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[2009] ZASCA 150
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SouthernEra Resources Ltd v Farndell NO (664/08) [2009] ZASCA 150; [2010] 2 All SA 350 (SCA) ; 2010 (4) SA 200 (SCA) (27 November 2009)
THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case number: 664/08
In the matter between:
SOUTHERNERA RESOURCES LIMITED APPELLANT
and
ALLAN GEORGE FARNDELL NO
(in his capacity as the Executor of the
Estate of the late Marjorie Diana Dent
(Estate Number 20514/1998)) RESPONDENT
Neutral citation:
SouthernEra
Resources Ltd v Farndell
(664/2008)
[2009]
ZASCA 150
(27 November 2009)
CORAM: Mpati P, Mthiyane JA, Lewis JA, Mhlantla JA
et
Hurt
AJA
HEARD: 10 November 2009
DELIVERED: 27 November 2009
SUMMARY
: Sale of mineral
rights â suspensive condition â sale complete (
perfecta
)
upon fulfilment of condition â risk and
benefit pass to purchaser on sale becoming
perfecta
â risk of loss or destruction of object of
sale on purchaser.
ORDER
On appeal from
: North Gauteng
High Court, Pretoria (Bam AJ sitting as court of first instance).
The appeal is dismissed with costs, which shall include
the costs consequent upon the employment of two counsel.
JUDGMENT
MPATI P
(Mthiyane JA,
Lewis JA, Mhlantla JA
et
Hurt
AJA concurring):
[1] The only issue in this appeal is whether a sale of
mineral rights had become
perfecta
before
the date on which it became impossible for the seller to give
transfer of the rights to the purchaser by way of registration
of
cession. The resolution of this issue entails a consideration of the
question whether a stipulation in the written agreement
of sale of
the mineral rights constitutes a term or a condition.
[2] The facts are common cause. On 30 September 1995 the
Estate of the late Marjorie Diana Dent ('the estate'), represented by
the
respondent in his capacity as executor, concluded a written
agreement ('the agreement') with the appellant in terms of which the
estate sold to the appellant certain mineral rights 'in, on and
under' the farm Duitschland 95, situated in the Registration Division
KS, Northern Province. The agreed purchase price was R1 792 269.64.
It was to be paid in cash against registration of
cession of the
mineral rights into the name of the appellant. In terms of the
agreement the appellant was required, within 30 days
of the date of
signature of the agreement, to furnish a bank guarantee as security
for payment of the purchase price. The appellant's
attorneys were to
attend to the preparation and registration of the Notarial Deed of
Cession of Mineral Rights.
1
Subsequent to the conclusion of the agreement the appellant furnished
the required guarantee. However, due to uncertainty relating
to the
identity of heirs in the estate, there was a delay in the respondent
obtaining the necessary consent to the sale from the
Master of the
High Court ('the Master'). Consequently, the guarantee was returned
to the appellant, at its request, on the understanding
that it would
be furnished once the identity of the heirs had been confirmed.
[3] On 14 December 2001 the parties concluded an
addendum to the agreement in terms of which clause 3.1 of the
original agreement
was amended to read as follows:
'The purchase price of the
Mineral Rights is the sum of R1 792 269.64 . . . which
amount will be paid in cash against
registration of cession of the
Mineral Rights into the name of the Purchaser. As security for the
payment of the purchase price,
the Purchaser will, within 14
(fourteen) days from the date on which the Purchaser is informed in
writing by the Seller that the
Master of the High Court has issued a
certificate in terms of
Section 42(2)
of the
Administration of
Estates Act, 1965
. . . consenting to the sale of the Mineral Rights,
furnish Seller's attorney with a bank guarantee or guarantees as
required and
approved of by the Seller or the Seller's attorney
payable to the Seller or the Seller's nominee/s forthwith upon
registration
of cession at such place or places as the Seller
stipulates.'
On 21 April 2004 the Master issued a certificate
embodying his consent to the sale and on 22 April 2004 the
respondent's attorneys
dispatched a letter to the appellant's
attorney advising of this fact. The letter elicited no response from
the appellant. In terms
of the agreement the appellant was required
to furnish the bank guarantee by 6 May 2004.
[4] On 1 May 2004 s 3(1)(m) of the Deeds Registries
Act
2
('the Act') was repealed.
3
The subsection had provided that â
'[t]he registrar shall, subject
to the provisions of this Act â
. . .
(m) register notarial cessions,
leases or sub-leases of rights to minerals and notarial variations of
such cessions, leases or sub-leases,
notarial cessions of such
registered leases or sub-leases . . . ;
. . . '
The effect of the repeal of s 3(1)(m) of the Act
was that registration of cessions of mineral rights could no longer
be effected.
