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[2016] ZASCA 48
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Kosmos v Leopont (20546/2014) [2016] ZASCA 48 (31 March 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 20546/2014
DATE:
31 MARCH 2016
Not
Reportable
In
the matter between:
KOSMOS
X6 HOMEOWNERS
ASSOCIATION
..........................................................
APPELLANT
And
LEOPONT
64 PROPERTIES (PTY)
LTD
......................................................
FIRST
RESPONDENT
JACOBUS
JOCHUM
GRABE
....................................................................
SECOND
RESPONDENT
Neutral
Citation:
Kosmos v Leopont
(20546/2014)
[2016] ZASCA 48
(31 March 2016).
Coram: Lewis,
Willis, Dambuza and Mathopo JJA and Plasket AJA
Heard:3
March 2016
Delivered:
31 March 2016
Summary:
Prescription – when does prescriptive period commence –
agreements of sale of erven not yet created –
appellants
claimed specific performance of ancillary obligations under the
agreements – special plea of prescription raised
–
respondent contended that prescription commenced on conclusion of the
agreements – prescription could only commence
when sale
agreements enforceable – special plea of prescription
dismissed.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Mabuse J
sitting as
court of first instance):
1
The appeal is upheld with costs, including the costs of two counsel.
2
The order of the trial court is set aside and is replaced with the
following:
‘
The
special plea of prescription is dismissed with costs, including the
costs of two counsel.’
3
The matter is referred back to the trial court for adjudication of
all the appellants’ claims, including whether Lombard
and
Partners’ letter to Len Dekker and Associates, dated 4 June
2007, contains a binding undertaking to perform the obligations
listed therein.
JUDGMENT
Dambuza
JA (Lewis, Willis and Mathopo JJA and Plasket AJA concurring):
[1]
The issue to be determined in this appeal
is when prescription commences in a claim for specific performance
under a contract of
sale that was not enforceable for a substantial
period after its conclusion. The appeal is with the leave of the
Gauteng Division
of the High Court, Pretoria (Mabuse J), against its
judgment dismissing the appellant’s claim against the first
respondent
for specific performance, on the basis that the claim had
prescribed.
[2]
The appellant, Kosmos X6 Homeowners Association (Kosmos), was
incorporated in terms of s 21 of the Companies Act 61 of
1973.
[1]
Its members were owners
of properties located within Kosmos Extension 6 Township (also known
as the Falcon View Estate) situated
along Kosmos Drive, in
Hartebeespoort, in the North West Province. During 2004 the first
respondent, Leopont Properties 64 (Pty)
Ltd (Leopont), was the owner
of a property, then known as Portion 176 (a portion of Portion 64) of
the Farm De Rust 478, situated
in the North West Province (the farm).
Leopont intended developing, on the farm, the township that would be
known as Kosmos Extension
6 Township. At the time the farm comprised
four erven.
[3]
During the period 31 March to 1 May 2004 Leopont concluded agreements
of sale with various purchasers in terms of which they
bought a
number of erven in the proposed township. The purchasers were
represented by Ivor Ichikowitz (on behalf of Umhlaba Projects
(Pty)
Ltd and Harts Falcon View (Pty) Ltd), and Petronella Schroeder (on
behalf of Sarpro Investments (Pty) Ltd, Stasec 120 (Pty)
Ltd and the
JCLR Trust). The second respondent, Mr Jacobus Grabe represented
Leopont.
[4]
In terms of s 67 of the Town Planning and Township Ordinance 15
of 1986 (the Ordinance) the sale, exchange, alienation
or disposal of
or granting of an option to purchase or otherwise acquire an erf in a
township is prohibited, after an owner of
land has taken steps to
establish a township on his land, until the township is declared an
approved township. However, in terms
of s 97(1) of the
Ordinance, a local authority may grant consent for pre-proclamation
acquisition of erven, subject to any
condition it may deem expedient.
[5]
The Kosmos township had not yet been proclaimed when the sale
agreements were concluded, but the Local Municipality of Madibeng
(the Municipality), under whose jurisdiction the farm fell, granted
consent to Leopont, in terms of s 97(1) of the Ordinance, to
enter
into pre-proclamation contracts of sale of the proposed erven.
