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[2014] ZAFSHC 122
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Louw N.O. and Others v Van Der Merwe N.O. and Others (4793/2012) [2014] ZAFSHC 122 (21 July 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
FREE
STATE DIVISION, BLOEMFONTEIN
Case
No.: 4793/2012
In
the appeal between:-
ANDRIES
NICOLAAS EVERHARDUS
…...................................................................
First
Applicant
LOUW
N.O.
RUSTU
GUVEN ATALA N.O.
…................................................................................
Second
Applicant
CARL
BOTHMA N.O.
…................................................................................................
Third
Applicant
LEON
WESSELS N.O.
…..............................................................................................
Fourth
Applicant
and
DAWID
RYK VAN DER MERWE N.O.
…..................................................................
First
Respondent
GAVIN
CECIL GAINSFORD N.O.
….....................................................................
Second
Respondent
BAREND
PETERSEN N.O.
…....................................................................................
Third
Respondent
SIVALUTCHMEE
MOODLIAR N.O.
….................................................................
Fourth
Respondent
INVESTEC
BANK LIMITED
….................................................................................
Fifth
Respondent
THE
MASTER OF THE WESTERN CAPE
….........................................................
Sixth
Respondent
HIGH
COURT, CAPE TOWN
THE
MASTER OF THE FREE STATE
…............................................................
Seventh
Respondent
HIGH
COURT, BLOEMFONTEIN
THE
REGISTRAR OF DEEDS,
…...........................................................................
Eighth
Respondent
BLOEMFONTEIN
PIETER
ADRIAAN GOOSEN
…...............................................................................
Ninth
Respondent
AUBREY
PHAGO LEDWABA
…..............................................................................
Tenth
Respondent
ROUTLEDGE
MODISE INC.
…...........................................................................
Eleventh
Respondent
HEARD
ON:
22 MAY 2014
JUDGMENT
BY:
VAN DER MERWE, J
DELIVERED
ON:
21 JULY 2014
[1]
This application concerns the validity and preference of a mortgage
bond.
BACKGROUND
[2]
Eagle Creek Investments 74 (Pty) Ltd (the company) was the owner of
18 portions of the farm Vaaldam Settlement No 177, district
Heilbron,
Free State Province, in total measuring approximately 625 hectares
(the properties). The company was finally liquidated
on 4
November 2011, whereafter the first to fourth respondents were
appointed as the joint liquidators thereof. The joint
liquidators sold the properties for the amount of approximately R5,5
million, which is held in trust pending this litigation.
The
essential purpose of the papers before me is to determine which party
would be entitled to the proceeds of the sale of the
properties.
[3]
The company intended to consolidate the properties and to develop
them by establishing a residential golf estate named the Lizard
Point
Golf Residential Leisure Estate (the project). The intended
development included the establishment of a township and
subdivision
of erven. For purposes of raising portion of the purchase price
of the properties and the capital required to
establish the project,
the company offered 100 investment opportunities to the general
public.
[4]
In order to receive and administer these investments and to protect
the interests of the investors, the Eagle Creek Investments
74 (Pty)
Ltd Debenture Trust (the trust) was created in terms of section 117
of the Companies Act 61 of 1973 (the Act). The
trust was formed
by trust deed entered into on 2 November 2004 by the company as
founder and by the ninth respondent and the tenth
respondent as joint
trustees. In terms of the trust deed the beneficiaries thereof are
the holders of the debentures issued to
the investors who subscribed
to the investment offer by the company. The trustees accepted
the fiduciary duties bestowed
on them in terms of the trust deed to
administer the debentures on behalf of the beneficiaries. The
trustees were authorised
to act as such in terms of section 6 of the
Trust Property Control Act 57 of 1998 (the TPC Act) and the trust
deed was lodged with
the Master in terms of section 4 thereof.
[5]
The relevant provisions of the trust deed are the following:
·
Each subscriber shall make payment of the
amount of R330 000,00 to the trustees.
