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[2007] ZASCA 124
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Van Niekerk and Another v Favel and Another (627/06) [2007] ZASCA 124; [2007] SCA 124 (RSA); 2008 (3) SA 175 (SCA); (27 September 2007)
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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
Case
number:
627/06
In the
matter between:
ADRIAAN
ADAM VAN NIEKERK
.......................
First Appellant
ALETTA
MAGDALENA VAN NIEKERK
.......................
Second Appellant
and
MAX
EDWARD FAVEL
.......................
First Respondent
CATHARINA
PETRONELLA FAVEL
.......................
Second
Respondent
CORAM
:
SCOTT, NAVSA, CLOETE JJA, HURT et KGOMO
AJJA
HEARD
:
17 SEPTEMBER 2007
DELIVERED
:
27 SEPTEMBER 2007
Summary:
Alienation of Land Act 68 of 1981
–
Notice in terms of
s 19(2)
to purchaser to remedy breach –
Interpretation of
s 19(1)(c)
– Seller required, under
s
19(2)(c)
, to refer in the notice to the remedies in
s 19(1)
he
intends to invoke if breach not remedied – Such reference may
be in the alternative – Mere reference to clause in
contract
not adequate.
Neutral
citation:
This
judgment may be referred to as
Van
Niekerk v Favel
[2007]
SCA 124 (RSA)
____________________________________________________________________
JUDGMENT
_____________________________________________________________________
HURT
AJA:
[1] During November 2000
the parties entered into a written contract in terms of which the
respondents sold immovable property to
the appellants. The appellants
agreed to pay the purchase price in instalments and, since the
property was a residential one, the
contract fell within the purview
of the Alienation of Land Act, 68 of 1981 ('the Act'). On 18 January
2005, four years after the
appellants had taken occupation of the
property, the respondents' attorney addressed a letter to them by
registered post, alleging
that the appellants were in breach of
various obligations under the contract and demanding that the
breaches be remedied within 30
days. On 22 February 2005 the
respondents' attorney addressed a second letter to the appellants
declaring the contract cancelled
and claiming forfeiture of the
payments thus far made by the appellants in terms of the contract.
There followed (in June 2005) an
application in the Magistrates'
Court, Vereeniging, for the eviction of the appellants from the
property. This the appellants opposed,
but without success. The
magistrate granted an order for their eviction. An appeal was lodged
to the Johannesburg High Court but
this, too, failed. While an appeal
was pending from that court, this court heard, and delivered judgment
in,
Merry Hill v Engelbrecht
[2007] SCA 60 (RSA), which
involved the interpretation of s 19 of the Act. The judgment in
Merry
Hill
(per Brand JA) dealt particularly with the meaning and
effect of s 19(2)(c) of the Act. Counsel in the course of arguing the
present
appeal before us were agreed that, if the letter of 18
January failed to meet with the requirements of s 19(2)(c), that
would dispose
of the appeal, and argument was effectively limited to
that issue.
[2] Subsecs 19(1) and (2)
of the Act read as follows:
'
19. Limitation of right of
seller to take action
(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,
subject to the provisions of subsection
(3),
1
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.'
[3] It will be
convenient, before discussing the judgment in the court
a quo,
2
to deal with the decision in
Merry Hill.
The seller in that
case had sent a letter to the purchaser in terms of s 19(2), the
relevant portion of which read 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 R 22 534, 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.'
[4] The contention on
behalf of the purchaser was that this letter failed to pass muster
insofar as compliance with s 19 was concerned
for two reasons. First,
s 19(2)(c) peremptorily required the seller to state the precise
contractual remedy which he intended to
invoke in the event of the
purchaser failing to comply with the notice. Secondly, the use of the
word 'entitled' was inappropriate
for the purpose of 'indicating' to
the purchaser what 'steps' would be taken in response to any
non-compliance by him with the notice.
Brand JA, after referring to
various earlier decisions
3
concerning s 19, came to the following conclusions:
(a) Subsec (2)(c) should
not be construed as affecting the seller's contractual right to make
his election whether to enforce the
contract or terminate it only
after the purchaser has failed to respond adequately to the notice;
(b) Accordingly it is
open to the seller, in the notice contemplated in s 19, to list, in
the alternative, those of the steps referred
to in s 19(1) he intends
to take if the breach is not remedied
4
;
(c) The provisions of
subsec 19(2)(c) are peremptory in the sense that a notice complying
with them is an essential prerequisite to
a valid exercise of any of
the remedies referred to in subsec 19(1). However, insofar as the
question of what constitutes such compliance
is concerned, the court
is required to decide, in each case, whether the notice complies
'substantially' with the requirements of
the statute.
