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[2021] ZAMPMBHC 44
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Nghwazi TT Investments (Pty) Ltd v Lowveld Show Society (2862/2018) [2021] ZAMPMBHC 44 (27 September 2021)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(MPUMALANGA DIVISION,
MBOMBELA)
REPORTABLE: NO
OF INTEREST TO OTHER
JUDGES: YES
REVISED: YES
27/09/2021
CASE
NO: 2862/2018
In
the matter between:
NGHWAZI
TT INVESTMENTS (PTY)
LTD
Plaintiff
and
LOWVELD
SHOW
SOCIETY
Defendant
JUDGMENT
MASHILE
J:
INTRODUCTION
[1]
In this judgment the following words will have the meaning ascribed
to them and appearing
next to each:
1.1
“Nghwazi” shall mean the Plaintiff;
1.2
“LSS” shall mean the Defendant;
1.3
“Vans Auctioneers” shall mean Spring Green Trading 258 CC
t/a Vans Auctioneers;
1.4
“The agreement” shall mean the deed of sale of the
immovable property concluded between
Nghwazi, LSS and Vans
Auctioneers;
1.4.1.1“The
property” shall mean
Portion [....] of the
Farm Nelspruit [....] Registration Division J.T., Mpumalanga;
1.5
“
the parties” shall mean Nghwazi and
LSS, including Vanns Auctioneers depending on the context;
1.6
“
Du Toit” shall mean Mr Petrus
Lodewiekus Du Toit;
1.7
“
Du Preez” shall mean Mr P J Du Preez;
1.8
“
Smuts” shall mean Mr Adriaan Smuts;
1.9
“
Saleh” shall mean Mr Mohamed Saleh.
[2]
The interpretation of an indemnity clause in the agreement is central
to what led
the parties to approach this Court for adjudication of
their dispute. The claim of Nghwazi against LSS is for payment of
damages
in the amount
of R3 192 000.00
ostensibly sustained in consequence of LSS’ infringement of the
agreement. To justify its refusal
for payment of the amount claimed
against it, LSS relies on the indemnity clause contending that
determination of risk of Nghwazi
is not dependent on occurrence of
registration of transfer of ownership of the property to Nghwazi.
[3]
Evidentiary material levied before this Court comprised discovered
documents consisting
of correspondence exchanged between the parties,
pleadings in Case Numbers 405/2017 and 47407/2015, documentary
material concerning
the sale of the property at the auction on 26
February 2015 and oral evidence per Messrs Du Toit and Du Preez,
attorneys of Nghwazi
and LSS respectively. All the discovered
documents of the respective parties form part of the evidentiary
material before this
Court regardless that they might not have been
specifically mentioned during the trial or proven in terms of the
rules of evidence.
FACTUAL MATRIX
[4]
The facts that gave rise to this action are largely common cause.
That said, what
the parties make of them, especially the
interpretation of the indemnity clause in the agreement, is radically
different. Tersely,
on 2 March 2015, Nghwazi, LSS and Van’s
Auctioneers concluded the agreement. In terms of the agreement LSS
sold the property
to Nghwazi for an amount of R28 000 000.00
Value Added Tax excluded. The recordal part of the agreement
provides:
4.1 LSS
is the registered owner of the Property;
4.2 The
Property had previously been auctioned to a previous purchaser,
Saleh, on 26 February 2015 subject to
confirmation by LSS within 7
days of the date of the auction;
4.3 The
Property was sold subject to a condition precedent that the Property
shall be transferred to the purchaser
free of the encumbrance imposed
by the restrictive condition B(ix) contained in the Title Deed;
4.4
Subsequently, LSS caught wind that -
4.4.1
Mbombela Local Municipality (“
the Municipality”
)
was in the process of challenging the validity of the Proclamation of
16 February 1983 abrogating certain restrictive conditions
from the
Title Deed of the property;
4.4.2
The Municipality was proceeding with a second urgent attempt to
expropriate the Property before registration
of transfer into the
name of Saleh;
4.4.3
The Municipality was applying for a caveat to be registered over the
Property pending the outcome of possible
litigation resulting from 1
or 2 above.
4.5 LSS
only foresaw a dispute with the Municipality in respect of the title
condition and not a total onslaught
on ownership alternatively the
title of LSS;
4.6 LSS
was not prepared to enter into extended litigation with the
Municipality in consequence of which LSS withdrew
the Property from
the auction prior to acceptance by Saleh;
4.7
Vans Auctioneers advised Nghwazi that the Property has been withdrawn
from the auction due to the actions
of the Municipality;
4.8
Notwithstanding all the attendant risks and perils brought about by
the actions of the Municipality, Nghwazi
nonetheless decided to
proceed with the purchase of the property at a reduced price.
[5]
The pertinent terms of the agreement are the following:
“
PURCHASE
PRICE
The Purchase price
shall be an amount of R28 000 000.00 (TWENTY-EIGHT MILLION RAND)
exclusive of VAT for the properties mentioned
above on the same terms
and conditions as per the conditions of sale applicable to the
auction of 26
th
of February 2015 annexed hereto as
annexure “A”, except that Paragraphs 1 and 2 of annexure
"A" shall not
be applicable
2.
RESTRICTIVE TITLE
CONDITIONS
This sale is not
subject to the suspensive condition that the Seller undertakes to
remove the restrictive condition referred to
in paragraph B(ix) of
the Title Deed of Portion [....]. Portion [....] will accordingly be
transferred to the Purchaser subject
to the restrictive condition
referred to above;
3.
