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[2007] ZASCA 60
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Merry Hill (Pty) Ltd v Engelbrecht (323/06) [2007] ZASCA 60; [2007] SCA 60 (RSA); 2008 (2) SA 544 (SCA) (24 May 2007)
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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
Case number : 323/06
In the
matter between :
MERRY
HILL (PTY) LTD
...............................
APPELLANT
and
HENDRIK JOHANNES ENGELBRECHT
...............................
RESPONDENT
CORAM : CAMERON, BRAND, LEWIS, MAYA JJA
et
THERON
AJA
HEARD : 3 MAY 2007
DELIVERED : 24 MAY 2007
Summary
:
Section 19(2)(c)
of
the
Alienation of Land Act 68 of 1981
– though peremptory in
its terms substantial compliance sufficient – requirements of
section satisfied by notice indicating
alternative steps intended by
seller upon purchaser's failure to rectify breach.
Neutral citation: This judgment may be referred to as
Merry Hill v Engelbrecht
[2007]
SCA 60 (RSA)
JUDGMENT
_____________________________________________________
BRAND JA
/
BRAND JA
:
[1] This appeal turns on the interpretation of
s
19(2)(c)
of the
Alienation of Land Act 68 of 1981
. The appellant
('Merry Hill') sold two residential erven in Cintsa near East London
to the respondent ('Engelbrecht') in terms of
an agreement of sale by
instalments. When Engelbrecht failed to pay some of these
instalments, Merry Hill purported to cancel the
sale and then resold
the erven to two others. Engelbrecht refused to accept the validity
of the cancellation on the narrow basis
that Merry Hill's preceding
notice of demand did not comply with
s 19(2)(c)
of the Act. As a
result, he approached the Eastern Cape High Court for an order
interdicting Merry Hill from transferring the erven
to the subsequent
purchasers. In a judgment which has since been reported as
Engelbrecht v Merry Hill (Pty) Ltd
2006
(3) SA 238
(E), the court
a quo
(Plasket
J) upheld Engelbrecht's contentions regarding the invalidity of Merry
Hill's purported cancellation. Accordingly, the interdict
sought was
granted with costs. The appeal against that order is with the leave
of the court
a quo.
[2] In this court Engelbrecht appeared in person, not
represented by counsel or an attorney. In consequence, Mr P J J
Zietsman of
the Free State Society of Advocates was requested by the
court to assist, as
amicus curiae,
in
establishing the meaning of the statutory provisions concerned. At
the outset I wish to convey the court's appreciation to Mr Zietsman
for his able performance of this task in the best traditions of the
advocates' profession.
[3] The background facts, which were essentially common
cause, are set out in the reported judgment of the court
a
quo
(paras 5-10). For present purposes the
bare essentials will therefore suffice. They are as follows.
Engelbrecht did not deny that
he fell into arrears with the
instalments stipulated in the agreement of sale. Though he blamed his
default on his erstwhile bookkeeper,
he accepted that this did not
absolve him from his contractual obligations and that he was
therefore in breach of the agreement.
In the result, clause 9 of the
agreement came into operation. In terms of this clause, failure by
Engelbrecht to comply with the
contract entitled Merry Hill to insist
that he rectify his breach within 30 days 'by way of written demand
as set out in
s 19
of the Act'. Broadly stated, clause 9 further
provided that, upon Engelbrecht's failure to rectify the breach Merry
Hill became entitled
either to claim immediate payment of the full
balance of the purchase price or, alternatively, to cancel the
contract and retain
all payments already made.
[4] The provisions of
s 19
of the Act here relevant
appear from subsections (1) and (2). They read as follows:
'(1) No seller is, by reason of any
breach of contract on the part of the purchaser, entitled –
(a) to enforce any provision of the
contract for the acceleration of the payment of any instalment of the
purchase price or any other
penalty stipulation in the contract;
(b) to terminate the contract; or
(c) to institute an action for damages,
unless he has by letter notified the
purchaser of the breach of contract concerned and made demand to the
purchaser to rectify the
breach of contract in question, and the
purchaser has failed to comply with such demand.
(2) A notice referred to in subsection
(1) shall be handed to the purchaser or shall be sent to him by
registered post to his address
referred to in
section 23
and shall
contain -
(a) a description of the purchaser's
alleged breach of contract;
(b) a demand that the purchaser rectify
the alleged breach within a stated period which . . . shall not be
less than 30 days calculated
from the date on which the notice was
handed to the purchaser or sent to him by registered post, as the
case may be; and
(c) an indication of the steps the seller
intends to take if the alleged breach of contract is not rectified.'
