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[2007] ZASCA 133
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Stalwo (Pty) Ltd v Wary Holdings (Pty) Ltd and Another (377/2006) [2007] ZASCA 133; [2007] SCA 133 (RSA); 2008 (1) SA 654 (SCA) (28 September 2007)
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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
Case number: 377/2006
In the matter between:
STALWO (PTY) LTD
........................... APPELLANT
and
WARY HOLDINGS (PTY) LTD
........................... FIRST RESPONDENT
REGISTRAR OF DEEDS
........................... SECOND RESPONDENT
CORAM: FARLAM, LEWIS, JAFTA,
PONNAN
et
MAYA JJA
HEARD: 19 SEPTEMBER 2007
DELIVERED: 28 SEPTEMBER 2007
Summary
:
Contract of sale of land – whether suspensive condition a tacit
term – whether tacit term offends against
sec 2(1)
of the
Alienation of Land Act 68 of 1981
– meaning of ‘agricultural
land’ as defined in section 1 of the Subdivision of
Agricultural Land Act 70 of 1970.
Neutral citation
:
This judgment may be referred to as
Stalwo
v Wary Holdings
[2007]
SCA 133 (RSA)
JUDGMENT
MAYA JA/
MAYA JA
[1] This appeal concerns the
validity of an agreement of sale of land concluded by the parties.
The Port Elizabeth High Court (Liebenberg
J) dismissed the
appellant’s application to have the agreement declared binding
on the parties, unconditional and of full force
and effect and
declined to order the respondent to pass transfer of the land to it.
The appeal is with the leave of the court below.
[2] On 6 December 2004,
consequent on an advertisement placed by the respondent in the East
Cape Property Guide for the sale of ‘PLOTS
FOR LIGHT
INDUSTRIAL’, the parties concluded an agreement worded as
follows:
‘
SALE
FROM WARY HOLDINGS (PTY) LTD TO STALWO (PTY) LTD OF PLOTS 5, 6, 7, &
8 OF PROPOSED SUBDIVISION PORTION 54 OF THE FARM NO
8 PORT ELIZABETH
FOR THE SUM OF R550 000 (five hundred and fifty thousand rand)
excluding agent’s commission.
Payment: Cash against transfer
Occupation: 10 January 2005
Possession: On transfer
Occupational rental: R2500 per month in
advance
Agreed
this 6
th
day of December,
2004
…’
[3] The land, which the appellant
intended to use for industrial purposes, was at this stage zoned as
‘agricultural land’.
However, the respondent had lodged
an application for its rezoning and subdivision with the relevant
local authority. The appellant,
aware of these facts and the
possibility that the application could be rejected and the sale
unravelled, duly took occupation of
the land on lease and took
various steps to prepare it for use. On 26 August 2005 the local
authority finally granted its approval
subject, however, to various
conditions which included a requirement that the respondent effect
certain substantial improvements
relating to an access way, storm
water drainage system and other essential services on the land.
Consequently, the respondent sought
to increase the purchase price of
the property on the basis that the financial costs involved in
complying with these conditions
significantly exceeded its
expectations when the agreement was concluded. As was to be expected,
the appellant was not amenable to
the increase in price. This is what
sparked the present dispute.
[4] In the court below, the
respondent
1
opposed the application on the
basis that the agreement was invalid for two reasons. First, it did
not comply with the provisions
of s 2(1) of the Alienation of Land
Act 68 of 1981 (the Alienation Act) as it did not contain a material
term, expressly agreed upon
by the parties that it was subject to a
suspensive condition that the land was to be subdivided; that it did
not describe the land
sufficiently and that it omitted another
material term relating to payment of the agent’s commission.
Secondly, it was in contravention
of s 3(a) and s 3(e)(i) of the
Subdivision of Agricultural Land Act 70 of 1970 (the Agricultural
Land Act),
2
which prohibit the subdivision of
agricultural land and the sale of a portion of agricultural land,
without the written permission
of the Minister of Agriculture, as the
land in issue is ‘agricultural land’ within the meaning
of section 1(i)(a) of
the Agricultural Land Act, such permission not
having been obtained in this matter.