INDEMNITY AND RISK
3.1
The purchaser
hereby indemnifies and hold the
Seller harmless against any
claim
of
whatsoever
nature
by the
Mbombela
Local
Municipality
or any other party against the
Seller arising from or in connection with the
withdrawal
of the properties from the auction
and or the sale of the properties to the Purchaser;
3.2
The Purchaser hereby takes
full risk for, and accepts all or any negative consequences,
including but not limited to
expropriation, restrictive title conditions, caveats etc. that may
result from the actions of the Mbombela
Local Municipality and will
have no claim again the Seller emanating from
the
above;
3.3
The Purchaser shall have no
right of recourse against the Seller resulting from any claim of
whatsoever nature instituted by the
Nelspruit Local Municipality.
AUCTIONEERS COMMISSION
The purchaser shall be
liable for Auctioneers commission at the rate of 10% (ten) percent on
the purchase price payable to the Auctioneer
on signature.
PAYMENT
The Purchaser shall on
signature pay:
3.1
a deposit of 5% (Five
percent)
of
the purchase price; and,
3.2
the Auctioneers
commission
plus VAT
The balance of the
purchase consideration shall be paid as per Annexure "A"”
[6]
The agreement proceeds to deal with particulars of the parties to the
agreement and
concludes with a clause pertaining to confidentiality.
The Conditions of Sale that were initially meant for the auction of
the
26
th
of February 2015 continue to be relevant because
its terms, with the exception of Clauses 1 and 2, are specifically
stated to be
applicable to the agreement.
[7]
Nghwazi, as it was obliged to do in terms of the
agreement, paid LSS a deposit of R4 592 000.00, which amount
represented 5%
of the purchase price, transfer costs in the amount of
R233 458.00 and commission of Vans Auctioneers in the amount of
R3 192
000.00. Additionally, Nghwazi delivered a Standard Bank
Guarantee as an undertaking that the balance of the purchase price in
the
amount of R26 600 000.00 has been secured and that it would
be paid.
[8]
During 2015, the Municipality launched an application against the
Premier of Mpumalanga
Province, Registrar of Deeds: Mpumalanga, LSS
and Nghwazi for an order interdicting the transfer of the Property to
Nghwazi. On
28 July 2016, Kollapen J granted the order in the
following terms:
“
i.
That portion of Proclamation No. 80 of 1983 that effects the removal
of Condition B(viii)
from Deed of Transfer No 12164/1953 is hereby
reviewed and set aside;
ii
The second respondent is interdicted from transferring Portion [....]
of the Farm Nelspruit
[....] JT held by Title Deed T12164/1953 from
the third respondent to the fourth respondent”
[9]
LSS argued that the interdict as aforesaid barred registration of
transfer of ownership
of the property to Nghwazi making performance
impossible. As a result, and almost a year following the court order
supra
, on 9 June 2017, Nghwazi cancelled the Contract as it
was entitled to do. In the letter of cancelation, Nghwazi demanded
LSS to
return:
9.1 The
agent’s commission;
9.2 The
deposit amount;
9.3 The
transfer costs;
9.4 The
guarantee issued by Standard Bank in the amount of R26 600
000.00.
[10]
In response to the cancellation and demand, LSS paid back to Nghwazi
the deposit of R4 592
000.00, transfer costs in the sum of R233
458.00, and returned the Standard Bank guarantee in the amount of
R26 600 000.00
but failed to reimburse the amount of R3 192
000.00 representing the commission of Vans Auctioneers.
[11]
The restrictive conditions mentioned under Clause 2 of the agreement
to which the property was
subjected when it was sold stipulate that:
“
The
land hereby transferred shall be subject to the conditions and
stipulations contained in Notarial Deed of Servitude No. 97/19258
dated the 10
th
day of February 1925, in favour of the South African Prudential
Limited.
B.
(I)
The property shall be used by the transferee for the sole purpose of
conducting
thereupon Agricultural shows.
(ii)
No trade or business for which any license shall be required shall be
conducted upon the
said property nor shall any Co-operative Society
as visualised by the Co-Operative Societies Act No. 28 of 1922, or
any amendment
thereof, in any manner whatsoever, function upon the
said property.
(iii)
The property shall be used for Agricultural Show purposes only.
(iv)
The property shall not be leased, except for sporting purposes, to
any person or concern
without the consent in writing of the Town
Council of the Municipality of Nelspruit (hereinafter referred to as
“the Council”),
which said consent shall not be withheld
unreasonably.
(v)
No residence, except such as may be required for the occupation by
the Supervisor
employed by the transferee shall be erected upon the
property.
(vi)
No sale of intoxicating liquor of any description whatsoever, shall
be permitted upon the
property.
(vii)
The foregoing condition (ii) – (vi) inclusive shall not apply
during the period when any
Agricultural Show is being held or
conducted by the transferee upon the property.
(viii)
The transferee shall not be permitted in any manner whatsoever to
alienate the said property to any
person or organisation, save for
the purpose of conducting thereon of Agricultural Shows and further
subject to the conditions
aforegoing.
