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[2017] ZAWCHC 121
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Papesch v Spanholtz (19183/2007) [2017] ZAWCHC 121 (31 October 2017)
Republic
of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
[WESTERN
CAPE DIVISION, CAPE TOWN]
Case
No: 19183/2007
In
the matter between:
UWE
PAPESCH
Applicant
and
AXEL
BERNHARD
SPANHOLTZ
Respondent
JUDGMENT DATED: 31 OCTOBER 2017
LE
GRANGE, J
:
Introduction:
[1]
This is an application brought by the Applicant (“Defendant in
the main action”) for leave to
amend its Claim in
Reconvention in terms of Rule 28(4) of the Uniform Rules of Court,
which relief is opposed by the Respondent
(“Plaintiff in the
main action”). I will refer as a matter of convenience to the
Applicant as the Defendant and the
Respondent as a Plaintiff.
Background:
[2]
The salient facts underpinning the application in brief are the
following. The Plaintiff instituted action against the Defendant
for
payment of the balance of the purchase price, that was payable by the
Defendant to the Plaintiff in respect of the shares held
by Plaintiff
in a company known as Fraai Uitzicht 1798 Farm Pty Ltd (“Fraai
Uitzicht”) and his right, title and interest
to his loan
account against the company. The sale transaction was pursuant
to a written Sale Agreement, with Annexures (“the
Agreement”)
concluded between the parties on 11 October 2005.
[3]
It appears to be common cause that the Defendant did not pay the full
purchase price. The balance in the amount of R1 550 000.00
which was payable on 31 October 2007, together with interest thereon,
is still outstanding.
[4]
The Defendant, on 2 July 2008, filed a Plea in which the indebtedness
to the Plaintiff as claimed was admitted. The Defendant,
however,
pleaded that he was
exempted
from the
payment of those amounts on the basis that the Plaintiff was indebted
to him in greater amounts. These amounts were set
out in the Claim in
Reconvention.
The
Pleadings:
[5]
The Claim in Reconvention was filed,
at the same
time
on 2 July 2008, by the Defendant which it now seeks to
amend. The pleading in its unamended form records the following
inter
alia
:
‘
1.1 The Defendant relies
upon the same written Sale Agreement dated 11 October 2005 (“the
Agreement”) in respect of
the sale of the shares and loan
account;
1.2
The Defendant
alleges that the material terms and conditions of the Agreement
included certain warranties;
1.3
The Defendant
alleges that the Plaintiff breached the aforesaid terms and
conditions in various respects, including that there were
defects in
the immovable property and incorrect recordals in respect of the
movable property, more particularly:
1.3.1
That the vineyards were infected with a disease known “leaf
roll”, which would require the infected areas to be removed
and
replanted;
1.3.2
That the peaches and apricot orchards were of poor plant
quality, as a consequence of which substantial sections of the
orchards
had to be replanted;
1.3.3
The Plaintiff misrepresented the extent of the olives that had
been planted;
1.3.4
The dam on the farm leaked and had to be repaired;
1.3.5
There were a number of structural defects in the main house,
the restaurant and a number of the guest cottages, causing water
leaks
and damp problems;
1.3.6
The value of the bottled and bulk wine was artificially
inflated in the Financial Statements;
1.4
The Defendant
pleaded that, when the Agreement was entered into, the aforesaid
defects existed; the Plaintiff was aware or must
have been aware
thereof; but intentionally did not disclose same to the Plaintiff.
1.5
In respect of all
the damages claimed, it is simply alleged that, by reason of the
various breaches of the contract, and the defects
in the assets of
the company (whether immovable or movable) the Defendant suffered
damages in the amounts claimed. The Defendant
further pleaded that
the Plaintiff was indebted to him for damages in the amount of R4
447 548.40, less the amount of R1 530 000.00,
being the
amount admitted to be owing by the Defendant to the Plaintiff in
respect of the balance of the purchase price.’
[6]
The Plaintiff in turn denied the alleged breaches of contract, and
denied any liability to the Defendant.
The
Proposed Claims:
[7]
The claims now sought to be introduced were styled as Claim “6A”
and Claim “6B” in the Notice of Intention
to Amend. In
the proposed Claim “6A”, the Defendant alleges that:
‘
1.6 In the Schedule of
Warranties, forming part of the Agreement, the Plaintiff had
warranted that (save as disclosed in the Agreement),
“
none
of the assets of the company are subject to any mortgage bond,
notarial bond or debenture, any right of retention pledge, lien,
cession in security or other encumbrance, option, pre-emptive right,
right of first refusal, lease instalment sale or credit agreement
.”