[6]
On 31 May 2005 the township was declared in terms of s 103 of the
Ordinance. In October 2005 the Municipality authorised the
subdivision of the farm into erven. On 8 December 2005 the General
Plan, providing for the further subdivision of the farm, was
approved
by the office of the Surveyor General. The erven sold were finally
transferred to the purchasers on 16 August 2006. The
purchasers then
ceded their rights under the agreements to Kosmos.
[7]
On 3 May 2007 the attorneys Len Dekker and Associates, acting on
behalf of Kosmos, wrote a letter to Leopont’s attorneys,
Lombard and Partners, setting out a list of snags under the agreement
and demanding performance of its obligations not later than
31 May
2007.
[2]
These related to
facilities that Leopont had undertaken to construct within the
township. In a letter dated 4 June 2007 Leopont,
through its
attorneys, undertook to perform its statutory obligations as set out
in the service agreement concluded with the Municipality.
It also
listed certain facilities as ‘uitstaande dienste & werke
soos op Mei 2007’. The list was attached to the
letter of 4
June 2007. Leopont’s attorneys advised in their letter that an
amount of R1 754 386 was held in trust,
presumably for
installation of the facilities. Of the stated amount, R250 000
was reserved for setting up the gardens. Apart
from a few exceptions,
the items listed by Leopont’s attorneys were, by and large, the
same as listed in the letter from
Kosmos’ attorneys of 3 May
2007.
[8]
On 18 August 2008 Kosmos issued a summons against Leopont, seeking an
order of rectification of the agreements and an order
of specific
performance in respect of certain obligations under the agreements
which it alleged Leopont had failed to perform.
It also sought, in
the alternative, payment of the damages it had suffered as a result
of the failure by Leopont to perform the
obligations. In the summons
Kosmos pleaded that certain terms relating to Leopont’s
obligations to build facilities within
the township were express,
alternatively, implied, alternatively tacit. These related to
installation of security features on the
estate, the nature or theme
of the estate, including landscaping and provision of parks thereon,
compliance with various Municipal
requirements, and provision of
water drinking troughs for animals on the estate.
[9]
Kosmos contended that the parties to the agreements had intended that
Leopont perform further obligations which were erroneously
omitted
from the agreements. They were that Leopont would build a parking
area, a circle road around the sewerage pump station,
a security wall
between the waterfront area and the waterfront erven, an embankment
and a launching ramp for boats next to the
dam, an electric fence on
top of the palisade fence around the sewerage purification works, a
sewerage plant that would be built
in accordance with an
environmental scoping report, a recreation area and an ablutions
facility. The development of a recreation
area included taking all
the necessary steps to secure a lease of certain identified land from
the government for that purpose.
[10]
According to Kosmos, the failure to include these terms in the
agreements was a result of an error common to all parties. This
was
the basis upon which it sought rectification of the agreements. It
then sought an order of specific performance, alleging that
Leopont
was in breach of the agreements as it had failed to construct certain
facilities. Specifically, Kosmos alleged that Leopont
had failed to
erect the perimeter wall, the animal drinking troughs, the sewerage
station and water purification works, the parking
area, the
recreation area, the security fencing between the waterfront area and
the waterfront erven, the circle road around the
sewage pump, the
earth embankment and launching ramp for boats, the ablution facility
and the fence around the purification works.
A further obligation
that Leopont had allegedly failed to perform was to install a
concrete sump to facilitate the flow of water
from a chlorine tank
into a reservoir for distribution to various points within the
township, such as the water troughs and water
features on the estate.
This was stipulated in the environmental scoping report. The
requirement arose because the erven near the
water edge were too low
to allow gravity feed into the sewage plant. The sewage feed
therefore needed to be pumped to the different
points within the
estate.
[11]
Kosmos further contended that the contents of the two letters
exchanged between the attorneys either constituted an agreement
that
Leopont would perform the obligations set out therein, or, that in
the letter from its attorneys, Leopont gave a binding undertaking
to
perform the ‘uitstaande dienste and werke…’.
