Land and Agricultural Development Bank of SA t/a Landbank v Master of the High Court and Others (352/05) [2006] ZASCA 70; [2006] SCA 68 (RSA) (30 May 2006)

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[2006] ZASCA 70
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Land and Agricultural Development Bank of SA t/a Landbank v Master of the High Court and Others (352/05) [2006] ZASCA 70; [2006] SCA 68 (RSA) (30 May 2006)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
Case no: 352/05
In
the matter between:
LAND
& AGRICULTURAL DEVELOPMENT BANK
OF
SA t/a LANDBANK
Appellant
and
THE
MASTER OF THE HIGH COURT
First
Respondent
DAVID
JOSEPHUS STRAUSS NO
Second Respondent
SAREL
ALBERTUS COETZEE NO
Third Respondent
THE
33 CONCURRENT CREDITORS IN
THE
INSOLVENT ESTATE OF THOROLD
ROY
DOUBELL
Fourth and Further Respondents
________________________________________________________________
Coram
:
SCOTT, ZULMAN, NAVSA,
NUGENT et HEHER JJA
Date of hearing
:
4 MAY 2006
Date of delivery: 30 MAY 2006
Summary: The remedies
afforded to the Land Bank in terms of s 33 and 34 of Act 15 of 2002
are not applicable to advances made by the
Land Bank under the
repealed Act 13 of 1944.
Neutral citation: This
judgment may be referred to as
Land Bank v The Master and others
[2006] SCA 68 RSA
JUDGMENT
________________________________________________________________
SCOTT JA/…
SCOTT JA:
[1] The appellant, to which I shall
refer as the Bank, was established under s 3 of the Land Bank Act 18
of 1912. The 1912 Act was
repealed by the Land Bank Act 13 of 1944
(‘the 1944 Act’) which in turn was repealed by the Land and
Agricultural Development
Bank Act 15 of 2002 (‘the 2002 Act’).
Despite the repeal of the earlier Acts the Bank established in 1912
continues to exist.
[2] The first respondent is the Master
of the High Court. The second and third respondents are the joint
trustees of the insolvent
estate of Mr Thorold Doubell. The remaining
respondents are the concurrent creditors of the insolvent estate.
Only the second and
third respondents participated in the appeal and
I shall refer to them as the respondents.
[3] Prior to his sequestration Doubell
carried on business as a farmer. The Bank lent and advanced money to
him in terms of four loan
agreements; two were secured loans in terms
of s 25 of the 1944 Act and two were unsecured loans in terms of s 34
of that Act. He
was provisionally sequestrated on 26 July 2000 and
finally sequestrated on 31 August 2000. It appears that the Bank
purchased the
immovable property that had been mortgaged to it and
deducted the purchase price from the outstanding amount of the loan.
A further
amount was received from the insolvent estate in September
2002. It is common cause that the amount still owing to the Bank is
well
over R2 million in respect of the four loans.
[4] The 1944 Act afforded the Bank
extraordinary powers for the recovery of loans. In terms of s 34 the
Bank was authorised in prescribed
circumstances, including in the
event of any payment due in respect of an unsecured advance falling
into arrears or the insolvency
of the debtor, and without recourse to
a court of law, to attach and sell so much of the debtor’s property
as may be necessary
to liquidate the amount owing to the Bank. The
section further conferred a preference in favour of the Bank in
respect of such proceeds.
Section 55 afforded the Bank similar powers
in relation to secured loans. However, the material provisions of
both sections were
declared unconstitutional in
First National
Bank of SA Ltd v Land and Agricultural Bank of SA and others
[2000] ZACC 9
;
2000
(3) SA 626
(CC). In terms of the court’s order, which was made on 9
June 2000, the invalidity of the offending provisions of s 34 of the
1944
Act were suspended for a period of two years:
‘
provided that as from
the date of this order no attachments and sales in execution in terms
of s 34(3)(b) of [the 1944 Act] not yet
completed shall take place
without recourse to a court of law.’