[5] On 22 November 2004 the respondent's attorney caused
to be delivered by hand, at the appellant's chosen
domicilium
,
a letter by which the appellant was again advised that the Master's
consent to the sale had been secured. The appellant was also
requested to furnish the required bank guarantee. An identical letter
was sent to the appellant's chosen
domicilium
by registered post. The appellant failed to respond and on 16
February 2005 the respondent's attorney sent a pre-paid registered
letter to the appellant notifying it of its breach of the terms of
the agreement.
4
The notice of breach was also ignored.
[6] In terms of clause 6 of the agreement the respondent
was entitled, in the event of the appellant (as the defaulting party)
failing
to remedy the breach, 'to claim immediate performance and/or
payment from the [appellant] of all its obligations in terms of this
agreement, whether or not the same are then due for performance or
payment'. Following another letter to the appellant dated 17
March
2005, in which the respondent's attorneys advised that the respondent
was to 'implement its rights under the agreement',
the latter
instituted motion proceedings in the high court seeking, as against
the appellant, an order for payment of the purchase
price and other
ancillary relief. The appellant opposed the order sought on the
ground that the repeal of s 3(1)(m) of the
Act rendered it
impossible in law to effect registration of cessions in mineral
rights as from 1 May 2004. The agreement, so the
appellant's defence
continued, accordingly lapsed due to supervening impossibility of
performance. The respondent could not effect
delivery of the
merx
.
[7] The respondent's case that the sale of the mineral
rights was complete (
perfecta
)
by 1 May 2004
5
was upheld by the court a quo (Bam AJ), which gave judgment in favour
of the respondent as prayed. This appeal is with its leave.
[8] That the repeal of the statutory provision that
enabled registration of cession of mineral rights made performance by
the respondent
(as seller) superveningly impossible is not in
dispute. As a general proposition, a party to a contract is
discharged from his/her
obligation if impossibility of performance
supervenes on account of a change in the law of the land.
6
But, as has been foreshadowed above, we are concerned in this matter
with a contract of sale, which necessitates an enquiry as
to where
the risk of loss or destruction lay at the time that registration of
the cession of the mineral rights became impossible.
Simply put, was
the sale
perfecta
by 1
May 2004, ie when registration of the cession of the mineral rights
into the appellant's name became impossible? If it was,
the benefit
and risk attaching to the mineral rights sold passed to the
appellant, as the purchaser, upon the sale becoming
perfecta
,
7
in which case the respondent, as seller, would be entitled to payment
of the purchase price.
8
[9] A sale is
perfecta
if it is absolute, in the sense that it is not subject to a
suspensive condition.
9
It becomes
perfecta
once there is agreement on the
merx
(the thing sold) and the
pretium
(price) and any condition, resolutive or suspensive, has been
fulfilled.
10
It is common cause that until such time as the Master had given his
consent the sale was incomplete. It was subject to the Master's
consent. Counsel for the respondent submitted that once the necessary
consent had been obtained and communicated to the appellant
in
writing on 22 April 2004, the suspensive condition was fulfilled and
the sale became
perfecta
.
The risk accordingly passed to the appellant, so the argument
continued.
[10] Counsel for the appellant contended, on the other
hand, that clause 3.2 of the agreement, which stipulates that the
purchaser
'shall procure that its attorneys do not lodge the cession
of Mineral Rights until the Seller's attorneys are in possession of
the guarantee . . . ', expressly held the act of registration in
suspense until the guarantee was furnished. He submitted that the
furnishing of the guarantee was a condition suspensive of the
respondent's obligation to allow registration of the cession, such
that transfer or delivery of the
merx
,
by registration of the cession of the mineral rights, could not take
place until that condition had been fulfilled. Counsel consequently
argued that until that suspensive condition was fulfilled or waived,
there was no agreement properly so called and the risk of
supervening
impossibility of contractual performance remained with the
respondent.
[11] It is not uncommon to find, in an agreement of
purchase and sale, a heading or sub-heading that reads: "Conditions
of
Sale'. What follows such headings are, usually, not true
conditions which suspend the operation of the agreement, but
enforceable
terms of the contract, or both. As was said in
R
v Katz,
11
the word 'condition' in relation to a
contract, 'is sometimes used in a wide sense as meaning a provision
of the contract, ie an
accepted stipulation', such as includes
'ordinary arrangements as to time and manner of delivery and of
payment of the purchase
price'. In the case of a true condition,
however, whether suspensive or resolutive, the operation of the whole
contract, or part
thereof, and its consequences, depend upon an
uncertain future event.