(ix)
In the event of the transferee failing, except due to circumstances
beyond the control
of the transferee and in regard to such
circumstances the onus or responsibility of proving that such
circumstances were beyond
its control shall rest upon the transferee,
to hold at least one Agricultural Show in any consecutive two years
or committing a
breach of the conditions aforegoing then and in such
event the Council shall be entitled, but not compelled, to retake
possession
of the property and demand re-transfer thereof. In such
event a committee consisting of three (3) members nominated by the
Chamber
of Commerce in Nelspruit. One (1) member nominated by the
Publicity Association in Nelspruit and One (1) member nominated by
the
Lowveld Farmers be appointed by the Administrator of the
Transvaal, shall be formed to determine whether such ground shall be
held
in trust for future Show Societies or whether such ground shall
be sold and the proceeds held in trust by the Council for future
Show
Societies. The conditions set out under B(I) – (ix) are
enforceable by the Transferor Municipality.”
[12]
On 4 May 2018, this Court per Strydom AJ in Case No: 405/2015 granted
an order permitting expropriation
of the property. The order is
extant but the property has not yet been transferred into the name of
the Municipality due to bond
cancellation problems. The nature of
this order means that the property cannot be transferred to any party
whether that party is
Nghwazi or not.
ORAL EVIDENCE OF
THE PARTIES
[13]
Du Toit testified on behalf of Nghwazi. His evidence was that he is a
practicing attorney and
conveyancer with experience exceeding 40
years. He is a director of Wiekus Du Toit Attorneys (“WDT,
which is the attorneys
of record of Nghwazi). His credentials were
not challenged. On 2 March 2015, he represented Nghwazi when it
concluded the agreement
with LSS and continued to be closely involved
in the process thereafter.
[14]
His association with the property goes back to 2014 to the date of
the conclusion of the agreement,
2 March 2015. Throughout that
period, Vans Auctioneers was represented by Smuts as its attorney.
Vans Auctioneers, as the agent
of LSS, was instructed to advertise
and inform all prospective purchasers of the restrictive title
conditions applicable to the
Property. In doing so, Vans Auctioneers
was directed to draw the attention of prospective purchasers to the
provisions of (VIII)
and (IX) in Clause B of the title deed, which I
have cited in full at Paragraph 11
supra
.
[15]
In brief, the restrictive conditions provide that the transferee is
not permitted to alienate
the Property save for purposes of
conducting agricultural shows and that should the transferee fail to
hold at least one agricultural
show biennially, the Municipality
would be entitled to expropriate the Property. Vans Auctioneers
advertised the auction for 26
February 2015. On that date, Saleh made
an offer, which he subsequently withdrew and cancelled. Following the
cancellation and/or
withdrawal of the offer, the parties concluded
the agreement on 2 March 2015. I need to point out that according to
the recordals
of the agreement, it was LSS that withdrew the property
from the auction. As is evident, that is materially different from
the
testimony of Du Toit. That said, it should suffice to state that
it is common cause that the auction did not go ahead.
[16]
Du Toit confirmed that during the 7-day period mentioned in Paragraph
4.2
supra
, LSS heard that the Municipality was in the process
of challenging the validity of the 1983 Proclamation rescinding
certain restrictive
conditions from the title deed. It also became
aware that the Municipality was proceeding with a second attempt to
expropriate
the Property before registration of transfer to Saleh.
LSS had anticipated a dispute with the Municipality on the title
condition
and not a total onslaught on the ownership, alternatively
on its title.
[17]
In consequence of the actions of the Municipality as aforesaid, Saleh
withdrew his offer to purchase
the Property, which led to the
cancellation of the transaction. Conscious of the risks associated
with the threatened actions of
the Municipality, Nghwazi purchased
the property at a reduced price. Du Toit alleged that when purchasing
the property, Nghwazi
was mindful that risk would pass to it once
registration of transfer of ownership into its name has occurred. The
risks notwithstanding,
neither party predicted a problem with
registration of transfer of ownership into the name of Nghwazi
[18]
Du Toit stated that the objective of the indemnity and risk clause,
Clause 3, of the agreement
was that:
18.1 Nghwazi would
accept full risk and accept all/or any negative consequences
including but not limited to expropriation,
restrictive title
conditions,
caveats
etc. that could result from the actions of
the Municipality, and would have no claim against LSS emanating from
the above;
18.2 Clause 3.2
would only find application post registration of transfer of
ownership into the name of Nghwazi. It was never
the intention of the
parties that LSS would be excused from liability in circumstances
where registration of transfer of ownership
had not happened;
18.3 The risk could
not be entertained until transfer had occurred. Transfer has always
been possible otherwise Nghwazi would
not have concluded the
agreement. Besides, LSS would have misrepresented to Nghwazi that it
could pass ownership of the property
when it could not.
[19]
Du toit confirmed that Nghwazi proceeded to perform in terms of the
agreement. Clause 2 of the
agreement that is headed: RESTRICTIVE
TITLE CONDITIONS, specially provides that Nghwazi would accept
transfer with the restrictive
conditions described in the title deed,
threat of expropriation or any risk regarding ownership included. He
stated further that
this was the essence of the protection inherent
in Clause 3.2 of the agreement.
[20]
Regarding The advertisement, Vans Auctioneers warranted in a letter
that registration of transfer
of ownership would be effected subject
to the restrictive conditions referred to in Clause 2 of the
agreement. Du Toit emphasized
that the parties did not intend LSS to
be released from its obligations to effect transfer of the Property
concerned merely because
of the restrictive conditions. If that were
the case, it would have been farcical to advise Nghwazi to enter into
the agreement
and expend large sums of money, which it was obliged to
pay as per the agreement.