Mabuse J decided the first issue against Kosmos but has still
not
decided whether the letter of Lombard and Partners contains a binding
undertaking. He must still do so. (The court a quo did
not consider
whether the letter from Leopont’s attorney constituted an
interruption of prescription, which it would certainly
have been in
respect of some of the obligations undertaken. It is not necessary to
consider this point given the conclusion I reach
below.)
[12]
Leopont raised a special plea of prescription, contending that all
Kosmos’ claims became due more than three years before
service
of the summons on it.
[3]
The
argument was that prescription commenced to run from 31 March 2004 to
31 April 2004, when the agreements were concluded. As
to the merits,
Leopont pleaded, amongst other things, that the agreements were
invalid for being in contravention of s 67
of the Ordinance
because a condition set by the Municipality for security to be
furnished was not met. However, the court a quo
made no finding in
this regard and there is nothing to suggest that the terms of the
authority were not met. It was also part of
Leopont’s case that
Mr Grabe had no authority to conclude the agreements. It successfully
sought the joinder of Mr Grabe
as the third party in the court a
quo.
[4]
Leopont denied that it
had undertaken to perform its obligations and maintained that the
contents of the letter from its attorneys
constituted a counter-offer
to the demands made on behalf of Kosmos. Accordingly, it was argued,
since Kosmos had not accepted
the counter-offer, no contractual
obligations arose from the letters.
[13]
Although extensive evidence was led before the court a quo, the court
decided the matter purely on the basis of prescription.
The judge a
quo found that prescription commenced on conclusion of the agreements
between 31 March and 1 May 2004. However,
he reasoned further
that because the agreements stipulated that the payment of the
balance of the purchase price was only due within
one month of
proclamation of the township, (which fell on 30 June 2005),
performance of the obligations listed in the summons became
due on 1
July 2005. Consequently, the court held, when the summons was served
on Leopont on 20 August 2008, the claims had indeed
prescribed. The
court also found that no agreement had been concluded as a result of
the letters exchanged by the attorneys and
dismissed Kosmos’
claims summarily (without considering whether Leopont had,
nevertheless, made the undertakings as contended
by Kosmos).
[14]
Before us Kosmos submitted that the date on which provision of the
facilities under the agreements became due, was 16 August
2006,
when the properties were transferred to the purchasers. But it
advanced its case based on the earliest date prescription
could
properly commence under the agreements, being 8 December 2005, when
the General Plan which provided for the further subdivision
of the
farm was approved by the Surveyor General and the individual erven
were created. The distinction in the two dates is inconsequential
for
determination of prescription in this appeal.
[15]
Section 12(1)
of the
Prescription Act 68 of 1969
provides that:
‘
Subject
to the provisions of subsections (2), (3) and (4), prescription shall
commence to run as soon as the debt is due.’
[5]
The
Prescription Act contains
no definition of the term ‘due’.
The basic principle on the running of prescription is that the debt
will be due and
the prescription period commences to run as soon as
there is a completed cause of action, with a plaintiff who can sue
and a defendant
who can be sued.
[6]
Completion of the cause of action is ‘when everything has
happened which would entitle the creditor to institute action to
obtain judgment’.
[7]
See
also
Minister
of Finance v Gore NO
[8]
where
this court said that until a creditor has the minimum facts that are
necessary to institute action, prescription does not
begin to run.
[16]
Thus our law distinguishes between the concept of a debt arising and
a debt becoming due, although the dates on which the debt
arises and
when it becomes due may coincide.
‘
The
difference relates to the coming into existence of a debt, on the one
hand, and the recoverability thereof, on the other. This
distinction
is recognised in the 1969
Prescription Act in
so far as
s 12
provides that prescription begins to run as soon as the debt is due,
whereas
s 16
, which deals with the application of Chapter
III
of
the Act (the chapter on extinctive prescription), provides that the
Act applies to any debt
arising
after the commencement of the Act. A debt may come into existence
(
arise
)
at the time when a debtor undertakes to pay at a certain date, but
the debt will only be
due
when that date arrives.’