[5] After Engelbrecht had fallen into arrears on a
number of occasions, Merry Hill decided to invoke the provisions of
clause 9 of
the contract. It therefore instructed its attorney, Mr J
E Bax, to demand rectification of the breach in accordance with
s 19
of the Act. In an attempt to comply with the provisions of
s 19
, Bax
sent a letter to Engelbrecht by registered post to his address
referred to in
s 23
of the Act. Since the contents of the letter
patently complied with subsecs 19(2)(a) and (b) of the Act, I focus
on that part which
sought to observe the requirements of
s 19(2)(c).
It reads as follows:
'In accordance with clause 9.1 of the
Deed of Sale we have been instructed by the Seller to demand from
you, as we hereby do, payment
of the [arrear instalments in the] sum
of R22 534,00 at our offices . . . within 32
days of the date of this
letter.
Should payment not be made
as aforesaid then and in that event, the Seller shall be entitled to
claim immediate payment of the full
balance of the purchase price and
interest as due by you, as well as all costs and collection
commission;
or alternatively
shall
be entitled to cancel this contract.'
[6] After the 32 days' grace had lapsed, Bax sent
another letter, again by registered post, informing Engelbrecht that,
as no payment
had been made in terms of the letter of demand, he had
been instructed by Merry Hill to cancel the agreement of sale.
According to
Engelbrecht, he became aware of the letter of demand
only after Merry Hill had already purported to cancel the agreement.
It happened,
he explained, when he discovered the letter amongst a
pile of documents which had been left by his erstwhile bookkeeper
when she
was dismissed on account of theft and fraud. Again he
accepted, however, that both the letter of demand and the letter of
cancellation
had reached his chosen
domicilium
citandi
and that the omissions of his
deceitful bookkeeper could not be laid at the door of Merry Hill.
[7] Engelbrecht's attack on the validity of the
cancellation was therefore confined, as I have said earlier, to the
contention that
the letter of demand preceding the cancellation did
not comply with the requirements of
s 19(2)(c)
of the Act. His
argument in support of this contention, which eventually found favour
with the court
a quo,
was
that the purported notice contained in the letter was defective in
two respects, First, because, on a proper interpretation,
s 19(2)(c)
does not allow the seller to indicate the steps he or she intends to
take by way of alternatives, as Merry Hill professed to do.
Secondly,
and in any event, because the notice did not indicate what Merry Hill
intended
to do, but
only recorded what it was
entitled
to do, upon his failure to purge his default.
[8] As appears from the judgment of the court
a
quo
(paras 15-21) its endorsement of
Engelbrecht's first argument, that
s 19(2)(c)
does not allow the
seller a reservation of choice between alternative remedies, was for
the most part influenced by two earlier judicial
pronouncements on
the interpretation of the provision, to wit in
Oakley
v Bestconstructo (Pty) Ltd
1983 (4) SA 312
(T) and in
Miller v Hall
1984
(1) SA 355
(D).
[9] The
s 19
notice relied upon in
Oakley
(as it appears at 315B-D) tersely informed
the purchaser '
that unless we receive your
payment of the balance of the purchase price still due to our client
within 30 days from date hereof,
our client will in its sole and
absolute discretion act against you in terms of para 9 of the deed of
sale . .
.'. Grosskopf J's finding (at
319A-G) that this notice fell short of what is required by
s 19(2)
seems to be largely based on subsec 2(a) in that, in his view, the
notice did not contain a proper description of the purchaser's
alleged breach. The learned judge then added, almost as an aside (at
319G-320D) – and with the express reservation that he
did not
profess to give an exact interpretation of
s 19(2)(c)
–
that the notice also failed to comply with the last-mentioned
subsection, in that it reserved the right to the seller to
chose
between the alternative remedies available to it under the contract
until after the 30-day notice period had lapsed.
[10] More pertinent in the present context was the
decision by Page J in
Miller
(at
361F-362D) that
s 19(2)(c)
requires the purchaser to be apprised
of precisely what step, of those enumerated in
s 19(1)
, the seller
intends to take in the event of the purchaser's failure to remedy the
breach. What the legislature intended, Page J held,
is that
defaulting purchasers should know exactly what consequences were to
ensue if they persist in their default, so as to enable
them to
arrange their future conduct accordingly. Consequently, the learned
judge concluded, a mere recital of the alternative steps
which the
seller might elect to take after the 30-day notice period, was not
enough.