[21]
Neither party expected that any other party, with the exception of
the Municipality, could initiate
legal proceedings which could affect
transfer of the Property. If expropriation had become relevant, for
example, in the sense
that it was effected after transfer, Nghwazi
would have assumed the risk. Thus, everyone understood that Nghwazi
would subsequent
to registration of transfer of ownership and title
become the owner subject to the restrictive conditions.
[22]
Du Toit maintained that LSS too had intended the property to be
transferred and the following
stand as confirmation of that
allegation:
22.1 It issued an
urgent application to obtain clearance certificates in respect of the
Property to effect transfer;
22.2 It strenuously
opposed two applications launched by the Municipality.
[23]
Du Toit testified further that in the second application, the
Municipality disputed the validity
of the 1983 Proclamation. In this
second application Nghwazi was cited as a Respondent because it was
the Purchaser in terms of
the agreement. Strangely, said Du Toit, LSS
opposed the relief sought. This he regarded as preposterous because
the removal of
the 1983 Proclamation did not prevent transfer. The
court in this second application reviewed and set aside the removal
of title
condition B (VIII). The court further interdicted the
transfer of the Property to Nghwazi due to the opposition of LSS.
[24]
The restrictive conditions on themselves did not make transfer of the
property impossible. The
interdict, on the other hand, prohibited
transfer of the property to Nghwazi directly as a result of the
opposition by LSS. The
restrictive condition only limited how the
owner could utilize the property but was not a bar to ownership in
any manner. Du Toit
remarked that LSS in another application in fact
asserted in its heads and answering affidavit that the restrictive
title condition
did not proscribe transfer of the property.
[25]
Du Toit testified that LSS was the author of its own misfortune. The
court granted the interdict
prohibiting transfer of the property at
the instance of LSS. The interdict granted by the court must be
understood in the context
of title condition B (VIII), which merely
entailed that LSS was not permitted to alienate the Property to
Nghwazi except for purposes
of conducting agricultural shows. Nghwazi
was mindful of this condition and had accepted that it would acquire
ownership subject
thereto. According to Du Toit there was no reason
why transfer could not have been permitted to take place.
[26]
Moreover, LSS failed to comply with title condition B (IX) by not
holding an agricultural show
once every second year. It was that
failure that the court in Case No: 405/2017 ordered that the
Municipality was entitled to expropriate
the Property. In consequence
of the inability of LSS to pass transfer of the property to Nghwazi,
the latter cancelled the agreement.
Following the cancellation, LSS
returned the Standard Bank guarantee, deposit and transfer costs but
would not refund the commission
of Vans Auctioneer’s.
[27]
Cross-examination of Du Toit did not achieve much as he merely
reiterated what I have already
captured as his testimony above. That
said, I need to point out that on being asked if Nghwazi intended to
develop the property,
he stated that it was not in its immediate
plans but that the possibility could not be excluded. Du Toit
emphasized that if Nghwazi
embarked on that route, it would do so
within the limitations of the restrictive conditions. To the
suggestion that Nghwazi purchased
the property not intending to
observe the restrictive conditions, he was persistent that Nghwazi
would have complied with the conditions
as stipulated.
[28]
To the proposition that the letter dated 12 December 2014 insisting
on Vans Auctioneers disclosing
the restrictive conditions and
possible actions of the Municipality was meant to discourage
potential purchasers, he stated that
it is a matter of course that
generally the attention of all potential buyers of immovable
properties is drawn to the existence
of restrictive conditions, if
they are present. In this instance, Nghwazi concluded the agreement
fully cognisant of the risks
and was prepared for any eventuality
post registration of transfer.
[29]
Du Toit also said that the notice of expropriation might have meant
to withdraw the property
from the sale but it did not deter Nghwazi
from concluding the agreement. Clause 3.2 indemnifies LSS in the
event of expropriation
materializing. So, for as long as registration
of transfer of ownership has been effected, Nghwazi would be prepared
to bear the
risks of which it had always been aware.
[30]
Du Toit agreed that the commission of Vans Auctioneers became due by
Nghwazi on the ‘fall
of the hammer’. If for any reason
the transaction was stymied, as is the position here, LSS on whose
behalf Vans Auctioneers
conducted the auction, would be liable to
reimburse Nghwazi. This was the essence of Du Toit’s testimony.
[31]
Like Du Toit, Du Preez who testified on behalf of LSS is an admitted
attorney practicing commercial
law for 39 years. He specializes in
the drafting of commercial instruments. His credentials too were not
questioned. He testified
that he enjoyed a close relationship with
LSS. He recalled that he was involved in its liquor act license
problems and several
other issues since approximately 1989. He also
assisted LSS in the process that led to the conclusion of the
agreement. He confirmed
that while that is so, he was not part of the
background negotiations of the agreement.
[32]
He stated that LSS downgraded its business on the showgrounds due to
problems concerning access
road. The difficulty led to loss of
parking at the venue. Membership contributions declined resulting in
the decision to obtain
alternative land to which to move the business
of LSS. The access challenges notwithstanding, the land remains
valuable and its
location too is good.
[33]
Regarding the expropriation application of 2017 bearing Case No:
405/2017, he said that the land
was still in the name of LSS despite
the order of the court directing that it be transferred to the
Municipality. He testified
that this was as a result of a 1973
transfer problem of a bond. Du Preez confirmed that he was aware of
the content of the answering
affidavit and other documents forming
part of the application under Case No: 405/2017. It was indicated to
Du Preez that the notice
of expropriation made the sale impossible.
