About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2011
>>
[2011] ZASCA 150
|
|
ABSA Bank Ltd v South African Commercial Catering and Allied Workers Union National Provident Fund (679/10) [2011] ZASCA 150; [2012] 1 All SA 121 (SCA) (27 September 2011)
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no
:
697/10
In the
matter between:
ABSA
BANK LIMITED
…............................................................................
Appellant
and
THE SOUTH AFRICAN COMMERCIAL CATERING
AND ALLIED WORKERS UNION NATIONAL
PROVIDENT FUND (UNDER CURATORSHIP)
….................................
Respondent
Neutral citation:
ABSA v SACCAWU
(697/10)
[2011] ZASCA 150
(27 September 2011)
Coram:
Lewis, Ponnan, Cachalia, Bosielo and Shongwe JJA
Heard:
24 August 2011
Delivered
27 September 2011
Summary:
Rental agreements in respect of office equipment
signed only by principal officer of Provident Fund invalid: rules of
Fund required
meeting of trustees and contracts to be signed by three
trustees.
ORDER
On appeal from South Gauteng High Court (Bashall AJ sitting as court
of first instance):
The appeal is dismissed with costs including those of two counsel.
JUDGMENT
LEWIS JA (dissenting)
[1] At issue in this appeal is the validity of 15 contracts for the
hire of office equipment by the respondent, the South African
Commercial Catering and Allied Workers Union National Provident Fund
(under Curatorship) (the Fund). The appellant, Absa Bank Limited
(the
Bank), is the cessionary of the rights of the lessors under the
agreements. It instituted action against the Fund for payment
of
arrears in respect of each of the leases, the amounts claimed being
substantial. The Fund pleaded that its Principal Officer,
Mr A
Mosiuoa, did not have the authority to conclude the contracts. The
parties agreed that a stated case be placed before the
high court on
this issue alone, pending the final determination of various other
matters, and agreed facts for the purpose. Bashall
AJ in the South
Gauteng High Court held that the principal officer was not authorised
to enter into contracts on behalf of the
Fund and that the contracts
were thus ‘ultra vires’ and not binding. The appeal to
this court is with his leave.
[2] Before turning to the stated case I shall set out in summary the
background facts that are not in contention as well as those
agreed
for the purpose of determining the legal issue in question. During
the course of 2000 and 2001 Sasfin Bank Ltd (Sasfin)
and Sunlyn
Investments (Pty) Ltd (Sunlyn), financed the acquisition of office
equipment by the Fund by entering into rental agreements,
negotiated
and signed by Mosiuoa. The Fund took possession of the equipment
(from the suppliers) but then defaulted on payment
of rentals. The
Bank, to which Sasfin and Sunlyn had ceded their rights to claim
payment under the agreements, instituted action
against the Fund,
Sasfin and Sunlyn, but subsequently withdrew the claims against the
two companies. On 18 March 2003 the Fund
was placed under the final
curatorship of Mr A L Mostert.
[3] In the statement of agreed facts the parties acknowledged that
Sasfin and Sunlyn ‘had sight’ of the rules of the
Fund
before signing the 15 rental agreements. Moreover, the companies had
given the rules to the Bank before they discounted their
rights to
it. They also stated that the contracts ‘were not signed by the
chairperson and two trustees of the Fund as contemplated
by Rule
4.13, at a duly constituted meeting of the Fund and by two trustees
and the chairperson’.
[4] As will be apparent by now the argument by the Fund was that in
order for it to be bound by the rental agreements these had
to have
been executed in a particular fashion prescribed by the rules. I
shall turn to this issue shortly for it is pivotal to
the issues to
be decided. It is useful at this stage, however, to set out this rule
in full. It is a subrule of rule 4 which regulates
the Board of
Trustees – its composition, procedures and the trustees’
duties and powers. Rule 4.13 itself reads:
1
‘
Signatures
to documents
All documents or contracts
effected by the Fund . . . shall be binding upon the Fund provided
that they have been signed by the
Chairperson and another two
Trustees
at a duly constituted meeting,
or
after such a meeting, provided
that authorisation for the signing of these documents or contracts
was granted at such meeting.
Where, however, the Act [the
Pension Fund Act 24 of 1956] prescribes specific formalities for the
signature of documents, such documents
shall only be binding upon the
Fund subject to compliance with these requirements.’