[5] The court below found that
the agreement did not fall foul of the provisions of the Alienation
Act. However, it concluded that
the disputed land constituted
‘agricultural land’ and that the lack of ministerial
consent rendered the agreement invalid.
Leave to appeal was granted
only against this finding. In this court, the respondent did not
concede the correctness of the other
finding of the court below
relating to the Alienation Act. As it was entitled to do, in view of
the fact that it did not seek a variation
of the substantive order
appealed against,
3
its counsel persisted with the
argument advanced in the court below in this regard. The issues to be
determined in this appeal therefore
remain those that were before the
court below, save that only the issue relating to the suspensive
condition, as regards the point
arising from the Alienation Act,
remains in contention. I deal with them in turn.
The
Alienation of Land Act
[6
] Counsel for the respondent
submitted that while the agreement contained the
essentialia
of a valid sale, it
nevertheless failed to record a material term, expressly agreed upon
by the parties prior to the conclusion of
the agreement, that the
sale was conditional upon the subdivision of the land. The omission
conflicted with the requirements set
out in
s 2(1)
and rendered the
agreement invalid, so the argument went.
[7]
Section 2(1)
,
4
whose objective is to achieve
certainty in transactions involving the sale of fixed property
regarding the terms agreed upon and limit
disputes,
5
requires an agreement for the
sale of land to be in writing and signed by the parties. That means
that the essential terms of the
agreement namely, the parties, the
price and the subject-matter, must be in writing and defined with
sufficient precision to enable
them to be identified. And so must the
other material terms of the agreement.
[8] What precisely is meant in
this context by the expression ‘material term’ need not
be decided. I say this because
it was not in dispute between the
parties that their agreement was subject to a suspensive condition
that the land was to be subdivided
in order to create the
contemplated plots and that such condition constituted a material
term of the contract.
6
It was merely argued on the
appellant’s behalf that the suspensive condition was implicit
in the description ‘…plots
5, 6, 7 and 8 of the
proposed
subdivision
’
embodied
in the agreement which both parties knew, in any event, could not be
fulfilled without the approval of the subdivision, and
that it should
be ‘read in’ as a tacit term. In response, the
respondent’s counsel contended that having expressly
agreed on
the suspensive condition, the parties’ failure to reduce it to
writing precluded the appellant from importing it
into the agreement
as a tacit term as it now sought to do.
[9] Before a court can imply a
tacit term or term implied from the facts, which it may infer from
the express terms of the contract
and the surrounding circumstances,
7
it must be satisfied upon a
consideration, in a reasonable and businesslike manner, of the terms
of the contract and the admissible
evidence of surrounding
circumstances, that an implication necessarily arises that the
parties intended to contract on the basis
of the suggested term.
8
[10] Regard being had to all the
relevant facts, there is no dispute as to what was in both parties’
minds in this matter: namely
that the existence of the agreement
depended wholly on the success of the subdivision application, which
would create the plots of
land being sold, and that even though they
did not expressly say so in the agreement, they intended to contract
on that basis.
[11] To find that the tacit term
contended for by the appellant exists, it seems to me that once such
intention is established, it
matters not whether it was expressly
agreed or necessarily imported that the agreement would be suspended
pending approval of the
subdivision application. This view finds
support in
Wilkins v
Voges
,
9
where Nienaber JA said:
‘
A
tacit term in a written contract, be it actual or imputed, can be the
corollary of the express terms – reading, as it were,
between
the lines – or it can be the product of the express terms read
in conjunction with evidence of admissible surrounding
circumstances.
Either
way, a tacit term, once found to exist, is simply read or blended
into the contract: as such it is “contained”
in the
written deed. Not being an adjunct to but an integrated part of the
contract, a tacit term does not in my opinion fall foul
of either the
clause in question or the [Alienation of Land ] Act.
’
(‘Emphasis
added’.)
[12] I am satisfied in the
circumstances, as was the court below, that it was a tacit term of
the agreement that it would remain suspended
until the subdivision
application lodged by the respondent was finally determined. The
agreement therefore complies with the provisions
of s 2(1) of the
Alienation Act.
The Subdivision of
Agricultural Land Act
[13] I turn to consider whether
or not the agreement falls foul of the provisions of the Agricultural
Land Act. The only question
to be decided in this regard is the
nature of the land when the agreement was concluded as only a finding
that it was ‘agricultural
land’ within the meaning of the
Agricultural Land Act will bring it within its purview.