[11] Rather surprisingly, the interpretation of
s
19(2)(c)
was not revisited, at least not in any reported decision,
for over twenty years. When the revisitation eventually took place,
it
happened twice in quick succession, first by the court
a
quo
in this matter and then by a full court
of the Witwatersrand Local Division (CJ Claassen J, with Jajbhay J
concurring) in
Van Niekerk v Favel
[2006] ZAGPHC 24
;
2006 (4) SA 548
(W). While the court
a
quo,
as we know, followed the two earlier
decisions in
Oakley
and
Miller
, the full court
in
Van Niekerk
came to
the diametrically opposite conclusion with regard to what
s 19(2)(c)
requires.
[12] Accordingly the full court held the letter of
demand in
Van Niekerk
(as
set out in para 8) to constitute proper notice in terms of
s 19(2)(c)
, despite the fact that it pertinently reserved the
seller's option to choose between the alternative remedies of
claiming cancellation
or acceleration of the payment of instalments,
until after the 30-day notice period had lapsed. Central to the
court's answer to
the reasoning in
Miller
is the following statement by Claassen J (para 30):
'In my view, if the
Legislature intended to restrict the contents of the letter of demand
to specifics, it could easily have done
so by using stronger
language, alternatively, demanded an express election of the remedies
mentioned in
s 19(1)
to be stated categorically in the letter. This
it did not do. In my view, the statutory requirement to give an
"indication"
of the seller's future conduct, must be given
a broad interpretation, more in line with the meaning of a "hint"
or "suggestion".
. . . In my view, the Legislature intended
to oblige the seller merely to inform the purchaser that he has
elected to act
upon
any failure by the purchaser to rectify the breach. He is in effect
saying to the purchaser: "I have elected not to abide
your
breach any longer. Should you fail to remedy it, I will take steps
against you. So beware!".'
[13] In considering the meaning of
s 19(2)(c)
, this
court therefore has the benefit of well reasoned judgments supporting
both points of view, as well as the contributions by
academic authors
referred to in those cases. Let me start with a proposition which
appears to be beyond contention, namely, that
the purpose of Chapter
2 of the Act, which includes
s 19
, is to afford protection, in
addition to what the contract may provide, to a particular type of
purchaser – a purchaser who
pays by instalments – of a
particular type of land – land used or intended to be used
mainly for residential purposes.
In this sense,
chapter 2, like its predecessor, the Sale of Land on Instalments
Act 72 of 1971, can be described as a typical
piece of consumer
protection legislation (see eg
Gowar
Investments v Section 3 Dolphin Coast and Cameron
[2006]
SCA 162 (SCA) para 9). The reason why the legislature thought this
additional statutory protection necessary is not difficult
to
perceive. It is because experience has shown this type of purchaser,
generally, to be the vulnerable, uninformed small buyer of
residential property who is no match for the large developer in a
bargaining situation (cf
Glen Anil Finance
(Pty) Ltd v Joint Liquidators, Glen Anil Development Corporation Ltd
(in liquidation)
1981 (1) SA 171
(A) at
183F-H).
[14] In this light, the purpose of s 19 was clearly to
afford additional protection to purchasers in this category who, by
reason
of their default, are exposed to a claim by the seller of the
kind contemplated in s 19(1). By its very nature, the corollary of
this additional protection must, however, involve the imposition of
limitations on the contractual rights of the seller. And, in
accordance with the general approach to statutory interpretation,
legislative limitations on common law contractual rights will be
confined to those that appear from the express wording or by
necessary implication from the statutory provision concerned (see eg
Wellworths Bazaars Ltd v Chandler's Ltd
1947
(2) SA 37
(A) at 43).
[15] Another consideration of relevance, in my view, is
that the stricter interpretation of s 19(2)(c), subscribed to in
Miller
and in the
judgment of the court
a quo,
imposes an obligation on the seller that is
substantially more onerous than merely requiring the seller to impart
more comprehensive
information to the purchaser. What the stricter
interpretation calls for is that the seller makes an election between
alternative
remedies and informs the purchaser of that election prior
to extending the 30-day notice. Even where the seller has
contractually
reserved the right to postpone that election until it
finally becomes available, ie until after the notice period had
lapsed, he
or she will be deprived of that right of reservation.