12
In other words, the operation of the obligations flowing from the
contract is suspended pending the happening, or failure, of the
uncertain future event. Fulfilment of a suspensive condition results
in the contract being enforceable. And, normally, if the condition
fails and the parties have not agreed otherwise, the contract is
rendered void.
13
[12] The difference between a term of a contract
(contractual obligation) and a condition is best described by Holmes
JA as follows:
'. . . a contractual obligation
can be enforced, but no action will lie to compel the performance of
a condition.'
14
The question, then, in the instant case, is whether the
stipulation in the agreement requiring the appellant to furnish a
guarantee
for payment of the purchase price within 14 days of written
notice having been given to him of the Master's consent to the sale
is a true condition, or a term of the contract.
[13] In my view, the appellant's obligation to furnish a
guarantee for payment of the purchase price depended on two
conditions.
The first was the Master's consent to the sale taking
place, which had to be obtained. The fulfilment of that condition was
dependent
upon the will of a third person, the Master, and not on any
one of the parties. It was a casual condition.
15
The second, a potestative condition, was the conveyance of the fact
of the Master's consent having been obtained to the appellant
in
writing. The fulfilment of this condition was entirely in the power
of the respondent.
16
It is common cause that both these conditions were fulfilled.
[14] In terms of the agreement the appellant undertook
to furnish the guarantee for the purchase price of the mineral rights
within
14 days from the date of fulfilment of the second condition.
Upon its fulfilment, the appellant thus became bound to perform its
side of the bargain â to furnish the guarantee within the time
stipulated in the agreement, ie within 14 days of the fulfilment
of
the condition (within 14 days after 22 April 2004).
17
The stipulation is an enforceable contractual obligation; a term of
the contract.
18
The fact that the agreement contains a condition that the deed of
cession of the mineral rights would not be lodged until the
respondent's attorneys were in possession of the guarantee does not
affect the position. The condition merely serves to ensure that
the
respondent is protected from parting with his rights, the subject
matter of the sale agreement, without an assurance that it
would be
paid.
[15] Counsel for the appellant sought support for the
proposition that clause 3.1 of the agreement â which stipulates
when the
guarantee was to be furnished â is a condition rather than
a term of the agreement, from the judgment of Willis J in
Ingledew
v Theodosiou
.
19
The relevant passage in the judgment reads:
'Mr
Solomon
criticised the Wilson agreement,
inter
alia
, for the fact
that it was a non-existent "enterprise" which was
purportedly sold, that the second defendant was recorded
therein as a
VAT vendor when she was not, and that clause 4.1 thereof contains the
following:
"As security for the
payment of such amount (the purchase price) the purchaser shall
within 30 days of the signature date,
furnish the seller's attorneys
with a bank guarantee or guarantees as required by the seller,
payable to the seller or the seller's
nominee/s upon registration of
transfer at such place or places as the seller stipulates."
This could be interpreted as a
condition precedent or a suspensive condition that was not fulfilled
by the purchaser.'
20
The court was dealing in that case with two agreements
in terms of which the owner of certain fixed property had sold the
property
to two individual purchasers, and the question whether the
rule
qui
prior
est tempore potior est jure
was of
application. Further down in the same paragraph the learned judge
accepts that the agreement at issue contained 'the requisite
elements
or requirements of a sale' and that 'there are enforceable rights
which [the parties] may exercise, the one against the
other . . . '.
[16] It is difficult to discern, from the judgment, the
basis upon which the learned judge suggests that the clause 'could be
interpreted
as a . . . suspensive condition'. I can find no reason
why the seller in that case could not have been able to enforce
performance
(the furnishing of a guarantee) by the purchaser upon
expiry of the period of 30 days. To the extent that the dictum of the
learned
judge may suggest that the clause, without more, may be said
to contain a suspensive condition, I disagree.
[17] It was further argued, on behalf of the appellant,
that the qualification in clause 3.1 of the written agreement, in the
present
matter, conferring the power on the respondent's attorney to
approve the required guarantee/s, suspended the operation of the
agreement.
This is because if the respondent's attorney were to
reject a guarantee furnished by the appellant, there would be no
agreement.
I am unable to agree. If a seller or his or her agent were
to reject a guarantee, the basis of the rejection would have to be
reasonable.
If not, his or her decision would be open to challenge.
The discretion given to a seller in an agreement of sale to accept or
reject
a guarantee has to be exercised
arbitrio
boni viri
.
21
It follows that when the appellant in the present matter was informed
in writing on 22 April 2002 that the Master had issued a
certificate
consenting to the sale of the mineral rights, the agreement between
the parties became unconditional. It became
perfecta
.