[9]
[17]
The agreements became binding on their conclusion. However, Leopont’s
principal obligation was to effect transfer of
the erven once the
township had been proclaimed and the erven registered in the Deeds
Registry.
[10]
It is therefore
only after 8 December 2005 that the purchasers’ cause of action
in respect of the erven became complete and
Leopont’s
obligation arose. Given that the facilities were secondary to the
main object of the agreements, it would have
made no sense for the
purchasers to be entitled to delivery of the facilities even before
they were entitled to the erven. By their
nature, the facilities were
intended to be enjoyed as accessories to the erven. We do not even
know when Leopont’s obligations
to provide the facilities and
services arose.
[18]
Indeed, there was neither an express time for performance nor an
express condition upon which performance was made dependent
in the
agreements. That, however, does not detract from the intrinsic nature
of the agreements. There could be no breach of collateral
obligations
prior to the main object of the agreements being realised. I agree,
therefore, that at the earliest, performance of
the obligations
relating to the facilities could be due only from 8 December 2005
when the erven came into existence. The claim
had therefore not
prescribed on 16 August 2008 when the summons was served. In any
event, the plea of prescription could not apply
to the claim for
rectification of the agreements in this case.
[11]
[19]
Consequently the following order is granted:
1
The appeal is upheld with costs, including the costs of two counsel.
2
The order of the trial court is set aside and is replaced with the
following:
‘
The
special plea of prescription is dismissed with costs, including the
costs of two counsel.’
3
The matter is referred back to the trial court for adjudication of
all the appellants’ claims, including whether Lombard
and
Partners’ letter to Len Dekker and Associates, dated 4 June
2007, contains a binding undertaking to perform the obligations
listed therein.
N
DAMBUZA
JUDGE
OF APPEAL
APPEARANCES:
For
the Appellant: A J Louw SC, M F Ackerman,
Instructed
by:
Len
Dekker & Associates, Pretoria
c/o
Rosendorff Reitz Barry, Bloemfontein
For
the Respondent: P Ellis SC, A P Ellis
Instructed
by:
Lombard
& Partners, Pretoria
c/o
McIntyre & Van der Post, Bloemfontein
[1]
See:
‘Schedule 5 to the
Companies Act 71 of 2008
–
Transitional arrangements, item 4(1)
(a)
:
Memorandum
of incorporation and rules. – (1)
Every
pre-existing company
(a)
Incorporated in terms of
section 21
of the
previous Act is deemed to have amended its memorandum of
Incorporation as of the general effective date to expressly state
that it is a non-profit company and to have changed its name in so
far as required to comply with
section 11
(3); …’.
Essentially this means that the company’s name should now end
in ‘NPC’.
[2]
With
the exception that some, such as the development of the waterfront
and the gardens, could be constructed and finalised within
a
reasonable period that would be agreed on between the parties.
[3]
Leopont
had excepted to the original summons served on 20 August 2008. The
amended summons was served on 29 May 2009. Initially
Leopont
contended that service of the original summons on 20 August 2008 did
not interrupt prescription. However this argument
was not advanced
before us. In any event nothing turns on the different dates of
service.
[4]
Incidentally
Mr Grabe was also a property owner in the Kosmos Township and
therefore a member of the appellant.
[5]
The
qualification is that the creditor must have knowledge of the
identity of the debtor.
[6]
M
M Laubser
Extinctive
Prescription
(1996)
47.
[7]
Truter
& Another v Deysel
[2006]
ZASCA 16
;
2006 (4) SA 168
(SCA) para 16.
[8]
Minister
of Finance v Gore NO
[2006]
ZASCA 98
;
[2007] 1 All SA 309
(SCA);
2007 (1) SA 309
(SCA) para 17.
[9]
Laubser;
Extinctive
Prescription
above
p 51.
[10]
In
terms of
s 46
of the
Deeds Registries Act 47 of 1937
a township
is declared when the general plan on which the erven are shown is
registered and a register opened of registrable
transactions.
[11]
Boundary
Financing Ltd v Protea Property Holdings (Pty) Ltd
2009
(3) SA 447
(SCA) para 13.