[14] The definition of
agricultural land is contained in section 1 of the Agricultural Land
Act which reads:
‘“
(i)
agricultural land” means any land, except-
land situated in the area of
jurisdiction of a municipal council, city council, town council,
village council, village management
board, village management
council, local board, health board or health committee …, but
excluding any such land declared
by the Minister after consultation
with the executive committee concerned and by notice in the Gazette
to be agricultural land
for the purposes of this Act;
. . .
Provided
that land situated in the area of jurisdiction of a transitional
council as defined in section 1 of the Local Government
Transition
Act, 1993 (Act No 209 of 1993), which immediately prior to the first
election of the members of such transitional council
was classified
as agricultural land, shall remain classified as such.’
10
[15] The following facts were
common cause. At the time of the conclusion of the agreement, the
land fell under the jurisdiction of
the Nelson Mandela Metropolitan
Municipality (the NMMM), a category A municipality in terms of s 2 of
the Local Government: Municipal
Structures Act 117 of 1998 (the
Municipal Structures Act).
11
Prior to the establishment of the
NMMM,
12
the land fell under the
jurisdiction of the Port Elizabeth Transitional Rural Council (the
PETRC), a transitional council as contemplated
in s 1 of the Local
Government Transition Act 209 of 1993 (the Transition Act).
13
[16] The first the question that
arises is whether the NMMM is a ‘municipal council, city
council or town council’ within
the meaning of the definition
of ‘agricultural land’ in the Agricultural Land Act. The
latter Act does not define these
terms. However, s 93(8) of the
Municipal Structures Act provides that ‘[w]ith effect from 5
December 2000 … any reference
in a law referred to in item 2
of Schedule 6 to the Constitution of the Republic of South Africa,
1996…, to a municipal council,
municipality, local authority
or another applicable designation of a local government structure,
must be construed as a reference
to a municipal council or a
municipality established in terms of this Act, as the case may be.’
In terms of item 2 of Schedule
6 of the Constitution ‘all law
that was in force when the new Constitution took effect, continues in
force, subject to any
amendment or repeal and consistency with the
new Constitution’ and ‘old order legislation …does
not have a wider
application; territorially or otherwise, than it had
before the [interim] Constitution took effect unless subsequently
amended to
have a wider application and continues to be administered
by the authorities that administered it when the new Constitution
took
effect, subject to the new Constitution.’
[17] To my mind, there is no
question that the Agricultural Land Act is a piece of the ‘old
order legislation’ envisaged
by the Constitution and s 93(8) of
the Municipal Structures Act. That being so, the words ‘municipal
council, city council,
town council’ in the definition of
‘agricultural land’ in the Agricultural Land Act must be
construed to include
a category A municipality such as the NMMM.
[18] This finding elicits
another question: Did the land retain its original status as
‘agricultural land’ by virtue of
the proviso in the
definition of ‘agricultural land’ (as it was classified
as such prior to the election of the first
members of the PETRC)
notwithstanding that it now falls within the area of jurisdiction of
a municipal council?
[19] In this regard, the court
below held:
‘
The
proviso, in my view, provides a point in time with reference to which
it must be established if land qualifies as agricultural
land. If at
that point in time, it is to be regarded as agricultural land it
remains so notwithstanding any changes to local government
structures
and their boundaries. This point in time is the first election of the
members of the transitional council. As stated above,
it is common
cause that at this point in time Portion 54 qualified as agricultural
land. It follows that it remained so and still
was agricultural land
at the time the agreement was entered into.’
[20]
This conclusion was based on the judgment in
Kotze
v Minister van Landbou
.
14
In this case, Van der Westhuizen
J considered whether ‘agricultural land’ as defined in s
1 of the Agricultural Land Act
still exists in view of the
constitutional changes to the system of local government in the
context of category B and C municipalities.