[5] The issues to be determined at the outset were framed as follows:
‘
2.1
Whether Mr Abie Mosiuoa . . . in his capacity as the principal
officer of the First Defendant (“the Fund”) acted
ultra
vires the applicable registered rules of the fund, read with the
Pension Fund Act 24 of 1956 . . . and the Regulations promulgated
thereunder, in concluding the 15 rental agreements referred to in the
Plaintiff’s Particulars of Claim (“the 15 agreements”).
2.2 If held that Mosiuoa acted
ultra vires the Rules as aforesaid, whether as a matter of law on the
facts and defences pleaded
in the Plaintiff’s replication, the
Fund may nonetheless be held bound in law by the 15 rental
agreements.
2.3 Whether by virtue of what
the Court holds as regards 2.1 and 2.2, the First Defendant may in
law be held bound by the 15 rental
agreements.’
[6] The high court, as I have said, found that Mosiuoa did act ultra
vires; that the facts and defences pleaded in the replication
(reliance on the Turquand rule or estoppel) did not bind the Fund and
that the Fund ‘may not in law be held bound by the
15 rental
agreements’.
[7] The Fund did not before us contend that the agreements were ultra
vires in the true sense – that rental of office equipment
was
not within the power of the Fund. The correct characterisation of the
issue is whether there was compliance with peremptory
formalities
laid down by the Fund’s rules. That raises the question whether
rule 4.13 was applicable to the contracts that
Mosiuoa in fact
concluded.
[8] Before turning to the rules themselves it is important to note
that regulation 30(2) (of the Regulations promulgated in terms
of the
Act) provides that the rules of a fund must provide for various
matters, including ‘(k) the manner in which contracts
and other
documents binding the pension fund shall be executed’. The
Fund’s only rule regulating execution of contracts
in express
terms is 4.13. The question that arises, therefore, is whether this
rule applies to all contracts entered into by the
Fund.
[9] The Bank argued that by virtue of his appointment as principal
officer, Mosiuoa was authorised to enter into contracts for
the
day-to-day running of the business of the Fund. He could do so orally
or in terms of a written contract, and that written contracts
executed by him did not have to be authorised at a meeting of the
board of trustees and signed by the chairperson of the board
and two
other trustees. That, it argued, would make the administration of the
Fund impossible. The safeguards imposed by rule 4.13
were unnecessary
for the acquisition of office equipment and other small items –
pizza and piffle, the Fund’s counsel
called it (though I hasten
to add that he did not regard rental contracts which involved large
sums of money as falling into this
category).
[10] In making this argument the Bank relied heavily on two
provisions in the preamble to the rules. Clause 4 provides that the
Fund ‘will, in its own name, be capable of suing and being sued
and of acquiring, holding and alienating property, movable
and
immovable’. And clause 5 provides that the trustees will
appoint a principal officer on terms determined by them. Clause
5
continues: ‘The Fund will, for the purposes of 4, above, at all
times be represented by the Principal Officer’.
[11] Did these clauses give authority to Mosiuoa to conclude written
contracts for the hire of office equipment? The Bank contends
they
did. In representing the Fund – including for the acquisition
of property – the principal officer would negotiate
and
conclude any contract on its behalf. Compliance with rule 4.13 was
thus unnecessary.
[12] The obvious difficulty with this submission is that the clauses
fall within the preamble, which is followed by an index of
rules and
then the general rules themselves. And the only rule that prescribes
a mode of executing a contract, as required by reg
30(2)(k), is, as I
have said, rule 4.13. Thus the question of its applicability to the
15 rental agreements arises.
[13] The Bank contended that the rule governs only those contracts
entered into by the trustees, and that since they are not executive
officers of the Fund they do not deal with its general
administration. Their task is to exercise oversight over the Fund’s
investments and to protect the members of the fund. They meet only
from ‘time to time to conduct the business of the Fund’
(rule 4.6.1) and are not required to meet more than twice a year.
Rule 4.2 provides for the appointment of 24 trustees and a quorum
for
a meeting is 13 trustees (4.6.3). The duties of the trustees include
ensuring that proper ‘records of the operations
of the Fund are
kept’ and ensuring that the rules and the ‘operation and
administration’ of the Fund comply with
legislation such as the
Income Tax Act.
