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[2015] ZAGPJHC 202
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Loncon Developments (Pty) Ltd v Ekurhuleni Metropolitan Municipality (2011/22837) [2015] ZAGPJHC 202 (11 September 2015)
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IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
Case
No. 2011/22837
DATE:
11 SEPTEMBER 2015
In
the matter between:
LONCON
DEVELOPMENTS (PTY)
LTD
............................................................................
Applicant
And
EKURHULENI
METROPOLITAN
MUNICIPALITY
.....................................................
Respondent
JUDGMENT
VAN
DER LINDE, AJ:
1
The applicant applies for an order
directing the respondent to sign the draft sale of property agreement
annexed as “X”
to the notice of motion within seven days,
and to sign all documents necessary to give effect to the transfer of
the properties
referred to in the said annexure “X” from
the respondent to the applicant. In the event of the respondent
failing
to sign the draft agreement, or failing to sign the transfer
documents, the applicant asks that the sheriff for the district of
Boksburg be authorised to do so on the respondent’s behalf.
2
The background to the application is
as follows. The applicant used to be the owner of the three
properties that are referred
to in paragraph 1 of the draft agreement
of sale. It disposed of the properties to the respondent’s
legal predecessor,
the City Council of Vosloorus, in terms of an
agreement which provided as follows:
“
10.
The Council (the predecessor to the respondent) shall …
10.1
…
10.6
not be entitled to sell the property to any other party or to use the
property for any other purpose other than for educational
purposes.
Should the purchaser desire to sell the property then the seller
shall have a right of first refusal and the Council
shall not be
entitled to sell the property to a third party on terms more
favourable than those offered to the seller.”
3
After an opposed application, Lamont
J in this Division under Case No. 2010/39419 made an order in the
following terms:
“
The
Court grants an order:
1.
Declaring that the first respondent, as the successor to the rights
and obligations of the Vosloorus Council, is bound by clause
10.6 in
the Deed of Sale known as Lots 1……., 1…….
and 1……., Vosloosrus Ext. 1…….,
which
Deed of Sale is attached to the founding affidavit, marked ‘FA10’.
2.
Directing the first respondent that, in the event of it intending to
alienate the property in any manner, to offer it to the
applicant on
the same terms and not less favourable than such third party may
offer to the first respondent, contemplated by clause
10.6 of ‘FA10’.
3.
Directing the second respondent (the Registrar of Deeds) to register
clause 10.6 against the Title Deeds of each of the aforesaid
properties.
4.
Interdicting and restraining the first respondent from alienating the
aforesaid erven to any third party without having offered
them to the
applicant in terms of clause 10.6 of the agreement, ‘FA10’.
5.
Ordering the first respondent to pay the costs of this application.”
4
This order was made by default of
appearance and the respondent consequently applied to rescind the
judgment. The matter came
before Makhanya, J who, in a reasoned
judgment, dismissed the application on 2 December 2011. A
subsequent application for
leave to appeal was dismissed
. It
is unclear whether
a further similar application
to the Supreme Court of Appeal was also dismissed
, or whether
it was filed out of time
without appropriate
condonation.
5
This application was then launched
on 17 June 2011 after the applicant had called on the respondent to
sign the draft agreement
which is now annexure “X” to the
notice of motion. That the respondent had intended to sell the
properties to
a third party, transpired at a meeting which took place
on the 28
th
of June 2010 at the respondent’s Boksburg offices, at which the
applicant was represented by its attorney Mr Creswick and
Mr Harrop,
and the respondent was represented by Mrs Dowd.
6
During that meeting Mrs Dowd
conveyed to the applicant that the respondent had sold the properties
to the Department of Public Works
for R315 000.
7
In a letter of 16 July 2010, the
applicant’s attorney recorded that the respondent intended
selling the properties to the
Department of Education (not the
Department of Public Works), and asked for an undertaking that the
respondent would not transfer
any of the properties into the name of
either the Gauteng Provincial Government (Department of Education) or
any other entity.
8
Subsequently the applicant’s
attorney asked the respondent to provide a copy of the agreement of
sale of the properties to
the Department of Public Works but the
respondent did not do so.
