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[2016] ZALMPPHC 8
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Damons NO and Others v Euphoria Home Owners Association NPC and Others (3972/2016) [2016] ZALMPPHC 8 (22 September 2016)
SAFLII
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Certain
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IN
THE HIGH COURT OF SOUTH AFRICA
(LIMPOPO
DIVISION, POLOKWANE)
Reportable:
No
Of
interest to other judges: No
Revised.
CASE NO: 3972/2016
In
the matter between:
JUANITO
MARTIN DAMONS
N.O
FIRST
APPLICANT
KGASHANE
CHRISTOPHER MONEYLA N.O
SECOND
APPLICANT
JOHANNES
ZACHARIAS HUMAN MULLER N.O
THIRD
APPLICANT
SOPHIE
THABANG KEKANA
N.O FOURTH
APPLICANT
(In
their capacities as liquidators for and on behalf of
EUPHORIA
GOLF ESTATE (PTY) LTD
[in liquidation],
Registration
Number: 2004/023480/08
JUANITO
MARTIN DAMONS
N.O.
FIFTH
APPLICANT
KGASHANE
CHRISTOPHER MONEYLA N.O. SIXTH
APPLICANT
LIZETTE
OPPERMAN
N.O. SEVENTH
APPLICANT
(In
their capacities as liquidators for and on behalf of
EUPHORIA
LODGES (PTY) LTD
[in liquidation],
Registration
Number: 2007/015246/07
and
EUPHORIA
HOME OWNERS ASSOCIATION NPC FIRST
RESPONDENT
(Registration
Number: 2005/031867/08)
THE
MASTER OF THE HIGH
COURT, SECOND
RESPONDENT
PRETORIA
RAND
MERCHANT BANK
LIMITED
THIRD
RESPONDENT
ABSA
BANK
LIMITED
FOURTH
RESPONDENT
SAMPADA
LODGES (PTY)
LTD
FIFTH
RESPONDENT
JUDGMENT
MAKGOBA
JP
[1]
On the 22 September 2016 and after hearing argument in this matter, I
granted the following order and indicated that my reasons
for the
order would follow in due course:
1.1.
The First Respondent is ordered to issue clearance certificates in
respect of the properties situated at EUPHORIA GOLF ESTATE
and
described in Annexure “A” to the Notice of motion of
EUPHORIA GOLF ESTATE (Pty) Ltd ( in Liquidation) within 2
days from
date hereof for the transfer of such properties to SAMPADA LODGES
(Pty) Ltd.
1.2.
The First Respondent is ordered to issue a clearance certificate in
respect of Erf […] EUPHORIA TOWNSHIP within 2 days
from date
hereof in order for the transfer thereof to EUPHORIA LODGES (Pty) Ltd
(in Liquidation) to be effected.
1.3.
The First Respondent is ordered to pay the costs of this application
such costs to include the costs of Senior Counsel.
1.4. The
Counter-application is dismissed with costs.
[2]
My reasons for the order follow hereunder.
[3]
The Applicants, as liquidators of the developer, Euphoria Golf
Estate(Pty) Ltd (in Liquidation) brought an urgent application
for an
order to compel the First Respondent, Euphoria Homeowners Association
NPC, (“HOA”) to issue clearance certificates
in respect
of properties they had sold to the Fifth Respondent, Sampada
Lodges(Pty) Ltd ( “SAMPADA”).
[4]
The HOA (First Respondent) opposed the application. HOA also
counter-applied for an order that the relief sought by the Applicants
be postponed for a period of 60 days during which the parties, by
order of Court, be compelled, to negotiate in good faith in order
to
reach agreement on the outstanding issues of a restructuring
agreement. HOA contends that the Constitution and the principle
of
Ubuntu direct that the parties must be given a further opportunity to
negotiate in good faith with a view to reach agreement
on the minor
outstanding issues of the restructuring agreement.
Factual Matrix against
which the Development of Euphoria Golf Estate took place
[5]
The development at the centre of the dispute comprises of 745 erven.
