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[2008] ZASCA 119
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Els v Smit and Another (356/07) [2008] ZASCA 119; [2009] 1 All SA 339 (SCA) (26 September 2008)
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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
Case no: 356/07
No precedential value
WYNAND
WILLEM ELS
Appellant
and
SUSARA
CAROLINA SMIT
First Respondent
THE
REGISTRAR OF DEEDS, PRETORIA
Second
Respondent
Neutral citation:
Els
v Smit
(356/07)
[2008] ZASCA 119
(26
September 2008)
Coram:
HARMS
ADP, SCOTT, LEWIS JJA, LEACH and MHLANTLA AJJA
Heard:
1 September 2008
Delivered:
26 September 2008
Corrected:
Summary:
Partnership ─ dissolution of
partnership agreement ─ effect.
___________________________________________________________
ORDER
___________________________________________________________
On appeal from:
High Court,
Pretoria (Mavundla J sitting as court of first instance).
1 The appeal is upheld to the extent set out in para 2
of this order.
2 The order of the court below is altered to read as
follows:
‘
(a) The claim succeeds to the following extent:
(i) It is declared that Erf 2075 Kempton Park, Gauteng
‘20 Aster Street’ is owned by the plaintiff and the
defendant
in equal shares.
(ii) It is declared that Plot 21 Caro Nome Agricultural
Holding (21 Atlas) and Erf 504 Croydon, Kempton Park (6
Brabazon),
are partnership assets.
(iii) The plaintiff is entitled to share in the net
proceeds of these properties as and when they are sold.
(iv) In the event the parties cannot agree on the
calculation and/or division of the profit after the properties have
been sold,
the plaintiff is entitled to the appointment of a
liquidator, who, in the event of disagreement, must be nominated by
the President
of the Law Society of the Northern Provinces.
(b) The counterclaim succeeds to the extent that the
plaintiff is ordered to pay the defendant the sum of R17 541.81.
(
c) The
defendant is ordered to pay the costs of suit including the costs of
two counsel.’
3 The appellant (the defendant) is to pay the costs of
the appeal, such costs to include the costs of two counsel.
___________________________________________________________
JUDGMENT
___________________________________________________________
MHLANTLA AJA
(HARMS ADP,
SCOTT, LEWIS JJA and LEACH AJA concurring):
[1]
This
is an appeal, with the leave of the court below, against an order of
the Pretoria High Court (Mavundla J). Mrs Smit, the first
respondent,
instituted an action against Mr Els, the appellant, for declaratory
relief in relation to certain immovable properties
which she claimed
were assets of a dissolved partnership between her and the appellant.
(The second respondent has been cited as
an interested party but
takes no part in the appeal and I shall henceforth refer to Mrs Smit
as the respondent.)
[2]
The
appellant denied the existence of the partnership and, in addition,
filed a claim in reconvention in terms of which he claimed
an account
relating to the proceeds of certain properties sold by the
respondent; and a debate of an account and payment of any
amount due
to him. He relied in this regard on an agreement that was for all
intents and purposes a partnership agreement.
[
3] Unsurprisingly,
at the commencement of the trial the appellant conceded the existence
of a partnership and the parties prepared
an agreed statement setting
out the terms of the partnership, namely
:
(a) That the respondent would search for and identify properties to
be purchased;
(b) That they would jointly decide on the purchase price;
(c) That the appellant would provide the capital for the deposit for
the property, the sheriff’s cost and commission;
(d) That the arrear rates and taxes would be furnished by the
appellant in the event of the property not being sold before
registration;
(e) That the appellant would be entitled to charge interest on the
respondent’s half share of the amount provided, at a rate
similar to the one he could have earned on his ABSA money market
account;
(f) That the net proceeds of the property would be divided between
the parties;
(g) That property purchased would be marketed and sold before
registration;
(h) In the event of the property not being sold before registration,
same would be used for letting and the proceeds thereof would
be used
towards the bond settlement;
(i) That any shortfall, having regard to any other expenses in
connection with the property, would be borne in equal shares.
