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[2022] ZAECMKHC 2
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Dlakavu and Another v Mthatha Nine (Pty) Ltd (1710/2019) [2022] ZAECMKHC 2 (19 April 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE DIVISION, MAKHANDA
CASE NO. 1710/2019
In the matter between:
SINESIPHO
DLAKAVU
First Applicant
OTTO CURNICK
DLAKAVU
Second Applicant
and
MTHATHA NINE (PTY)
LTD
Respondent
JUDGMENT
LAING
J
[1]
There
are two applications before the court. The first is for the removal
of the matter to the High Court in Mthatha; the second
is for the
rescission of a judgment given in relation to an option agreement
concluded by the Second Applicant and the Respondent
with regard to
the lease of land described as erf 583 Ncise, in the district of
Mthatha (‘the property’).
[2]
The
parties were not in agreement, initially, about what exactly was
before the court but argued both applications on the implicit
understanding that if the rescission application was unsuccessful
then there would be no need for the court to deal with the removal
application. The court proceeds accordingly.
Background
[3]
On
31 January 2018, the Second Applicant granted a written option to the
Respondent to lease the property, which could be exercised
with
effect from the date upon which the Second Applicant received a
notice in that regard from the Respondent. In such an event,
a
notarial lease was to have been concluded within seven days upon the
terms and conditions stipulated therein.
[4]
Subsequently,
the Second Applicant, represented by Graham Mpeto & Associates,
requested the Respondent not to proceed at any
stage with the
registration of the notarial lease until the parties had held further
discussions about the terms thereof. The Respondent
engaged with the
Second Applicant, resulting in the conclusion on 3 July 2018 of a
number of addenda to the notarial lease. These
varied the sum payable
on registration, as well as the monthly amounts payable for rent;
granted the Respondent additional time
(two years) within which to
transfer the property to a family trust; and extended the period
within which to exercise the option
to 28 February 2019.
[5]
The
Respondent exercised the option on 29 January 2019. At the same time,
the Respondent entered into a sub-lease with Spar Group
Limited for
the use of the property and agreed to construct buildings thereon for
such purposes. On 4 March 2019, the Respondent
concluded a JBCC
contract with Nichol Projects (Pty) Ltd for the necessary
construction works. The sub-lease would commence on
1 April 2020.
[6]
Notwithstanding,
the Second Applicant refused to sign the notarial lease and to give
vacant occupation of the property, prompting
the Respondent to
approach the court for a declaratory order in relation to the
validity of the option agreement and addenda, and
the exercise of the
option itself. The Respondent also sought an order directing the
Second Applicant to sign the option agreement,
failing which the
sheriff would be authorised to do so, and an order directing the
Second Applicant to vacate the property. On
27 June 2019, the court
granted the relief sought.
Applicants’
submissions
[7]
The
First Applicant alleges that she brings the rescission application in
her capacity as a trustee of the Jwara Otto and Sons Trust
and on
behalf of the remaining trustees. She avers that the trustees were
never informed about or included in the processes leading
up to the
development of the property and had no knowledge of the notarial
lease and its various addenda. The facts only came to
light at a
meeting with the Second Applicant on 20 October 2019. If the trustees
had been involved from the outset, then more acceptable
terms would
have been negotiated.
[8]
For
his part, the Second Applicant states that several years ago he had
dealings with representatives of the Respondent, including
a Mr Ian
Aitken, informing them that he was interested in the development of
the property but would not sign any documents prior
to the creation
of a trust, for which he had given instructions to his erstwhile
attorney, Ms Claire McFarlane. He goes on to allege
that, on or about
18 October 2016, he was misled into signing a memorandum of
understanding (‘MOU’), stipulating the
terms that would
form the basis upon which the property would be leased, and alleges,
too, that Ms McFarlane failed to act in his
best interests and failed
to advise him properly when he eventually entered into the option
agreement and notarial lease. Finally,
he alleges that the Respondent
was established with the intention of defrauding him and to strip him
of his rights to the property.