5
[5] Applying these
considerations to the facts before him, the learned Judge concluded
that listing of the alternative contractual
options in clause 9 of
the relevant contract of sale (payment of the full balance of the
purchase price or cancellation of the contract)
was sufficient
compliance with s 19(2)(c). Insofar as the use of the words 'shall be
entitled' instead of 'intends' was concerned,
Brand JA held that, on
a sensible interpretation of the letter, it clearly conveyed the
message that, if the purchaser failed to
comply with the demand, he
would be in jeopardy of one of the remedies, set out in the letter,
which were both remedies listed in
s 19(1), being exercised by the
seller. He therefore held that the letter as drafted constituted
substantial compliance with the
statute.
[6] In certain passages
in his judgment, Brand JA expressed agreement with some of the views
expressed by Claassen J in the court
a quo
. However, in para
23, Brand JA expressly disagreed with the suggestion by Claassen J
6
that the provisions of s 19(2)(c) should be treated as merely
directory. Furthermore, in coming to the conclusion that a seller is
entitled to list his possible remedies in the alternative, Brand JA
indicated that he should not be understood to be endorsing everything
said by Claassen J. It is appropriate to consider two significant
aspects of the reasoning of the learned judge in the court
a quo
.
[7] The first relates to
the general approach to the interpretation of the statute. Claassen J
purported to apply what has generally
been described as a 'purposive
construction' in interpreting s 19 (2). Accepting that 'the overall
intention of the Legislature was
to afford the purchaser reasonable
protection', he took the view
7
that a comparison between s 19 and its precursor, s 13(1) of the Sale
of Land in Instalments Act, 72 of 1971, demonstrated that the
Legislature intended to afford the seller 'a measure of leniency'.
Elaborating on this, he said
8
:
'The Legislature must have recognized
that commerce and the flow of business could be hampered if sellers
found the statutory provisions
regarding the enforcement of
contractual rights too onerous. Experience showed that obstructive
purchasers were able to abuse the
onerous communicative duties
imposed upon the sellers in the previous section 13(1) to the
detriment of honest sellers seeking their
contractual dues. The
overall intention to afford protection to purchasers is now balanced
by an intention not to overburden sellers.
Hence the relaxation of
the seller's communication duties as set out in subsection 19 (2)(b)
as referred to earlier. An interpretation
of subsection 19(2)(c)
which amounts to an over-protectiveness in favour of the purchaser
would, therefore, fall foul of this changed
attitude evinced by the
Legislature. In line with this manifest intent, it would be wrong to
interpret subsection 19 (2)(c) as reintroducing
onerous duties on the
seller, only in a different guise.'
[8] This led him to apply
a wide interpretation to s 19. Thus, he interpreted the word
'indication' in subsec (2)(c) as being 'in
line with the meaning of
"hint" or "suggestion"'
9
,
and concluded that
'. . . the Legislature
intended to oblige the seller merely to inform the purchaser that he
has
elected to act
10
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!" In my view the Legislature
requires a seller to warn the purchaser, not only that he is in
default, but that his continued default could lead to the seller
taking certain steps. In order to protect the purchaser against such
consequences, the Legislature obliges the seller to indicate
that he
is serious about acting upon the default. Such serious intent will be
demonstrated by setting out some indication of what
his intentions
are without specifying details.'
[9] The second aspect of
the judgment in the court
a quo
concerns the type of purchaser
whom the Legislature intended to protect by the statute and, more
particularly, the capabilities of
such purchaser to deal with the
exigencies which might arise in the event of alleged breaches by him
of his contractual obligations.
In this regard, Claassen J said
11
:
'It must have been within the
contemplation of the Legislature that purchasers of immovable
property in residential areas are sufficiently
commercially
sophisticated to read and understand written contracts of sale. This
intention of the Legislature is manifest from the
provisions of
section 5 of the Act which allow a purchaser to choose the official
language in which the contract is to be drawn up.
It must have been
contemplated by the Legislature that a defaulting purchaser will
understand the clauses dealing with the consequences
of any breach as
he could read (them) in the language of his choice! A similar
supposition underpins the legislative requirement
for letters of
demand to be sent to defaulting purchasers. In order for the
protection to purchasers contemplated in section 19 to
become
effective, the Legislature assumed that a purchaser is able to and
will read and understand letters of demand.'