[
4] They
also agreed that the partnership had been terminated but disagreed as
to the date and cause of dissolution. They then prepared
a list of
issues to be decided separately and the court agreed to do so. The
issues were these (freely translated):
(a) whether it was a term of the agreement that the respondent would
earn commission in the event the properties were sold by her
estate
agency;
(b)
whether the
respondent and/or her estate agent were at all relevant times in
possession of a valid fidelity fund certificate;
(c
) whether the
respondent was obliged to contribute towards the other expenses after
transfer had been taken as and when they were
incurred;
(d) which party had repudiated the agreement and the effect thereof
on the dissolution of the partnership;
(e) whether the appellant was entitled to share in
the proceeds of the Woodlake properties;
(f) whether the respondent was entitled to share in the net proceeds
of
the sale of the properties procured by the appellant or registered in
his name, that is, 6 Brabazon Street, 20 Aster Street and
Plot 21
Atlas Road; and
(g) whether the respondent was entitled to request the appointment of
a liquidator in the event that the parties are unable to
agree on the
computation or calculation and/or division of profits after the
properties have been sold.
[5
] Mavundla
J decided most of the issues in favour of the respondent in these
terms:
(a) that it was a contract term that the plaintiff, in the event the
property should be sold by her estate agency, will earn a
commission
from the transaction;
(b) that the plaintiff or her estate agency at all relevant times was
in possession of a fidelity fund certificate;
(c) that the plaintiff’s estate agent company was entitled to
the estate agency commission paid and set out in the contract
attached as annexure A;
(d) that the plaintiff is obliged to contribute towards the other
expenses (excluding the Bond repayment) after transfer of the
property has been taken;
(e) that the plaintiff is entitled to share in the proceeds of the
property listed in prayer 1.3 of the particulars of claim;
(f) that in the event the parties cannot agree on the calculation
and/or division of the profit after the property listed in prayer
1.3
of the particulars of claim have been sold:
(i) the plaintiff is entitled to the appointment of a liquidator (as
stated in prayer 1.4 of the particulars of claim);
(ii) the parties must approach the President of the Law Society of
Gauteng for the
appointment of a liquidator;
(g) That:
(i) It is irrelevant, for the purposes of this matter whether or not
the repudiation is by
the plaintiff or the
first defendant; and
(ii) that both parties are entitled to share equally in the proceeds
of the property
listed in prayer 1.3 of the
particulars of claim.
(h) that the transactions 18 Woodlake, Glen Marais and 35 Woodlake,
Glen Marais were within the scope and ambit of the partnership;
(i) that the first defendant is entitled to share in the profit of
the transaction 18 Woodlake and 35 Woodlake;
(j) that the defendant pays the costs of suit on party and party
scale which costs shall include the costs of two counsel.
[
6] Benevolently
interpreted the order was declaratory, although it was not framed as
such. Instead it followed in exact terms the
formulation of the
issues as identified by the parties at the beginning of the trial.
The order is defective as it is in parts
vague and incapable of being
enforced. Nor does it in express terms declare the rights of the
parties.
[7] In spite of the separation of issues the
respondent’s counsel conducted the proceedings as if all the
issues were before
the court. However, although all the issues were
ventilated, the parties failed to approach the court below, before
applying for
leave to appeal, for a consequential order that would
have brought the matter to an end
.
The correct procedure where a court has
made this type of order is for the parties to request the court to
convert the ruling into
a proper order. And a court ought not to
grant leave to appeal before a proper order has been formulated,
simply because rulings
are not appealable: only orders are.
[8] In deciding whether what appears to be a ruling is
in fact an appealable order, this court in
SA
Eagle Versekeringsmaatskappy
Bpk
v
Harford
1
held that the decisive question which had to be answered was what the
parties sought to achieve with the litigation and what effect
the
court had intended its judgment to have. It went on to say that the
trial court in that case had intended, despite the awkward
way in
which it was worded, to make a final decision regarding the liability
of the appellant ─ it had not been the court’s
intention
to come to a provisional conclusion which could be altered or
amended. The judgment therefore constituted an appealable
judgment or
order in that it had a final and decisive effect on the litigation in
which the parties were engaged.
[
9] The
same can be said in relation to the rulings in this case. In
practical terms the rulings that have any practical effect amount
to
an order in more or less these terms:
(a) The claim succeeds to the following extent:
(i) It is declared that the three properties are
partnership assets;
(ii) The plaintiff is entitled to share in the net
proceeds of these properties as and when they are sold;
(iii) that in the event the parties cannot agree on the
calculation and/or division of the profit after the properties have
been
sold, the plaintiff is entitled to the appointment of a
liquidator.
(b) The counterclaim succeeds to the extent that the
plaintiff is to pay the defendant his net share of the profit on the
Woodlake
properties.
(c) The defendant is ordered to pay
the costs of suit including the costs of two cou
nsel.