[14] The trustees thus exercise an oversight role: they do not
themselves administer the Fund. They appoint a principal officer
and
an administrator to deal with the business of the Fund – which
is the investment of moneys for the benefit of the members.
But what
contracts are then referred to in 4.13? The Bank’s answer is
those contracts that require a meeting of at least
13 trustees –
major investments or the appointment of the principal officer,
actuary or auditor.
[15] Rule 5 regulates the ‘method of investment and financial
structure of the Fund’. Rule 5.2 states that the trustees
have
the power to invest in immovable property or to lend moneys at
interest and generally deal with the money and the property
of the
Fund. But the same subrule states that the trustees may delegate
their power to make investments to a subcommittee of members,
or to a
financial institution. And rule 5.2.6 provides that every ‘cheque,
contract or other document pertaining to the Fund
will be signed by
such persons as the trustees by resolution appoint and executed in
such manner as the trustees may determine’.
The rules do
therefore envisage that delegation is permissible and that even
investment contracts may be concluded other than by
way of a formal
meeting of trustees and with the signature of three of them. Why then
should contracts for the hiring of office
equipment be treated
differently?
[16] The rules are far from clear. They do not prescribe in express
terms how the principal officer should represent the Fund.
They do
not indicate what contracts must comply with rule 4.13, nor why the
trustees, as non-executive officers, should be burdened
with the
daily administration of the Fund’s business. Thus there is
apparent non-compliance with reg 30(2)(k), unless the
Fund’s
contention (that all contracts entered into by the Fund must be
authorised in a trustees’ meeting and signed
by three trustees)
is accepted. We were urged to adopt this contention on the basis that
the Fund is not a business: it is not
a trading company that requires
regular intervention by executive managers. Moreover, argued the
Fund, since compliance with prescribed
formalities is necessary to
protect the members of the Fund – vulnerable pensioners –
a strict approach should be taken
to the interpretation of the rules.
[17] In my view, however, the rules must be examined having regard to
their purpose and the context in which they operate. Rules,
like
contracts, must be given a sensible meaning.
2
And all the rules must be considered – not one plucked out of
context.
3
[18] It is not sensible or reasonable to require that at least 13
trustees should meet and authorise the hiring of office equipment.
That is the function of the principal officer. Even the conclusion of
investment contracts, the prime business of the Fund, may
be
delegated to a subcommittee of members or a financial institution. It
is inconceivable that the trustees would have to meet
to decide
whether to hire a photocopier when a chief executive officer
(principal officer) must be appointed in terms of the Act.
Section 8
of the Act lays down stringent requirements that must be met before a
person can be appointed as a principal officer
of a pension fund.
[19] The Fund did not contend that the running of the office of the
Fund is not the domain of the principal officer. It conceded
that
some contracts could be concluded without a meeting, a written
document and three signatures. But it could not suggest where
the
line is to be drawn between those contracts that do not require the
rule 4.13 formalities, and those that do.
[20] The Fund’s principal argument was that only rule 4.13
prescribed the mode of executing contracts, as required by reg
30(2)(k), and thus that all contracts (except for piffle and pizza)
concluded by the Fund had to comply with rule 4.13. The result
of
that contention is that rule 4.13 and rule 5.2 are in conflict. The
contracts that are crucial to the fund – investments
–
may be concluded by other bodies, but contracts for the rental of
office equipment must comply with unnecessary and burdensome
procedures. That is not a reasonable or sensible interpretation of
the rules. And it undercuts the role of a principal officer
who is
the only executive employed by the Fund and who, in the preamble to
the rules, is expressly said to represent the Fund in
the acquisition
and holding of property.
[21] While I do not accept that clauses 4 and 5 in the preamble are
in themselves rules, I consider that they do indicate clearly
(and in
this they reflect the provisions of the Act) that it is the principal
officer who is charged with the administration of
the office of the
Fund. This conclusion is reinforced by rule 4.1, dealing with the
board of trustees, which records that the object
of the board is to
‘direct, control and oversee the operations of the Fund’
– an echo of s 7C of the Act. It
is not to run the daily
business of the Fund.
[22] There is undoubtedly a gap in the rules: they do not prescribe
how contracts are to be executed when they do not fall within
the
ambit of rules 4.13 and 5. That cannot mean, however, that any
contract concluded by the Fund that does not comply with rule
4.13 is
invalid. In my view what the framers must have intended is that the
principal officer was authorised, by virtue of his
office, to
conclude contracts within the powers of the Fund (intra vires) in the
usual fashion.