Respondent’s
submissions
[9]
In
response, the Respondent takes issue with the
locus
standi
of the First Applicant. The Respondent also points out that the
sheriff has already signed the notarial lease by reason of the
Second
Applicant’s refusal to do so, that it has been registered, that
the development of the property was far advanced,
and that various
financing arrangements have been made on the strength of the notarial
lease itself. If the order granted on 27
June 2019 were to be
rescinded, then it would affect the interests of other parties,
including Spar Group Limited, the Standard
Bank of South Africa Ltd,
and Nichol Projects (Pty) Ltd. None of the above parties have been
joined in these proceedings.
[10]
The
Respondent firmly denies that the Second Applicant was not involved
in the preparation of the option agreement or notarial lease.
It
asserts that the transfer of the property to the trust will not
affect the notarial lease and the rights arising therefrom.
Overall,
the conclusion of the option agreement followed a period of extensive
negotiations. This was followed by a further period
of negotiations,
which ultimately resulted in the deferral of the Respondent’s
pre-emptive right to purchase the property
so as to allow the Second
Applicant to establish the trust and to transfer the property
thereto, as apparent from the relevant
addenda. Throughout this time,
the Second Applicant was represented by attorneys and later a
business consultant, Mr Jack Mdeni.
There was never any suggestion or
complaint that the Second Applicant was being defrauded.
Issues
for determination
[11]
The
primary issue for determination is whether the Second Applicant has
satisfied the requirements for the rescission of the order
granted on
27 June 2019. A secondary issue is whether the First Applicant has
locus
standi
in the matter. The remaining issue is whether, in the event that the
rescission application is successful, the matter should be
removed to
the High Court in Mthatha.
[12]
Before
dealing with the issues directly, it is necessary to address the
Respondent’s application for leave for the filing
of a
supplementary affidavit. In that regard, the affidavit in question
merely updated the court on developments subsequent to
Mr Aitken’s
having deposed to the answering affidavit in the rescission
application. The affidavit was of benefit to the
court and there was
no opposition to the application; there is no reason why leave should
not be granted.
Discussion
Locus
standi
[13]
The
question of
locus
standi
was raised squarely by the Respondent. Neither the First Applicant
nor any of the other trustees was party to the main application.
Whereas the provisions of rule 12 allow a party such as the First
Applicant to intervene, the leave of the court must first be
obtained. The test remains whether a party has a direct and
substantial interest in the subject matter of the case. See
SA
Riding for the Disabled Association v Regional Land Claims
Commissioner
2017 (5) SA 1
(CC) at 5A-D.
[1]
[14]
Here,
the First Applicant states that the notarial lease failed to address
various concerns but does not succeed in demonstrating,
convincingly,
how the trust itself has been prejudiced by the Second Applicant’s
granting of the option and the Respondent’s
exercise thereof.
This is especially so where the trust was only created after the
order of 27 June 2019 and where the Second Respondent
has yet to
transfer ownership of the property to the trust.
[2]
At a
more basic level, however, no application has been made for joinder.
In the absence of a proper application to that effect,
the First
Applicant cannot be treated as a party to these proceedings.
Basis
for rescission
[15]
Turning
to the main issue, a litigant would usually apply to court in terms
of rule 42 for the rescission of a judgment. The Second
Applicant has
not relied on the provisions thereof but has expressly applied for
rescission on the common law ground of fraud.
The decision in
Schierhout
v Union Government
1927 AD 94
remains good authority for such an approach.
[3]
For a party to do so successfully, the applicant must allege and
prove that the successful litigant was a party to the fraud, that
the
evidence was in fact incorrect, that it was made fraudulently and
with the intent to mislead, and that it diverged to such
an extent
from the true facts that the court would have decided otherwise were
the true facts to have been placed before it. See
Robinson
v Kingswell
1915 AD 277
at 285,
Makings
v Makings
1958 (1) SA 338
(A) at 344H-345A,
Rowe
v Rowe
[1997] ZASCA 54
;
1997 (4) SA 160
(SCA) at 166I, and
Fraai
Uitzicht 1798 Farm (Pty) Ltd v McCullough
(unreported, SCA case no 118/2019 dated 5 June 2020 at [16].