1.7 That the Plaintiff breached that
term, in that he failed to inform the Defendant of the existence of
an “
unregistered right of way in favour of certain
neighbours over the company’s property, in respect of which the
Western Cape
High Court under Case No. 19182/2011, ordered the
registration of a servitude right of way on 2 November 2011. The
servitude being
registered against the property during 2014
”;
1.8 That the “
registration of
the servitude
” was causing financial loss to the Defendant
in that
inter alia
“
the Defendant is prevented from
expanding the guesthouse business, so as to accommodate more guests
due to the proximity of the
servitude to the guesthouse”
;
1.9 The financial loss claimed by the
Defendant, in the form of damages, was claimed in the amount of
R3 650 000.00.’
[8]
In the proposed Claim “6B”, the Defendant alleges that:
‘
1.10 Prior to the conclusion of
the Sale Agreement, the Plaintiff had sent documents to him stating
that there was sufficient water
on the property to “
irrigate
40 hectares of land”;
1.11 That the Plaintiff knew that the
Defendant would act on the assumption that the documentation was
factually correct and owed
a duty of care towards the Defendant to
provide correct information;
1.12 The documentation was material
and made with the intention of inducing the Defendant to act thereon;
1.13 The Defendant, relying upon the
truth thereof, entered into the Sale Agreement with the Plaintiff
without being notified that
the representation was false and without
it being brought to the Defendant’s attention that the amount
of water reflected
in
Annexure “B”
to the Schedule
of Warranties (forming
Annexure “A”
to
Annexure
“UP1”
) specifies that the number of hectares of water
rights are 25.2 hectares of water rights, and did not reflect that it
was sufficient
for 40 hectares;
1.14 That the Plaintiff was negligent
in making the representations,
alternatively
negligent in
failing to draw the Defendant’s attention to the altered
Annexure “UP1”
;
1.15 As a consequence of the
Plaintiff’s representation, the Defendant had suffered damages
in the amount of R1 250 000.00
which was the amount it
would cost to irrigate “
an additional 25 hectares of farm
land”.’
The
Strike-out:
[9]
The Defendant filed a notice to strike out a number of paragraphs in
the Plaintiff’s answering affidavit on the grounds
that these
paragraphs are either irrelevant, scandalous, vexatious or
argumentative. According to the Defendant, the insertion
of the
alleged offending paragraphs does not pertain to the disputes in
issue and is irrelevant to the determination thereof.
[10]
In terms of Rule 6(15) of the Uniform Rules, a Court may on
application strike out from any affidavit any matter which is
scandalous, vexatious or irrelevant if it is satisfied that the
applicant will be prejudiced in his case.
[11]
On a conspectus of all the papers filed of record, the paragraphs
complaint of by the Defendant, mostly relate to the circumstances
and
background underpinning the proposed amendments. These factors, in my
view, can hardly be prejudicial to the Defendant’s
case. In my
view they are certainly relevant in determining whether the Defendant
should be allowed to introduce the two proposed
claims. It follows
that the application to strike out falls to be dismissed.
The proposed amendments and
objections raised by the Plaintiff:
[12]
Turning to the proposed amendments and objections thereto. It is now
well accepted in our law that the general approach to
be adopted in
applications of this nature, is to allow an amendment unless the
application to amend is
mala
fide
or the amendment would cause an injustice to the other side which
cannot be compensated by costs, or unless the parties cannot
be put
back in the same position as they were when the pleading, which is
sought to be amended was filed.
[1]
The power of the court to allow material amendments is, accordingly,
limited only by consideration of prejudice or injustice to
the other
side.
[2]
The
objections to the proposed amendments:
[13]
The Plaintiff raised, in all, thirteen objections to the proposed
amendments. As a result of the view I have taken in this
matter, it
is unnecessary to deal with each of the objections. There are
essentially three main grounds against the proposed amendments.
The
first is that the proposed amendments attempt to introduce a new
cause of action. Secondly, the proposed new cause of action
has
prescribed and thirdly, that the proposed amendments would render the
Defendant’s pleadings excipiable.
[14] The Plaintiff, in respect of the
proposed Claim “6A”,
inter alia
, contended that
the new proposed claim has prescribed by reason of the provisions of
s 12(1), alternatively 12(3) of the
Prescription Act, 68 of 1969
. The
Plaintiff in raising the issue of prescription accepted the onus to
establish the date upon which prescription would have
commenced and
the date of completion.