And later, in para 32,
'It is not for the seller to
make it easy for the purchaser to decide whether the latter could get
away with his breach or not. If
the purchaser is in breach, he should
remedy it!
Pacta servanda sunt -- c
ontracts
are to be observed. A purchaser is presumed to know the law. This
doctrine still holds good of a person who, in a modern
state, wherein
many facets of the acts and omissions of legal subjects are
controlled by legal provisions, involves himself in a
particular
sphere, that he should keep himself informed of the legal provisions
which are applicable to that particular sphere.'
[10] I do not think that
the reasoning in these passages is correct. As to the view that the
Act evinces an intention to ameliorate
the burdens which it places on
the seller compared with those imposed by Act 72 of 1971, it is not
without relevance to note that,
of the twenty-two sections in Chapter
2 of the Act, no less than eleven
12
either impose burdens on the seller or restrict the seller's ordinary
contractual rights. So, in Chapter 3, do ss 27, 28, 29 and
29A. On
that basis alone, there seems to be little justification to
attribute, to the Legislature, the type of seller-oriented intention
postulated by Claassen J. But, of substantially more importance, is
the fact that Claassen J's approach to the contextual setting
and
interpretation of the Act is diametrically opposed to that of this
court in
Merry Hill.
In para 13 of the judgment in that case,
Brand JA said:
'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 . . .. 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 . . . .'
[11] Moreover, it was not
on the basis of any perception that the Act reflected a more lenient
attitude toward the seller than did
Act 72 of 1971, that Brand JA
concluded that s 19 did not impose upon the seller a duty to make an
election at the time of sending
the s 19(2) notice. On the contrary,
he arrived at that interpretation by applying the well-established
presumption that legislation
intends to alter the existing law only
so far as is necessary to achieve the objects of the Legislature
.
In para [14], following immediately upon the passage quoted above
from para [13], he said:
' 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 .
. . .'
These
dicta
are
inconsistent with the approach outlined by Claassen J and the latter
must be taken to be incorrect.
[12] As indicated
earlier, the resolution of the issue in this appeal depends upon the
meaning of s 19(2)(c) and, in particular, of
the words 'an indication
of the steps the seller intends to take'. Before turning to that
issue, it will be convenient to make a
further comment about the
hypothetical 'average purchaser' to whom the Legislature may be taken
to have intended to afford protection
by its enactment. Apart from
being 'vulnerable' and possibly 'uninformed', I think that he should
be considered unlikely to be acquainted
with the law, or to have an
attorney at his beck and call. He would presumably also be reluctant
to incur the expense of retaining
an attorney for the purpose of
obtaining advice concerning the contract, except perhaps at a later
stage. On this basis, there is
plainly no room, in interpreting the
subsection, for the application of the general presumption that 'the
purchaser must know the
law' when it comes to deciding precisely what
the Legislature intended in the Act. What is of paramount importance
here is that the
remedies mentioned in s 19(1), which the seller will
become entitled to exercise (always assuming that they are reserved
to the seller
in the contract) if he complies with s 19, are all
drastic remedies which will no doubt have serious repercussions as
far as the
purchaser is concerned. Considering the attributes of the
'average purchaser', it becomes clear that what is intended is that
the
purchaser must be put in a position where the extent of his
jeopardy becomes clear to him by a reading of the letter alone and
without
recourse either to the Act or the contract itself or to legal
advice. Thus the requirement that a purchaser be informed of the
'steps'
open to the seller if he fails to purge his default.
Furthermore, the 'steps' to which s 19(2)(c) refers are plainly one
or more
of the drastic steps listed in s 19(1) and not the remedies
reserved to the seller in the contract. Having said that I can now
turn
to the issue in this appeal.
[13] The remedies
reserved to the respondents in the event of default by the appellants
were set out in clause 26 of the contract
of sale, which was to the
following effect:
'26.1 As die koper versuim om enige
verpligting kragtens hierdie kontrak na te kom mag die verkoper:-
26.1.1 van die koper eis dat
hy die saldo van die koopprys vroeër betaal (of) enige ander
verpligting vroeër nakom as wat
die kontrak bepaal; of
26.1.2 die kontrak beëindig
en eis dat die koper enige verpligting wat op datum van beëindiging
agterstallig was nakom,
en dat die koper enige reg op herstel van wat
hy reeds presteer het, verbeur; of
26.1.3 die kontrak beëindig
en skadevergoeding eis, en die verkoper mag enige bedrag wat deur die
koper betaal is behou tot die
bedrag skadevergoeding vasgestel is
sodat die bedrae teen mekaar verreken kan word; of
21.1.4 enige ander stappe neem wat hy
regtens mag neem."