The majority of the erven comprise of residential erven.
The
remainder of the erven comprise of roads, a golf course, erven for
the provision of municipal services (such as water treatment
plants,
sewer treatment plants, water reservoirs) a golf clubhouse, a hotel,
a restaurant and even a cableway.
[6]
The development was established as a leapfrog development. This
necessitated a costly investment into municipal services by
the
developer. That huge investment was totally dependent upon rapid
sales of erven. That would have guaranteed a sufficient levy
income
in order to maintain all municipal services infrastructure, security
and other operational expenses necessary to keep the
development
afloat.
[7]
Unfortunately, the 2008 economic downturn affected sales so
negatively that only approximately 50% of all residential erven
were
sold. This in turn resulted in the liquidation of the developer and
the appointment of the liquidators ( Applicants) on behalf
of the two
secured creditors, the Third and Fourth Respondents respectively.
[8]
The Third and Fourth Respondents are the secured creditors of the
liquidated companies Euphoria Golf Estate(Pty) Ltd and Euphoria
Lodges (Pty) Ltd, the erstwhile developers of this massive
development. The Fifth Respondent, SAMPADA is the purchaser of the
properties for which the clearance certificates are sought in order
to effect transfer of the properties to the purchaser.
[9]
The HOA wants the following issues to be discussed between the
parties with a view to reaching a consensus and thus enter into
a
restructuring agreement:
9.1.
Preparedness of the HOA to accept certain levy payments in full and
final settlement of levies due;
9.2.
The leasing of Stand 529 to the HOA;
9.3. The development of
Stand 718 (Chapel) and 719
(Community hall) by the
Fifth Respondent and transfer thereof to the HOA after a period of
time;
9.4.
The joint development of Stand 720(airstrip);
9.5.
Access arrangement to stands necessary for services;
9.6.
Reduced levies on commercial stands;
9.7.
Amendment of the Memorandum of Incorporation to make the above
possible.
[10]
The Fifth Respondent’s stance is that it negotiated with the
HOA in good faith, but that the HOA is exploiting such negotiations
in order to obtain ownership of properties to which it is not
entitled. That further negotiations with the HOA would frustrate
its
contractual rights.
The
Fifth Respondent contends that the HOA is not in law entitled to the
order sought in the Counter-application and that the Fifth
Respondent
should not be compelled to negotiate with the HOA.
Issues
[11]
The following issues arise from this case:
11.1.
Whether the Court has the power to order parties to negotiate in the
circumstances where one of the parties is unwilling to
enter into
such negotiations.
11.2.
Does the present case demonstrate the need for the development of the
common law to infuse it with the principle of Ubuntu
and other
constitutional values as per the instruction of Section 39(2) of the
Constitution?
11.3. Has the First
Respondent (HOA)
in casu
made out a case for an order
compelling the parties to negotiate a restructuring agreement?
The
Legal Position
[12]
Our Courts, including the Constitutional Court have always been very
careful not to interfere with the right of parties to
contract
freely. The well-known principle repeatedly applied in the context of
interpretation is that a Court should not make a
contract for parties
even if it would have been very reasonable to do so.
See
Natal Joint Municipal Pension Fund v. Emdumeni Municipality
2012(4) SA 593 (SCA) at 604 par 18.
[13] The Constitutional
Court had the opportunity to confirm the legal position in regard to
agreements to negotiate in good faith
(
pactum de contrahendo
)
in the recent case of
Makate v. Vodacom Limited 2016(4) SA 121
(CC).
At par 97, pages 152 to 153 the Court confirmed the legal
position in terms of the common law that an agreement to negotiate in
good faith is enforceable if it provides for a deadlock-breaking
mechanism in the event of the negotiating parties not reaching
consensus.
In
Everfresh Market Virginia (Pty) Ltd v.