[23] In view of this conclusion it is not necessary to consider
whether the Fund would have been bound by virtue of the Turquand
rule
or estoppel. Whether in fact Mosiuoa had authority is a matter that
could have been explored in the trial.
[24] I would accordingly have upheld the appeal with costs and
replaced the order of the high court with one to the effect that
the
contracts concluded by the principal officer were not invalid by
reason only of the fact that they did not comply with the
requirements of rule 4.13.
_____________
C H Lewis
Judge of Appeal
PONNAN JA (CACHALIA, BOSIELO and SHONGWE JJA concurring)
[25] I have had the benefit of reading the judgment of Lewis JA with
which I regret I am unable to agree. The parties agreed to
a written
statement of facts in the form of a special case for adjudication
before the high court. The facts agreed upon or assumed
to be correct
for the purpose of the special case are:
'3.1 The Plaintiff is ABSA Bank
Limited, a public company duly registered and incorporated in
accordance with the laws of the Republic
of South Africa, carrying on
business as a bank duly registered under the Banks Act 94 of 1990
with branches throughout the country
and having its principal place
of business situate at 160 Main Street, Johannesburg.
3.2
3.2.1 The First Defendant is the
South African Commercial Catering and Allied Workers Union National
Provident Fund ("the Fund"),
a body corporate capable of
being sued under its own name by virtue of its due registration as a
pension fund under the Pension
Funds Act 24 of 1965, ("the Act")
and having its principal place of business at 6
th
floor,
SA Centre Building, 253 Bree Street, Johannesburg.
3.2.2 The First Defendant was
placed under provisional curatorship by order of the Transvaal
Provincial Division under case number
24187/02 on 10 September 2002.
The said order was made final on 18 March 2003 in terms of which
Antony Louis Mostert, a director
of A L Mostert & Company
Incorporated, was appointed the curator.
3.2.3 The Fund is and was a
pension fund in terms of the Act and governed by it, by the
Regulations under the Act (a copy of which
is attached marked A) and
by the consolidated Rules of the Fund, ("the Rules")
effective from 1 January 1999 (a copy
of which is attached, marked
B), and which have been registered under the Act.
3.3 Sasfin Bank Limited
("Sasfin") is a private company duly registered and
incorporated in accordance with the laws of
the Republic of South
Africa, carrying on business as such and having its principal place
of business situate at 29 Scott Street,
Waverley, Johannesburg.
3.4 Sunlyn Investments (Pty)
Limited ("Sunlyn") is a private company duly registered and
incorporated in accordance with
the laws of the Republic of South
Africa, carrying on business as such and having its principal place
of business situate at Sasfin
Place, 29 Scott Street, Waverley,
Johannesburg.
3.5 Sasfin and Sunlyn had sight
of the Rules before signing the 15 rental agreements (which Rules
Sasfin and Sunlyn also furnished
to the Plaintiff before the
conclusion of the three discounting agreements and the cessions and
payments as pleaded in the particulars
of claim).
3.6 Mosiuoa was appointed by the
First Defendant to the position of principal officer as envisaged by
section 8 of the Act read
with clause 4.10.1 of the Rules.
3.7 Mosiuoa signed each of the
15 rental agreements referred to in the Particulars of Claim,
purportedly on behalf of the First
Defendant.
3.8 The 15 rental agreements
were not signed by the chairperson and two trustees of the fund as
contemplated by Rule 4.13, at a
duly constituted meeting of the Fund
and by two trustees and the chairperson.'
[26] The principal question is whether, notwithstanding
non-compliance with rule 4.13 of its rules, the Fund is nonetheless
bound
by the agreements in question. The rules of the Fund are its
constitution. It is the document by which the Fund was constituted
and is binding on the Fund and its members. The appeal turns upon the
interpretation to be placed on the rules of the Fund. And
whilst it
is not seriously contested that the scope and functions of the
various organs of the Fund fall to be determined, primarily
from its
rules, it is nonetheless necessary in interpreting the rules to
examine the general framework according to which the Fund
has been
constituted.
[27] The Act read together with the regulations and the rules define
the limits of the Fund’s contractual capacity. In deciding
how
to approach the problem raised by this appeal one would thus do well
to start with the Pensions Fund Act 24 of 1956 (the Act).