9
On 1 October 2010 the respondent
wrote to the applicant’s attorney advising that it would put on
hold the envisaged transfer
of the properties while it was
investigating the matter, but in the end the respondent declined to
sign the draft agreement.
10
In its answering affidavit the
respondent said that it intended to and indeed did dispose of the
properties to the Department of
Education. It said that it had
no duty to provide the undertaking sought by the applicant and it
pointed out that it was
at that stage still applying for leave to
appeal against the refusal to grant the rescission of the judgment of
Lamont, J.
The respondent did not deal with the applicant’s
assertion that at the meeting held with Mrs Dowd on 28 June 2010 the
respondent
conveyed to the applicant that the property had been sold
for R315 000.
11
In the applicant’s replying
affidavit the applicant alleges that in fact the respondent had never
launched an application
for leave to appeal to the Supreme Court of
Appeal.
12
At the hearing of the matter before
me the respondent handed up, without objection from the applicant, a
supplementary affidavit
in which the deponent said on 27 August 2015,
the following:
“
9.
Bearing in mind that it may lose them to the detriment of these
purposes (sic), the respondent now changed its mind
and cancelled all
such arrangements it had entered with the Gauteng Department of
Education. For these purposes, such agreement
has now been
cancelled and the respondent is no longer intent on alienating the
properties but rather will keep and administer
them itself.
10.
For this reasons (sic), the respondent will be bound by only
paragraphs 1, 3, 4 and 5 of this Court’s order of 26
October
2010 since it has now cancelled its arrangement with Gauteng
Department of Education in that it is no longer alienating
or intent
on alienating any of the properties because they are required for
educational purposes.
11.
Accordingly, the respondent cannot now be forced to sell the
properties to the applicant if it is no longer intent on
alienating
to any other person.”
13
Against this background, the
competing contentions were the following. For the applicant Mr
Shepstone argued that the applicant’s
right of pre-emption was
perfected when the respondent formed the desire to sell the property
to the Department of Education
, and the applicant thereupon
exercised its right
. The applicant
did
this in writing when
it sent FA4 to the respondent
attaching the draft agreement, signed by the applicant on 19 May
2011. The respondent does not
dispute receiving this
communication.
14
It is to be noted that the proposed
purchase price is R320 000, which is more than the R315 000
which Mrs Dowd said was the
price at which the properties had been
disposed of.
15
The applicant argued that no
subsequent changing by the respondent of its mind as to whether or
not to dispose of the properties
affected the applicant’s
exercise of its right of pre-emption. The applicant relied
specifically on
Hirschowitz v Moolman,
1985 (3) SA 739 (A)
, particularly at
p.765 F-H. It also referred to
Van
Deventer v Ivory Sun, 2015 (3) SA 532 (SCA)
for the proposition that the debt owed by the respondent to the
applicant arose once the applicant had made the written offer to
the
respondent (paragraph 23 of the judgment).
16
For the respondent, Mr Ngutshana
argued first, that having regard to the respondent’s changing
of its mind and cancellation
of the arrangements it had entered into
with the Department of Education, clause 10.6, the basis of the
applicant’s right
of pre-emption, no longer afforded the
applicant the entitlement for which it contends.
17
Second, he argued that on a proper
interpretation of clause 10.6 the intention was that the respondent
would hold the properties
exclusively for educational purposes.
The right of pre-emption, according to the argument, would
accordingly not have been
triggered by the intended disposal of the
properties to the Department of Education, because self-evidently the
Department of Education
would use the properties for educational
purposes, and therefore the use of the properties would still be
within the ambit of the
clause.
18
In reply Mr Shepstone argued that on
a proper construction of clause 10.6 it contained two relevant
parts. The first was that
there was a prohibition on the
Council not to sell the properties to any other party. Second,
there was a prohibition on
the Council not to use the properties for
any other purpose other than for educational purposes. If the Council
despite the first
prohibition desired to sell the properties, then
the applicant would have the right of first refusal and the
respondent would not
be entitled to sell the properties to a third
party on terms more favourable than those offered to the applicant.