Shoprite Checkers (Pty) Ltd 2012(1) SA 256 (CC)
it was stated that agreements seriously entered into should be
enforced and that the value of Ubuntu which inspires much of the
Constitutional compact may tilt the argument in its favour. Moseneke
DCJ at par 72 states:
“
Where
there is a contractual obligation to negotiate, it would be hardly
imaginable that our constitutional values would not require
that the
negotiation must be done reasonably, with a view to reaching an
agreement and in good faith”.
[14] It should be noted
that in the two decisions, the
Makate
case and
Everfresh
case, there was a “Contractual obligation” as referred to
by Moseneke DCJ.
In casu
there is no agreement to negotiate a
specific term of agreement. There is thus no “contractual
obligation” no
pactum de contrahendo
. Negotiations for a
restructuring agreement between HOA and the Fifth Respondent had been
going on but there was never a stage
of consensus or an agreement to
negotiate further. The situation has been reached where HOA is
withholding the clearance certificates
to force its views on the
other parties and drag them to a negotiating table.
Whether
HOA has made out a Case
[15].
The HOA alleges that by refusing to negotiate in a bona fide manner,
the Applicants and Fifth Respondent have caused the situation
whereby
they need to approach the Court for relief. In my view the HOA has no
right to withhold the clearance certificates pending
an agreement
being entered into.
[16].
The attitude of HOA is bizzare and difficult to understand. While
they repeatedly state that the holding back of the clearance
certificates required for transfer to take place is not in order to
hold a lever to seek to obtain rights and properties to which
they
are not entitled, no basis in law or otherwise is submitted as to why
the alleged obligation to negotiate a restructuring
agreement should
stand in the way of the transfer of the properties or, at the very
least, the provision of the clearance certificates.
In my view there
is nothing to prevent the negotiations of such agreement after
transfer of the properties to the Fifth Respondent
has taken place.
This shows lack of
bona fides
on the part of the HOA.
[17].
A party who wishes to negotiate and who requires the Court to compel
another party to negotiate with it in good faith must
surely
demonstrate to the Court that it is, from its side, prepared to
negotiate in good faith. On this point the HOA fails completely.
Most
blatant is the fact that they wish to withhold what is immediately
due to the Fifth Respondent pending the outcome of a protracted
negotiating period. This is blackmailing. Thus in order for the Fifth
Respondent to minimise its losses, it will be in the position
where
it would make sense to make otherwise unwarranted concessions in
order to finalise the negotiations to the satisfaction of
the HOA.
Surely such negotiations can never be said to be
bona fide.
[18]. It is
unconscionable that the HOA will be entitled to abuse the negotiation
process in order to force a party into such a
negotiation and to make
concession to which the HOA is not entitled. Needless to say that the
HOA wants to obtain ownership of
some of the Fifth Respondent’s
properties for free.
All
of this is done where no basis in law is alleged for the implied
submission that in law the entitlement to clearance certificates
is
reciprocal upon the Fifth Respondent entering into an agreement with
the HOA.
[19]. Under the
circumstances the Applicants are granted the relief as set out in the
notice of motion and the Counter – application
is dismissed.
_________________________
E
M MAKGOBA JP
JUDGE OF THE HIGH
COURT OF SOUTH AFRICA, LIMPOPO DIVISION, POLOKWANE
APPEARANCES
Heard
on
: 22
September 2016
Order
pronounced on :
22 September 2016
For
the Applicants
:
D M
Leathern SC
Instructed
by
: Rorich
Wolmarans & Luderitz Inc.
c/o
Pratt Luyt & De Lange
For
First Respondent :
A Liversage
Instructed
by
: Krȕgel
Heinsen Inc.
c/o
Kampherbeek Twine & Pogrund
For
Third Respondent :
I.A Van den Ende
Instructed
by
: Cox
Yeats
c/o
Pratt Luyt & De Lange
For
Fifth Respondent :
J.L Van der
Merwe SC
Instructed
by
: E.Y
Stuart Inc.
c/o
Corrie nel & Co.