[18] In their heads of argument counsel for the
appellant indicated that they would seek to argue two issues in this
court. The
first was whether the sale of the mineral rights was
perfecta
by 1 May
2004.
22
If it was, the second issue would be whether the coming into effect
on 1 May 2004 of the
Mineral and Petroleum Resources Development Act
28 of 2002
23
and the Mining Titles Registration Amendment Act,
24
s 53 of which repealed s 3(1)(m) of the Deeds Registries
Act, resulted in supervening impossibility of performance having
the
effect of discharging the agreement of sale. Although counsel did not
argue the second issue, they did not expressly abandon
it. Counsel,
however, conceded in argument, correctly so in my view, that if the
sale was
perfecta
by 1
May 2004, then the risk of impossibility of delivery of the object of
the sale, by registration of the cession of the mineral
rights,
passed to the appellant, as purchaser. The first issue now having
been decided in the affirmative, the second does not
arise. The
appeal must therefore fail.
[19] In the result, the appeal is dismissed with costs,
which shall include the costs consequent upon the employment of two
counsel.
â¦â¦â¦â¦â¦
..
L MPATI P
JUDGE OF APPEAL
For
Appellant:
C Puckrin SC
K
Spottiswoode
Instructed
by: Werksman Inc
c/o
Edelstein Bosman Inc
PRETORIA
Correspondents: Matsepes
BLOEMFONTEIN
For
Respondent: A Gautschi SC
N
Konstantinides
Instructed
By: Van Hulsteyns Attorneys
c/o
Savage Jooste & Adams
PRETORIA
Correspondents: Rossouws
Attorneys
BLOEMFONTEIN
1
A Notarial Deed of Cession of Mineral Rights was
signed by the respondent on 10 October 2000.
2
47 of 1937.
3
By
s 53
of the
Mining Titles Registration
Amendment Act 24 of 2003
.
4
The written agreement required that a party in
breach be notified of the breach and called upon to remedy it within
14 days.
5
The date of the repeal of
s 3(1)(m)
of the
Mining Titles Registration Amendment Act.
6
J W
Wessels
The Law
of Contract in South Africa
(2 ed)
Vol II paras 2671 and 2672.
7
Fine & Gluckmann v Heynecke
1915
TPD 211
;
Grobbelaar v Van Heerden
1906
EDC 229
;
W W Barrett v Ngazana
[1920] LKCA 39
;
(1901)
22 NLR 223
;
Garvin and others NNO v
Sorec Properties Gardens Ltd
1996 (1)
SA 463
(C) at 467C and
Mulder v Van Eyk
1984 (4) SA 204
(SE) at 207C.
8
See the cases in n 7 above.
9
A J Kerr
The Law of
Sale and Lease
(3 ed) p 237; Voet
18.6.1.
10
Mnyandu v Mnyandu NO
1964
(1) SA 418
(N) at 422H;
BC Plant Hire
CC t/a BC Carriers v Grenco (SA) (Pty) Ltd
2004
(4) SA 550
(C) para 41;
Mulder v Van
Eyk
above n 7 at 207F.
11
1959 (3) SA 408
(C) at 417E.
12
Ibid
at 417E-F;
Design and Planning Service v Kruger
1974 (1) SA 689
(T) at 695C.
13
See R H Christie
The
Law of Contract in South Africa
(5 ed)
p 145.
14
Scott v Poupard
1971 (2) SA 373
(A) at 378H; see also
MacDuff
& Co Ltd (in liquidation) v Johannesburg Consolidated Investment
Co Ltd
1924 AD 573
at 590.
15
MacDuff
above n
14 at 588; F du Bois et al
Wille's
Principles of South African Law
(9
ed) at 793.
16
Ibid.
17
Jurgens Eiendomsagente v Share
[1990] ZASCA 81
;
1990
(4) SA 664
(A) at 674E-675B.
18
Scott v Poupard
above
n 14.
19
2006 (5) SA 462
(W).
20
At para 52.
21
Dharumpal Transport (Pty) Ltd v Dharumpal
1956
(1) SA 700
(A) at 707A-B;
Blake v
Cassim and another NNO
[2008] ZASCA 67
;
2008 (5) SA 393
(SCA) at paras 20, 21 and 22.
22
The date from which cession of mineral rights
could no longer be effected due to the repeal of
s 3(1)(m)
of
the
Deeds Registries Act 47 of 1937
.
23
The Act provides, inter alia, that a holder of
mineral rights immediately before it took effect has the exclusive
right to apply
for a prospecting right or a mining right (item 8
schedule 2 thereof).
24
Above n 5.