The learned judge found
that the effect of s 151 of the Constitution, which provides that
‘the local sphere of government consists
of municipalities
which must be established for the whole of the territory of the
Republic’, and the Municipal Structures Act,
which established
new, different categories of municipalities with extended boundaries,
was to create ‘wall to wall municipalities’
such that all
land now falls within municipal jurisdictions, thereby rendering the
Agricultural Land Act ineffective. He held that
as this could not
have been the intended result, the local government structures
referred to in s 1 had to be interpreted to mean
what they meant when
the Act was promulgated
15
(which required a narrow
interpretation of ‘municipal council’ to exclude
latter-day municipalities such as the NMMM):
in the event, the
proviso meant that since all land within the Republic fell within
areas of jurisdiction of transitional councils
when these entities
were established by the Transition Act, any land which was classified
as ‘agricultural land’ immediately
prior to the election
of the first members of the transitional councils retains that
classification, for as long as the proviso remains
in force.
[21] Counsel for the appellant
challenged the correctness of this interpretation of the proviso
arguing,
inter alia
,
that, if accepted, its effect would be that the status of
agricultural land would remain perpetually frozen from the time when
transitional
councils were established and would not be determined by
whether or not land is situated within the area of jurisdiction of
the local
government structures listed in the definition of
‘agricultural land’. Developing this argument, he
contended for a narrow
interpretation of the proviso which, he
submitted, simply served to preserve the status quo pending the
demarcation and establishment
of the final new order local government
structures at which time the land fell within the jurisdiction of the
NMMM and lost its historical
character. I agree.
[22] The proposition that the
intention of the framers of the Agricultural Land Act contemplated
the concept of ‘agricultural
land’ as fluid rather than
static, changing with the expansion of local authorities and the
creation of new ones, seems to
me to be eminently sound. This
intention can be gleaned from the wording of s 3(f) of the Act in
terms of which ‘no area of
jurisdiction, local area,
development area, peri-urban area referred to in paragraph (a) or (b)
of the definition of ‘agricultural
land’ in section 1,
shall be
established
on, or enlarged so as to include,
any
land which is agricultural land…unless the Minister has
consented in writing.’
16
In cases where the Minister
granted such permission the land obviously ceased to be agricultural
land. Followed to its logical conclusion,
this reasoning does not
permit the narrow approach adopted by the court below. Thus, any
exercise in the interpretation of the proviso
cannot ignore the
present day municipal structures created by the Municipal Structures
Act. The court in
Kotze
in my view misapplied the
principle set out in
Finbro.
17
[23] It further seems to me that
the purpose of the proviso must be determined in the light of the
legislative scheme which guided
the restructuring process of local
government; from the promulgation of the first statute in the
exercise, the Transition Act of
1993, through to the final
demarcation brought about by the Local Government: Municipal
Demarcation Act 27 of 1998 and the Municipal
Structures Act which
established new categories of municipalities – to use existing
statutory provisions until new ones could
be enacted. A similar view
was expressed by Conradie JA in an analogous situation in
CDA
Boerdery Edms Bpk v Nelson Mandela Metropolitan Municipality
,
18
where he said:
‘
[I]n
the process of constructing the new edifice and before it could stand
on its own, some of the essential transition measures …
were
legislatively imperfect. They were makeshifts, intended to remain in
force, messy as they were, until they were repealed by
the Act that
completed the design of the new structure…. But before the
structure was finished, all the provinces in the new
South Africa
were, temporarily, intended to make do with what they had inherited
from the provinces in the old South Africa.’
[24] It is well to consider that
the proviso was enacted within the context of the Transition Act
which, as indicated, was itself
meant to provide interim measures
such as the establishment of interim municipal structures to promote
the contemplated constitutional
restructuring of local government,
pending the final demarcation of municipal boundaries. The proviso
makes specific reference to
‘land situated in the area of
jurisdiction of a transitional council’ which it states ‘shall
remain classified
as such’. From the ordinary grammatical
meaning of the words, I am unable to read any meaning other than that
the proviso was
meant to operate only for as long as the land
envisaged therein remained situated in the jurisdiction of a
transitional council.
It was a simple matter for the Legislature to
say so expressly if it intended such land to retain the
classification after transitional
councils ceased to exist.