It will be noted that
only the remedies in sub-clauses 1, 2 and 3 fall within the ambit of
s 19(1).
[14] The relevant
paragraph of the letter of 18 January 2005, read as follows:
'U word ingevolge paragraaf
26 van die ooreenkoms dertig (30) dae geleentheid gegee vanaf
ontvangs van hierdie kennisgewing om die
versuime soos hierbo te
herstel by gebreke waarvan kliënt sy keuse sal uitoefen wat hy
regtens mag hê. Die nodige bewyse
van herstel kan direk aan
kliënt of aan ons kantore gelewer word binne die gemelde dertig
(30) dae.'
The court
a quo
held
that, since the letter made explicit reference to clause 26 of the
contract, the appellants could have been under no misconception
as to
its import.
13
But that is not the point. The notice required in terms of s 19(1) is
necessary only when the seller intends to enforce one or more
of the
remedies referred to in that section, ie acceleration of the payment
of any instalment, the enforcement of any penalty stipulation,
termination of the contract or payment of damages. If some other
relief is sought, eg payment of the outstanding arrears or
performance
of what otherwise might be due under the contract, no
notice in terms of s 19(1) is required. Section 19(2)(c) must be
construed
in this light. The 'steps' referred to must accordingly be
understood as referring to one or more of the four remedies referred
to
in s 19(1). The respondents' letter in this case is to be
contrasted with the express reference, in the letter in
Merry
Hill
, to the contractual options (which were equivalent to two of
the drastic remedies referred to in s 19(1)) available to the seller
in the event of the purchaser's default not being purged. Here,
14
the mere reference to a clause of the contract and the warning that
'kliënt sy keuse sal uitoefen wat hy regtens mag hê'
is
quite consistent with an intention on the part of the seller to do no
more than sue for the outstanding instalments or rates.
It fails to
achieve the very purpose of s 19(2)(c) which is to warn the purchaser
– not simply that the continuing breach will
not be tolerated –
but that the seller proposes taking one or more of the drastic steps
enumerated in s 19(1).
[16] It is no doubt true
that an astute purchaser armed with a copy of the Act may reason that
the seller proposes taking one or other
of the steps referred to in s
19(1) because otherwise the notice would be unnecessary. But the
whole purpose of s 19(2)(c) is specifically
to alert the purchaser to
the serious of the consequences of his or her breach and that must be
made clear in the notice itself.
If this were not the case s 19(2)(c)
would serve no purpose.
[17] It follows that the
letter of 18 January 2005 does not comply with the requirements of s
19 and the appeal must succeed.
[16] The appeal is
accordingly upheld with costs. The order of the court
a quo
is
set aside and the following order is substituted in its place:
'(1) The appeal is upheld
with costs.
(2) The order of the
magistrate is set aside and the following order is substituted
therefor:
"The application is
dismissed with costs".'
N V HURT
ACTING JUDGE OF APPEAL
Concur:
SCOTT JA
NAVSA JA
CLOETE JA
KGOMO AJA
1
Which
are not relevant to the issues in this matter.
2
Now
reported as
Van Niekerk v Favel
2006 (4) SA 548 (W).
3
Including
the judgment of Claassen J in the court
a quo
.
4
Para
21.
5
Para
23.
6
In
para 26 of the judgment of the court
a quo.
7
Para
29 of the judgment of the court
a quo.
8
Loc.cit.
9
Para
30.
10
Emphasis
in the original.
11
Para
31.
12
Sections
2,5,6,7,9,10,12,13,16,19 and 24.
13
Para
35. The learned judge said: 'In the present instance the letter of
18 January 2005 expressly indicated the step which the respondents
intended taking: they elected to invoke clause 26 of the contract
should the appellants fail to remedy their breach. In my view
that
was sufficient compliance with the provisions of section 19(2)(c)
within the parameters of the facts in this case.'
14
Indeed,
it may be not without significance that clause 26.1.4 reserved the
right to take 'any other(unspecified) steps which may
be available
to the seller', presumably of a less drastic nature than those in
sub-clauses 1, 2 and 3. However, in view of the
conclusion to which
I have come, it is not necessary to consider this aspect.