·
Upon such payment a non-interest bearing
debenture in that amount shall be issued by the company and handed to
the trustees to be
held by them on behalf of the debenture holder.
·
The trustee shall then pay over the
subscription monies to the company, subject to the registration of a
mortgage bond over the
properties.
·
As security for the repayment of the
debentures, the company shall pass a first mortgage bond over the
properties in favour of the
trustees.
·
The provisions of the trust deed shall be
incorporated by reference in the mortgage bond.
·
The company is obliged, after payment of
certain specified costs, to utilise the subscription monies paid to
it by the trustees
for finalisation of the purchase and transfer to
it of the properties and the development of the project.
·
Each debenture shall be converted into an
agreement of sale in respect of a specified proposed erf in the
project linked to the
debenture, in terms of clause 5 of the trust
deed.
[6]
In due course approximately 100 investors each paid the amount of
R330 000,00 to the trustees. A debenture in that
amount
was issued to each in terms of the trust deed. The debentures
are described as “Secured Non-interest Bearing
Convertible
Linked Debentures”.
[7]
On 2 June 2005 the Registrar of Deeds, Bloemfontein registered the
envisaged first mortgage bond over the properties in favour
of the
trustees in the amount of R33 million under number B10121/2005 (the
debenture bond).
[8]
However, on 12 April 2006, the Registrar of Deeds registered a
further first mortgage bond over the properties, this time in
the
amount of R200 million in favour of the fifth respondent (Investec).
The reference number of this bond is B7073/2006
(the Investec bond).
This was made possible by the fact that on 30 March 2006 the ninth
respondent in his capacity as trustee
of the trust in writing agreed
to the waiver of preference of the debenture bond in favour of the
Investec bond (the waiver of
preference), with the result that the
Investec bond enjoyed preference over the debenture bond. The
waiver of preference
was also noted by the Registrar of Deeds on the
debenture bond on 12 April 2006. The Investec bond was
registered to secure
inter alia
advances in the amount of approximately R32 million made by Investec
to the company in respect of the project.
[9]
Despite having received the total amount of approximately R65 million
from the trust and Investec, the company failed to commence
with the
physical development of the project and upon its liquidation the
properties were its only assets. On or about 2
February 2010
the company circulated a letter to the debenture holders, stating
that it is “… unfortunately not envisaged”
that
the company will develop the project in the foreseeable future.
It further stated that the trustees will be requested
to call a
general meeting of debenture holders to consider the way forward.
Such a meeting took place on 26 March 2010, although
not attended by
the trustees. This set in motion a chain of events that
eventually led to the resignation of the ninth and
tenth respondents
as trustees of the trust. The four applicants were appointed as
trustees of the trust on 13 August 2012
and in that capacity they
launched the present application on 22 November 2012. The
essential relief claimed by the applicants
is an order declaring that
the waiver of preference is void and that the debenture bond ranks
first in preference to the Investec
bond.
[10]
The eleventh respondent (Routledges) is a firm of attorneys that was
instructed to register the Investec bond. As Investec
has
indicated that it might seek to claim damages from Routledges should
the application succeed, Routledges obtained leave to
intervene in
these proceedings. The application is opposed only by Investec
and Routledges, on a number of grounds.
[11]
Before considering whether the waiver of preference is void, it is
necessary to deal with the submissions by Investec and Routledges
that the debenture bond is in any event invalid. In this regard
both Investec and Routledges rely on non-compliance with
section
118(3) of the Act. Investec also filed a counter-application
for an order declaring that the debenture bond is null
and void and
for ancillary relief. In addition, Routledges relies on
contravention of section 3(e)(i) of the Subdivision
of Agricultural
Land Act 70 of 1970 and of section 8(5), read with section 8(7), of
the Free State Townships Ordinance 9 of 1969.
Routledges also
claims that the debenture bond is invalid on the ground that the
registration thereof was not authorised by the
company. I deal
with these defences in turn.