Moreover, according to the doctrine of election, the seller would be
bound
by that choice; he or she will not be able to have a change of
mind if the purchaser should fail to purge the default during the
30-day notice period. This appears, in my view, from the following
succinct statement of the principles involved by Friedman JP in
Bekazaku Properties (Pty) Ltd v Pam Golding
Properties (Pty) Ltd
1996 (2) SA 537
(C) at
542E-F:
'When one party to a
contract commits a breach of a material term, the other party is
faced with an election. He may cancel the contract
or he may insist
upon due performance by the party in breach. The remedies available
to the innocent party are inconsistent. The
choice of one necessarily
excludes the other, or, as it is said, he cannot both approbate and
reprobate
. Once he has elected to pursue one
remedy, he is bound by his election and cannot resile from it without
the consent of the other
party.
'
(My
emphasis.)
(See also
Segal v Mazzur
1920 CPD 634
at 644-5.)
[16] An illustration of the finality of an election in
the present context is to be found in
Walker v
Minier et Cie (Pty) Ltd
1979 (2) SA 474
(W)
at 479A-G (to which reference is made by Page J in
Miller
at 362H-363E). What the seller in
Walker
announced in its letter of demand was that it
intended to claim the outstanding balance of the purchase price if
the purchaser should
fail to remedy the default within 30 days. When
that happened, the seller tried to change his mind by cancelling the
contract. In
applying the doctrine of election, the court held,
however, that the seller was precluded from doing so. It is true that
it was also
held in
Walker
(at
480D-H),
obiter
, as it
were, that a seller who has indicated an intention to claim
performance of the contract can still claim cancellation at a
later
stage, if the purchaser persists in his or her default during the
30-days notice period, provided that another 30-day notice
is given
in which cancellation is signified. Whether this is so, is, in my
view, not necessary to decide. I say this for two reasons.
First, as
I understand the position regarding election, the suggested solution
will operate one way only, ie where the seller threatens
to demand
specific performance. If, by contrast, the seller threatens to claim
cancellation he will be finally bound by that choice.
He will not be
able to change his mind if the purchaser persists in default,
whatever the position may be where he threatened to
claim specific
performance instead (see eg
Consol Ltd t/a
Consol Glass v Twee Jongen Gezellen
(Pty)
Ltd
(2)
2005 (6) SA 23
(C) paras 35-36;
Christie,
The Law of Contract in South Africa
5 ed at 541). Secondly, the suggested solution will in
any event require a further 30-day notice period while the financial
position
of the purchaser or the condition of the property, or both,
may be deteriorating.
[17] The court
a quo
appears
to have been of the view (para 20) that the strict interpretation of
s 19(2)(c) it subscribed to would not really impose an
additional
burden on the seller, because, so the court reasoned, a party to a
contract who gives notice of his or her intention to
cancel is in any
event required to give that notice in clear and unequivocal terms
(see para 20 of the judgment). I am unable to
agree with this line of
reasoning. The notice in terms of s 19(2)(c) is not yet a notice of
cancellation. If the purchaser should
fail to purge his or her
default during the 30-day notice period, the seller will clearly be
required to make an election between
the available remedies and to
convey that election to the purchaser in clear and unequivocal terms.
The point is, however, that on
a strict interpretation of s 19(2)(c)
these obligations are imposed on the seller
prior
to the 30-day notice period which, in my view, is indeed
a substantial additional burden.
[18] Can this additional burden – and the
concomitant inroad into the seller's contractual rights at common law
– be said
to be imposed by the express wording or to appear by
necessary implication from the provisions of s 19(2)(c)? The express
wording
of s 19(2)(c) clearly does not require an early election
by the seller. It may, however, be understood to be required by
necessary
implication if the notice allowed by the broad
interpretation of the section, ie a notice reserving the seller's
right to elect at
a later stage, would be of no noteworthy benefit to
the purchaser. This seems to be the argument adopted by Page J in
Miller
(at 361G-362A).
According to this argument mere recital of the steps that the seller
may possibly take after the 30-day notice period,
would serve no
protective purpose. Since the remedies available to the seller
already appear
ex facie
the
contract, so the argument goes, the purchaser would derive no real
assistance from being informed that the seller intends to invoke
one
of these remedies if the breach of contract is not rectified.
