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[2015] ZASCA 121
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Four Arrows Investments 68 v Abigail Construction (20470/2014) [2015] ZASCA 121; 2016 (1) SA 257 (SCA) (17 September 2015)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 20470/2014
DATE:
17 SEPTEMBER 2015
In
the matter between:
FOUR
ARROWS INVESTMENTS 68 (PTY)
LTD
........................................................
APPELLANT
And
ABIGAIL
CONSTRUCTION
CC
....................................................................
FIRST
RESPONDENT
THE
REGISTRAR OF DEEDS,
PRETORIA
............................................
SECOND
RESPONDENT
Neutral
citation
:
Four
Arrows Investments 68 v Abigail Construction
(20470/2014)
[2015] ZASCA 121
(17 September 2015)
Coram
:
Lewis, Mhlantla, Willis, Saldulker and Swain JJA
Heard
:
8 September 2015
Delivered:
17 September 2015
Summary
:
Whether option had been granted:
option for the purchase of a portion of agricultural land without
Ministerial consent – prohibited
in terms of s 3
(e)
(i)
of the Subdivision of Agricultural Land Act 70 of 1970.
Order
On
appeal from:
Gauteng Division of the High Court, Pretoria, (Bam J
sitting as court of first instance).
The
appeal is dismissed with costs such costs to include the costs of two
counsel.
JUDGMENT
Swain
ja
(lewis,
Mhlantla, Willis and Saldulker JJA concurring):
[1]
The central issue in this appeal is whether
a contract concluded between the appellant, Four Arrows Investments
68 (Pty) Ltd (Four
Arrows), and the first respondent, Abigail
Construction CC (Abigail), conferred upon Four Arrows an option to
purchase a demarcated
portion of an undivided immovable property, or
whether the contract constituted a sale of the property, which was
subject to a
suspensive condition.
[2]
The importance of the distinction for Four
Arrows lies in its submission that an option for the sale of a
portion of agricultural
land, the nature of the immovable property in
question, does not fall within the prohibition contained in s 3
(e)
(i)
of the Subdivision of Agricultural Land Act 70 of 1970 (the Act).
This section provides that ‘no portion of agricultural
land . .
. shall be sold or advertised for sale . . . unless the Minister has
consented in writing.’ The definition of ‘sale’
in
s 1 of the Act includes a sale subject to a suspensive condition.
[3]
Four Arrows unsuccessfully relied upon this
submission in seeking an order before the Gauteng Division of the
High Court, Pretoria,
compelling Abigail to pass transfer of the
whole property to it. Transfer was sought in reliance upon additional
terms in the contract,
which made provision for this eventuality in
the event of the sale agreement between Abigail and the liquidators
of an insolvent
company, from whom the property was to be acquired,
not proceeding, or the consent of the Minister of Agriculture (the
Minister)
to the subdivision of the property not being obtained.
[4]
The court a quo (Bam J) held that the
contract constituted a sale subject to a suspensive condition, being
the approval of the Minister.
In reliance upon the decision of this
court in
Geue & another v Van der
Lith & another
[2003] ZASCA 118
;
2004 (3) SA 333
(SCA), it declared the contract void, as claimed by
Abigail in its counter-application. The appeal against this decision
is with
the leave of this court.
[5]
Apart from the clause in the contract
purporting to confer an option upon Four Arrows, the remaining
clauses all clearly indicate
that a sale of the property subject to a
suspensive condition was intended by the parties. The contract is
headed ‘Agreement
of sale of immovable property. . . .’
Abigail and Four Arrows are respectively defined as ‘the
seller’ and ‘the
purchaser’ and it is provided that
‘[t]he seller hereby sells to the purchaser who hereby
purchases the property, at
the price and upon and subject to the
terms and conditions herein contained.’
[6]
Although it is recorded that Four Arrows
has agreed to assist Abigail in financing the payment of Abigail’s
purchase price
for the property in the amount of R4 047 000,
it is then recorded that this amount ‘constitutes payment of
the
purchase price due to the seller by the purchaser, payable in
advance’. It is common cause that this amount was paid: Abigail
was ordered to repay Four Arrows by the court a quo.
[7]
In this context, clause 2.7.1 which
purports to grant an option to Four Arrows to purchase an undivided
half share in the property
is incomprehensible. The clause provides
as follows:
‘
.
. . [T]his Agreement shall be deemed to be an option to purchase the
Property granted by the Seller [Abigail] to the Purchaser
[Four
Arrows] at the price and upon and subject to the terms and conditions
hereof which option shall be exercisable by the Purchaser
at any time
after the Purchaser and the Seller succeeds in obtaining the required
consent to the subdivision of the Property from
Portion 175.’
