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[2023] ZAECMKHC 132
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Christ the King Primary School CC v V.F. Group Trust (3668/2022) [2023] ZAECMKHC 132 (28 November 2023)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
FLYNOTES:
ADMINISTRATIVE – Tender –
Bid
specifications deficiencies
–
Parking
management services – Applicant unhappy that tender required
bidders to adopt cashless parking revenue collection
system –
Alleges bid specifications did not impose minimum revenue that was
to be collected – Bid specifications
set not in compliance
with regulation requirements and City’s supply chain
management policy – City failed to
assess functionality and
preference claimed by successful bidder by conducting proper risk
analysis of its bid and verifying
its status – City’s
omissions constituted material irregularities – Occurred
pursuant to a breach of mandatory
provisions – Appropriate
relief considered – Tender award reviewed and set aside –
Regulation 51 of the
Supply Chain Management Regulations.
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE
DIVISION, MAKHANDA)
Reportable
Case no: 3668/2022
In
the matter between:
CHRIST
THE KING PRIMARY SCHOOL CC
APPLICANT
and
V.F.
GROUP TRUST
(Registration
No.: IT2[…]
Represented
by:
PRAKASH
VALLABH N.O.
FIRST
RESPONDENT
RENUKA
VALLABH N.O.
SECOND
RESPONDENT
BAREND
JOHANNES SAHD N.O.
THIRD
RESPONDENT
JUDGMENT
Govindjee J
[1]
This
application is premised on the provisions of the
Alienation of Land
Act 1981
[1]
(‘the Act’).
It concerns the purchase of land by way of instalments and raises the
following key issues: can a purchaser
who has paid more than 50 per
cent of the purchase price demand transfer of the land from the
seller notwithstanding the seller’s
purported cancellation of
the sale agreement due to the purchaser’s default? If so, when
does the demand for transfer prescribe,
and is this affected by the
seller’s acceptance of instalment payments subsequent to the
purported cancellation?
[2]
The
applicant is a duly registered and incorporated close corporation
carrying on business as a primary school (‘the school’)
in Komani (formerly known as Queenstown). It seeks to compel the
respondent (‘the trust’) to comply with a written
agreement entered into between the parties on 16 March 2016 (‘the
agreement’). It seeks an order directing the trust
to take
steps to cause transfer of certain immovable property (‘the
property’) in the name of the school, against tender
of the
balance of the purchase price.
[2]
The facts
[3]
Most
of the facts presented in the papers are common cause. The parties
entered into the agreement during March 2016. In terms of
the
agreement, the purchase price was R1,85 million. The school made
payment of R500 000 on 14 March 2016 and took occupation.
[3]
The balance was to be paid by way of six half-yearly instalments of
R225 000, commencing by no later than 31 August 2016.
The school
paid a total of some R1,175 million by 11 June 2018. In terms of an
express term of the agreement, transfer of the property
would only be
registered in the school’s name once the purchase price and
transfer costs had been paid in full.
[4]
It was also an express term that, in the event of
default on the part of the school, the trust was entitled to cancel
the agreement
by way of notice and retain any monies that had already
been paid. It was then open to the trust to act against the school
for
the recovery of the whole of the purchase price together with any
amount payable by the school in terms of the agreement.
[5]
The school admitted defaulting on the last three
payments due, resulting in the trust delivering a letter of demand,
dated 13 July
2018, and notice of cancellation of the agreement on 31
January 2019. The validity of the trust’s cancellation of the
agreement
is in dispute. Of relevance is that the trust, despite
purported cancellation, accepted two further payments of R225 000
each,
on 15 May 2019 and 3 December 2020.
[6]
The crux of the school’s claim is that the
agreement falls within the ambit of the Act. As the agreement was
never recorded
with the Registrar of Deeds, the school’s first
argument is that the trust’s actions were premature and that
the purported
cancellation violated the provisions of the Act.
Considering that some 85 per cent of the purchase price had been
paid, the school’s
further argument is that it is entitled to
registration of the property in its name.
Does Chapter II of the
Act regulate the agreement?
[7]
The
Act regulates the alienation of land in certain circumstances.
[4]
Its purpose extends to ‘fulfil the need for protection of
vulnerable purchasers and imbuing good faith and fairness into
contractual relationships relating to land’.
[5]
The notion of ‘land’ is defined. For purposes of s 3(2)
and Chapter II, it ‘means any land used or intended to
be used
mainly for residential purposes’, excluding certain land
regulated by other legislation. The Act includes the following
sections:
‘
20.
Recording of contract.
1.
(
a)
A seller,
whether he is the owner of the land concerned or not, shall cause the
contract to
be recorded by the registrar concerned in the prescribed
manner provided …
26.
Restriction on the receipt of consideration by virtue of certain
deeds of alienation.
(1)
No person shall by virtue of a deed of alienation
relating to an erf or a unit receive any consideration until—
…
(b)
in case the
deed of alienation is a contract required to be recorded in terms of
section 20, such recording has been effected.’
[8]
It is
immediately apparent that the receipt of consideration prohibition in
s 26(1) is restricted to a contract that, courtesy of
s 20, is
required to be recorded.
[6]
While s 26 of the Act forms part of Chapter III, s 20 is contained in
Chapter II. As indicated, for purposes of that chapter, ‘land’
is defined to mean any land used or intended to be used mainly for
residential purposes. In other words, it is only a seller of
such
land, as defined, that is obliged to cause the registrar to record
the contract in the prescribed manner, failing which no
consideration
shall be received.
[9]
The difficulty for the school is that there is no
allegation in the founding papers that the usage, or intended usage,
of the property
was for residential purposes. The trust pertinently
raised the point in its answering papers, indicating that the school
operated
for profit and conducted its business operations from the
property, so that Chapter II of the Act was inapplicable. There was
no
reply to these averments. On the papers, therefore, it must be
accepted that the property was not used or intended to be used for
residential purposes at the time of the agreement. As such, there was
no statutory obligation on the trust to cause the registrar
to record
the contract, and no prohibition in respect of receipt of
consideration in terms of the agreement.