SECTION
118(3) OF THE ACT
[12]
Section 116 of the Act provides that the company may create and issue
secured or unsecured debentures, if the company is authorised
to do
so by its memorandum or articles. It is not alleged that the
company was not authorised to issue debentures.
A debenture
(“skuldbrief”) is a document which creates or
acknowledges indebtedness by the company to another for monies
advanced to the company on loan. Sections 125 and 126 of the
Act prescribe the form and content of such debentures.
For
present purposes it suffices to mention that these sections require
that the debenture contains the term “debenture”
or other
term denoting a debenture, the terms of the debenture and
specifically whether it is secured or unsecured.
[13]
Section 117(1) of the Act deals with the binding of movable property
as security for a debenture and section 117(3) then provides:
“
The
binding as aforesaid of immovable property may be effected by a
mortgage bond, collateral mortgage bond or surety bond executed
in
favour of one or more debenture-holders or of a trustee for
debenture-holders.”
Such
mortgage bond must of course be registered in a deeds registry.
As already indicated, in this case the binding of the
properties as
security for the debentures was intended to be effected by
registration of a mortgage bond in favour of the trustees
of the
trust. In this regard section 118(3) of the Act provides:
“
If
any such bond is in favour of a trustee for debenture-holders,
certified copies of the debenture concerned and of the trust deed
by
which the trustee is appointed and in which his rights and duties are
defined, shall be annexed to the said bond.”
[14]
It is common cause that section 118(3) was not complied with in
respect of the debenture bond. At no stage were any copies
of
debentures or of the trust deed annexed to the debenture bond.
The question is what the effect of non-compliance with
section 118(3)
is on the validity of the debenture bond. Investec and
Routledges argue that the debenture bond is a nullity,
whereas the
applicants argue that it is not.
[15]
In
Schierhout
v Minister of Justice
[1]
Innes CJ said that it is a fundamental principle of our law that a
thing done contrary to the direct prohibition of the law is
void and
of no effect. That, however, is not always the case where a
statute is not complied with. What must be determined
in each
case is whether the legislature intended the non-compliance with the
statute to be visited with nullity
[2]
or, for convenience put differently, whether the provision was
intended to be peremptory or directory.
[3]
This requires construction of the statutory provision by
consideration of its language, context, scope and purpose, especially
the mischief that the legislature intended to prevent.
[4]
[16]
In this regard certain guidelines have over the years been
developed. In
Sutter
v Scheepers
[5]
Wessels JA, whilst making clear that he did not pretend to provide an
exhaustive list, set out the following guidelines.
The word
“shall” in a statute “… is rather to be
construed as peremptory than as directory unless there
are
circumstances which negative this construction.” If a
provision is couched in a negative form it is to be regarded
as
peremptory rather than directory. If on the other hand a
provision is couched in positive language and no criminal or
other
sanction for non-compliance is added, there is a presumption in
favour of an intention to make the provision only directory.
If
the statute contains no explicit statement that the contravening act
is to be void or if no sanction for non-compliance is added
and a
consideration of the scope and objects of the provision leads to the
conclusion and strict compliance therewith would lead
to injustice or
even fraud, then the presumption is in favour of the provision being
directory. The reason for this is that
in such a case “…
greater inconveniences and greater impropriety would result from the
rescission of what was done,
than would follow the act itself done
contrary to the law.”
[6]
Finally,
Wessels JA pointed out that the history of the legislation may in
some instances afford “a clue”.
[17]
A penal sanction for contravention of a statutory provision generally
indicates that the contravening act is void.
[7]
There are cases, however, where the absence of a sanction leads to
the conclusion that nullity was intended.
[8]
This will especially be the case where the purpose of the provision
will be defeated if the contravention thereof is not
visited with
nullity.
[18]
Section 118(3) is couched in positive language and no sanction for
non-compliance is added. This case illustrates that
great
injustice may flow from a finding that section 118(3) is peremptory.