[25] Bearing in mind the trite
principle that exceptions to general rules (such as the proviso) are
to be read restrictively,
19
I am persuaded that the
Legislature enacted the proviso as a stopgap measure, based on the
realisation that the effect of the Transition
Act, which would
establish municipalities for rural areas for the very first time,
would be to include transitional councils within
the meaning of
‘municipal council’ envisaged in the definition of
‘agricultural land’, thus excluding certain
agricultural
land from the definition – clearly an untenable situation.
Therefore, once the PETRC was disestablished and the
land fell within
the jurisdiction of the NMMM, it ceased to be agricultural land
within the meaning of the Agricultural Land Act
and the agreement is
not affected by the proviso. In my view, the fact that the proviso
remains in the statute book takes the matter
no further. Accordingly,
the interpretation afforded to it by the court below and the
Kotze
judgment cannot be sustained.
[26] I am fortified in this view
by the following. First, the approach adopted by the court below is
incompatible with and does not
give credence to the radically
enhanced status and power the new constitutional order accorded to
local government.
20
Municipalities are no longer the
pre-constitutional creatures of statute confined to delegated or
subordinate legislative powers,
which could be summarily terminated
and their functions entrusted to administrators appointed by the
central or provincial governments.
They have mutated to
interdependent and, subject to permissible constitutional
constraints, inviolable entities with latitude to
define and express
their unique character and derive power direct from the Constitution
or from legislation of a competent authority
or from their own laws.
21
To my mind, this status
necessarily includes the competence and capacity on the part of
municipalities to administer land falling
within their areas of
jurisdiction without executive oversight.
[27] In any event, the Minister,
in terms of the very definition of agricultural land, retains the
power to exclude any land from
the exceptions imposed by it, and
declare it ‘agricultural land’ for purposes of the
Agricultural Land Act, a fact which,
with respect, the learned judges
in
Kotze
and
the court below seem to have overlooked, their reasoning being
premised on the basis that any other interpretation of the proviso
would lead to the emasculation of the Agricultural Land Act. The
object of the Agricultural Land Act, as expressed in its preamble,
is
‘to control the subdivision of agricultural land’ so as
to prevent the fragmentation of farming land into small, uneconomic
units.
22
Section 3 of the Act still
prohibits subdivision of agricultural land without the Minister’s
permission. Having regard to these
provisions there clearly is no
possibility that this objective may be thwarted.
[28] In conclusion, I am
satisfied that the disputed land, which is in fact no longer used as
agricultural land, is not agricultural
land. The provisions of s 3 of
the Agricultural Land Act have no application to the parties’
agreement and the Minister’s
consent is not required as a
prerequisite for its validity.
[29] For these reasons the appeal
is allowed with costs, such costs to include the costs occasioned by
the employment of two counsel.
The order made by the court below is
set aside and the following order is substituted:
‘
1.
The agreement of sale entered into between the first respondent and
the applicant on 6 December 2004 in respect of Plots 5, 6,
7 and 8 of
the proposed subdivision of Portion 54 of the Farm Kuyga No 8,
Western District Council, Port Elizabeth (the property),
is declared
binding on the parties and unconditional and of full force and
effect.
2.
The first respondent is ordered to take all steps and to sign all
documents as may be necessary to effect transfer of the property
to
the applicant against compliance by the applicant of its own
obligations in terms of the agreement of sale.
3.
The first respondent is ordered to pay the costs of this
application.’
……………………
MML MAYA
JUDGE OF APPEAL
CONCUR:
FARLAM )
LEWIS )
JAFTA )
PONNAN )
1
The
other respondent, the Registrar of Deeds, Cape Town, abided the
decision of the court below and is not involved in these
proceedings.
2
The
Agricultural Land Act was repealed by the Subdivision of
Agricultural Land Act Repeal Act of 1998, but this statute has not
yet come into operation.
3
See,
for example,
Municipal
Council of Bulawayo v Bulawayo Waterworks Co Ltd
1915
AD 611
at 624, 631 and 632;
Western
Johannesburg Rent Board v Ursula Mansions (Pty) Ltd
1948
(3) SA 353
(A) where it was held at 355: ‘[I]t is open to a
respondent on appeal to contend that the order appealed against
should be
supported on grounds which were rejected by the trial
judge: he cannot note a cross-appeal …unless he desires a
variation
of the order’;
Holland
v Deysel
1970
(1) SA 90
(A) at 93D-E.