There was no similar suspension of the
unconstitutional provisions of s 55.
[5] As previously mentioned, Doubell’s
estate was finally sequestrated some three months later on 31 August
2000. Nonetheless, no
attempt was made by the Bank during the period
of suspension to recover the amount outstanding in terms of the
unsecured loans by
exercising the Bank’s powers under s 34, subject
to the limitation imposed in the Constitutional Court’s order.
Instead, the
Bank subsequently ‘notified’ the respondents of its
claim and in fact received a dividend in terms of the first
liquidation and
distribution account. A possible reason for the Bank
not pursuing its rights under s 34 is that it was no longer possible
to rely
on s 55 for the recovery of the amounts due under the secured
loans.
[6] The 2002 Act came into operation
on 10 June 2002, ie two years after the Constitutional Court’s
order. Unlike the 1944 Act,
no distinction was made between secured
and unsecured loans in relation to the remedy available to the Bank
in the case of default.
As in the case of the earlier Act, the 2002
Act affords the Bank far-reaching remedies. The provisions in the Act
dealing with the
new remedies are contained in s 33.
[7] On 26 March 2004 the Bank launched
the application giving rise to the present appeal. By this time all
the assets of the insolvent
estate had been sold and all amounts
owing to it recovered. In terms of the second and final liquidation
account there was a free
residue of R319 327,50 which was allocated
to concurrent creditors. The Bank objected to the account and it has
not been confirmed
by the Master. The application was based on s
33(4)(c) and s 34(1) of the 2002 Act. The order sought was for the
attachment of the
liquidated amount standing to the credit of the
free residue of Doubell’s insolvent estate and for a declaration
that the Bank
was entitled as a preferent creditor to the money so
attached, together with certain ancillary relief, which included the
rectification
of the second and final liquidation and distribution
account so as to reflect the Bank’s full claim.
[8] The matter came before Davis J in
the Cape High Court. It was opposed on various grounds. One was that
the institution of the
proceedings was not properly authorised. In
this Court the respondents abandoned the point, in my view rightly
so, and nothing further
need be said about it. The ground upon which
the learned judge found in favour of the respondents was that,
properly construed, ss
33(3)(b) and ss 33(4) were not applicable to
advances made in terms of the 1944 Act. The judgment is reported
sub
nom
Land and Agricultural Development Bank of SA t/a Land Bank
v The Master and others
2005 (4) SA 81
(C). The conclusion of the
court
a quo
differed from that arrived at by Wright J in
Land
and Agricultural Development Bank of SA t/a The Land Bank v Venter NO
and others
[2004] 2 All SA 314
(O) who held that the subsections
were applicable to advances made under the 1944 Act. The present
appeal is with the leave of this
Court.
[9] Section 33 has 14 subsections. It
is necessary to quote the first four.
‘
(1) Despite anything
to the contrary in any other law or any agreement and without
prejudice to any other remedies the Bank may have,
the Bank may in
respect of advances that it has made take any action envisaged in
subsection (3) if any of the circumstances envisaged
in subsection
(2) exist.
(2) The circumstances
contemplated in subsection (1) are if—
(a)
payment of any
sum of money, due in respect of any advance made in terms of this
Act, is in arrear, whether it is the capital sum
or interest thereon;
(b)
any such
advance has been applied for a purpose other than the purpose for
which it was made;
(c)
the advance
has not within a reasonable time been applied for the purpose for
which it was made;
(d)
any other
condition to which the advance is subject has not been complied with
substantially;
(e)
(i) the
debtor becomes insolvent, commits any act of insolvency in terms of
section 8 of the Insolvency Act, 1936 (Act 24 of
1936), or is
sequestrated by virtue of an order of court in terms of that Act;
(ii) the debtor is
sentenced to imprisonment without the option of a fine;
(iii) judgment is
obtained against the debtor for the payment of any sum of money;
(iv) any asset of the
debtor is by order of a competent court declared executable or is
attached in pursuance of an order of any such
court;
(f)
the debtor is
deceased, and his or her estate is about to be dealt with in terms of
section 34 of the Administration of Estates Act,
1965 (Act 66 of
1965), or has been sequestrated;
(g)
the debtor is
a company or close corporation which has been placed under judicial
management or is being wound up or is being deregistered,
as the case
may be; or
(h)
the debtor is
a private company or close corporation and any director, shareholder
or member thereof is sentenced to imprisonment
without the option of
a fine.