It would have the effect that a mortgage bond
intended to secure
loans actually made to the company by members of the public and
actually registered by the Registrar of Deeds,
thus giving
constructive notice thereof to the public at large, provides no
security. I accept the submission of counsel
for Investec that
the purpose of section 118(3) is to give notice to the public at
large of information such as the terms of the
debentures and the
powers of the trustees in dealing with the security provided by the
company.
[9]
But the
question is whether holding that the section is directory will defeat
that purpose.
[19]
The information intended to be available in the records of the deeds
registry, is obtainable elsewhere. A mortgage bond
registered
in favour of a trustee for debenture holders will invariably reflect
that fact. Clause 11 of the trust deed provides
that the
company shall cause a register of debentures to be kept in terms of
the Act and that a duplicate thereof shall be lodged
with the
trustees and updated from time to time. Section 128 of the Act
provides that every company shall keep at its registered
office a
register of debenture holders showing the number of debentures issued
and outstanding and whether or not they are payable
to bearer and
specifying the names and the addresses of the debenture holders other
than bearers. Section 50 of the new
Companies Act 71 of 2008
similarly obliges a company to establish and maintain a register of
securities issued by the company. The definition of
“securities” includes debentures. It requires
little imagination to conclude that with this information the terms
of debentures may be ascertained, even if the company in question is
unhelpful.
[20]
The authority and powers of a trustee derive from the trust deed.
If the trust deed was lodged with the Master, as is
the case here, a
copy thereof could be obtained in terms of section 18 of the TPC
Act. The TPC Act only applies to trusts
as defined in section 1
thereof. In terms of this definition the ownership in property
must pass to the trustee. The
TPC Act therefore applies to a
trust in the strict or narrow sense.
[10]
In many cases the trustee of a debenture trust will only be a trustee
in the wide sense of being entrusted with the affairs
of others and
not become vested with ownership of any property.
[11]
I accept therefore that the trust deed of a trust for debenture
holders may in many cases not be obtainable in terms with
the TPC
Act. However, as counsel for Investec fairly pointed out,
access to such trust deed may be obtained in terms of the
Promotion
of Access to Information Act 2 of 2000 (PAIA). A trustee for
debenture holders clearly falls within the definition
of “private
body” in section 1 of PAIA and accordingly access to the trust
deed may be obtained in terms of Part 3
of PAIA for the exercise or
protection of any right.
[21]
I conclude therefore that although an interested person may to some
extent be inconvenienced by non-compliance with section
118(3), the
purpose of the section will not thereby be defeated. Such
inconvenience is in my judgment outweighed by the other
factors that
I have mentioned.
[22]
Counsel for Investec relied heavily on the judgment in
Klerck
NO v Van Zyl and Maritz NNO and related cases
[12]
.
In that matter the court dealt with a regulation under the then
Sectional Titles Act 66 of 1971 that
inter
alia
provided that a sectional mortgage bond hypothecating a unit held
under a sectional title deed shall be prepared by a conveyancer
and
shall be signed by the mortgagor or his duly authorised agent, as
well as with
section 50(1)
of the
Deeds Registries Act 47 of 1937
which provides that a mortgage bond shall be executed in the presence
of the registrar by the owner of the immovable property therein
described or by a conveyancer duly authorised by such owner by power
of attorney. The matter was decided on exception and
the
averment that the signature on the mortgage bond in question had been
forged, had to be accepted. It had to be accepted
therefore
that the bond was not executed by the owner of the property
qua
owner or by a conveyancer authorised by her and that it was not
signed by the person reflected therein as the mortgagor or his
duly
authorised agent. The court held that the purpose of these
provisions was similar to that of legislation requiring contracts
for
the sale of land or suretyship agreements to be in writing, namely
the promotion of legal certainty, the thwarting of fraud
and perjury
and the minimising of disputes and litigation. The court held
that this purpose could be frustrated if strict
compliance with these
provisions were not insisted upon. This factor as well as the
use of the word “shall” persuaded
Kroon J that the
provisions were peremptory and the bond a nullity.