The Fund is
a juristic person (s 4B(1)), a body corporate capable in law of suing
and being sued (s 5). Section 7A(1) of the Act
provides that every
fund shall have a board consisting of at least four board members.
The objects of the board are set out in
s 7C
4
and its duties in s 7D.
5
In terms of s 8 every fund shall have a principal executive officer.
Section 8 then deals with who may be appointed a principal
officer,
considerations of such person’s fitness to hold office and the
termination of such person’s appointment. Section
11(1)
empowers the Fund to adopt rules, which shall be in the prescribed
format and form and shall comply with the prescribed requirements.
Section 13 provides:
‘
Subject
to the provisions of this Act, the rules of a registered fund shall
be binding on the fund and the members, shareholders
and officers
thereof, and on any person who claims under the rules or whose claim
is derived from a person so claiming.'
[28] Section 36 authorises the Minister of Finance to make
regulations not inconsistent with the provisions of the Act in
respect
of all matters which he considers necessary or expedient to
prescribe in order to achieve the purposes of the Act. The Minister
has done so. The Regulations provide for a variety of matters.
Regulation 30(2)(k) states that the rules shall provide for ‘the
manner in which contracts and other documents binding the pension
fund shall be executed'.
[29] Of the rules adopted by the Fund only one – Rule 4.13 –
meets that purpose. It provides:
'Signatures to documents
All documents or contracts
effected by the FUND … shall be binding upon the FUND provided
that they have been signed by the
Chairperson and another two
TRUSTEES
(a) at a duly constituted
meeting, or
(b) after such a meeting,
provided that authorisation for the signing of these documents or
contracts was granted at such meeting.
Where, however, the ACT [the
Pension Fund Act 24 of 1956] prescribes specific formalities for the
signature of documents, such documents
shall only be binding upon the
Fund subject to compliance with these requirements.'
[30] As Centlivres CJ put it in
Cape United Sick Fund Society v
Forrest
1956 (4) SA 519
(A) at 527H -528A:
'The Society's constitution is
in writing and, to use the words of Stratford, JA,
in
Wilken v Brebner and others
,
1935 AD 175
at p 187,
"we have only to solve the
question submitted to us by ascertaining the meaning of a written
document according to the well-established
rules of construction."
This
dictum
is in consonance with a long
line of cases in which emphasis is laid on the necessity of adhering
to the terms of the constitution
of a body like the Society.'
[31] Rule 4.13 is the only effective overriding control over the
legal capacity of the Fund to enter into written contracts. It
is
common cause that it has not been complied with. That one would have
thought would be the end of the matter. For, as Trollip
J stated in
Abrahamse v Connock's Pension Fund
1963 (2) SA 76
(W) at
79B-E:
'As the defendant is a corporate
body its legal capacity to enter into a particular contract must be
sought for exclusively within
the expressed and implied provisions of
its constitution and if it is not found there then the defendant has
exceeded its powers
in entering into the contract and it is null and
void. That is because according to the Act, the constitution not only
defines
defendant's legal capacity but also confines it to what is
expressly or impliedly contained therein. That is the effect of the
sections of the Act quoted above. In other words the doctrine of
ultra vires
applies
to defendant like any other corporation (see Street,
Doctrine
of Ultra Vires
, pp 4,
22, 23;
Cape United
Sick Fund Society & others v Forrest & others
1956
(4) SA 519
(AD);
The
Mineworker's Union v Prinsloo
1948
(3) SA 831
(AD) at 843-4, 847).
Street's
summary of the position at p 4
is so lucid and apposite that it is worth quoting in full:
"A corporation is commonly
styled a 'legal person', but the appellation 'person' is applicable
to it only by analogy; and the
analogy fails when it is thus clearly
stated that this legal person is wanting in much that belongs to a
natural person - that
its course of existence is marked out from its
birth; that it has been called into being for certain special
purposes; that it
has all the powers and capacities, and only those,
which are expressly given it, or are absolutely requisite for the due
carrying
out of those purposes; and that all the obligations it
affects to assume which do not arise from or out of the pursuit of
such
purposes, are null and void." '
[32] But, as Lewis JA points out, great stress was laid by the Bank
on clauses 4 and 5 of the preamble to the rules. Clause 4 headed
‘Legal Persona’ provides: ‘The Fund will, in its
own name, be capable of suing and being sued and of acquiring,
holding and alienating property, movable and immovable’. Whilst
clause 5 headed ‘Principal Officer’ reads:
‘
The
TRUSTEES will appoint a Principal Officer in terms of Rule 4.10.1
6
on
such terms and conditions as they may determine.