[8]
As
its name implies, an option confers upon the option holder a choice
whether to enter into the main contract or not. It is clear,
however,
that no provision is made in the contract for the repayment by
Abigail of the purchase price paid in advance, in the event
of Four
Arrows choosing not to exercise the ‘option’. This
eventuality was not catered for because the parties clearly
envisaged
the sale proceeding without any election to purchase the property by
Four Arrows, once the consent of the Minister was
obtained. The
absence of this essential element precludes the creation of an option
by the parties. The fact that the parties recorded
that the agreement
‘shall be deemed to be an option to purchase the property’
matters not. Substance rather than form
has to be considered to
ascertain the true nature of the transaction.
[1]
Its true nature is that of a sale subject to a suspensive condition,
which is prohibited in terms of the Act.
[9]
Even if a valid option to purchase had been
conferred upon Four Arrows, the outcome would be the same. In
Geue
(para 15) it was stated that:
‘
The
purpose of the Act is not only to prevent alienation of undivided
portions of land. The target zone of the Act is much wider.
This is
clear, for example, from s 3
(e)
(i),
which also prohibits
advertisements
for sale. Since advertisements obviously precede the actual sale or
alienation of an undivided portion, it is by no means absurd
to infer
that the Legislature intended to prohibit any sale of an undivided
portion of farmland, whether conditional or not, unless
and until the
subdivision has actually been approved by the Minister. Courts are
not entitled, under the guise of absurdity, to
avoid the
Legislature’s clear intention because they regard particular
consequences to be harsh or even unwise. Moreover,
once the intention
of the Legislature is clearly established, it can be dangerous to
speculate as to why the Legislature would
have intended a particular
result. . . .’
[10]
That the Legislature has prohibited the
advertisement of a portion of agricultural land for sale in the
absence of Ministerial consent,
clearly indicates that the object of
the legislation was not only to prohibit concluded sale agreements,
but also preliminary steps
which may be a precursor to the conclusion
of a prohibited agreement of sale. In this context the grant of an
option would clearly
be a precursor to the conclusion of a prohibited
agreement of sale, at the election of the option holder.
[11]
That an option falls within the ambit of
the prohibition contained in the Act becomes clear when its true
nature is considered:
‘
The
essence of an option is that it is binding on the option grantor. It
is an offer, in this case to sell property, which cannot
be revoked.
It is the option holder that has the choice whether to exercise its
right.’
[2]
In
the present context the option grantor purports to be bound to sell a
portion of agricultural land without Ministerial consent,
on the
election of the option holder, contrary to the provisions of the Act.
The fact that the option may provide, as in the present
case, that
the option holder may only exercise the option after the consent of
the Minister has been obtained, matters not. In
the interim, the
option grantor purports to be bound to sell a portion of agricultural
land without Ministerial consent, which
remains contrary to the
provisions of the Act.
[12]
Counsel for Four Arrows submitted, however,
that if clause 2.7.1 was found to be null and void and unenforceable,
the whole contract
should not suffer the same fate on the basis that
the provisions of this clause were severable from the remainder of
the contract.
On this basis the entitlement of Four Arrows to receive
transfer of the whole property, would be based upon the additional
terms
referred to above, conferring this right on Four Arrows, in the
event of the sale agreement between Abigail and the original owner
not proceeding.
[13]
The
probable intention of the parties as it appears from the contract as
a whole, was that the principal purpose of the contract
was to enable
Four Arrows to purchase one half of the property. The provisions of
the contract which provided for the acquisition
of the whole property
were clearly subsidiary to this principal purpose.
[3]
The offending clause consequently results in the entire contract
being null and void.
[14]
In any event, on the evidence, the
agreement of sale between Abigail and its seller did proceed to
fruition. Four Arrows accordingly
did not prove that it was entitled
to obtain transfer of the whole property.
[15]
The following order is made:
The
appeal is dismissed with costs such costs to include the costs of two
counsel.
K
G B Swain
Judge
of Appeal
Appearances:
For
the Appellant: M C Erasmus SC (with him D Prinsloo)
Instructed
by: De Bruin Oberholzer Attorneys, Centurion
Symington
& De Kok, Bloemfontein
For the
Respondent: C A Da Silva SC (with him J C Klopper)
Instructed
by: Corrie Nel & Co, Pretoria
Honey
& Associates, Bloemfontein
[1]
Roshcon
(Pty) Ltd v Anchor Auto Body Builders CC & others
[2014]
ZASCA 40
;
2014 (4) SA 319
(SCA) para 23 et seq.
[2]
Du
Plessis NO & another v Goldco Motor & Cycle Supplies (Pty)
Ltd
[2009]
ZASCA 62
;
2009 (6) SA 617
(SCA) para 15.
[3]
Sasfin
(Pty) Ltd v Beukes
[1988] ZASCA 94
;
1989 (1) SA 1
(A) at 16B and 17D-E.