[23]
As I have said, the intention of the legislature in respect of the
consequence of non-compliance with a statutory provision
must be
determined by consideration of the factors and circumstances relevant
to each provision. It is clear that the relevant
considerations
in the present case are very different from those in
Klerck
.
[13]
[24]
In sum,
section 118(3)
is couched in positive terms, no sanction is
added, great injustice may flow from insistence on strict compliance
therewith, but
its purpose will not be defeated if non-compliance is
not visited with nullity. I conclude therefore that
section
118(3)
lays down what conveyancers should observe in respect of
presentation of a mortgage bond in favour of a trustee for debenture
holders
for registration in a deeds registry. The Registrar of
Deeds may refuse to register the bond until these requirements are
met, but if the mortgage bond is nevertheless registered, it is not
invalid.
INVALID
SALES?
[25]
The argument made by Routledges in the papers proceeds along the
following lines. The trust deed read with the debentures,
the
letters of acceptance of the investment proposal of the company and
the accompanying declarations made by the debenture holders,
constitute contracts of sale that are prohibited by section 3(e)(i)
of the Subdivision of Agricultural Land Act 70 of 1970 and/or
section
8(5) of the Free State Townships Ordinance 9 of 1969. As a
consequence the trust deed and the debentures are invalid
and that
vitiates the debenture bond.
[26]
Section 3(e)(i) of the Subdivision of Agricultural Land Act provides
that no portion of agricultural land shall be sold or
advertised for
sale except with the consent of the Minister in writing.
Section 8(5) of the Free State Townships Ordinance
provides that
after an owner of land has taken steps to establish a township
thereon, no person shall enter into any contract whereby
any land in
such township is sold, exchanged, leased or disposed of in any other
manner except with the approval of the responsible
MEC. Section
8(7) of the Ordinance specifically provides that any contract entered
into in conflict with the provisions of
section 8(5) shall be of no
force or effect.
[27]
Each debenture states that it is linked to a particular stand
number. These stands are reflected on a layout of proposed
erven in the project that was attached to the trust deed. The
letters of acceptance and declarations take the matter no further
and
no further reference thereto is required.
[28]
It is common cause that the properties comprise agricultural land and
that the relevant Minister did not consent to the sale
of any portion
thereof. It is also common cause that the company has taken
steps to establish a township on the properties
and that the
responsible MEC did not grant any approval as envisaged by section
8(5) of the Ordinance.
[29]
It is clear however that the argument is dependent thereon that the
trust deed and debentures
per se
constitute contracts of sale
of the proposed linked erven.
[30]
The relevant provisions of the trust deed are the following:
“
5.1
The Company shall convert this Debenture into an Agreement of Sale
for the linked erven on issuing of the Record of Decision
for the
Project by the relevant authorities, expected to be March 2005:-
5.2
The conversion of the Debenture in terms hereof, shall become
effective on the Conversion Date, against surrender to the Company
of
the relevant Debenture certificate and signing of the Agreement of
Sale for the relevant erven by the Debenture Holder and the
Mortgagor.
5.3
The purchase price for the erven, as will be reflected on the
Agreement of Sale shall be equal to the original issue price of
the
Debenture, being R330 000 (Three Hundred and Thirty Thousand
Rand). It is hereby recorded that the official launch
price for
the remaining erven in the Project will be not less than R590 000
(Five Hundred and Ninety Thousand Rand), and only
the Debenture
Holders, as founding, members of the Project, will qualify for the
reduced erven selling price through conversion
of the linked
Debenture. As founding members of the Project, the Debenture
Holders will qualify for special benefits, for
example lifelong free
social membership of the Lizard Point Links Course, as well as use of
the Private Founding Members Clubhouse,
details of which will be
fully described in the Agreement of Sale to be entered into between
the Debenture Holders and the Mortgagor
on the Conversion Date.”