[10]
This
approach to Chapter II of the Act, and the proper approach to its
interpretation, has been confirmed by the SCA in
Merry
Hill (Pty) Ltd v Engelbrecht
:
[7]
‘
Let
me start with a proposition which appears to be beyond contention,
namely that the purpose of chapter 2 of the Act, which includes
s 19,
is to afford protection, in addition to what the contract may
provide, to a particular type of purchaser – a purchaser
who
pays by instalments – of a particular type of land – land
used or intended to be used mainly for residential purposes.
In this
sense, chapter 2, like its predecessor, the Sale of Land on
Instalments Act 72 of 1971, can be described as a typical piece
of
consumer protection legislation … The reason why the
legislature thought this additional statutory protection necessary
is
not difficult to perceive. It is because experience has shown this
type of purchaser, generally, to be the vulnerable, uninformed
small
buyer of residential property who is no match for the large developer
in a bargaining situation …’
[11]
These
sentiments were endorsed by in
Sarrahwitz
v Maritz NO
.
[8]
The Constitutional Court highlighted that aspect of the definition of
‘land’ that entitled any instalment purchaser,
however
wealthy, to benefit from the Act’s protection when purchasing
residential property. The majority added that the statutory
confinement of protection from hardship to ‘residential
property’ was a strong pointer that only ‘vulnerable
purchasers’ were the targeted beneficiaries of the legislative
intervention, and that the Act probably required amendment.
[9]
[12]
As Mr
Smith
,
for the trust, pointed out, there is also authority from other
Divisions confirming the position in respect of the interplay between
both sections relied upon by the school. Those judgments confirm that
‘…the purpose of the relevant sections, such
as ss 20
and 26, is to protect vulnerable, financially disadvantaged and
relatively unsophisticated purchasers from private companies
…’.
[10]
What is decisive, for purposes of determining whether the sale to the
school constituted a ‘contract’ in terms of the
Act, is
the intended use of the property by the purchaser at the time the
agreement was entered into.
[11]
On the papers, the ineluctable conclusion is that the school, as
purchaser, did not propose to use the property for any residential
purpose.
[12]
There is also no
reference on the papers to suggest that it was being used for
residential purposes at the time of sale. Following
the cited
authorities, the result is that the agreement is not regulated by
Chapter II of the Act and that the school’s arguments
in that
respect are rejected.
[13]
Should the Court order
transfer of the property to the school?
[13]
The
remaining issue to be addressed is whether, notwithstanding purported
cancellation, the school is entitled to the relief premised
on s 27
of the Act. That section provides as follows:
[14]
‘
27.
Rights of purchaser who has partially paid the purchase price of
land.
(1)
Any purchaser who in terms of a deed of alienation has undertaken to
pay the purchase
price of land in specified instalments over a period
in the future and who has paid to the seller in such instalments not
less
than 50 per cent of the purchase price, shall, if the land is
registrable, be entitled to demand from the seller transfer of the
land on condition that simultaneously with the registration of the
transfer there shall be registered in favour of the seller a
first
mortgage bond over the land to secure the balance of the purchase
price and interest in terms of the deed of alienation.
…
(3)
If for whatever reason the seller is unable, fails or refuses to
tender transfer within
three months of the receipt of the demand
referred to in subsection (1), the purchaser may cancel the relevant
deed of alienation,
in which case the parties are entitled to the
relief provided for in section 28(1): Provided that nothing contained
in this subsection
shall detract from any additional claim for
damages which the purchaser may have.’
[14]
The
interpretation to be given to this section has been authoritatively
determined. In
Botha
and Another v Rich NO
[15]
(‘
Botha
’
),
the applicants’ main contention was that the enforcement of the
cancellation clause, where more than 50 per cent of the
purchase
price was paid, and in the face of a demand for a transfer pursuant
to s 27, was contrary to public policy. The Constitutional
Court
considered this to be an alternative enquiry, the primary issue being
whether, under s 27(1), the respondent was obliged
to register the
property in the applicants’ name against registration of a
mortgage bond in their favour.
[16]
Answering that question required proper interpretation of the
section.
[15]
It is
unnecessary, for present purposes, to repeat the analysis of
contractual obligations in the context of the Constitution as
reflected in
Botha
.
It suffices to state that the Constitutional Court confirmed that s
27 must be interpreted in a manner that promotes the spirit,
purport
and objects of the Bill of Rights.
[17]
Nkabinde J, on behalf of the majority, held that a plain reading of s
27(1) revealed that it sought to protect the right of a purchaser
who
had paid not less than half of the purchase price. Successful
reliance on that subsection required the presence of the following
jurisdictional facts:
[18]
a)
First, the purchaser must have undertaken to pay
the purchase price in specified instalments;
b)
Second, the purchaser must have paid to the seller
in such instalments not less than 50 per cent of the purchase price;
c)
Third, the property in question must be
registrable.
[16]
Reading
s 27(1) together with s 27(3), the learned judge held that a lower
court had been incorrect to hold that specific performance,
in the
form of compelling the respondent to register the property and sign
all documents necessary for transferring the property
into the name
of the applicant, was not an available remedy. Such a conclusion was
held to be inconsistent with the proper approach
to interpretation of
the section.
[19]
[17]
Botha
also
considered whether a party was entitled to claim specific
performance, in the context of the Act, despite being in arrears,
and
whether the respondent could raise the
exceptio
non adimpleti contractus
as
a defence to the demand for transfer.