19
Although Mr Ngutshana did suggest
from the Bar that the price of R320 000 for the properties was
grossly undervalued, but declined
to press the point after an
objection by Mr Shepstone that this issue had not been raised on the
papers, there
was no suggestion that
the
terms contained in the draft sale agreement annexed as “X”
to the notice of motion were less favourable
to the respondent
than the terms that would have applied had the
disposal of the properties by the respondent to the Department of
Education gone
ahead.
20
The discussion of the issues that
arise in this application must commence with a consideration of the
nature of the right which
the applicant has in terms of clause 10.6.
In its terms, it is a “
right of
first refusal”
.
Hirschowitz
,
referred to by Mr Shepstone was concerned with a right of
pre-emption, not, in terms, with a “
right
of first refusal”
. RH
Christie & GB Bradfield,
Christie’s
The Law of Contract in South Africa, 6
th
Edition,
say (at p.58) that in the
context of sale a “
first refusal”
is usually called a “
right of
pre-emption”
. In substance,
such a right is regarded as a personal right and may be enforced in
the same say as an agreement between parties
whereby one of them is
prohibited from selling property without having obtained the consent
of the second of them; see
Cussons v
Kroon, 2001 (4) SA 833 (SCA)
. In
Super Rent (Pty) Ltd v Bax Global (Pty)
Ltd, 2006 (3) SA 422 (W)
Cachalia, J
(as he then was) equated a clause which entitled a contractual party
to “
match”
any other acceptable offer which the other party might receive, with
a right of pre-emption.
21
Accordingly, the principles set out
in
Hirschowitz
relied upon by Mr Shepstone may validly be applied in the present
matter. At p.765 F-H of
Hirschowitz
,
Corbett, JA (as he then was) accepted as correct the submission that
the grantor of a right of pre-emption is obliged to sell
the property
to the grantee if two things will have occurred: first, the
contingency bringing the right of pre-emption into operation
must
have supervened; and second, the grantee must have exercised the
right of pre-emption in writing.
22
In much the same vein is the
discussion in the third edition of
The
Law of Sale and Lease
by AJ Kerr, at
p.462:
“
A
preferent conditional right to purchase is referred to as a right of
pre-emption. It gives the grantee – in the context
under
discussion, the lessee – a right to purchase if the condition
in question is satisfied. Normally the condition
is that if the
lessor decides or desires or proposes to sell, he shall offer the
property to the lessee first. The grant
of a right of
pre-emption does not compel the grantor to sell; it only compels him
to give the grantee the preference in case he
sells at all. And
consequently it too prevents him from selling to third persons during
the existence of the right.”
23
In the present matter the
contingency which brings the right of first refusal into operation is
stated in clause 10.6 to be the
respondent’s “
desire
to sell the property”
. Has
that contingency supervened in the present matter?
24
One must accept that it has
supervened, for two reasons. First, it is not disputed by the
respondent that certainly at some
stage it intended to dispose of the
properties to the Department of Education. And second, the mere
fact that the respondent
explicitly states that it has changed its
mind and “
is no longer intent on
alienating the properties”,
supposes
that before its mind was that it was intent on alienating the
properties.
25
The second requirement, namely that
the grantee will have exercised the right of pre-emption in writing,
is not in dispute in this
matter.
26
What is in dispute is whether or not
in law the contingency is capable of being retracted by unilateral
action on the part of the
grantor. On general principle it
seems to me that the occurrence of the contingency that brings into
operation the right
of pre-emption, being the desire to sell the
property, may for present purposes be compared with the obligation on
the part of
the grantor of the right, to offer the property to the
grantee. Although generally an offer to contract is a
communication
voluntarily made by the offeror to the offeree, in the
case of a right of pre-emption the grantor of the right is obliged
and may
be compelled to make an offer to the grantee. The
question is whether such an offer, whether made voluntarily or under
compulsion,
may be withdrawn.
27
Since generally an offer may be
withdrawn before it is accepted, in my view in this matter too the
offer which the respondent was
compelled to make by virtue of clause
10.6, could be withdrawn before it was accepted by the grantee, the
applicant. One
is not concerned
here
with
whether the offer should have been kept open for a reasonable time,
or whether in the case of an offer made under compulsion
is should be
deemed to remain open for a reasonable time.