[34]
Additionally, it was proposed that it was also the reason the
Municipality was advised that LSS
would not hold shows. These
agricultural shows that were to be held every second year were those
stipulated in restrictive title
conditions B (ix). He stated that
apart from the withdrawal of the notice of expropriation, the
Municipality would not allow a
sale. He agreed that the withdrawal of
the expropriation notice by the Municipality meant that LSS could
transfer the property
to Nghwazi. That said, the continued threat of
the Municipality to proceed with expropriation at a later stage
constituted a clear
intention not to transfer the property.
[35]
Du Preez reiterated his evidence that it was Smuts who was closely
involved with all aspects
of the sale both prior and on the date of
the sale itself, 2 March 2015. The obstructive measures of the
Municipality aside, Du
Preez agreed that he was still able to advise
LSS to proceed with the sale of the property.
[36]
Under cross-examination, Du Preez conceded that:
36.1 The order
granted under Case No: 405/2017 directing that the property could be
expropriated and registration of transfer
of ownership could be
effected in the name of the Municipality was prompted by LSS’s
failure to adhere to the Restrictive
Title Condition B(ix) that
required LSS to hold an agricultural show every second year;
36.2 Nghwazi, on
the other hand, complied with all its contractual obligations
entitling it to registration of transfer of
ownership into its name;
36.3 His testimony
that Nghwazi had refused to take transfer was incorrect;
36.4 Registration
of transfer of ownership into the name of Nghwazi became impossible
as a result of LSS’s lack of compliance
with Restrictive Title
Condition B(ix);
36.5 Nghwazi
complied with all the 4 obligatory payment conditions, which it could
neither negotiate nor control.
[37]
Du Preez did not contest that all the 4 payment requirements, the
commission of Vans auctioneers,
deposit of the purchase price,
transfer costs and payment guarantee issued by Standard Bank, had to
be effected simultaneously
as part of Nghwazi’s payment
conditions and obligations without which the transfer would not
happen. He agreed that 3 of
the 4 payment obligations were reimbursed
subsequent to the cancellation of the sale by Nghwazi on 9 June 2017
[38]
The agreement was cancelled as it was not executed. He confirmed that
the agreement was cancelled
and not declared void and/or unlawful by
a competent court. Du Preez agreed that the Property was not
transferred to Nghwazi. However,
he would not comment when it was put
to him that failure to do so constituted a breach by LSS as a result
of which Nghwazi was
within its own right to cancel. He also
acknowledged that in line with the heads of LSS in Case No: 405/2017
the restrictive title
conditions did not prevent a transfer of the
Property.
[39]
Cross-examined further, he accepted that the agreement was somehow
destined to come to an end.
He also acknowledged that the
cancellation of the agreement had to be accompanied with preservation
of the
status quo ante
. Du Preez also agreed that contrary to
LSS’ professed wish, it subsequently became entangled in a
long-drawn-out litigation
with the Municipality. Incredibly, Du Preez
confessed under cross-examination that LSS did not intend to pass
ownership to Nghwazi
even though he had advised it to conclude the
agreement.
[40]
Du Preez agreed that restitution would follow as a matter of course
in circumstances where an
agreement was lawfully terminated. However,
he would not respond when it was put to him that the payment
guarantees, transfer costs
and deposit were returned as a result of
the valid cancellation of the agreement by Nghwazi. This brought to
an end the evidence
of Du Preez and also marked the culmination of
the evidence part of the whole case.
ISSUES
[41]
Neither party disputed that key to the resolution of this controversy
is the interpretation of
clause 3.2 of the agreement. If the meaning
attributed to Clause 3.2 of the agreement is that the risk includes
payment of the
commission of Vans Auctioneers regardless of any event
such as transfer of the property, LSS will not be held liable for
payment.
The reverse will mean the opposite. For proper assessment of
this matter, it is important to examine both the documentary evidence
together with the oral evidence levied by the two witnesses of the
parties, Messrs Du Toit and Du Preez on behalf of Nghwazi and
LSS
respectively.
[42]
The interpretation of Clause 3.2 of the agreement, however, is not
the sole determinant of the
outcome of this matter. Other issues to
be considered prior to examining the main issue are, for example, the
role played by LSS
in the court granting the order prohibiting
registration of transfer of ownership and title to Nghwazi on 28 July
2016. Another
issue concerns whether or not the presence of the
Restrictive Title Condition B (VIII (and (IX) barred transfer to
Nghwazi. Lastly,
it must be determined whether or not Clause 3.2
survived cancellation of the agreement.
LEGAL FRAMEWORK
[43]
To the extent that LSS relies on impossibility of performance, it
could be useful to reinstate
the general principle regarding
impossibility of performance as described in
Hersman v Shapiro and
Co
1926 TPD 367
:
“
Therefore,
the rule that I propose to apply in the present case is the general
rule that impossibility of performance does in general
excuse the
performance of a contract, but does not do so in all cases, and that
we must look to the nature of the contract, the
relation of the
parties, the circumstances of the case, and the nature of the
impossibility invoked by the defendant, to see whether
that general
rule ought, in the particular circumstances of the case, to be
applied.”