[20]
The court held that they could, but that a rigid application of the
principle of reciprocity may result in injustice in certain
circumstances. The law of contract, based as it is on the principle
of good faith, contained the necessary flexibility to ensure
fairness. This was achieved in
Botha
as
follows:
[21]
‘
In
my view, to deprive Ms Botha of the opportunity to have the property
transferred to her under section 27(1) and in the process
cure her
breach in regard to the arrears, would be a disproportionate sanction
in relation to the considerable portion of the purchase
price she has
already paid and would thus be unfair. The other side of the coin is,
however, that it would be equally disproportionate
to allow
registration of transfer, without making that registration
conditional upon payment of the arrears and the outstanding
amounts
levied in municipal rates, taxes and service fees. Accordingly, an
appropriate order in this regard will be made. The condition
that Ms
Botha must pay the arrears and all municipal balances, set out in our
order, on top of the statutory requirement that a
bond be registered,
constitutes an equitable exercise of the discretion a court has to
avoid undue hardship to the Trustees.’
[18]
In
refusing the respondent’s prayer for cancellation, the court
added as follows:
[22]
‘
For
the same reasons mentioned above, granting cancellation – and
therefore, in this case, forfeiture – in circumstances
where
three-quarters of the purchase price has already been paid would be a
disproportionate penalty for the breach.’
[19]
Mr
Smith
sought to distinguish
Botha
on the basis that: firstly, the school had invoked
a term implied by law only after the cancellation of the agreement of
sale; and
secondly, the enforcement of the implied term was
conditional on a preceding demand.
[20]
These
arguments appear to be without merit. It is so that a paragraph of
the contract in
Botha
expressly
incorporated s 27(1). Considering that s 27(1) has been held to
create a contractual right implied by law, this feature
of the case
is immaterial for present purposes.
[23]
Our law recognises that the terms of the contract – express,
tacit or implied – determine the obligations parties to
a
contract owe to each other.
[24]
[21]
On the
facts in
Botha
,
the respondent had successfully instituted proceedings against the
applicants in the magistrate’s court for cancellation
of the
contract, eviction and forfeiture of amounts already paid by the
applicants, obtaining judgment on 3 April 2008. Only on
21 May 2008
did the applicant exercise her rights by demanding transfer in terms
of s 27(1) of the Act.
[25]
In
other words, as in the present circumstances, a term implied by law
was invoked only after the purported cancellation of the
agreement of
sale. The Constitutional Court’s views as to the cancellation
itself support the conclusion that whether the
s 27(1) right was
invoked before or after purported cancellation is not determinative
of the issue.
[22]
As for
the second argument raised, there is authority that the right to
specific performance flows from the contract itself, so
that a
creditor in the position of the school may, therefore, institute
proceedings by summons or notice of motion claiming such
performance
without first putting the debtor in
mora
by
way of a separate notice.
[26]
Accepting that authority as correct, the need for a ‘demand’
in the form of a notice, as seemingly argued by the trust,
may be
read to relate only to the other possible remedies, as flowing from s
27(3) and s 28(1) of the Act. The decision in
Chetty
v Erf 311, Southcrest CC
is
direct authority for the proposition that a ‘demand’ for
transfer in terms of s 27(1) may be made for the first time
in a
notice of motion, and without a preceding notice, thereby
interrupting prescription. Following a survey of decided cases,
the
court in that matter concluded that there was no reason why a claim
for specific performance without a prior demand (i.e.
interpellatio
extra iudicialis
)
would be prohibited where such ‘demand’ is contained in
the notice of motion itself.
[27]
[23]
Service
of the notice of motion, in other words, constitutes a demand for
purposes of s 27(1) based on the contractual right implied
by that
section. That occurred on or about 20 October 2022. There was
no need for an extrajudicial notice of demand absent
a contractual or
statutory basis for this.
[28]
[24]
In my
view, the wording of the Act, and the decision in
Botha
,
supports this interpretation. For example, unlike s 19 of the Act, s
27(1) makes no provision for the ‘demand’ to
be issued by
way of ‘letter’ or ‘notice’, and does not
refer to any specific manner of communication.
[29]
Botha
,
in detailing the necessary jurisdictional prerequisites, makes no
reference to a separate, preceding demand.
[25]
It might be added that the trust noted, in a
single sentence contained in supplementary heads of argument,
that
the third jurisdictional fact (i.e. that the property was
registrable) had not been pleaded. In my view it is unsurprising
that
the point was not pressed. There is nothing on the papers to suggest
that the property in question is not registrable. It
would be wholly
inappropriate to construe the pleadings strictly so as to deprive the
school of the relief it seeks purely on this
basis, and in
circumstances where it has paid, and would likely forfeit, some 85
per cent of the purchase price.
[26]
The
decision in
Botha
has
been the subject of extensive consideration, also by the
Constitutional Court itself.
Beadica
231 CC and Others v Trustees, Oregon Trust and Others
[30]
(‘
Beadica
’
)
concerned the proper constitutional approach to the judicial
enforcement of contractual terms and the public policy grounds upon
which a court may refuse to enforce these terms.
[31]
Theron J, on behalf of the majority, noted that
Botha
had
caused some controversy, and therefore considered that judgment in
detail.
[27]
The
summary of
Botha
in
Beadica
confirms
that the present matter fits closely with the circumstances that
persuaded the court in
Botha
to
rule as it did. That decision offers a rich basis for approaching the
present application. This is because of the school’s
attempt to
rely on the statutory regime created by s 27(1) of the Act, rather
than placing reliance on s 27(3), in circumstances
where there had
been default of payment of purchase price, and where the contract
contained a cancellation clause coupled with
forfeiture of any
payments already made.
[32]
Botha
confirms
that the section affords the school that relief.
[33]
As was the case in
Botha
,
a substantial part of the purchase price, more than 50 per cent, had
been paid prior to the litigation. The present matter is
different in
that two payments of R225 000 each had been made subsequent to
the purported cancellation, and because the trust
relies on
prescription.
Prescription
[28]
What
remains is to consider the timing of the s 27(1) demand, in the
context of prescription. It is the party relying on prescription
that
must allege and prove the date of the inception of the period of
prescription.
[34]
The trust
alleges the date of purported cancellation of the contract, namely 31
January 2019, as the date of inception.