(3) As contemplated in
subsection (1) the Bank may—
(a)
refuse to pay
any portion of an advance which has been approved, but which has not
yet been paid;
(b)
after the
expiry of seven days after the Bank has in writing—
(i) made a demand for the
repayment of the advance, addressed to the address of the debtor
stated in the form of application for the
advance; and
(ii) given notice to the
holder of a preferent or similar security in respect of the property
of the debtor and, if appropriate, to
the Registrar of Deeds,
apply to a court of law
for an order contemplated in subsection (4).
(4)
(a)
If the
Bank makes an application in terms of subsection (3)
(b)
, and
if there is evidence supported by affidavit that—
(i) a liquidated amount
in money is due and payable to the Bank;
(ii) the Bank intends
without undue delay to institute an action in that court against the
debtor for recovery of the debt;
(iii) the debtor has no
bona fide
defence to the intended action;
(iv) if such action were
instituted, the court would have jurisdiction in respect of the
debtor and the cause of action;
(v) the debtor has
property at his or her disposal from which the debt or part thereof
could be satisfied if the property were available
for execution after
judgment;
(vi) a substantial danger
exists that if an action for the recovery of the debt is instituted
against the debtor, he or she will dispose
of such property or will
remove it from the area of jurisdiction of the court in order to
evade satisfaction of the debt, or that
the delay likely to be caused
by the institution of an action for recovery of the debt would result
in the property having no value
due to its perishable nature;
(vii) arrangements
including the giving of security have been or will be made by the
Bank in order to protect the interests of the
debtor or any other
person whose interests might be affected by the granting of the order
mentioned herein,
a court of law may
authorise the Bank to attach and sell by public auction or public
tender, so much of the property and rights of
the debtor as may be
necessary to liquidate the amount owing in respect of the advance
made by the Bank, together with interest and
costs in respect
thereof.
(b)
In making
such an order the court may impose conditions with regard to the
institution of the action and the giving of security by
the Bank for
any damages which the debtor or any persons might suffer or costs
which might be incurred as a consequence of the attachment
of any of
his or her property.
(c)
If it is
reasonable or just in the circumstances or if compelling
considerations exist and the Bank has provided necessary guarantees
or other safeguards, the court may authorise the Bank to attach and
sell the debtor's property and rights without recourse to ordinary
court processes.
(d)
Any person
affected by an order referred to in paragraphs (a) to (c) may apply
to a competent court to have the order set aside.’
Section 34 deals with the ranking of
claims to the proceeds of the realisation of property attached and
sold in terms of s 33 and
creates a preference in favour of the Bank.
It is unnecessary to quote it.
[10] It will be observed that, broadly
stated, in terms of ss 33(1) the Bank may ‘without prejudice to any
other remedies [it] may
have’ take the action envisaged in ss 33(3)
if any of the circumstances envisaged in ss 33(2) exist. In terms of
ss 33(3)(b) the
Bank may, subject to the fulfilment of certain
requirements, ie demanding payment and giving notice to the holder of
a security in
respect of the property in question, apply to ‘a
court of law’ for an order contemplated in ss 33(4). Subsection
33(4)(a), in
turn, provides that the court may authorise the Bank to
attach and sell by public auction or public tender so much of the
debtor’s
property as is necessary to liquidate the amount owing to
the Bank, provided there is evidence on affidavit of certain facts.