[4]
[16]
In
the present matter, the Second Applicant alleges that he was misled
into completing the option agreement, having already signed
the
memorandum of understanding in the belief that it amounted to his
consent to the installation of water services infrastructure
on the
property. A supporting affidavit deposed to by his wife, Ms Lindiwe
Matshaza, makes the same allegation. In that regard,
the Second
Applicant suggests, too, that his erstwhile attorney, Ms McFarlane,
was in fact acting in the interests of the Respondent,
resulting in
the predicament in which he finds himself.
[17]
The
allegations are far-fetched. The nature of the MOU, which is
contained in a letter from Mr Aitken to the Second Applicant and
signed by both parties, clearly stipulates that a lease of the
property was intended and that the document could in no way be
construed as consent to the installation of water services
infrastructure. In the unlikely event that Ms McFarlane was indeed
acting
in the interests of the Respondent rather than her own client
for purposes of the completion of the option agreement, then the
Second Applicant fails to explain how he could have been subsequently
misled by his new attorney, Mr Mpeto, into signing not one
but three
separate addenda that amended the terms of the notarial lease, none
of which having created any visible prejudice. He
also fails to
explain how his business consultant, Mr Mdeni, could have been party
to such an attempt to have misled him.
[18]
The
Respondent has narrated the history of its engagement with the Second
Applicant and the steps that were taken in reaching the
conclusion of
the option agreement and subsequent addenda. This took place over a
period of approximately two years, during which
time there is no
evidence at all that the Second Applicant was unaware of what was
happening or that the various parties involved
were conspiring to
strip him of his land, as he alleges.
[19]
The
Second Applicant bears the onus of demonstrating that the signed MOU,
option agreement and addenda thereto were induced by the
Respondent’s
fraudulent conduct and that if this had been known to the court in
the main application then the order of 27
June 2019 would not have
been granted. Overall, the court is satisfied that the onus has not
been discharged. There is, moreover,
no real dispute of fact; the
Second Applicant’s allegations are so clearly untenable and so
palpably implausible as to allow
the usual principles to apply and
for such allegations to be rejected merely on the papers. See
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634H-635C,
Administrator,
Transvaal v Theletsane
[1990] ZASCA 156
;
1991 (2) SA 192
(A) at 197C, and, more recently,
Gelyke
Kanse v Chairperson of the Senate of the University of Stellenbosch
2020 (1) SA 368
(CC) at [16].
[5]
[20]
What
appears to have occurred, from the papers, is that the Respondent’s
exercise of the option only became a problem once
it was brought to
the attention of the trustees at the time that the trust was created.
They may have disagreed with the wisdom
of the Second Applicant’s
having concluded the various underlying agreements in relation to the
property but to avoid the
consequences thereof by alleging fraudulent
conduct on the part of the Respondent requires considerably more
compelling evidence
than what has been presented.
[21]
In
the circumstances, the court is not persuaded that the Second
Applicant has satisfied the common law requirements. He has not
proved that the Respondent and others misrepresented the nature of
and circumstances under which the MOU, option agreement (and
addenda)
and notarial lease were signed, such that the Second Applicant was
deprived of his rights, as alleged. There is simply
no indication of
fraud on the papers.
Notice
to interested parties
[22]
A
further, possibly more serious, hurdle for the Second Applicant is
his failure to have provided notice of the application to at
least
two other parties: the sub-lessee (Spar Group Limited) and the
provider of development finance for the project (Standard
Bank of
South Africa Ltd).
[6]
For the
sub-lessee, the rescission of the order would mean that it no longer
had any right to the use of the property; for the
bank, it would mean
that it no longer had adequate security for its loan to the
Respondent. These are potentially serious consequences
for both
parties.
[23]
Prior
notification is a requirement under rule 42 in relation to rescission
applications brought in terms thereof.