[29]
While
the act of cancellation is frequently performed by the non-defaulting
party absent judicial involvement, a prayer claiming
cancellation is
normal when this remedy is relied upon. As Bradfield notes, the
desirability of having an order of cancellation
so that the status of
the contract is not in doubt is well recognised.
[35]
There is good reason for this approach, as evinced by the facts and
judgment in
Botha
.
While cancellation without the need for a court order may be a
practical approach to enable the general flow of commerce, various
authorities confirm that courts would be asked to declare that the
cancellation was effective if litigation ensued.
[36]
It must be reiterated that in
Botha
the
respondent had successfully instituted proceedings against the
applicants in the magistrate’s court for cancellation,
eviction
and forfeiture. Following the Constitutional Court’s approach,
and for reasons that follow, it would be expected
of future litigants
in the position of trust to consider issues of cancellation and
forfeiture together, and to seek an order from
this court confirming
cancellation, so that any possible issues of disproportionality may
be properly ventilated.
[30]
The
trust rightly acknowledged that the validity of its purported
cancellation remained in issue.
[37]
Its papers are silent as to forfeiture of the amounts it has
received. It does not dispute the payments allegedly made by the
school, that it accepted two payments of R225 000 each after the
purported cancellation, and that the consequence of such acceptance
was that the school had made payments in the amount of R1,625
million, constituting over 85 per cent of the purchase price. The
school relies on this, in its founding papers, to argue that the
purported cancellation violated the provisions of the Act.
[38]
[31]
That
argument finds strong support in
Botha
.
On that authority, it is fundamentally erroneous to de-link questions
of forfeiture and restitution from the question of the fairness
of
upholding the cancellation.
[39]
The question of forfeiture and restitution is not independent of, and
logically anterior to, the question of cancellation.
[40]
There is no suggestion on the papers that the right to claim
forfeiture has been waived. Accepting a valid cancellation on the
purported date in such circumstances, and where over 85 per cent of
the purchase price has been paid, would be ‘a disproportionate
penalty for the breach’.
[41]
Absent a valid cancellation on 31 January 2019, the plea of
prescription, which is centred on cancellation on that date, must
fail.
[42]
[32]
In the event that this conclusion is erroneous, or
that a more relaxed approach is required in respect of the pleaded
date of prescription,
there appear to be three separate pathways for
arriving at the same conclusion.
[33]
Firstly,
following
Ethekwini
Municipality v Mounthaven
,
[43]
the school’s claim for transfer of the property in the name of
the trust is a claim to deliver goods in the form of immovable
property, which qualifies as a ‘debt’.
[44]
The running of prescription commenced only as soon as the debt ‘is
due’.
[45]
The
Prescription Act does not define this notion, so that the implied
term requires interpretation in the usual manner, including
the
unitary exercise of consideration of the words of the statute in
combination with context and apparent purpose.
[46]
[34]
On an
ordinary interpretation, s 27 affords the purchaser of land by way of
instalments an important right.
[47]
Provided the land is registrable, and that at least 50 per cent of
the purchase price has been paid, any such purchaser ‘shall
…
be entitled to demand’ transfer of the land from the seller.
The stipulated condition is registration of a first
mortgage bond
over the land in favour of the seller, to secure the balance of the
purchase price and interest, simultaneous with
the registration of
transfer. Properly construed, the earliest possible time that the
debt became ‘due’, for purposes
of prescription, was the
moment that 50 per cent of the purchase price was paid by the
school.
[48]
This accords with
the authority that where the day on which a debt becomes due may be
unilaterally determined by the creditor,
the debt is deemed to be due
on the earliest day which the creditor may determine.
[49]
[35]
Even
assuming, in favour of the trust, that this is the position,
[50]
the acceptance of instalment payments had the effect of interrupting
the running of prescription. The views expressed in
Lamprecht
v Lyttleton Township (Pty) Ltd
clarify
the point:
[51]
‘
Where
however a time is fixed for performance at a future date the position
is altered. The seller, having given the purchaser credit,
has no
right to payment of the purchase price until the prescribed time, and
prescription begins to run against him in respect
of his action for
such price only from the date fixed for payment – in the case
where payment by instalments is agreed, in
respect of each instalment
from its appropriate date, not being bound (unless otherwise
provided) to pass transfer or effect delivery
until payment of the
full price. On the other hand the purchaser, except in the infrequent
case of the instalment arrangement being
equally for the seller’s
benefit, has the right to pay up the full price at any time and claim
transfer or delivery, though
not compellable so to do. It is
consequently open to argument that extinctive prescription in respect
of the purchaser’s
action for transfer or delivery runs against
him as from the date of sale,
and
is only interrupted from time to time by a payment of an agreed
instalment
…’
(Own
emphasis.)
[36]
A
sensible interpretation, drawing on this decision, would consider the
debt to be due from the time that 50 per cent of the purchase
price
has been paid, but interrupted from time to time by the seller’s
acceptance of payment of an agreed instalment.
[52]
As Ms
Teko
emphasised
in her supplementary heads of argument, the trust accepted two
additional payments after purporting to cancel the contract.
The
trust failed to deal with the legal effect of this in its
supplementary submissions. Those payments could only have been
accepted
in terms of an extant agreement and as partial-payment of
the purchase price, and belie the purported preceding cancellation.
On
the facts, that is an additional basis for rejecting both the
trust’s reliance on its purported cancellation, as well as the
claim of prescription.
[53]
Considering the agreement in its proper context and subsequent
events, including the payments made and received, also after the
purported cancellation, it cannot be said that the claim had
prescribed at the time of the demand.
[54]
[37]
Secondly,
s 14(1) of the Prescription Act provides that the running of
prescription is interrupted by an express or tacit acknowledgement
of
liability by the debtor.