[31]
These provisions stipulate that the conversion of a debenture shall
take place on the surrendering of the debenture to the
company and
the signing of an agreement of sale for the relevant erf. The
agreement of sale to be entered into will be for
the reduced purchase
price of R330 000,00 and will contain the further terms of the
agreement, such as the full description
of the special benefits of
the debenture holder in respect of the project.
[32]
Therefore, although the company and the debenture holder did envisage
that the debenture holder would eventually acquire ownership
of a
proposed erf, a right in respect of the erf would only be obtained by
the debenture holder when an agreement of sale is entered
into.
This never happened.
[33]
I conclude therefore that the trust deed and debentures do not
per
se
constitute agreements of sale.
At the hearing counsel for Routledges argued that the erven were
advertised in contravention
of section 3(e)(i) and disposed of in
contravention of section 8(5). What was advertised however, was
the investment opportunity
set out in the trust deed and the
debentures which, as I have said, do not constitute sales.
Also, the erven were not disposed
of in terms of the trust deed and
debentures. They would in future be disposed of in terms of
deeds of sale. In my
judgment the debenture bond is not invalid
on this ground.
AUTHORITY
TO EXECUTE THE DEBENTURE BOND
[34]
In the answering affidavit on behalf of Investec, it was mentioned
that the company gave power of attorney to register the
debenture
bond to “Pieter Abraham Goosen en/of …”. The
power of attorney afforded the said Pieter Abraham
Goosen the power
of substitution. It was pointed out that the name of Petrus
Gerhardus Louw van Blerk was inserted, by means
of a rubber stamp, in
the power of attorney and that Mr van Blerk executed the debenture
bond on behalf of the company. On
behalf of Investec it was
then said that the debenture bond “…may be invalid”
for the reason that the person
that executed the debenture bond was
not authorised to do so.
[35]
In response hereto, the applicants filed a comprehensive affidavit by
Ms Sharon Ann de Lange, a conveyancer who at the time
of the
registration of the debenture bond was a director of Naudes Inc.
Ms de Lange explained how it came about that Mr van
Blerk executed
the debenture bond. The said Mr P.A. Goosen was an attorney who
instructed his correspondent in Bloemfontein,
Naudes Inc, to execute
the debenture bond. In terms of this instruction and the power
of substitution, Mr Goosen effectively
authorised any conveyancer of
Naudes Inc to execute the debenture bond, depending on who would
appear before the Registrar of Deeds
on the particular day. The
late Mr van Blerk was a conveyancer and a director of Naudes Inc.
The insertion of the name
of Mr van Blerk in the power of attorney by
rubber stamp in the space left for that purpose took place in terms
of accepted practice
in all the deeds registries in the country.
None of this was disputed or even dealt with in the affidavits on
behalf of Investec
or Routledges.
[36]
It therefore came as no surprise that counsel for Investec indicated
at the hearing that the possibility raised in the answering
affidavit
is abandoned. Nevertheless counsel for Routledges argued that I
should find that the registration of the debenture
bond was not
authorised. For the reasons stated, this argument has no
factual basis and is devoid of merit.
THE
WAIVER OF PREFERENCE
[37]
It is settled law that in the absence of a contrary provision in a
trust deed, the trustees must act jointly if the trust is
to be bound
by their acts.
[14]
The
trust deed of the trust contains no such provision. It is a
proven fact that the ninth respondent acted alone when
he executed
the waiver of preference. Therefore, unless the contentions of
Routledges that the ninth respondent was the only
trustee of the
trust at the time or that the debenture holders ratified the waiver
of preference must be accepted, the trust was
never bound by the
waiver of preference.
[38]
The trust deed provides that the ninth and tenth respondents are the
trustees of the trust. Each signed the trust deed
in that
capacity. Although it may not have been strictly required,
letters of authority to act as such were issued to them
in terms of
section 6 of the TPC Act. In terms of section 21 of the TPC Act
trustees are required to resign by notice in
writing. Both the
ninth and tenth respondent resigned as trustees of the trust on 23
November 2011, years after the execution
of the waiver of preference
on 30 March 2006.