[7]
The same principle must be applied to an application made in terms of
the common law, provided that the parties in question have
a legal
interest. See
De
Villiers v GJN Trust
2019 (1) SA 120
(SCA) at 128A-129C. That is clearly the situation
here; the Second Applicant has not given notice to either the Spar
Group Limited
or to the Standard Bank of SA Ltd.
Relief
and order to be granted
[24]
The
Second Applicant has not met the requirements for the rescission of
the order granted on 27 June 2019. There is no evidence
of fraud; it
has failed to provide the necessary notice.
[25]
An
unsuccessful application for rescission means that the order stands.
Consequently, there would be no point at all in permitting
the
removal of the matter to the High Court in Mthatha. Unless the Second
Applicant attempts to bring an appeal or to explore such
other avenue
as may be open to him, the matter must be considered as
res
judicata
.
The application for removal cannot be entertained.
[26]
On
the question of costs, the parties disputed liability for the wasted
costs occasioned by the postponements on 14 and 28 May 2020.
At the
heart of the matter was the condition of the court file. This court
has no intention of delving into the various allegations
made, other
than to observe that the Second Applicant, as
dominis
litis
,
ultimately bears responsibility for ensuring that the papers have
been properly paginated and indexed before the matter is heard.
Consequently, the wasted costs for the dates in question must follow
the result. It is apposite to remark that the condition of
the court
file was still far from satisfactory at the hearing itself.
[27]
The
Respondent has sought costs on an attorney-and-client scale in
relation to the rescission application. Whereas the application
is
badly deficient in many respects and the conduct of the Second
Applicant may well have been a source of great irritation to
the
Respondent, the court sees no real grounds upon which to make a
punitive costs order. The Second Applicant was entitled to
have at
least approached the court for the relief sought and the deficiencies
in the papers were not necessarily of his own doing;
he was certainly
not directly responsible for the earlier postponements.
[28]
In
the circumstances, the following order is made:
(a)
leave
is granted to the Respondent for the filing of its supplementary
affidavit, dated 26 January 2022;
(b)
the
application for rescission of the judgment granted on 27 June 2019 is
dismissed;
(c)
the
application for the removal of the matter to the Eastern Cape Local
Division, Mthatha, is dismissed; and
(d)
the
Second Applicant is liable for the costs of both applications on a
party-and-party scale, including the costs reserved on 14
and 28 May
2020, but excluding the costs of the Respondent’s application
for leave.
_________________________
JGA
LAING
JUDGE
OF THE HIGH COURT
APPEARANCE
Counsel for the 1
st
and 2
nd
applicants: Adv Marasha,
instructed by L. Mthambo Attorneys, Mthatha.
Counsel for the
respondent: Adv
Paterson SC, instructed by Wheeldon, Rushmere & Cole Inc.,
Makhanda.
Date of
hearing: 03
February 2022.
Date of delivery of
judgment: 19
April 2022.
[1]
A more recent authority is
Peermont
Global (KZN) (Pty) Ltd v Afrisun KZN (Pty) Ltd t/a Sibaya Casino and
Entertainment Kingdom
[2020] 4 All SA
226
(KZP) at [18].
[2]
To complicate matters further, the First
Applicant’s name is not included in the list of trustees
indicated in the letters
of authority issued by the Master of the
High Court on 17 September 2019.
[3]
See, too,
Freedom
Stationery (Pty) Ltd v Hassam
2019 (4)
SA 459
(SCA) at 465D and, more recently,
Kunene
v Minister of Police
(unreported, SCA
case no 260/2020 dated 10 June 2021 at [27].
[4]
The subject is also discussed in DE van
Loggerenberg
Erasmus: Superior Court
Practice
(Jutatstat e-publications, RS
17, 2021) at D1-563.
[5]
Op cit, RS 17, 2021, D1-74-6.
[6]
The Respondent argues that the contractor, Nichol
Projects (Pty) Ltd, ought to have been notified, too, but this may
not have
been strictly necessary where the construction of the works
was to have been completed before the commencement of the sub-lease
on 1 April 2020.
[7]
See rule 42(3).