[44]
Thus, impossibility of performance as a defence will not assist a
party seeking to rely thereupon
if he is found to have created it. In
this regard Paragraph 28 of
King Sabata Dalindyebo Municipality v
Landmark Mthatha
(Pty) Ltd
(2013) 3 All SA 351
(SCA)
serves as confirmation:
“
[28
]
It
will have become clear by now that in considering the question
whether the impossibility was due to the Municipality's fault,
the
issue of Landmark's, or even the Municipality's, knowledge of the
land claims does not feature at all. It would have if the
question of
the assumption of risk by either Landmark or the Municipality had to
be considered. That has become unnecessary in
view of the finding
that the impossibility was self-created. It follows that the general
rule that impossibility of performance
brought about by vis major or
casus fortuitous will excuse performance of a contract does not avail
the Municipality in this case.
The appeal against the finding of the
court below relating to the defence of supervening impossibility
must, accordingly, fail.”
See also, FRAJENRON (PTY) LTD v
METCASH TRADING LTD AND OTHERS
2020
(3) SA 210 (GJ).
[45]
Both parties have referred me to cases pertinent to the question of
interpretation of agreements,
documents, statutes and/or court
orders. The Supreme Court of Appeal in
Natal Joint Municipal
Pension Fund v Endumeni Municipality
2012(4) SA 593 (SCA) at
para 18
said the following:
“…
.
Whatever the nature of the document, consideration must be given to
the language used in the light of the ordinary rules of grammar
and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed and the material known to
those
responsible for its production. Where more than one meaning is
possible each possibility must be weighed in the light of
all these
factors. The process is objective not subjective. A sensible meaning
is to be preferred to one that leads to insensible
or unbusinesslike
results or undermines the apparent purpose of the document. Judges
must be alert to, and guard against, the temptation
to substitute
what they regard as reasonable, sensible or businesslike for the
words actually used. To do so in regard to a statute
or statutory
instrument is to cross the divide between interpretation and
legislation. In a contractual context it is to make a
contract for
the parties other than the one they in fact made. The
“inevitable
point of departure is the language of the provision itself”
,
read in context and having regard to the purpose of the provision and
the background to the preparation and production of the
document.”
[46]
The SCA in
Iveco South Africa (Pty) Ltd v Centurion Bus
Manufacturers (Pty) Ltd
(Case no 183/2019)
[2020] ZASCA 58
(3
June 2020)
was following on the footsteps of Endumeni
supra
when it held that:
“
[6] It is trite
law that the provisions of a Deed of Sale must be read and understood
in the context within, and having regard to
the purpose for which,
the Deed of Sale was concluded. The point of departure is the
language employed in the document. But the
words must not be
considered in isolation. A restrictive examination of words, without
regard to the context or factual matrix,
has to be avoided. Evidence
of prior negotiations is inadmissible, but evidence relating to the
surrounding circumstances and the
meaning to be given to special
words and phrases used by the parties, is admissible. No distinction
is drawn between context and
background circumstances. Words have to
be interpreted sensibly so as to avoid unbusinesslike results.”
ANALYSIS
IMPOSSIBILITY OF
PERFORMANCE
[47]
The case of LSS is partly anchored on the order granted by the court
in Case No: 47407/2015.
The court in that matter essentially set
aside the removal of the Restrictive Title Condition B(viii). It
would appear that LSS
opposed the application on the fallacy that
reinstatement of the restrictive title conditions would prohibit
registration of transfer
of ownership to Nghwazi.
[48]
Nghwazi, on the other hand, has always stood firm that it was
prepared to take transfer of the
property with all the attendant
restrictive title conditions including B(viii) and (ix). Given the
risk that Nghwazi was ready
to assume, it was preposterous for LSS to
have opposed the application. In any event, it is clear that the
restrictive title conditions
pertained to use rather than divestment
in ownership.
[49]
It is manifest from the testimony of Du Preez that from the time LSS
concluded the agreement
with Nghwazi, it knew that registration of
transfer of ownership was not dependent on the removal of the
restrictive title conditions.
The steps upon which LSS embarked
subsequent to the conclusion of the agreement bear testimony to this.
These consisted, among
others, requesting clearance certificates and
launching an application against the Municipality for the provision
of the figures
when it delayed to supply the figures.
[50]
There is no other manner of reading the actions of LSS other than
that it knew that the restrictive
title conditions were not a
proscription to registration of transfer of ownership. Understood in
that context, LSS’ opposition
of the application by the
Municipality is, to say the least, confounding. To the extent that
the court barred registration of transfer
of ownership and title to
Nghwazi as a result of the opposition by LSS, the latter cannot turn
around and seek to rely on an impossibility
that it created. This is
the essence of the decision in the King Sabata Dalindyebo
Municipality
supra.
In the result and to the extent that LSS
relies on impossibility of performance as a defence, it is rejected
and dismissed as bereft
of any merit.
[51]
The above said, it would appear that a proper interpretation of the
order in Case No: 47407/2015
is that the court was simply stating
that no registration of transfer of ownership should take place from
LSS to Nghwazi for as
long as the Nghwazi was not prepared to observe
Restrictive Title Condition B(ix). Nghwazi was prepared to acquire
ownership subject
to that condition but for some reason LSS believed
that registration of transfer of ownership would not be possible. As
will be
seen, the actions of LSS following the order in Case No:
47407/2015 demonstrate that LSS did not regard Restrictive Title
Condition
B(ix) as a barrier.
DID THE RESTRICTIVE
TITLE CONDITIONS PROHIBIT REGISTRATION OF TRANSFER OF OWNERSHIP?
