Brief Summary

Contract — Misrepresentation — Claim for repayment based on negligent misrepresentation and latent defects — Plaintiff purchased vacant land from first defendant, later discovering property unsuitable for intended residential development due to dolomitic instability — Defendants denied liability, citing voetstoots clause in sale agreement — Court held that latent defect not disclosed by defendants constituted misrepresentation, allowing plaintiff to claim repayment of purchase price and associated costs.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings took the form of a civil action in the High Court of South Africa, Gauteng Division, Pretoria, in which the plaintiff sought restitutionary relief arising from the sale of immovable property. The claim was pleaded on the basis of innocent or negligent misrepresentation, alternatively on the basis of a latent defect in the merx, with the plaintiff tendering to return the property to the seller.

The plaintiff was Daphney Chuma. The first defendant was Bondcor (Pty) Ltd, described as an entity engaged in the business of dealing in immovable property. The second defendant was Werner Serfontein, the sole director of the first defendant and the person who represented it in concluding the sale. The third defendant was Standard Bank of South Africa Ltd, the mortgagee; however, no substantive relief was pursued against the third defendant.

The matter concerned a sale concluded during 2017, with litigation later instituted under case number 4151/2020. The trial was heard on 11 May 2022, and judgment was delivered on 5 September 2023. The dispute concerned the sale of a vacant erf in Lyttelton Manor, Centurion, and, specifically, whether the land’s dolomitic conditions and related requirements constituted a latent defect substantially impairing the property’s utility for the plaintiff’s intended purpose of constructing a residential dwelling, and whether the defendants could rely on a voetstoots clause to defeat the plaintiff’s claim.

Material Facts

The court treated several material facts as common cause. On 4 August 2017, the plaintiff and the first defendant (represented by the second defendant) concluded a written agreement in terms of which the first defendant sold the vacant property to the plaintiff for R600,000.00. The agreement required the plaintiff to pay a deposit of R270,000.00 and was subject to the plaintiff obtaining a mortgage bond for the balance of the purchase price. The agreement also contained a voetstoots clause, framed as an indemnity by the purchaser against latent defects.

The plaintiff paid the deposit (in the amount of R270,000.00) on 4 September 2017 and also paid transfer costs of R17,082.29. On 13 December 2017, after Standard Bank approved the bond, the property was registered in the plaintiff’s name and a mortgage bond was registered over it.

The dispute arose after the plaintiff sought to proceed with development. The plaintiff’s evidence was that, before purchasing, she had been informed by the estate agent that the property came with approved plans for a double-storey house. However, she was not provided with those plans at the time. After purchase, she had plans drawn for a single-storey dwelling and submitted them to the municipality, but approval was not obtained. The municipality advised that there were no current approved plans, that previously approved plans had lapsed due to no building taking place within the prescribed period, and that the property was underlain by dolomite, requiring a dolomite stability investigation.

In response, the plaintiff commissioned an engineering geologist, Ms Beverley Keyter, to conduct a dolomite stability study. The Keyter report referred to an earlier geological report for the property by Mr Johann van der Merwe, dated 6 September 2001, which the plaintiff testified she had been unaware of and had not been informed about by the defendants. The plaintiff later obtained a set of the earlier building plans, and with them discovered that they included (or were associated with) the Van der Merwe geological report.

The plaintiff’s case, as accepted by the court, was that the dolomitic condition and the associated engineering and regulatory consequences were not visible to the naked eye, and that she purchased the property to build a home. She also testified that, had she known of the Van der Merwe report and the dolomitic risk and requirements, she would not have purchased the property. In support of her intended use, she relied, among other things, on a Standard Bank quotation and pre-agreement statement indicating that the loan related to vacant land intended for development of a normal residential dwelling, which she said had been sent to the estate agent before registration.

Ms Keyter’s evidence was accepted as expert evidence. In her opinion, applying the relevant standards referred to in her report, the site was unsuitable for residential development under current regulations, with risk factors including the accumulation of water and sinkhole formation, and she indicated that the property had no residential resale value in that sense. She also testified that the Van der Merwe report contemplated development only subject to precautionary measures and engineering interventions.

The second defendant testified that he had purchased the property at auction in 2016 for R160,000.00 and, after viewing municipal records, he discovered the existence of approved building plans and that the municipal file contained the Van der Merwe report. His evidence was that he did not study the plans or the report at that stage and only became aware of the report’s contents in 2019. He stated that, according to the report, residential construction was possible subject to remedial measures. He also conceded that he had not informed the plaintiff about the Van der Merwe report or its contents. The court further noted evidence that the title deed contained a condition requiring that an engineer be appointed before building plans were submitted, and that a certificate confirming study of the relevant geological report and measures for safe development be submitted with building plans.

Legal Issues

The central legal questions concerned the availability of restitutionary relief to the purchaser in the face of a contractual voetstoots clause, and whether the circumstances justified the purchaser’s reliance on the aedilitian remedies, specifically the actio redhibitoria.