[15]
According to the Plaintiff, the original Claim in Reconvention in
this matter was filed on 2 July 2008. The Order of Court
that the
Defendant relies upon in support of its proposed amendment was
granted by agreement between the parties on 2 November
2011 under
case No. 19182/2011. In terms of that Order, Fraai Uitzicht was the
First Respondent. The Court
inter alia
ordered that the Applicants in that
matter (or their duly authorised representatives), be granted access
to and the right to use
the road in question (“the right of
way”).
[16] According to the Plaintiff on
these stated facts on the pleadings, the Defendant must have been
aware by no later than 2 November
2011 of the existence of the
unregistered right of way by reason of the fact that Fraai Uitzicht
was a party to that proceedings
and that the Order of Court,
recognising the right of way, was taken by agreement.
[17]
According to the Plaintiff upon a proper consideration of the
pleadings, the proposed Claim “6A” has indeed prescribed,
as the Notice of Intention to Amend the Claim in Reconvention was
introduced on 31 August 2016, almost five years after the Order
of
Court was granted on 2 November 2011.
[18] The Defendant in essence did not
take serious issue with the contention that the proposed amendments
may introduce a new cause
of action and or claim. The Defendant
however is adamant that the proposed amendments are
bona fide
and necessary and if allowed, will determine the real issues between
the parties which will have the effect of bringing the same
parties
before the same court on the same issues.
[19]
The Defendant further contended that it suffered damages as a result
of the registration of the servitude which only occurred
in 2014 and
that a right to a servitude is ineffectual in burdening land unless
it is duly registered in the Registry of Deeds
and endorsed upon the
title deeds. To this end, it was argued that the issue of
prescription should have been raised by way of
a special plea rather
than exception. Moreover, the issue as to when the Defendant first
became aware of the Order of Court dated
2 November 2011 or the
registration of the servitude is a matter of evidence.
[20]
Our case law is replete with instances where the Courts are slow to
refuse leave to amend on the grounds of prescription, which
ordinarily should be raised by way of special plea.
[3]
[21]
It is apparent that the Defendant in the proposed Claim “6A”
relies upon a breach of contract, in the form of a
breach of
warranty, and that the proposed Claim “6B” is premised
upon a negligent misrepresentation and accordingly
is a claim in
delict.
[22]
There can be no doubt that the proposed Claim “6A”, the
Defendant now seeks to introduce, is a new cause of action.
Although,
in principle there can be no real objection to a new cause of action
or defence being added by way of amendment, such
amendment can only
be objectionable in circumstances where for instance the cause of
action was not in existence at the time of
issuing the summons.
[4]
[23]
In the present instance, the question now is whether the proposed
Claim “6A” is objectionable to the extent that
it has
prescribed by reason of the provisions of s 12(1), alternatively
12(3) of the
Prescription Act, which
provides as follows:
“
12.
When
prescription begins to run
: -
(1) Subject to the provisions of
subsections (2), (3), and (4), prescription shall commence to run as
soon as the debt is due.
(2) If the debtor wilfully prevents
the creditor from coming to know of the existence of debt,
prescription shall not commence to
run until the creditor becomes
aware of the existence of the debt.
(3) A debt shall
not be deemed to be due until the creditor has knowledge of the
identity of the debtor and of the facts from which
the debt arises:
Provided that a creditor shall be deemed to have such knowledge if he
could have acquired it by exercising reasonable
care.”
[24]
On the pleadings, it is common cause that on 1 April 2005, the
Defendant acquired all the shares in Fraai Uitzicht from the
Plaintiff and the shares were transferred to the Defendant who had
been the Director and sole shareholder of the company at all
material
times. Moreover, in 2011 Fraai Uitzicht was a party to court
proceedings whereby agreement between the parties recognised
the
right of way as envisage in the Order of Court. On these stated facts
on the pleadings, the contention by the Plaintiff that
the Defendant
must have been aware by no later than 2 November 2011 or reasonably
ought to have been aware of the existence of
the unregistered right
of way, cannot be regarded as contrived and must be accepted as
established facts beyond a doubt.
[25]
The contention by the Defendant that the right of way in this
instance only came into being in 2014 when it was duly registered
in
the Registry of Deeds and not upon the Order of Court in 2011, is
clearly at variance with the pleaded facts and our current
law.
[26]
The Supreme Court of Appeal in
Aventura
Ltd v Jackson N.O. & Others
[5]
,
held that: ‘While a way of necessity, ordinarily, comes into
being upon the order of a court to that effect, it is usually
desirable for this to be followed by the registration of a servitude
to ensure that third parties have notice of the right of way…’.