[
10] I
now turn to a consideration of the facts relevant to the appeal. The
appellant met the respondent during 2000 when they became
neighbours.
He assisted her and her husband with their income tax affairs and
completed a business proposal for her. The respondent
subsequently
employed the appellant as a part-time agent selling properties
after-hours. As a result of these dealings the parties
concluded the
oral partnership agreement during March 2001. The object of the
partnership was to buy immovable properties, especially
at public
auctions or from insolvent estates or properties repossessed by
banks. They would later sell such properties for profit
and share the
proceeds on an equal basis.
[
11] The
appellant, a chartered accountant, was initially employed by ABSA
Bank but later resigned to join the respondent in the
partnership
business. He was in charge of the financial affairs of the
partnership. The respondent was an estate agent with her
own agency
trading as Saartjie East Rand Repo Properties.
[
12] The
partnership bought and sold approximately 18 properties without any
dispute arising between the partners. The following
facts, though,
gave rise to the respondent’s claim in convention:
(a
) Two
properties, described as Erf 504 Croydon, Kempton Park (‘6
Brabazon’) and Plot 21, Caro Nome Agricultural Holding
(‘21
Atlas’) were registered in the name of the appellant who
declared himself to be the sole owner thereof.
(b
) Another
property, Erf 2075 Kempton Park (‘20 Aster’), was also
acquired by the parties and the appellant laid a similar
claim
thereto.
[13]
The
respondent sought a declaratory order that she was entitled to share
equally in the net profit of those properties upon their
sale. The
appellant resisted the claim mainly on the ground that the properties
were not part of the partnership assets and, to
the extent that they
were, she had forfeited any right to the properties because of the
termination of the partnership. I shall
deal with the detail of each
property later.
[
14] The
counterclaim in essence related to two matters:
(a) The respondent had received
R78 831 by way of commission in respect of seven properties sold
through her agency. The appellant
sought to reclaim this amount. This
issue is reflected in rulings (a), (b) and (c).
(b) The respondent had purchased and
sold two properties described as 18 and 35 Woodlake, Glen Marais
without the knowledge of the
appellant and did not account to him in
regard thereto. He sought payment of the net profit on the two
transactions. This issue
is reflected in ruling (h) and (i).
[
15] It
is convenient first to consider the commission issue raised by the
counterclaim. This dispute arose after the appellant had
resigned
from the bank when he refused to pay further commission to the
respondent on future transactions, having realised that
she was
earning more money than he did. He contended that the commission
should be shared by them equally. The respondent in response
refused
to market the properties without any remuneration. This dispute
eventually led to the dissolution of the partnership agreement.
[16] Counsel for the appellant contended that the court
below had erred in holding that the respondent was, in terms of the
partnership
agreement, entitled to the estate agent’s
commission. There is no substance in this contention. The respondent
expressly
and unequivocally testified that the parties had agreed
that she would earn commission when she or her agency sold the
property.
The appellant signed all the contracts which provided that
commission would be paid to her agency. It was not put to the
respondent
that such an agreement was never concluded. There is clear
evidence regarding the agreement between the parties consistent with
the manner in which they conducted themselves towards each other. The
appellant did not testify to refute the respondent’s
evidence.
The evidence of the respondent remains uncontradicted and there is no
reason to doubt it. In my view, the appellant has
not provided any
reason why this court should interfere with the ruling of the court
below ‘that it was a contract term that
the plaintiff, in the
event the property should be sold by her estate agency, will earn a
commission from the transaction.’
[17] Part of the appellant’s case relating to the
commission issue was that, even if it was a term of the agreement
that the
respondent was entitled to commission, she was not entitled
to it because she either did not have the necessary fidelity fund
certificate
or, if she had one, it had been incorrectly issued. The
court below held that she did have the necessary certificate (finding
(b))
but the respondent on appeal abandoned the factual finding in
her favour.
[18] This leaves for consideration the appellant’s
argument that in the absence of a fidelity fund certificate the
commission
has to be repaid. Counsel did not persist in the argument
in the light of the judgment of this Court in
J
J
Taljaard v T L Botha
Properties,
2
which held
that
commission paid to an agent who did not possess the necessary
fidelity fund certificate could not be reclaimed by virtue of
s 34A
of the Estate Agency Affairs Act 112 of 1976. In the result the
ruling issued by the court below in para (c) was correct
to the
extent that it held that the respondent was entitled to retain the
commission received, although on an incorrect basis,
namely the
existence of a certificate. The effect of this is that the
counterclaim, to the extent that it related to the commission
paid,
was correctly dismissed.