[39]
At the time of the creation of the trust, the ninth and tenth
respondents were partners of the firm Auret Goosen Ledwaba
Attorneys.
The tenth respondent resigned from the firm in
November 2005. Routledges argued that in terms of the trust
deed the tenth
respondent then automatically ceased to be a trustee
of the trust. Reliance was placed on the definition of
“trustees”,
namely
“’
Trustee(s)
’
– means the designated Partners of the firm Auret Goosen
Ledwaba Attorneys and its successor in title, and any future
trustees
duly appointed in terms of this Deed, whilst acting in that
capacity.”
[40]
The designated partners of Auret Goosen Ledwaba Attorneys were
obviously the ninth and tenth respondents. They were the
first
trustees of the trust. The definition understandably intends to
include successors of the first trustees. It
does not deal with
the term of office of the first trustees and certainly does not
provide that it terminates automatically on
resignation from Auret
Goosen Ledwaba Attorneys. In my judgment the tenth respondent
remained a trustee until his resignation
as such and therefore the
ninth and tenth respondents had to act jointly for the waiver of
preference to bind the trust.
[41]
I accept, without deciding, that the trust is a trust in the wide
sense and that the trustees thereof act on behalf of the
beneficiaries. I accept therefore that the waiver of preference
may in law have been clothed with validity by ratification
thereof by
the debenture holders. But once again, Routledges’
contention must fail for lack of any factual foundation.
A
waiver of preference of the debenture bond would at least amount to a
modification of the rights of the debenture holders.
The trust
deed provides that this may only be brought about by special
resolution taken at a properly constituted meeting of debenture
holders. The evidence does not prove anything of this sort.
The only piece of evidence relied upon by Routledges is
a passage in
a letter dated 5 August 2011 by an attorney who previously acted for
the trustees, stating no more than that the debenture
holders had
been made aware of the waiver of preference approximately two years
before.
[15]
PRESCRIPTION
[42]
What remains is Routledges’ reliance on prescription. The
first question is of course whether the applicants’
claim for a
declaratory order that the waiver of preference was
ultra
vires
and that the debenture bond
continues to rank first and in preference to the Investec bond,
constitutes a debt for purposes of
the
Prescription Act 68 of 1969
.
[43]
It has repeatedly been held that a debt for purposes of the
Prescription Act is
an obligation (on the part of the party that
raises prescription) to do something or to refrain from doing
something.
[16]
In
Duet
and Magnum Financial Services v Koster
[17]
Nugent JA preferred the term “liability” over
“obligation”.
[18]
[44]
In
Boundary
Financing Ltd v Protea Property Holdings (Pty) Ltd
[19]
it was held that a claim for rectification of a contract is not a
“debt”. As I see it, the essential reason for
this
finding is that by way of a claim for rectification of a contract the
court is asked to declare what the parties to the contract
to be
rectified had in fact agreed. In
Bester
,
Brand JA followed the decision in
Boundary
Financing
and held that a claim for rectification of a deed of transfer do not
rely on any obligation or liability on the part of the party
in whose
name the property was incorrectly transferred in the deeds registry
and is therefore also not a debt.
[45]
The present claim is no different. The claim does not rely on any
obligation or liability to do or refrain from doing anything.
The
claim is not for the enforcement of a debt. It merely serves to
clarify, because there is a dispute, what has throughout
been the
actual legal position. In my judgment therefore the defence of
prescription must also fail.
CONCLUSION AND
ORDER
[46]
In the result the application must be granted and the
counter-application dismissed. Costs of both should be borne
jointly
and severally by Investec and Routledges. The parties
before me were agreed that these costs should include the costs of
Routledges’ application for intervention and of two counsel.