[55]
There is authority as to the proper weight to be given to
‘tacit’:
[56]
‘…
full
weight must be given to the Legislature’s use of the word
“tacit” in s 14(1) of the Act. In other words,
one must
have regard not only to the debtor’s words, but also to his
conduct. In one’s quest for an acknowledgement
of liability.
That, in turn, opens the door to various possibilities. One may have
a case in which the act of the debtor which
is said to be an
acknowledgement of liability, is plain and unambiguous. His prior
conduct would then be academic. On the other
hand, one may have a
case where the particular act or conduct which is said to be an
acknowledgement of liability is not as plain
and unambiguous. In that
event, I see no reason why it should be regarded
in
vacuo
and
without taking into account the conduct of the debtor which preceded
it. If the preceding conduct throws light upon the interpretation
which should be accorded to the later act or conduct which is said to
be an acknowledgement of liability, it would be wrong to
insist upon
the later act or conduct being viewed in isolation. In the end, of
course, one must also be able to say when the acknowledgement
of
liability was made, for otherwise it would not be possible to say
from what day prescription commenced to run afresh …
Thirdly,
the test is objective. What did the debtor’s conduct convey?’
[38]
Any
sort of conduct may provide the necessary material to reveal the
debtor’s state of mind as one intending to admit the
existence
of the debt and liability therefore.
[57]
It must be emphasised that the context in which the payments were
made, and accepted, was the agreement to sell the property and
the
express undertaking to transfer same once the purchase price and
transfer costs had been paid in full.
[58]
If the school’s payment of instalments towards the agreed
purchase price constituted a series of tacit acknowledgements of
liability, so that prescription was interrupted on the date of each
payment and commenced running again from those dates,
[59]
the trust’s continued acceptance of such payments must operate
with similar effect in the context of the agreement, including
the
term implied by s 27(1).
[39]
Finally, completion of the period of prescription
is also delayed in certain circumstances in terms of the provisions
of the Prescription
Act. Section 13(2) reads as follows:
‘
A
debt which arises from a contract and which would, but for the
provisions of this subsection, become prescribed before a reciprocal
debt which arises from the same contract becomes prescribed, shall
not become prescribed before the reciprocal debt becomes prescribed.’
It is
clear that in the case of a contract for a sale of land with the
purchase price payable by instalments, the seller’s
debt to the
purchaser to transfer the property and the purchaser’s debt to
the seller to pay the price are ‘reciprocal
debts’.
[60]
Botha
confirms
the position:
‘…
there
is a presumption that obligations in bilateral contracts are
reciprocal. The presumption is not rebutted here. If anything,
section 27(1) indicates that the seller’s obligation to give
transfer and the purchaser’s obligation to pay instalments
timeously are intimately interconnected. That is why the purchaser is
entitled to transfer only “on condition that simultaneously
with the registration of transfer there shall be registered in favour
of the seller a first mortgage bond over the land to secure
the
balance of the purchaser price and interest”. The section thus
recognises that it would be unfair for the purchaser to
maintain her
rights in the property if she falls into arrears. It follows
inexorably that the provision does not allow the purchaser
to obtain
rights in the property unless she first purges her arrears.’
[40]
In the
case of debts payable in instalments, prescription runs in respect of
each instalment as it falls due.
[61]
Leaving aside the purported cancellation, having accepted the final
payment made by the school on 3 December 2020, the trust’s
entitlement to claim the outstanding balance, or subsequent
instalment, would not have prescribed for a three-year period from
that date, at the earliest. In the normal course of events, a debt is
due when it is ‘claimable’ by a creditor, and
as the
corollary thereof, is payable by the debtor.
[62]
The effect of s 13(2) is that the reciprocal debt to transfer the
property, an implied contractual term relied upon by the school,
does
not prescribe until that point in time.
[63]
[41]
In
conclusion, it may be added that this is not one of the cases where a
creditor seeks to postpone the commencement of prescription
based on
their own failure to perform in order to delay the running of
prescription.
[64]
Prescription, it must be remembered, is aimed at penalising negligent
inaction, rather than innocent inaction.
[65]
The continued attempts at payment distinguish the matter from cases
where a negligent creditor ‘failed to take or initiate
any
steps’ to satisfy its reciprocal obligations.
[66]
The acceptance of the instalments paid on 15 May 2019 and 3 December
2020 must be viewed in the context of an invalid attempt to
cancel
the agreement on 31 January 2019. The demand for transfer of the
land, based on the contractual right implied by s 27(1),
occurred on
or about 20 October 2022, when the application was served on the
respondent’s attorneys.
[67]
Botha
explains
that, in terms of s 27(3), the school enjoyed the option to cancel
the deed of alienation in terms of s 27(3) and to claim
the relief
included in s 28(1) of the Act, should the seller be ‘unable,
fails or refuses to tender transfer within three
months of the
receipt of the demand’. In addition, based on that authority,
it was entitled to invoke s 27(1) directly and
demand transfer of the
property, as it did.
[68]
There
is no basis to refuse to exercise the discretion to award specific
performance in the circumstances.
[42]
In all the circumstances, the school is
entitled to the relief it seeks, modified in accordance with
Botha
to ensure that the trust is not disproportionately
affected as a result. The usual order as to costs is appropriate.
Although counsel
were directed to furnish further heads, this was
primarily due to the failure to address the
Botha
judgment in earlier heads of argument. No special
direction in that respect is warranted.
Order
[43]
The following order is made:
1.
The respondents (‘the Trustees’) are
ordered to sign all necessary documents to effect the registration
and transfer
of the remainder of Erf 4[…] Queenstown and
remainder of Erf 1[…] Queenstown, held by deed transfer number
T56[…]
(‘the property’) into the name of the
applicant, against the simultaneous:
(i)
Payment of any arrears owing and outstanding
amounts levied in respect of municipal rates, taxes and service fees
under the instalment
sale agreement, by the applicant to the VF Group
Trust IT2[…] (‘Trust’);
(ii)
Registration of a first mortgage bond over the
property in favour of the Trust to secure the balance of the purchase
price and interest
thereon in terms of the agreement; and
(iii)
Payment of all costs of transfer.