[19] With regard to the transactions in respect of the
Woodlake properties, the high court held that that the transactions
fell
within the scope and ambit of the partnership and that the
appellant was entitled to share in the profit of the transactions.
The
respondent did not cross-appeal and the issue is accordingly
moot. What remains was a determination of the quantum which, strictly
speaking, fell outside the scope of the issues the court below was
called upon to adjudicate. However, the parties agreed that
this
court should, on the information available, determine the quantum.
According to appellant’s counsel it amounted to R53
836.61.
[20] The calculation was based on the assumption that
the respondent should forfeit her share as she had made secret
profits; thus,
the appellant was entitled to the entire profit
generated. There is no basis for the argument. Our law does not
recognise such
a penalty: compare
Schoeman v
Constantia Insurance Co Ltd
.
3
Furthermore, in view of the fact that the appellant had repudiated
the partnership agreement by denying the respondent’s
right to
commission, he is hardly in a position to insist on forfeiture.
In
Purdon v Muller
4
Ogilvie Thompson JA (dealing with a forfeiture clause in a
partnership agreement) held:
‘Partnership is a contract
uberrima fidei
and, in my
view, that connotes that a partner wishing to invoke against his
co-partner the stringent provisions of a summary cancellation
and
forfeiture clause contained in the partnership agreement must at
least himself be honouring the terms of that agreement. In
my
judgment the equitable principles of our law do not permit a partner,
who is himself repudiating his partnership obligations
towards his
co-partner, to enforce against that co-partner a forfeiture clause. .
. .’
The reasoning applies
a fortiori
in a case where there is no forfeiture clause.
[21] The calculation was also based on the assumption
that the respondent was not entitled to commission, something already
disposed
of. A recalculation shows that after deduction of the
commission the appellant’s half share in the profit that arose
from
these properties amounts to R17 541.81.
[22] The final issue relates to the relief claimed by
the respondent in regard to the three properties mentioned in her
particulars
of claim viz, 20 Aster, 6 Brabazon and Plot 21. Her case
was uncomplicated: she alleged that the three properties were
partnership
assets; the partnership had been terminated; and she was
entitled to her share in the profits from any sale of these
properties.
Secondly, she asked (absent an agreement between the
parties) for the liquidation of the partnership assets by a
liquidator.
[23] In so far as these properties are concerned, it is
necessary to deal with them separately. I propose to commence with
the property
that was acquired by the parties allegedly in terms of a
different agreement and thereafter deal with the circumstances
relating
to the two properties that are registered in the appellant’s
name.
[24] 20 Aster Street: It is common cause that the
parties are joint owners of this property. The parties could not sell
same as
there was a usufruct registered over it. The respondent as
joint owner is entitled to her half share if and when the property is
sold. It is in this context that the respondent said that the
property fell outside the partnership. Her evidence is probably wrong
but it is in any event irrelevant whether this property was acquired
in terms of the partnership or in joint ownership. The property
ought
to be dealt with in the same manner. The respondent as co-owner of
the property has a right to institute the
actio
communi
dividundo
to claim a division of the
property. In
Robson v Theron
,
5
the court summarised the principles of the common law applicable to
actio
communi
dividundo
where the partners cannot agree on
the method of dividing a particular jointly owned asset.
All that is required in this case, is a
declaratory order to the effect that the appellant and the first
respondent are co-owners
of 20 Aster and that the net proceeds
thereof are to be shared equally by the parties as and when the
property is sold.
[25] 21 Atlas Road: The parties purchased three
properties on 29 March 2001, including this one. They signed the
agreement of sale.
The mortgage bond was granted in their favour
whereafter they signed the documents for registration of transfer.
They subsequently
discovered an endorsement on the title deed to the
effect that the holding may not be held by two persons jointly. The
respondent
as a result signed a waiver renouncing her rights to
facilitate registration of transfer. The parties decided to not to
sell the
plot immediately but wait for appropriate offers.
[26] 6 Brabazon Street: The parties agreed that the
property be purchased by the appellant as the bank refused to pay
commission
where the estate agent purchased the property. The
respondent placed the offer. They received the commission because the
property
was registered in the appellant’s name only. The
parties agreed to renovate the property and thereafter sell it. The
respondent
marketed the property. A dispute arose between the parties
whereupon the appellant declared himself the sole owner of the
property
and sold it for R550 000.