4
According
to this subs
ection
‘[n]o alienation of land … shall be of any force or
effect unless it is contained in a deed of alienation signed
by the
parties thereto or by their agents acting on their written
authority.’
5
Wilken
v Kohler
1913 AD 135
at 142;
Clements v
Simpson
1971 (3) SA 1
(A) at 7A-B.
6
See
in this regard
Johnstone
v Leal
1980
(3) SA 927
(A) at 937G – 938A;
Van
Leeuwen Pipe and Tube (Pty) Ltd v Murray
1985
(3) SA 396
(D);
Jones
v Wykland v Properties
1998
(2) SA 355
(C).
7
Alfred
McAlpine & Son (Pty) v Transvaal Provincial Administration
1974
(3) 506 at 531E-532A;
Delfs
v Kuehne & Nagel (Pty) Ltd
1990
(1) SA 822
(A) at 827B-G;
Wilkins
v Voges
[1994] ZASCA 53
;
1994
(3) SA 130
(A).
8
Alfred
McAlpine & Son (Pty) Ltd v Transvaal Provincial Administration
supra
at
5312H – 533A.
9
Supra
at
144C-D.
10
The
proviso was inserted by Proclamation R100 of 1995 published on 31
October 1995.
11
Section
2 of the Municipal Structures Act provides:
‘
An
area must have a single category A municipality if that area can
reasonably be regarded as –
(a) a conurbation featuring –
(i) areas of high population
density;
(ii) an intense movement of
people, goods, and services;
extensive development; and
(a) multiple business districts
and industrial areas;
(b) a centre of economic
activity with a complex and diverse economy;
(c) a single area for which
integrated development planning is desirable; and
(d) having strong interdependent
social and economic linkages between its constituent units.’
12
In
terms of the Municipal Structures Act and Provincial Notice 85 of
2000 published on 27 September 2000.
13
In
terms of section 1 ‘“transitional council”
includes a local government co-ordinating committee, a transitional
local council and a transitional metropolitan council for the
pre-interim phase, and a transitional local council and a
transitional
metropolitan council for the interim phase’;
‘“interim phase” means the period commencing on
the day after
elections are held for transitional councils …
and ending with the implementation of final arrangements to be
enacted by
a competent legislative authority’; and
‘pre-interim phase’ means ‘the period commencing
on the date of
commencement of this Act and ending with the
commencement of the interim phase’.
14
2003
(1) SA 445
(T).
15
In
this regard, the learned judge relied on
Finbro
Furnishers (Pty) Ltd v
Registrar
of Deeds, Bloemfontein
1985
(4) SA (A) at 804D-E, where this court held that ‘the words of
a statute must be construed (unless subsequent legislation
declares
otherwise) as they would have been interpreted on the day when the
statute was passed.’
16
See
also
Geue v Van der
Lith
[2003] ZASCA 118
;
2004 (3) SA 333
(SCA) para 8.
17
In
Finbro
the
court took the lack of any definition of the word ‘mineral’
as an indication that the Legislature intended it to
have a wide
meaning to enable the inclusion in its meaning of substances which
were not yet discovered when the relevant act, the
Deeds Registry
Act was enacted in 1937.
18
[2007] ZASCA 1
;
2007
(4) SA 276
(SCA) para 30. His was a dissenting judgment but not in
relation to this dictum.
19
Norwich
Union Life Insurance Society v Dobbs
1912
AD 395
at 399;
South
African Broadcasting Corporation v Pollecutt
[1995] ZASCA 112
;
1996
(1) SA 546
(SCA) at 556D.
20
CDA
Boerdery v Nelson Mandela Metropolitan Municipality
[2007] ZASCA 1
;
2007
(4) SA 276
(SCA) paras 33-40.
21
Fedsure
Life Assurance v Greater Johannesburg TMC
[1998] ZACC 17
;
1999
(1) SA 374
(CC) paras 31 and 38;
City
of Cape Town v Robertson
[2004] ZACC 21
;
2005
(2) SA 323
(CC) para 60.
22
Geue
v Van der Lith
[2003] ZASCA 118
;
2004
(3) SA 333
(SCA) para 5.