2.
The Trustees are ordered to pay the applicant’s
costs.
A GOVINDJEE
JUDGE OF THE HIGH
COURT
Heard:
07
September 2023
Delivered:
28
November 2023
APPEARANCES:
For
the Applicant:
Adv
A E Teko
St
George’s Chambers, Makhanda
Instructed
by:
Z
E Sontshi & Associates
Applicant’s
Attorneys
Suite
1, 14 Prince Alfred
Komani
Tel:
045 838 3460
Email:
sontshize2@gmail.com
C/O:
Yokwana
Attorneys
New
Street
Makhanda
For
the Respondent:
Adv
D.A Smith
Chambers,
Gqeberha
Instructed
by:
Mr
Wesley Hayes Incorporated
5
Gray Street
Komani
Tel:
045 805 0081
Email:
sec1@wrhlaw.co.za
C/O:
Neville
Borman & Botha Inc.
22
Hill Street
Makhanda
[1]
Act
68 of 1981.
[2]
The
order was sought in the following terms:
(a)
‘
The Trust be compelled to comply with the
written agreement entered into between the Applicant and the Trust
on 16 March 2016,
to purchase the immovable property known as:
1. Remainder
of Erf 4[…] Queenstown
Situate in the Lukhanji
Municipality
Division of Queenstown
Province of the Eastern
Cape
In Extent: 455 (four
hundred and fifty-five) square metres
2. Remainder of
Erf 1[…] Queenstown
Situate in the Lukhanji
Municipality
Division of Queenstown
Province of the Eastern
Cape
In Extent: 169 (one
hundred and sixty-nine) square metres
The 2 (two) properties
held by deed transfer number T56[…](‘the property’)’
(b)
An order directing the Trust to cause the
transfer of the property to be effected in the name of the Applicant
against payment
by the Applicant of the balance of R200 000,00
to the respondent, with interest, and all costs of transfer.
(c)
Costs of the application on the scale as between
attorney and client.’
(d)
[3]
It
may be noted, for the sake of completion, that the school has since
been evicted from the property by the magistrate’s
court. An
appeal against that decision was unsuccessful. A petition for leave
to appeal to the SCA is pending.
[4]
Preamble
to the Act.
[5]
Amardien
and
Others v Registrar of Deeds and Others
[2018]
ZACC 47
;
2019 (2) BCLR 193
(CC
)
2019
(3) SA 341
(CC) para 10.
[6]
Both
the notions of ‘consideration’ and ‘contract’
are defined in s 1 of the Act. ‘Consideration’,
in
relation to a sale of land under any deed of alienation, means the
purchase price and interest thereon, excluding rent or
occupational
interest constituting a reasonable compensation for the use and
enjoyment of the land by the purchaser. ‘Contract’
means
a deed of alienation under which land is sold against payment by the
purchase to, or to any person on behalf of, the seller
of an amount
of money in more than two instalments over a period exceeding one
year. It is defined to include any agreement or
agreements which
together have the same import, whatever form the agreement or
agreements may take. In
Sarrahwitz
v Maritz NO and Another
[2015]
ZACC 14
;
2015 (4) SA 491
(CC);
2015 (8) BCLR 925
(CC) (‘
Sarrahwitz
’
)
para 78, the Constitutional Court read the words ‘including
residential property paid for in full within one year of the
contract, by a vulnerable purchaser’ into the definition of
‘contract’ at the end of s 1(a), adding the following
definition: ‘vulnerable purchaser’ means a purchaser who
runs the risk of being rendered homeless by a seller’s
insolvency.’
[7]
Merry
Hill (Pty) Ltd v Engelbrecht
[2007]
ZASCA 60
;
2008 (2) SA 544
(SCA) para 13.
[8]
Sarrahwitz
above
n 6 paras 34, 39.
[9]
Ibid
para 35. See G Muller, R Brits, JM Pienaar and ZT Boggenpoel
Silberberg
and Schoeman’s The Law of Property
(6
th
Ed)
(2019) at 484.
[10]
Katshwa
and Others v Cape Town Community Housing Co (Pty) Ltd and Four
Similar Cases
2014
(2) SA 128
(WCC) para 45.
[11]
Bouwer
v Aurae (Pty) Ltd
1991
(4) SA 622
(W) at 626H–I.
[12]
Ibid
at 626I–627D.
[13]
Cf
Amardien
above
n 5 paras 45-46 and
Chetty
v Erf 311, Southcrest CC
2020
(3) SA 181
(GJ) (‘
Chetty
’
)
paras 10-13.
[14]
S
28 deals with consequences of deeds of alienation which are void or
are terminated, in part, as follows:
‘
(1)
Subject to the provisions of subsection (2), any person who has
performed partially or in full in terms of an alienation of
land
which is of no force or effect in terms of section 2(1), or a
contract which has been declared void in terms of the provisions
of
section 24(1)(c), or has been cancelled under this Act, is entitled
to recover from the other party that which he has performed
under
the alienation or contract …’
[15]
Botha
and Another v Rich NO and Others
[2014]
ZACC 11
;
2014 (4) SA 124
(CC);
2014 (7) BCLR 741
(CC) (‘
Botha
’
).
[16]
Botha
above
n 15 paras 21 and 23.
[17]
Botha
above
n 15 para 28.
[18]
Botha
above
n 15 para 34.
[19]
Botha
above
n 15 para 41.
Botha
considered
and rejected the argument that cancellation, in terms of s 27(3),
followed by the relief in s 28(1), was the only remedy
when demand
for transfer was refused: paras 36 and 37. This was due to the
common law entitlement to specific performance in
respect of any
contractual right, coupled with the creation of an implied
contractual right, courtesy of s 27(1), in circumstances
where there
was no indication that the legislature intended to depart from the
common-law position. That a purchaser ‘may
cancel’ the
contract of sale, in terms of s 27(3), was not to be construed to
exclude specific performance, especially
when considering the
legislature’s demonstrated concern for the protection of the
rights of a purchaser who had partially
paid the purchase price of
immovable property: paras 39 and 40.