The FUND will, for the purposes
of 4. above, at all times be represented by the Principal Officer.'
R H Christie
The Law of Contract in South Africa
6 ed (2011)
at 219 states:
'Preambles or recitals in a
written contract present more of a problem. The general principle is
that they should be regarded as
subordinate to the operative part
which, if its meaning is clear, must be taken as expressing the
common intention of the parties
and so must prevail over anything to
the contrary in the preamble. If the operative part is not clear,
recourse may be had to the
preamble to assist in elucidating it.'
It is therefore wrong to approach a written contract as though every
provision is intended to create contractual obligations (
Absa Bank
Ltd v Swanepoel NO
2004 (6) SA 178
(SCA) at para 6). Indeed
Standard Bank v Fisher's Trustee
1919 TPD 83
at 88 makes the
point that the operative parts of the document (a bond in that case)
had to be construed first without construing
the recitals, because
‘one ought to determine first what the operative part of the
bond clearly lays down'. The recital,
so
Clayton, NO v
Metropolitan and Suburban Railway Company and Walker
(1892-1893)
10 SC 291
at 304 held, can only control the operative part of the
deed if the operative part is doubtful in its meaning. In my view no
words
can be less ambiguous than those employed in rule 4.13. I thus
do not think that clauses 4 and 5 of the preamble carry the matter
any further.
[33] No doubt it may be said to be desirable that there should be a
provision in the rules that would enable the principal officer
to
enter into written contracts with regard to the day-to-day
functioning of the Fund. But there is no such express provision.
Nor
for that matter does one find any such provision in the Act. The
question that then arises is whether it can be inferred by
necessary
implication from the rules (
Cape Union Sick Fund Society v Forrest
at 532D). Needless to say a court should be very slow to do so
(
Mullin (Pty) Ltd v Benade Ltd
1952 (1) SA 211
(A)). Solomon
JA held in
Union Government (Minister of Railways and Harbours) v
Faux Ltd
1916 AD 105
at 112:
'The rule to be applied by a
Court in determining whether or not a condition should be implied, is
well stated by Lord Esher in
the case of
Hamlyn
& Co v Wood & Co
(1891
(2) QBD 491)
as follows: "I have for a long time understood that
rule to be that a Court has no right to imply in a written contract
any
such stipulation, unless, on considering the terms of the
contract in a reasonable and business manner, an implication
necessarily
arises that the parties must have intended that the
suggested stipulation should exist. It is not enough to say that it
would be
a reasonable thing to make such an implication. It must be a
necessary implication in the sense that I have mentioned." '
[34] In
Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial
Administration
1974 (3) SA 506
(A) at 532G-533A Corbett JA
pointed out:
‘
The
implied term . . . is essentially a standardised one, amounting to a
rule of law which the Court will apply unless validly excluded
by the
contract itself. While it may have originated partly in the
contractual intention, often other factors, such as legal policy,
will have contributed to its creation. The tacit term, on the other
hand, is a provision which must be found, if it is to be found
at
all, in the unexpressed intention of the parties. Factors which might
fail to exclude an implied term might nevertheless negative
the
inference of a tacit term. . . The Court does not readily import a
tacit term. It cannot make contracts for people; nor can
it
supplement the agreement of the parties merely because it might be
reasonable to do so. Before it can imply a tacit term the
Court must
be satisfied, upon a consideration in a reasonable and businesslike
manner of the terms of the contract and the admissible
evidence of
surrounding circumstances, that an implication necessarily arises
that the parties intended to contract on the basis
of the suggested
term.'