[27]
In the present instance, the said Order of Court in 2011 made it
clear that the Applicants therein were entitled to a right
of way,
over the property owned by Fraai Uitzicht. Furthermore, the
Applicants were granted immediate access to a precisely defined
road
and bridge that was depicted on a map.
[28]
On these stated facts, the right of way was granted immediately and
not on some convenient date in the future or when the servitude
would
be registered. As mentioned previously, the Defendant is the sole
shareholder and Director of Fraai Uitzicht, and it is inconceivable
that he was unaware of the Court Order granted on 2 November 2011.
The claim by the Defendant that his knowledge or otherwise of
the
Court Order on 2 November 2011, is a matter of evidence and in the
face of the established facts on paper, untenable and falls
to be
rejected.
[29]
In my view, this is one of those matters where on the pleadings, the
issue of prescription is beyond dispute. The Plaintiff
has clearly
shown the date of commencement and completion of prescription, and
that this claim has prescribed prior to the introduction
of the
Notice of Intention to Amend.
[30] It follows that the first
objection by the Plaintiff must be upheld. The remaining objections
raised by the Plaintiff in respect
of this claim, although not
unmeritorious, do not warrant further consideration as the
introduction of Claim “6A” falls
to be refused.
Objection(s)
in respect of the proposed Claim “6B”:
[31]
The proposed amendment introducing Claim “6B”
relies upon an alleged negligent statement by the Plaintiff, made
prior
to the conclusion of the Agreement, to the effect that there
was “
sufficient water
”
available on the property to irrigate 40 hectares of land, whereas
the Agreement signed by the parties specifies that the
number of
hectares of “
water rights
”
is 25.2 hectares and “
does not
reflect that it is sufficient for 40 hectares”.
[32]
The claim by the Defendant is that the Plaintiff was negligent in
making such representation,
alternatively
negligent in failing
to draw the Defendant’s attention to the “
altered
”
term of the contract, and that the Defendant is entitled to damages
suffered as a consequence thereof.
[33]
The Plaintiff, as mentioned previously, has also raised a number of
objections against this proposed amendment on the basis
that the
claim has been pleaded in a vague and unclear manner and that the
Plaintiff is uncertain as to precisely what the cause
of action
really is, and what the case is that it is required to meet.
[34]
The primary objection by the Plaintiff against this proposed
amendment was also that the Defendant was attempting to introduce
a
new cause of action which by reason of the provisions of s 12(1),
alternatively
s 12(3)
of the
Prescription Act, had
in fact
prescribed. According to the Plaintiff, the Defendant must have been
or ought to have been aware of the existence of his
alleged claim and
or cause of action as the Director of Fraai Uitzicht on a date no
later than 29 August 2013, which is a date
more than three years
prior to the filing of the proposed amendment. The Plaintiff
had also, amongst others, objected to
the fact that the Defendant
failed to plead a valid cause of action as it failed to plead how
Fraai Uitzicht would be entitled
to irrigate an additional 25
hectares of farm land, in the absence of additional water rights
being allocated in terms of the National
Water Act, 36 of 1988.
[35]
According to the Defendant, the date upon which it became aware that
there was insufficient water on the property to water
40 hectares, is
a matter for evidence and cannot be decided on at this point in time.
Furthermore, the amendment does not raise
a new cause of action but
merely alleges further acts of negligence upon which the Defendant
intends to rely. Similarly, the Defendant
contended that the
objection that it failed to plead any entitlement, or ability in law
to irrigate a greater area than the water
rights already granted and
that its claim for damages does not disclose a valid cause of action,
alternatively that it would render
the pleading vague and
embarrassing, is a matter for evidence.
[36]
It is trite that water rights are governed by the National Water Act.
Furthermore, that water rights represent the volume of
water that a
land owner may lawfully use, if available, to irrigate his farm land.
On the pleadings, it
is evident that the
number of hectares of farm land that had water rights and could
lawfully be irrigated by Fraai Uitzicht was
limited to 25.2 hectares.
The Defendant, at all material times must have known or ought to have
been aware of the hectare water
rights as this was always known to
both parties. It was properly recorded and described in the Agreement
which was signed by all
parties including the Defendant. Accordingly,
the extent of the water rights, and the amount of water that might be
utilised for
irrigation lawfully, was known for a period of more than
three years prior to the introduction of the amendment. On these
pleaded
facts the Defendant must have been aware or ought to have
been aware on a date no later than 29 August 2013, which is a date
more
than three years prior to the filing of the proposed Notice of
Amendment, whether such water that was available would be sufficient
for 40 hectares and the alleged cause of action against the
Plaintiff.