[20]
Botha
above
n 15 para 43.
[21]
Botha
above
n 15 para 49 footnotes excluded.
[22]
Botha
above
n 15 para 51.
[23]
Botha
above
n 15 para 37.
[24]
See
the judgment of Froneman J in
Trinity
Asset Management (Pty) Ltd v Grindstone Investments 132 (Pty) Ltd
[2017]
ZACC 32
;
2017 (12) BCLR 1562
(CC);
2018 (1) SA 94
(CC) (‘
Trinity
’
)
para 157, and the authorities cited there.
[25]
Botha
above
n 15 paras 6 and 8. By that time, she had already paid instalments
in excess of half of the purchase price.
[26]
ADJ Van Rensburg et al ‘Contract’ (3
rd
ed) in WA Joubert and JA
Faris
LAWSA
(3
rd
ed)
(vol 9) (2014) para 391. In other words, the need for a ‘demand’,
referenced in s 27(1), may be read to relate
only to the possible
remedies flowing from ss 27(3) and 28(1). Also see the judgment of
Corbett J in
Theron
v Theron
1973
(3) SA 667
(C).
[27]
Chetty
above
n 13 para 17.
[28]
Chetty
above
n 13 para 16. Also see
Win
Twice Properties (Pty) Ltd v Binos and Another
2004
(4) SA 436
(W) at 441C–444B.
[29]
What
constitutes a valid demand in law is a question of fact: see
Kragga
Kamma Estates CC v Flanagan
[1994]
ZASCA 137
;
1995 (2) SA 367
(A) (‘
Kragga
Kamma Estates
’
)
at 374E–G, cited with approval in
Trinity
above
n 24 para 74.
[30]
Beadica
231 CC and Others v Trustees, Oregon Trust and Others
[2020]
ZACC 13
;
2020 (9) BCLR 1098
(CC);
2020 (5) SA 247
(CC) (‘
Beadica
’
).
[31]
Beadica
above
n 30 para 1.
[32]
Clause
6 of the agreement provides as follows: ‘In the event of this
sale being cancelled by reason off any default on the
part of the
purchaser, all amounts paid by the purchaser up to the point of
cancellation shall be forfeited by and not be refundable
to the
purchaser. The seller retains the right to claim damages from the
purchaser for breach of contract in terms of clause
18 hereof.’
See
Beadica
above
n 30 para 49:
Botha
principally
concerned the interpretation and application of s 27 in the context
of a contract of an instalment sale, in particular
a contract of
sale that contained a cancellation clause, which provided for
forfeiture.
[33]
Botha
above
n 15 para 41.
[34]
Gericke
v Sack
1978
(1) SA 821
(A) at 827H–828A.
[35]
See
GB Bradfield
Christie’s
The Law of Contract in South Africa
(8
th
Ed)
(2022) at 673.
[36]
Sonia
(Pty) Ltd v Wheeler
[1958]
2 All SA 38
;
1958 (1) SA 555
(A) at 560-561, citing
Lebedina
v Schechter and Haskell
1931
WLD 247.
[37]
Para
3.1 of the answering affidavit.
[38]
The
trust’s supplementary heads of argument appear to suggest that
the school had failed to plead a justiciable right of
action for
which it was obliged to answer. That submission is factually
incorrect. The founding affidavit specifically pleaded
reliance on
chapter 3 of the Act, and went so far as to quote s 27(1).
[39]
Botha
above
n 15 para 51.
[40]
Ibid.
[41]
Botha
above
n 15 para 51.
[42]
Santam
Ltd v Ethwar
[1998]
ZASCA 102
;
1999 (2) SA 244
(SCA) at 256F–H;
[1999]
1 All SA 252 (A).
[43]
Ethekwini
Municipality v Mounthaven (Pty) Ltd
2019
(4) SA 394
(CC) (‘
Ethekwini
’
).
[44]
Ethekwini
above
n 43
para
8.
[45]
S
12(3) of the Prescription Act 68 of 1969 (‘the
Prescription
Act&rsquo
;).
[46]
See
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012]
2 All SA 262
;
2012 (4) SA 593
(SCA) para 8. A debt to perform
contractual obligations generally becomes due in accordance with the
provisions of the contract,
properly interpreted: Bradfield above n
35 at 594.
[47]
On
the benefits afforded to purchasers, and the corresponding burdens
or restrictions on the rights of sellers, in terms of the
Act, in
general, see
Van
Niekerk and Another v Favel and Another
2008
(3) SA 175
(SCA) para 10. As already indicated, following
Botha
,
the remedy for specific performance remained available to the school
notwithstanding the provisions of s 27(3) of the Act. In
accordance
with the general principles applicable to reciprocal obligations, an
applicant claiming specific performance must
perform, or, as in the
present instance, tender to perform, its own reciprocal obligations:
Bradfield above n 35 at 664 and 665;
Crispette
and Candy Co Ltd v Michaelis NO and Another
1947
(4) SA 521
(A). Also see Muller et al above n 9 at 484.
[48]
The
Constitutional Court has upheld as a ‘fundamental principle of
prescription’, and based on the wording of the
current act in
comparison to the 1943 legislation, that ‘it will begin to run
only when the creditor is in a position to
enforce his right in law,
not necessarily when that right arises:
Trinity
above
n 24 para 40, read with paras 95, 99 and 100. The
Prescription Act
provides
that prescription ‘shall commence to run as soon as
the debt is due’, to be contrasted with the earlier
legislation
that prescription shall run ‘from the date on
which the right of action first accrued against the debtor’:
s 5 of the Prescription Act 18 of 1943. Also see
Phasha
v Southern Metropolitan Local Council of the Greater Johannesburg
Metropolitan Council
2000
(2) SA 455
(W) (‘
Phasha
’
)
at 463G–464A; 468H–469C. See, for example,
Dongwe
NO v Slater-Kinghorn NO and Another
2009
JDR 1341 (KZP) (‘
Dongwe
’
)
para 2.