Here if a term is to be imported at all it is not one to be imported
by law from without (an implied term) but rather one to be
based on
the inferred intention of the parties – a tacit term (
South
African Forestry Co Ltd v York Timbers Ltd
2005 (3) SA 323
(SCA)
para 28). Any such term as may be imported seems though to be against
the Bank in view of the specific requirements of rule
4.13. For, as
Trengrove JA put it in
Robin v Guarantee Life Assurance Ltd
[1984] ZASCA 72
;
1984 (4) SA 558
(A) at 567C-D:
‘
A
tacit term cannot be imported into a contract in respect of any
matter to which the parties have applied their minds and for which
they have made express provision in the contract. As was said by Van
Winsen JA in
SA
Mutual Aid Society v Cape Town Chamber of Commerce
1962
(1) SA 598
(A) at 615D:
“
A term
is sought to be implied [a tacit term in the terminology of
Alfred
McAlpine
]
in an agreement for the very reason that the parties failed to agree
expressly thereon. Where the parties have expressly agreed
upon a
term and given expression to that agreement in the written contract
in unambiguous terms, no reference can be had to surrounding
circumstances in order to subvert the meaning to be derived from a
consideration of the language of the agreement only.”
'
(See also
Pan American Airways Incorporated v SA Fire and Accident
Insurance Company Ltd
1965 (3) SA 150
(A) at 175C.)
[35] The further difficulty with the Bank’s case is that even
if one construes the rules as conferring capacity on the principal
officer to conclude binding written agreements on behalf of the Fund,
it is not clear what the limits of that capacity will be
or how it is
to be exercised. As I have pointed out, in terms of rule 4.13 the
trustees have to follow a fairly rigorous procedure
to bind the Fund
to written agreements. One finds no similar provision in respect of
the principal officer. The absence of any
such provision pertaining
to the principal officer, as complete and comprehensive as rule 4.13,
may be the clearest indicator that
it was never intended that the
principal officer should be endowed with the capacity to bind the
Fund to written contracts. It
may be a contradiction in terms to say
that the trustees control and administer the Fund, but that the
principal officer, who is
appointed by them, has, by virtue of his or
her unlimited capacity to bind the Fund to written contracts, the
power to control
the Fund and in turn the trustees. Needless to say
the principal officer cannot control the board of trustees in respect
of matters
where authority is specifically conferred on them by the
Act and the rules of the Fund. To allow that would constitute a
violation
of the Act and the rules.
[36] In my view questions of equity cannot, when the rule is clear
and unambiguous, affect the interpretation to be placed on it.
The
question that naturally arises is what was the purpose of the Fund in
adopting rule 4.13 if it can simply be ignored as the
Bank
postulates. And, the further rhetorical question that then remains
unanswered is: if rule 4.13 does not apply to these contracts
then
when precisely would it apply? Here we are dealing with an
elaborately framed constitution from which it is clear, as I hope
I
have shown, the control of expenditure is entrusted to the trustees.
Indeed that is precisely what the Act envisages, given the
public
interest at stake. In those circumstances it is not difficult to
appreciate why such an elaborate and cumbersome procedure
was chosen
in rule 4.13. It was to ensure the greatest measure of protection for
the funds entrusted to the Fund which was to be
administered by the
board of trustees. The chosen procedure thus has a legitimate and
rational purpose. One looks in vain for similar
protection were the
principal officer to act as postulated by the Bank. There is nothing
to suggest that although somewhat cumbersome
the chosen procedure is
unworkable or that the Fund cannot regulate its affairs in such a way
as to ensure compliance with the
requirements of the rule. Moreover
the Fund is free, if so advised, to effect such amendments as it may
desire to its rules. For,
even if we were to hold that the
constitution of the Fund may be a foolish contract, this Court has no
power to make a new contract
for its members.
[37] In
Gründling v Beyers & others
1967 (2) SA 131
(WLD) at 139 Trollip J drew the following important distinction:
'Now, the constitution does
specify certain acts which the Union is required or permitted to do;
it often specifies too the manner
in which those acts are to be done.
The former are the Union's powers, the latter, its internal
management (cf.
Mine
Workers' Union v. Prinsloo
,
1948 (3) S.A. 831
(A.D.)). If it exceeds the former powers, that is,
does an act that the constitution does not require or permit it to
do, that
act is
ultra
vires
, and null and
void. Such an act cannot be validated by ratification or estoppel,
and the Union, any outsider affected by it, or
a member may, if
necessary, have it set aside or declared null and void. On the other
hand, if the act is within its powers, but
the manner of doing it
deviates from or is contrary to the constitution, it is not null and
void; at most, it is voidable, but
it can be validated by
ratification or estoppel.'
