance of some R 52 million on transfer, and the remainder of the balance in 30 monthly instalments thereafter. Although the contract provided that the seller would provide possession of the property, both parties were aware that there was a large number of squatters on the property. They were still there when the property was transferred to the purchaser on 7 May 2009. To address the issue, the parties on that same day signed an ‘indemnity and undertaking’ (I&U) in which the seller undertook to evict the squatters – at its own expense – by 31 August 2009, and to indemnify the purchaser against any claims or expenses resulting from the eviction. When no eviction materialised, the purchaser refused to pay the outstanding balance. The seller instituted action, claiming the outstanding balance, and the purchaser counterclaimed for damages resulting from the unlawful occupation of the property, which supposedly rendered it completely valueless. The purchaser argued that since the parties’ obligations were reciprocal, it was not obliged to pay. In response the seller argued that its obligation to provide vacant possession under the agreement of sale was replaced by an obligation under the I&U to take steps to lawfully evict the squatters, which it had done. The purchaser argued that the I&U had merely postponed the obligation to give vacant possession to 31 August 2009. The High Court found in favour of the seller. In an appeal to the SCA the court had to decide whether –

  • the purchaser was entitled to vacant occupation; and
  • whether it had to pay the balance of the purchase price.

Tshiqi JA held that the objective of the I&U was to provide vacant occupation. The purchaser’s obligation to pay the balance of the purchase price depended on the applicability of the exceptio non adimpleti contractus, which would operate if the agreement were such that it contemplated an exchange of performances for the general principles of the exceptio. While the present agreement did create bilateral obligations, dismissal of the eviction application on the ground of the seller’s malperformance was, in the light of the purchaser’s election to persist in the agreement, not a suitable remedy.

The court accordingly decided to rather grant judgment in favour of the seller, on condition that the seller first evicted the occupiers. Since no evidence was led regarding the market value of the property at the relevant times, the counterclaim was dismissed.

Other cases

Apart from the cases and topics that were discussed or referred to above, the material under review also contained cases dealing with: Administrative law, children, company law, constitutional law, contracts, criminal law and procedure, environment, hate speech, jurisdiction, land reform, marriages, practice and pleadings, property, restraint orders, tax, and vexatious proceedings.

This article was first published in De Rebus in 2018 (July) DR 38.

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