[49]
See
the judgment of Van den Heever J in
Benson
and Another v Walters and Others
1981
(4) SA 42
(C) (‘
Benson
’
),
cited with approval in
Santam
Ltd v Ethwar
above
n 42 at 256A–B.
[50]
The SCA has confirmed that there is a difference between the coming
into existence of a debt, on the one hand, and the recoverability
thereof, on the other:
Standard
Bank of South Africa Ltd v Miracle Mile Investments 67 (Pty) Ltd
[2016]
ZASCA 91
;
2017 (1) SA 185
(SCA) para 24. There is also authority
that a debt may only be due after the occurrence of some future
event:
Mtati
v Whitesides Attorneys
[2018]
ZAECGHC 32 para 17. Based on such decisions, and the general
approach in
Botha
,
it may, for example, be open to argument that a purchaser was not in
a position to claim transfer. Bearing in mind the
exceptio
non adimpleti contractus
,
and the specified condition of registration of a mortgage bond in s
27(1) of the Act, the debt would then not be ‘due’
in
terms of s 12(1) of the Prescription Act.
[51]
Lamprecht
v Lyttleton Township (Pty) Ltd
1948
(4) SA 526
(T) at 530–531. Also see MM Loubser
Extinctive
Prescription
(2
nd
Ed)
(2019) at 139.
[52]
The
benefit afforded by the section would be negated if a purchaser was
not able to decide when to trigger its effect, and was
restricted to
claiming the entitlement at the moment that 50 per cent of the
purchase price was paid. There may be various reasons
for invoking
the implied term at a much later point in time, for example once the
purchaser was able to secure the necessary
financial backing to
comply with the stipulated condition of simultaneous registration of
a first mortgage bond.
[53]
It may be noted that the agreement included the following waiver
clause
:
‘No indulgence, latitude or extension of time which may be
allowed by the seller to the purchaser in respect of any payment
provided for herein or any matter or anything which the purchaser is
bound to perform in terms hereof, shall be deemed to be
a waiver of
the seller’s right at any time and without any notice to
require strict and punctual compliance with each provision
and term
hereof.’ No arguments were advanced in respect of the
relevance of this, if at all, for the issues under consideration.
[54]
On
the role of context, including the parties’ subsequent conduct
in implementing their agreement, in interpretation of
a contract,
see the judgment of Wallis JA in
Bothma-Batho
Transport (Edms) Bpk v S Bothma en Seun Transports (Edms) Bpk
[2013]
ZASCA 176
;
2014 (2) SA 494
(SCA);
[2014] 1 All SA 517
(SCA) para 12
and
Comwezi
Security Services (Pty) Ltd and Another v Cape Empowerment Trust Ltd
[2012]
ZASCA 126
para 15.
[55]
S
14(2) provides: ‘If the running of prescription is interrupted
as contemplated in subsection (1), prescription shall commence
to
run afresh from the day on which the interruption takes place or, if
at the time of the interruption or at any time thereafter
the
parties postpone the due date of the debt, from the date upon which
the debt again becomes due.’ See Loubser above
n 51 at 225.
[56]
Cape
Town Municipality v Allie NO
1981
(2) SA 1
(C) at 5G–H, cited with approval in
Investec
Bank Limited v Erf 436 Elandspoort (Pty) Ltd and Others
[2020]
ZASCA 104
(‘
Investec
’
);
2021 (1) SA 28
(SCA) para 29.
[57]
Benson
above
n 49 at 50F–H.
[58]
On
the importance of context, see
Investec
above
n 56 para 43.
[59]
See
Investec
above
n 56 para 33.
[60]
Dongwe
above
n 48 para 27, and the authorities cited there.
[61]
Bradfield
above n 35 at 595.
[62]
Standard
Bank v Miracle Mile Investments
[2016]
ZASCA 91
;
[2016] 3 All SA 487
(SCA);
2017 (1) SA 185
(SCA) para 24.
A debt is due when the creditor acquires a complete cause of action
for the recovery of the debt, i.e. when the
entire set of facts
which the creditor must prove in order to succeed with their claim
against the debtor is in place or, in
other words, when everything
has happened which would entitle the creditor to institute action
and to pursue their claim:
Truter
and Another v Deysel
[2006]
ZASCA 16
;
2006 (4) SA 168
(SCA) para 16.
[63]
BBS
Empangeni (formerly ZTC Cashbuild CC) v Phoenix Industrial Park
(Pty) Ltd and Another
[2011]
ZAKZDHC 1 para 11.2. Also see
Dongwe
above n 47 para 32: the
claim for transfer is enforceable as soon as a tender of payment can
be made, but prescription will not
set in until the reciprocal claim
for payment of the instalments has prescribed.
[64]
See
Benson
above
n 48 and the authorities cited therein, as cited in
Phasha
above
n 47 at 469E–470A.
[65]
Macleod
v Kweyiya
[2013]
ZASCA 28
;
2013
(6) SA 1
(SCA) para 13.
[66]
See
Uitenhage
Municipality v Molloy
[1997]
ZASCA 112
;
)
[1997] ZASCA 112
; ;
[1998] 1 All SA 140
(A)
1998 (2) SA 735
(SCA) at 743B. Cf
Phasha
above
n 47 at 473D–G.
[67]
It
may be noted that, unlike s 19 of the Act, s 27(1) makes no
provision for the ‘demand’ to be issued by way of
‘letter’ or ‘notice’, and does not refer to
any specific manner of communication. What constitutes a valid
demand in law is a question of fact: see
Kragga
Kamma Estates
above
n 29 at 374E–G, cited with approval in
Trinity
above
24 para 74.
[68]
Botha
above
n 15 para 41.