I have approached the matter thus far on the basis of the former of
the two postulates articulated by Trollip J. But even if rule
4.13
were to be approached on the basis of the latter, namely that it is a
simply a matter of internal management - for the reasons
that follow,
the conclusion to which I have come remains unaltered. In
The Mine
Workers' Union v J J Prinsloo; The Mine Workers' Union v J P
Prinsloo; The Mine Workers' Union v Greyling
(3)
1948 SA 831
(A)
at 849 Greenberg JA held:
'I do not think that the
validity of a transaction such as the one in question in
Turquand's
case is to be decided on a
subjective basis, depending on whether the other party does or does
not know of the constitution or whether
— as would follow if
the basis were subjective — even though he knew of the
constitution, he did or did not apply his
mind to the question
whether the internal acts of management had been performed. It seems
to me that the true position is that
the necessary acts of internal
management are presumed to have been performed and not that a
particular person is entitled to assume
that they have. (See also per
Scrutton, L J in the
Kreditbank
Cassel
case at pp
837/8.) I have already said that this presumption does not arise when
the other contracting party knows that the acts
have not been
performed.'
Here as the agreed facts in the stated case reveal both third parties
to the contract, as also the Bank, to whom the contracts
were ceded,
knew of the existence of the rule and knew, furthermore, that it had
not been complied with.
[38] It follows, in my view, that the appeal must fail and I would,
in the result dismiss it with costs including those consequent
upon
the employment of two counsel.
_________________
V M PONNAN
JUDGE OF APPEAL
APPEARANCES:
For
Appellant: A Subel SC (with him D K Nigrini)
Instructed
by Schwellnus Spies Haasbroek (Gauteng) Inc
Randburg
Symington
& De Kok
Bloemfontein
For
Respondent: J J Gauntlett SC (with him L J Van Tonder and S B Rose)
Instructed
by A L Mostert & Company Inc
Bryanston
Matsepes Inc
Bloemfontein
1
The
use of capital letters and different fonts in this rule, as well as
others cited, is not reproduced here.
2
Ekurhuleni
Mertopolitan Municipality v Germiston Municipal Retirement
Fund
2010 (2) SA 498
(SCA) paras 12-14. And see
Lloyds of London
Underwriting Syndicates 969, 48, 1183 and 2183 v Skilya Property
Investments (Pty) Ltd
[2004] 1 All SA 386
(SCA) para 14;
Trustees, Bus Industry Restructuring Fund v Break Through
Investments CC
2008 (1) SA 67
(SCA) paras 14 and 15;
3
Ekurhuleni
Metropolitan Municipality
above para 12, citing
Sassoon
Confirming and Acceptance Co (Pty) Ltd v Barclays National Bank Ltd
1974 (1) SA 641
(A).
4
Section
7C reads:
‘
(1) The object of a board
shall be to direct, control and oversee the operations of a fund in
accordance with the applicable laws
and the rules of the fund.
(2) In pursuing its object the board shall -
(
a
) take all reasonable steps to ensure that the
interests of members in terms of the rules of the fund and the
provisions of this
Act are protected at all times, especially in the
event of an amalgamation or transfer of any business contemplated in
section
14, splitting of a fund, termination or reduction of
contributions to a fund by an employer, increase of contributions of
members
and withdrawal of an employer who participates in a fund;
(
b
) act with due care, diligence and good faith;
(
c
) avoid conflicts of interest;
(
d
) act with impartiality in respect of all
members and beneficiaries.'
5
Section
7D provides:
'The duties of a board shall be to —
(
a
) ensure that proper registers, books and
records of the operations of the fund are kept, inclusive of proper
minutes of all resolutions
passed by the board;
(
b
) ensure that proper control systems are
employed by or on behalf of the board;
(c) ensure that adequate and appropriate information is
communicated to the members of the fund informing them of their
rights,
benefits and duties in terms of the rules of the fund;
(
d
) take all reasonable steps to ensure that
contributions are paid timeously to the fund in accordance with this
Act;
(
e
) obtain expert advice on matters where board
members may lack sufficient expertise;
(
f
) ensure that the rules and the operation and
administration of the fund comply with this Act, the Financial
Institutions (Protection
of Funds) Act, 2001 (Act No. 28 of 2001),
and all other applicable laws.'
6
Rule
4.10.1 provides: ‘The TRUSTEES will appoint a Principal
Officer, an ACTUARY and an AUDITOR for such periods as they
may
determine. The TRUSTEES may withdraw any such appointment and make
another appointment in its place.'