[37]
The suggestion by the Defendant that the claim in respect of the
water is not a new cause of action as it does not raise a
new cause
of action, but “
merely alleges
further acts of negligence
” upon
which the Defendant intends to rely, is unconvincing. The alleged
breach relied upon by the Defendant is clearly a
separate breach, and
a separate and new cause of action, with separate facts, and separate
damages. Moreover, the existing claims
for damages against the
Plaintiff are all premised on a breach of warranty, whereas the
current proposed claim is premised upon
a negligent misrepresentation
and accordingly a claim in delict and not upon a breach of a
contract. Furthermore, the suggestion
by the Defendant that it relies
on a further act of negligence by the Plaintiff for the proposed
amendment is also unconvincing,
as the Defendant in the existing
Claim in Reconvention does not rely upon any claim based upon an “
act
of negligence
”.
[38]
On these stated facts it is evident from the terms of the Agreement,
that the Defendant was at all times, since 2005, aware
or reasonably
ought to have been aware of the number of hectares of water rights
attached to the land of Fraai Uitzicht. Moreover,
there is no
allegation in the Defendant’s pleading that there was, as a
matter of fact, insufficient water on the property
to irrigate 40
hectares of farm land and or whether there was indeed a shortfall and
or how much water was in fact available. On
these pleaded
facts, the proposed amendment does not only render the pleading vague
and embarrassing but any claim based upon a
shortfall of water rights
has indeed prescribed, as envisaged in s 12(1),
alternatively
s 12(3)
of the
Prescription Act, and
that the amendment falls to be
dismissed.
[39]
One of the Plaintiff’s other objections that the Defendant
failed to plead how Fraai Uitzicht would be entitled to irrigate
an
“
additional 25 hectares
” of farm land, in the
absence of additional water rights being allocated or granted in
terms of the National Water Act, is
also not without merit. The
Defendant has not pleaded any entitlement to irrigate more farm land
than allowed by the 25.2 hectares
of water rights held.
[40]
The Defendant’s claim for damages, representing the alleged
“
cost to irrigate an additional 25 hectares of farm land
”,
in the absence of additional water rights being obtained or granted
in terms of the National Water Act is highly questionable
and the
objection by the Plaintiff that on the pleaded facts the claim does
not constitute a valid cause of action in law, is therefore
not
unfounded.
[41]
Lastly, the objection by the Plaintiff that the entire counterclaim
sought to be introduced by the Defendant cannot be a valid
cause of
action as the entire amount the proposed amendments intends to
recover not only exceeds the entire purchase price but
also includes
further compensation whilst the Defendant retains the property, is
also not without merit.
[42]
The entire counterclaim, is all based upon alleged shortcomings to
the property and the assets of the company, and amounts
to
R9 347 548.40. The purchase consideration for the shares
and loan account as stipulated in the Agreement and annexures
thereto
was only in the amount of R9 030 000.00.
[43]
The Defendant by way of these proposed amendments seeks to recover an
amount that is in excess of the entire purchase price
paid by him,
thus effectively having the Plaintiff transfer the shares and loan
account to him at no consideration.
[44]
The Defendant’s response that this is a matter for legal
argument is unconvincing. It is difficult to imagine a valid
cause of
action, either in contract or in delict, which has the effect that,
because of alleged defects in the merx, the seller
is obliged not
only to reimburse the entire purchase price of the merx to the
purchaser, but also provide further compensation
to the purchaser,
whilst at the same time the purchaser retains the merx.
[45]
For these reasons, it follows that the Plaintiff’s objection(s)
against the proposed amendments are successful and should
be upheld.
[46]
In the result the following order is made.
The Applicant’s Application for
Leave to amend its Claim in Reconvention is dismissed with costs.
________________
LE GRANGE, J
[1]
See
DE Van Loggerenburg
Erasmus:
Superior Court Practice
(2
nd
ed 2015) Vol 2 [Service 4, 2017] at D-331 to 342 and the cases
referred therein.
[2]
Rosner
v Lydia Swanepoel Trust
1998
(2) SA 123
(W) at 127D-G.
[3]
Manwood
Underwriters (Pty) Ltd and others v Old Mutual Life Assurance
Company (South Africa) Limited
[2013]
1 All SA 701
(WCC) para [27] and the cases referred to therein.
[4]
Erasmus
n
1 at D-335.
[5]
2007
(5) SA 497
(SCA) para [9].