[52]
The actions of LSS subsequent to entering into the agreement are
reminiscent of a party that
believed that the restrictive title
conditions would not bar transfer of ownership from it to another
party as long as the party
acquiring ownership was not only aware of
the limitations of use imposed by the restrictive title conditions
but also prepared
to comply therewith. The admission by Du Preez that
although he had advised LSS to conclude the agreement, it did not
want to see
registration of transfer of ownership passed to Nghwazi
is enigmatic.
[53]
If the parties believed that registration of transfer of ownership
was not possible for as long
as the restrictive title conditions were
in place, the question is, why was the agreement not entered into
subject to their removal
or their non-reinstatement. It was
vigorously argued on behalf of LSS that the order under Case No:
47407/2015 prevented registration
of transfer. The events that
unfolded subsequent to the granting of the order in that application,
however, turn that assertion
on its head.
[54]
One profound and obvious question, for example, is why did Nghwazi
adhere to the terms of the
agreement by making payment if it knew
that transfer would not be possible with the restrictive title
conditions? The answer that
the parties did not perceive them as a
barrier is inexorable. A further question that arises, is if it is
right that the order
handed down in Case No: 47407/2015 on 28 July
2016, prevented transfer of ownership, why did LSS wait for Nghwazi
to cancel the
agreement prior to reimbursement of the amounts that it
had paid? The ineluctable answer is that both parties knew that it
was
still possible for transfer of ownership to be effected with all
those restrictive title conditions still firmly in place.
[55]
The obligations that ensued following the agreement between the
parties that Nghwazi had to make
payment of the deposit, transfer
costs, commission of Vans Auctioneers and obtain a payment guarantee
from Standard Bank had to
be met prior to registration of transfer of
ownership and were not part of the risk as intended in Clause 3.2. A
concomitant obligation
that was expected from LSS was to give
ownership of the property to Nghwazi, which it failed to do.
[56]
While the one party, Nghwazi, had observed the terms, LSS, by its
failure to give transfer of
ownership, as envisaged, contravened the
terms of the agreement. This rendered the transaction susceptible to
cancellation and
restitution. It is common cause, if the evidence of
Du Preez is anything to determine this, that Nghwazi cancelled the
agreement
as a result of the failure of LSS to give transfer of
ownership.
[57]
In the absence of a provision to the contrary in the agreement, the
cancellation of the agreement
due to the breach by LSS should have
been complemented with the return of the payment guarantee, deposit,
transfer costs and commission
of Vans Auctioneers. Du Preez conceded
that this would have been a natural consequence of the cancellation
but could not explain
LSS’ failure to reimburse Nghwazi with
the commission of Vans Auctioneers.
[58]
One event that made any registration of transfer of ownership of the
property to any party impossible
was the order granted on 4 May 2018
under Case No: 405/2017. The court order permitting the Municipality
to expropriate the property
was inspired by LSS’ failure to
adhere to Restrictive Title Condition B(ix) requiring it to hold
agricultural show biennially.
For what it is worth, Nghwazi was
mindful of this condition and was prepared to comply with it prior to
expropriation, it having
understood that if the property was
subsequently transferred into its name and then expropriated, Clause
3.2 would operate against
it. As such, the restrictive title
conditions never constituted a hindrance to registration of transfer
of ownership.
DID CLAUSE 3.2
SURVIVE CANCELLATION OF THE AGREEMENT
[59]
Here I agree with Nghwazi that it is trite that generally, unless an
agreement specifically provides
otherwise or a contrary intention of
the parties is evident from the agreement or the provision is of such
a nature that it accommodates
continued existence, a provision in a
cancelled agreement cannot endure beyond the life of the agreement
itself. Nothing in the
agreement suggests the inapplicability of the
general rule as described
supra
.
As such, if it is accepted that Nghwazi cancelled the agreement,
Clause 3.2 is inoperative and cannot be relied upon to excuse
LSS
from liability.
INTERPRETATION OF
CLAUSE 3.2
[60]
Here it is important to emphasise that both the Indumeni and Iveco
cases
supra
mention the language, context and purpose of the
document to be interpreted as being vital. Accordingly, these are the
three elements
on which I will now focus in an endeavour to resolve
this dispute.
CONTEXT AGAINST
WHICH THE AGREEMENT WAS CONCLUDED
[61]
Nghwazi was desirous of purchasing the property, which it intended to
use for whatever purpose
but within the precincts of the restrictive
title conditions. LSS was the owner of the property and it wished to
dispose of it
provided the purchaser would be willing to acquire it
subject to the restrictive title conditions from which it suffered.
In their
wisdom, the parties prescribed certain condition precedents.
These were that Nghwazi would obtain a payment guarantee, pay the
deposit, transfer costs and commission of Vans Auctioneers upon the
fall of the hammer. Once this had been done, LSS on the other
hand,
was expected to obtain clearance certificates and cancel any
encumbrances that could obstruct registration of transfer of
ownership. LSS would have done these in preparation to passing
ownership to Nghwazi.
[62]
Clause 3.2 was conceived in circumstances where the Municipality was
threatening to expropriate
or reintroduce the restrictive title
conditions or apply for the imposition of caveats on the property.
This explains why Vans
Auctioneers was instructed to warn potential
purchasers of the risks and perils associated with the purchasing of
the property.
Nghwazi entered into the agreement mindful of all these
and was prepared to confront whatever contingencies, negative or
positive,
that could be brought about by the actions of the
Municipality. It was against this background that the parties
concluded the agreement.