28
That issue does not arise in the
present matter, because here the change of heart only came about
substantially after the grantee
of the right, being the applicant,
had
in fact
accepted the offer deemed to
have been made under compulsion upon the respondent forming the
“
desire”
or intent to dispose of the property.
29
In the circumstances it follows that
in my view the argument raised in paragraphs 9, 10 and 11 of the
respondent’s supplementary
affidavit dated 27 August 2015 does
not hold water.
30
That leaves for determination the
question relating to the interpretation of clause 10.6. Here
the respondent’s argument,
described above, was that properly
construed there was no prohibition in clause 10.6 against the
respondent disposing of the property
to a third party
,
provided that it would be for educational
purposes.
31
The respondent’s submission
entails that the component parts of clause 10.6 are the following.
First, the Council shall
not be entitled to sell the property to any
other party. Second, the Council shall not be entitled to use
the property for
any other purpose other than for educational
purposes. And third, the Council shall not be entitled to sell
the property
to any other party other than for educational purposes.
32
As I have indicated above, the
applicant’s argument is that this part of clause 10.6 contains
only two component parts.
The first is that the Council shall
not be entitled to sell the property to any other party. And
the second is that the Council
shall not be entitled to use the
property for any other purpose other than for educational purposes.
The right of first refusal
is then attached to the case where the
Council nonetheless desires to sell the property “
to
any other party”
.
33
There are to my mind two reasons why
the interpretation advanced on behalf of the respondent is not
correct. The first is
that the first sentence of clause 10.6,
read with the introductory party, contains two infinitives: “
to
sell the property”
, and “
to
use the property”
. Those
two infinitives define the structure of the sentence by composing it
of two parts. The first part is the
prohibition “
to
sell the property to any other party”
,
and the second part is the prohibition “
to
use the property for any other purpose other than for educational
purposes”
.
34
In other words, there is no scope in
the first sentence of clause 10.6 to conflate the sale prohibition
with the use prohibition,
thereby qualifying the former by the
contents of the latter.
35
The second reason is that the right
of first refusal arises should the purchaser
simply “
desire
to sell the property”
; it is not
stated to arise should the purchaser “
desire
to sell the property other than for educational purposes”.
The envisaged desire is not qualified in this way.
36
It follows therefore that to my mind
the applicant is entitled to the relief it seeks, and I make the
following order:
1.
The respondent is directed to sign the draft Sale of Property
Agreement annexed as “X” to the notice of motion within
seven days of the service of the order on it.
2.
The respondent is directed to sign or cause to be signed all
documents necessary to give effect to the transfer of the properties
referred to in annexure “X” (“the properties”)
into the name of the applicant or the applicant’s
nominee
,
within seven days of being furnished with such
documents and a guarantee as provided for at paragraph 2.2 of
annexure “X”
,
and being
requested to sign same
;
and generally to
take all steps necessary to give effect to the transfer of the
properties into the name of the applicant or its
nominee,
particularly the issuing and furnishing of clearance certificates in
respect of the properties.
3.
In the event of the respondent failing, refusing and/or neglecting to
sign or cause to be signed the aforesaid annexure “X”
to
the notice of motion, as provided in paragraph 1 above, and/or
failing to sign the transfer documents referred to in paragraph
2
above, the deputy sheriff for the district of Boksburg is hereby
authorised to sign or cause to be signed annexure “A”
to
the notice of motion and/or the transfer documents referred to above
on behalf of the respondent.
4.
The respondent is directed to pay the costs of the application.
WHG
VAN DER LINDE
ACTING
JUDGE OF THE HIGH COURT
For
the Applicant: Adv. RS Shepstone
Instructed
by: Adam Creswick Attorneys
21
Orange Road
Cnr
The Avenue
Orchards
Tel.
011 – 728 1124
Ref:
Mr Adam Creswick/M0896
For
the Respondent: Adv. VP Ngutshana
Instructed
by: Ndzondo Kunene Mosea Inc.
Suite
107 1
st
Floor
Klamson
Towers
151
Commissioner Street
Johannesburg
Tel.
011 – 331 6753
Ref:
J0001/11/TM
Date
argued: Monday, 31 August 2015
Judgment
delivered: Friday, 11 September 2015