These
are listed in ss 33(4)(a)(i) to (vii). It is apparent from what
is required that the order contemplated is an order
pendente lite
,
in other words an order pending the adjudication of the Bank’s
claim against the debtor. In terms of ss 33(4)(c) the court may
authorise the Bank to attach and sell the debtor’s property
‘without recourse to ordinary court processes’ if it is
‘reasonable
or just in the circumstances’ to do so or if
‘compelling considerations exist’ and the Bank ‘has provided
necessary guarantees
or other safeguards’. I interpose that the
Bank’s case is that it is entitled to an order in terms of ss
33(4)(c) as the circumstances
are such that the indebtedness is
common cause and no adjudication of its claim is necessary; also that
no guarantee is required
as it is common cause that there are no
creditors whose claims would outrank the Bank’s claim to the free
residue in terms of s
34. A subsection which I have not quoted above
but which has some relevance is ss 33(10). It provides that the
sequestration or liquidation
of the debtor’s estate does not limit
the Bank’s right to apply to court for an order in terms of ss
33(4).
[11] But fundamental to s 33 is that
the Bank’s right to apply for an order in terms of ss 33(4) and the
Court’s power to grant
such an order is dependent on the existence
of ‘any of the circumstances’ listed in ss 33(2). The meaning to
be attributed to
this subsection and its effect was the main subject
of the debate before us.
[12] The first circumstance mentioned
(in para (a)) is the payment of any sum of money ‘due in respect of
any advance
made in terms of this Act’
falling into arrears
(my emphasis). Davis J, in his judgment in the court
a quo
,
considered the paragraph to be incapable of being construed as
including a reference to an advance made under the 1944 Act. He
regarded
the words ‘such advance’ in para (b) and the words ‘the
advance’ in paras (c) and (d) as referring quite clearly to an
advance
contemplated in para (a), ie an ‘advance made in terms of
this Act’. Similarly he considered the words ‘the debtor’ in
paras
(e), (f), (g) and (h) to refer to a debtor in relation to an
advance contemplated in paras (a), (b), (c) and (d). He accordingly
held that s 33 had no application where, as in the instant case, the
advances were made pursuant to the 1944 Act.
[13] Counsel for the appellant
stressed the importance of construing the relevant provisions against
what he termed the clear policy
and object of the Act which, he said,
included the giving of assistance to small scale farmers and the
beneficiaries of land reform
programmes who required financial
assistance but who were unable to acquire such assistance from other
lending institutions by reason
of their lack of creditworthiness. The
object of s 33 and s 34 of the 2002 Act, and of s 34 and s 55 of the
1944 Act, was, he said,
to afford the Bank a special remedy and a
preference so as to enable it to advance money without adequate or
any security to farmers
who would otherwise be unable to obtain
financial assistance. In support of this proposition, he referred in
particular to paras
9, 10 and 11 of the Constitutional Court’s
judgment in the
First National Bank
case,
supra
. He
argued that in these circumstances it would be anomalous for the Bank
to be unable to utilise the remedies provided for in s
33 of the 2002
Act in respect of an existing loan just because the advance had been
made under the 1944 Act. Against this background
he argued, first,
that it was essential to construe para (a) of ss 33(2) as including
advances made under the 1944 Act, presumably
on the basis that the
ordinary meaning of the words used was inconsistent with the
intention of the legislature and that in accordance
with the
principles enunciated in
Venter v Rex
1907 (TS) 910 at 914, a
departure from the ordinary meaning was justified. In the
alternative, he argued that if para (a) of ss 33(2)
is to be
construed as referring to advances under the 2002 Act only, then the
reference to ‘such advance’ in para (b) and ‘the
advance’ in
paras (c) and (d) should be construed as a reference to the words
‘advances it has made’ in ss 33(1) which, he
contended, were wide
enough to include advances made under the 1944 Act as well as under
the 2002 Act. Similarly, the words ‘the
debtor’ in paras (e) to
(h) he said, had to be construed as a debtor in relation to the
‘advances’ referred to in ss 33(1),
not the ‘advance’
referred to in para (a) of ss 33(2).