The language used in the agreement must as
such, be understood in this context.
[63]
The context suggests that delivery (registration of transfer of
ownership) of the property to
Nghwazi would first happen prior to the
passing of risk. Before registration of transfer of ownership there
existed only obligations
of the parties. On the one hand, Nghwazi had
to pay the commission of Vans Auctioneers, deposit, transfer costs
and obtain a payment
guarantee from Standard Bank. Similarly, LSS had
to adhere to its side of the bargain – apply for clearance
certificates,
remove all impediments such as, mortgage bond
cancellation, etc. These obligations were not risks but were merely
requirements,
which once fully executed would have passed the risk to
Nghwazi. The risk would not pass for as long as registration of
transfer
of ownership had not occurred.
LANGUAGE USED IN
CLAUSE 3.2
[64]
The language employed to deliver the intended message in Clause 3.2
is plain. It leaves no room
for any other meaning other than that
which is intended by the parties. The significance of the clause
requires it to be fully
cited once again at this point. It provides
that:
“
The
Purchaser hereby takes full risk for, and accepts all or any negative
consequences,
including
but not limited to expropriation, restrictive title conditions,
caveats etc. that may result from the actions of the Mbombela
Local Municipality and will have no
claim again the Seller emanating from
the
above.”
[65]
If at the time of the conclusion of the agreement it is accepted, as
the parties do, that certain
obligations were imposed on them,
Nghwazi could not have taken any risks or attracted any negative
consequences of the Municipality
because there was only a threat of
those happening. In any event, only one party to the agreement
(Nghwazi) had performed whereas
LSS had not. If the risks and/or
negative consequences were assumed at the time of the conclusion of
the agreement, the agreement
would have been nonsensical.
[66]
The above must be so because Nghwazi would be taking a risk in
circumstances where LSS had not
adhered to its side of the bargain.
In fact, to employ the language used in the Indumeni case
supra
,
it would be ‘unbusinesslike’ with preposterous
consequences. Who in his right mind would risk his hard-earned assets
in such a transaction? In my opinion, No one. Risk and/or the
negative consequences would only creep into the arena once
performance
by both parties has been executed.
[67]
I agree with Nghwazi that it undertook to accept full risk and all
negative consequences including
but not limited to expropriation,
restrictive title conditions,
caveats
that could result from the actions of the Municipality. Clause 3.2
would only find application post registration of transfer of
ownership into the name of Nghwazi. It was never the intention of the
parties that LSS would be excused from liability in circumstances
where registration of transfer of ownership had not happened.
Transfer has always been possible otherwise Nghwazi would not have
concluded the agreement. Besides, LSS would have misrepresented to
Nghwazi that it could pass ownership of the property when it
could
not.
PURPOSE OF THE
TRANSACTION
[68]
The parties’ objective when concluding the agreement was to
ultimately pass ownership of
the property from the one to the other.
To accomplish their objective, the parties had certain obligations.
Only Nghwazi fully
discharged its obligations and had the right to
demand registration of transfer of ownership into its name. When LSS
could not
perform, Nghwazi elected to cancel and demanded restitution
as the purpose of the agreement could not be realized.
COSTS
[69]
There can be no doubt that LSS is liable for the costs of Nghwazi.
However, it is another to
expect LSS to pay such costs at the scale
as between attorney and client. The opposition of the matter was not
as vain that LSS
should be mulcted with punitive costs. In my opinion
normal party and party costs should suffice.
CONCLUSION
[70]
LSS cannot rely on impossibility of performance because subsequent to
the conclusion of the agreement
it opposed the reintroduction of the
restrictive title condition when they had nothing to do with
registration of transfer of ownership
to Nghwazi. Thus, LSS
contributed towards the court’s order prohibiting transfer of
the property from it to Nghwazi. In that
sense, the impossibility was
self-created. The restrictive title conditions did not bar
registration of transfer of ownership to
Nghwazi.
[71]
Similarly, LSS cannot rely on the provisions of Clause 3.2 because it
does so in circumstances
where the agreement has been cancelled. In
the absence of a specific provision that Clause 3.2 would survive the
agreement, it
is accepted to have stopped being of utility to either
party by the cancellation. Clause 3.2 does not allow for an
interpretation
that contemplates risk passing to Nghwazi prior to
registration of transfer of ownership to Nghwazi. On a balance of
probabilities,
I am satisfied that Nghwazi has demonstrated that it
is entitled to be reimbursed in the amount claimed. In the result,
the action
against LSS succeeds.
ORDER
[72]
I make the following order:
1.
LSS is directed to pay the amount of
R3 192 000.00 to Nghwazi;
2.
Interest on the aforesaid sum of R3 192
000.00 calculated at the rate of 10,25% per annum
a
tempore morae
;
3.
LSS is liable for the payment of the costs
of Nghwazi.
B A MASHILE
JUDGE OF THE HIGH
COURT OF SOUTH AFRICA
MPUMALANGA DIVISION,
MBOMBELA
This judgment was
handed down electronically by circulation to the parties and/or
parties’ representatives by email. The date
and time for
hand-down is deemed to be 27 September 2021 at 10:00.
APPEARANCES:
Counsel
for the Plaintiff:
Adv J De Beer
Instructed
by:
WDT Attorneys INC.
Counsel for the
Defendant:
Adv J H Roelofse
Instructed
by:
Kruger & Partners INC
Date of
Hearing:
16 March 2021
Date of
Judgment:
27 September 2021