[47]
The following order is issued:
1. It is declared
that the ninth respondent acted
ultra vires
in waiving the
ranking order of preference of the first mortgage bond registered
with the eighth respondent (“the Registrar
of Deeds,
Bloemfontein”) in favour of the trustees, at the time, of the
trust, under reference number B10121/2005 in favour
of the mortgage
bond registered with the Registrar of Deeds, Bloemfontein in favour
of the fifth responded under reference number
B7073/2006.
2. It is declared
that mortgage bond B10121/2005 retains its status as ranking first
and in preference to the mortgage bond B7073/2006.
3. The Registrar of
Deeds, Bloemfontein, is directed to amend his records accordingly.
4. The
counter-application is dismissed.
5. The fifth
respondent and the eleventh respondent are jointly and severally
ordered to pay the costs of the application and the
counter-application, including the costs of the application for
intervention by the eleventh respondent and of two counsel.
________________________
C.H.G.
VAN DER MERWE, J
On behalf of
applicants: Adv A.P. Joubert SC
with
him:
Adv
G.P. van Rhyn
Instructed
by:
McIntyre
& Van der Post
BLOEMFONTEIN
On
behalf of fifth respondent: Adv G.W. Woodland SC
Instructed
by:
Matsepes
Inc
BLOEMFONTEIN
On
behalf of eleventh respondent: Adv G.B. Rome
Instructed
by:
Lovius
Block
BLOEMFONTEIN
[1]
1926
AD 99
at 109
[2]
See
Standard
Bank v Estate Van Rhyn
1925 AD 266
at 274.
[3]
Nkisimane
and Others v Santam Insurance Co Ltd
1978 (2) SA 430
(A) at 433H – 434D.
[4]
See
Swart
v Smuts
1971 (1) SA 819
(A) at 829C – 830C;
[5]
1932
AD 165
at 173 – 174.
[6]
Voet
1.3.16 quoted in
Standard
Bank v Estate Van Rhyn
,
supra
,
p 274.
[7]
Standard
Bank v Estate Van Rhyn
,
supra
,
p 274.
[8]
See
Lupacchini
NO & Another v Minister of Safety and Security
2010 (6) SA 457
(SCA) paras [17] and [18].
[9]
See
Henochsberg
on the Companies Act 61 of 1973
,
Vol 1, p 228.
[10]
See
Conze
v Master Bond Participation Trust Managers Practice (Pty) Ltd
1996 (3) SA 786
(C) at 794 to 795.
[11]
This
appears to be the position in terms of the trust deed of the trust
but it is not necessary to decide this point.
[12]
1989
(4) SA 263
(SEC) at 281.
[13]
The
same applies to the other case relied upon on behalf of Investec,
namely
Sheray
Investments (Pty) Ltd v Town Council of Springs and Others
1984 (4) SA 80 (W).
[14]
See
Nieuwoudt
and Another NNO v Vrystaat Mielies (Edms) Bpk
2004 (3) SA 486
(SCA) paras [16] and [20];
Land
and Agricultural Bank of South Africa v Parker and Others
2005 (2) SA 77
(SCA) paras [15] and [176];
Lupacchini
NO & Another v Minister of Safety and Security
,
supra
,
paras [1] and [2].
[15]
In
fact the author of the letter intended to refer to a meeting with
three debenture holders on 30 March 2010.
[16]
See
Oertel
v Direkteur van Plaaslike Bestuur
1983 (1) SA 354
(A) at 370B;
Desai
NO v Desai and Others
[1995] ZASCA 113
;
1996 (1) SA
141
(A) at 146H – 147A;
Bester
NO and Others v Schmidt Bou Ontwikkelings CC
2013
(1) SA 125
(SCA) at 129J – 130A.
[17]
2010
(4) SA 499
(SCA) para [24].
[18]
It
is at least doubtful whether Nugent JA intended to extend the
meaning of “debt” beyond the meaning attributed thereto
in
Oertel
and
Desai
.
See
Bester
para [14].
[19]
2009
(3) SA 447
(SCA) paras [12] – [14].