[19] I do not agree with this argument. Though it can be
said that an early election by the seller will be more advantageous
to the
purchaser, that is not the question. The true question is
whether a notice that informs a purchaser that persistence in his or
her
breach will result in either cancellation or a claim for payment
of the full balance of the purchase price, can be said to serve
no
real purpose at all. In
Van Niekerk,
Claassen J concluded (at 368C-E) that such notice would
serve the purpose of warning the purchaser that the seller was not
prepared
to abide his breach any longer and that failure to remedy
the breach will lead to one of the drastic steps contemplated in s
19(1).
I agree with this view.
[20] I also agree with Claassen J that the broader
interpretation of s 19(2)(c) is supported by the wording of the
section. What
the section requires is '
an
indication
' of '
the
steps
' (plural) that the seller intends to
take. Apart from the fact that the dictionary meaning of 'indicate'
tends to suggest a notification
of lesser exactitude, the plural
'steps' in my view supports the perception that the seller need not
elect a single step. He is allowed
to indicate an intention to take
more than one step in the alternative. In
Miller
Page J gave the following answer to this
argument (at 364H-365A):
'Some significance was sought to be
attached to the use of the plural "steps" and not "step".
It was contended
that this showed that it was permissible to indicate
an intention to take all the steps enumerated in ss (1), albeit in
the alternative.
In my view the use of the plural does not justify
this conclusion, since each of the courses enumerated in ss (1) could
comprise
more than one step'
[21] I do not find this answer convincing. If the plural
'steps' must be understood to refer to the various actions included
in each
of the remedies enumerated in subsec (1), a strict
interpretation of s 19(2)(c) would in fact require each of those
actions –
'steps' – to be mentioned in the notice, which
would clearly be absurd. In short, if the legislature intended that
the seller
should indicate which of the three options enumerated in
subsec (1)(a), (b) or (c) he intends to take, it could simply have
said
so. Though it is not necessary to express a view on everything
said in
Van Niekerk
, I
agree with the conclusion arrived at, namely that s 19(2)(c) allows a
seller to indicate the steps he intends to take in the alternative
and that it does not require an election between those alternative
steps in the notice of demand.
[22] This brings me to the second objection against the
notice contained in the Bax letter, which was also upheld by the
court
a quo
(paras 22
and 23). What it amounted to, in essence, was that the letter
referred only to the alternative steps the seller would be
entitled
to take (in terms of the contract) and not to any steps
that the seller in fact
intended
to
take as required by s 19(2)(c). On a literal interpretation of
the letter that, of course, is what it says. If the notice
is
therefore required to follow the exact wording of s 19(2)(c),
the Bax letter would probably not make the grade.
[23] Does the answer to this difficulty lie in the
notion endorsed in
Van Niekerk
(para 26), that s 19(2)(c) is merely directory and that
its non-compliance can therefore be condoned? I do not believe so. In
my view,
the provisions of the section are peremptory in the sense
that a notice which complies with the section is an essential
prerequisite
for the exercise of any one of the remedies contemplated
in s 19(1). But it has been accepted by this court that, even
where
the formalities required by a statute are peremptory, it is not
every deviation from literal compliance that is fatal. Even in that
event, the question remains whether, in spite of the defects, there
was substantial compliance with the requirements of the statute.
(See
eg
Unlawful Occupier, School Site v City of
Johannesburg
2005 (4) SA 199
(SCA) para 22;
Moela v Shoniwe
2005
(4) SA 357
(SCA) paras 8-12. See also, eg
Maharaj
v Rampersad
1964 (4) SA 638
(A) 646C-E.)
[24] On a sensible interpretation of the Bax letter, the
message it conveyed is clear: if Engelbrecht should fail to purge his
breach,
Merry Hill would exercise one of the alternative remedies set
out in the letter, which would then become available to it. Thus
understood,
the letter, in my view, complied in substance - if not in
exact form - with the requirements of s 19(2)(c). It follows that the
appeal
must, in my view, succeed and I can see no reason – and
none was suggested by either party – why costs should not
follow
the event – both in this court and in the court
a
quo.
[25] For these reasons:
(a) The appeal is upheld with costs.
(b) The order by the court
a quo
is set aside and replaced with the following:
'The application is dismissed with costs.'
.......................
F D J BRAND
JUDGE OF APPEAL
Concur
:
CAMERON JA
LEWIS JA
MAYA JA
THERON AJA