The court was required to determine, as a matter involving both fact and the application of law to fact, whether the property was affected by a latent defect that substantially impaired its utility for the purpose for which it was sold, whether that defect existed at the time of the sale, and whether the plaintiff was unaware of it. A further decisive question involved a value-laden assessment of conduct and credibility: whether the defendants knew of the latent defect (or were taken to have known of it) and failed to disclose it, such that they could not rely on the voetstoots clause.

Although the plaintiff’s pleadings referenced misrepresentation, the reasoning in the judgment focused on the legal framework governing latent defects, the voetstoots clause, and the requirements for the actio redhibitoria, together with the factual findings on knowledge and non-disclosure.

Court’s Reasoning

The court set out the principle that a voetstoots clause ordinarily deprives a purchaser of the right to cancel the contract and claim restitution where a latent defect is discovered after conclusion of the contract. However, the court held that this contractual protection is not available where the seller was aware of the latent defect and failed to disclose it to the purchaser prior to contracting. In those circumstances, the purchaser may invoke the aedilitian remedies, including the actio redhibitoria.

The court identified the elements the plaintiff was required to prove to succeed with the actio redhibitoria on a balance of probabilities. These included that the merx had a defect that objectively and substantially impaired its utility for the purpose for which it was sold; that the defect existed at the time of sale; that it was latent (not discoverable on inspection); that the purchaser was unaware of it; that the purchaser would not have bought had she known; and that the purchaser was willing and able to restore the merx.

Applying these principles, the court treated it as common cause that, at the time of contracting, the plaintiff was unaware that the property had dolomitic issues and that remedial measures were required for stability, as contemplated in the Van der Merwe report. On that basis, the court concluded that the property had a latent defect at the time the sale was concluded. The plaintiff’s intention to build a residential dwelling was treated as central to the transaction’s purpose, and the court considered it significant that the property had been marketed as having approved plans for a dwelling, which supported the inference that the contemplated use was residential development.

The court made explicit credibility findings. The plaintiff was regarded as a credible witness whose evidence on her intended purpose and the circumstances under which she purchased the property was coherent and logical. By contrast, the second defendant was regarded as evasive on issues bearing on his awareness of the Van der Merwe report and the title deed condition relating to geological measures. The court considered the second defendant’s claimed lack of knowledge implausible given the cumulative considerations that he operated a business dealing in property, worked in a conveyancing environment at the time of transfer, processed the registration, and had knowledge of dolomitic conditions in the relevant areas. The court also took into account that the second defendant conceded the plaintiff was never informed of the report or its contents, despite the existence of information in municipal records and conditions recorded in the title deed relating to geological considerations.

On these facts, the court concluded that the defendants had fraudulently failed to disclose the latent defect and thus could not rely on the voetstoots clause. The court was satisfied that the plaintiff had established the necessary requirements for rescission and restitution under the actio redhibitoria, including that she would not have purchased had she known of the defect and that she was willing to make restitution by returning the property.

Outcome and Relief

The court granted judgment in favour of the plaintiff and ordered the defendants to provide restitutionary relief.

The first defendant was ordered to repay the purchase price of R600,000.00 to the plaintiff, together with interest at 10.25% per annum from the date the plaintiff and Standard Bank entered into the mortgage bond. The first defendant was further ordered to pay R20,127.38 in respect of rates and taxes and municipal services paid in relation to the property, and R17,082.29 in respect of transfer costs. The defendants were ordered to pay the costs of the action. No relief was granted against the third defendant.

Cases Cited

None were cited in the judgment.

Legislation Cited

No specific statute was cited in the judgment.

Rules of Court Cited

No specific rules of court were cited in the judgment.

Held

The court held that the property was affected by a latent defect existing at the time of sale, arising from its dolomitic conditions and the associated requirements and risks relevant to residential construction, and that the plaintiff had been unaware of this at the time she contracted. It held further that the defendants were aware of the relevant defect-related information and failed to disclose it, with the result that they were precluded from relying on the voetstoots clause. On this footing, the court held that the plaintiff satisfied the requirements of the actio redhibitoria, justifying rescission in substance and restitution, including repayment of the purchase price and associated amounts, together with interest and costs.

LEGAL PRINCIPLES

A voetstoots clause generally protects a seller against claims arising from latent defects discovered after the conclusion of a contract of sale, and may bar cancellation and restitution that would otherwise follow from such defects.

That contractual protection does not avail a seller who was aware of a latent defect and failed to disclose it to the purchaser prior to the sale. In such circumstances, the purchaser may rely on the aedilitian remedies, including the actio redhibitoria, notwithstanding a voetstoots clause.

For the actio redhibitoria to succeed, a purchaser must establish, on a balance of probabilities, that the merx had a defect that objectively and substantially impaired its utility for the purpose for which it was sold; that the defect existed at the time of sale; that it was latent and not discoverable upon inspection; that the purchaser was unaware of it; that the purchaser would not have contracted had the defect been known; and that the purchaser is willing and able to make restitution.

Chuma v Bondcor (Pty) Ltd and Others (4151/2020) [2023] ZAGPPHC 1131 (5 September 2023)