[27] Counsel for the appellant conceded that these
properties, 6 Brabazon and 21 Atlas, were acquired in pursuance
of the partnership
agreement. He argued, however, that since these
properties were registered in the appellant’s name, the
respondent was not
entitled to share in the net proceeds thereof. He
contended that the claim by the respondent was a personal right as
opposed to
a real right and that the partnership asset was not the
property but the profit in respect of the property sold.
[28] In my opinion this argument is ill-conceived. The
cardinal point is that the properties were purchased in pursuance of
a partnership
and are thus partnership assets. It is evident that the
partnership purchased the properties with the intention to later sell
them
at a profit. The fact that they were registered in the name of
one party is irrelevant. In the result the two parties have a right
to share the net proceeds thereof once the properties are sold.
6
[29] Counsel also argued that the respondent could not
claim any profits since the partnership had been dissolved and that
her
claim amounts to a claim for specific performance in respect of a
cancelled contract. Counsel, I fear, failed to distinguish between
specific performance and the natural consequences of the dissolution
of a partnership. Although there is a difference in law, there
may be
no practical difference. On dissolution of a partnership accounting
must take place, and the idea that the one partner,
who by chance was
in possession of a partnership asset at the date of dissolution, is
on liquidation entitled to the increase in
value of the article after
the date of dissolution is simply nonsense. A partner has an accrued
right to claim profits not only
during the existence of the
partnership, but also after its dissolution. A partner does not
forfeit his right vis-à-vis
a partnership asset due to him,
and is entitled to a distribution of all assets. In
Korb
v Roos
7
the court held that the termination of a
partnership marked the beginning of a dissolution, liquidation and
settling of accounts.
It did not extinguish the claims of the partner
who ‘terminated’ the agreement and concurrently entitle
the other partner
to regard the entire partnership assets as his
exclusive property.
[30] In the result, since the properties described as 6
Brabazon and 21 Atlas Road are partnership assets, the respondent is
entitled
to share in the proceeds derived from their sale, whenever
that takes place.
[31] To give effect to the aforegoing I intend to
reformulate the order of the high court but, as indicated, it does
not change
its practical effect. The mere alteration of the order to
give practical effect to it, does not mean that the appellant had any
success which entitles it to the costs of the appeal. In so far as
the trial costs are concerned, there is no basis to interfere
with
the exercise of the court a quo’s discretion.
[32] In the result I make the following order:
1 The appeal is upheld to the extent set out in para 2
of this order.
2 The order of the court below is altered to read as
follows:
‘
(a) The claim succeeds to the following extent:
(i) It is declared that Erf 2075 Kempton Park, Gauteng
‘20 Aster Street’ is owned by the plaintiff and the
defendant
in equal shares.
(ii) It is declared that Plot 21 Caro Nome Agricultural
Holding ‘21 Atlas’ and Erf 504 Croydon, Kempton Park
‘6
Brabazon’, are partnership assets.
(iii) The plaintiff is entitled to share in the net
proceeds of these properties as and when they are sold.
(iv) In the event the parties cannot agree on the
calculation and/or division of the profit after the properties have
been sold,
the plaintiff is entitled to the appointment of a
liquidator, which, in the event of disagreement must be nominated by
the President
of the Law Society of the Northern Provinces.
(b) The counterclaim succeeds to the extent that the
plaintiff is ordered to pay the defendant the sum of R17 541.81.
(c)
The
defendant is ordered to pay the costs of suit including the costs of
two counsel.
3 The appellant (the defendant) is to pay the costs of
the appeal, such costs to include the costs of two counsel.
________________________
N Z MHLANTLA
ACTING JUDGE OF APPEAL
APPEARANCES:
For
Appellant: G Naudé
H
N de Wet
Instructed
by
S
C Vercueil Inc Menlo Park
Symington
& De Kok Bloemfontein
For
Respondent: M C Erasmus SC
G
Jacobs
Instructed
by
Joubert
& Scholtz Pretoria
Andries
Spangenberg Inc Bloemfontein
1
[1992] ZASCA 42
;
1992 (2) SA 786
(A) at 792.
2
[2008] ZASCA 38.
3
[2003] 2 All SA 642, 2003 (6) SA 313 (SCA).
4
1961 (2) SA 211
(A) at 230G-H.
5
1978 (1) SA 841
(A) at 856H-857C.
6
Van Heerden v Pienaar
1987 (1) SA 96
(A) at 107D-E;
Cussons
v Kroon
2001 (4) SA 833
(SCA) at 838E-I.
7
1948 (3) SA 1219
(T).