[14] It is well to remember that in
the quest to ascertain the purpose or object of a statute its
language must always be the primary
source. The purposive approach is
no justification for simply ignoring the clear and unambiguous
language of the statute itself.
The remarks of Judge Learned Hand in
Borella et al v Borden Co
145 F 2d 63
at 65, (quoted with
approval in
Standard Bank Investment Corporation Ltd v Competition
Commission and others
[2000] ZASCA 20
;
2000 (2) SA 797
(SCA) at 812E) are
particularly apposite:
‘
We do not indeed mean
that here, or in any other interpretation of language, the words used
are not far and away the most reliable
source for learning the
purpose of a document; the notion that the “policy of a statute”
does not inhere as much in its limitations
as in its affirmations, is
untenable.’
Turning to the present case, I can see
no ambiguity in the phrase ‘advance made in terms of this Act; in
ss 33(2)(a); nor could
counsel suggest one. Indeed the legislature
could hardly have expressed itself in clearer terms. It is true that
the consequence
of attributing to the phrase its ordinary meaning is
that the remedy provided for in s 33 will not be available in the
case of a
payment due in respect of and advance under the 1944 Act
falling into arrears. It is also so that in such an event the Bank
would
be limited to its ordinary common law remedies. But there is
nothing in the Act to suggest that this could not have been what was
intended by the legislature. The remedies provided for in s 34 and s
55 of the 1944 Act had been found to be unconstitutional. The
remedy
contemplated in s 33 of the 2002 Act was new. It is by no means
inconceivable that the legislature should deliberately have
refrained
from affording to one party to a completed loan agreement a remedy
which would not have been in existence when the agreement
was
concluded. The remedy in such circumstances would have interfered
with the existing rights of the parties to the loan and for
Parliament to have decided that the remedy was not to apply in the
case of advances under the 1944 Act is not unreasonable. But,
in any
event, the legislature could hardly have been unaware of the
consequence of limiting the arrear payments contemplated in
ss
33(2)(a) of the 2002 Act to payments due in respect of advances made
in terms of that Act. In my view, therefore, there can be
no
justification for departing from the ordinary grammatical meaning of
the language employed in ss 33(2)(a).
[15] I turn to the appellant’s
alternative argument. The first question is whether the words ‘such
advance’ in para (b) and
‘the advance’ in paras (c) and (d) of
ss 33(2) can be construed as a reference to ‘advances’ in ss
33(1) as contended for
by the appellant or whether they must be
construed as a reference to ‘any advance’ in para (a) of ss
33(2). In my view there
can be no doubt that they are to be read as
referring to ‘advance’ in para (a). Any other construction would
be contrived. There
would also be no sense in the distinction between
para (a) on the one hand and paras (b), (c) and (d) on the other
which the appellant
says must be made, in other words, for the event
contemplated in (a) to apply only to advances under the 2002 Act and
the events
contemplated in paras (b), (c) and (d) to apply to
advances under both the 1944 and the 2002 Acts.
[16] The next question relates to the
proper interpretation of para (e). It is clear that the words ‘the
debtor’ in paras (e),
(f), (g) and (h) can only mean the debtor in
relation to an advance. The question is this: is the advance to be
construed as one
made ‘in terms of this Act’, ie an advance of
the kind contemplated in paras (a), (b), (c) and (d), or is the
advance to be construed
as the advance referred to in ss 33(1), which
the appellant contends includes an advance under both Acts? (I
mention in passing that
para (e) reads ‘the debtor becomes
insolvent, commits an act of insolvency . . . or is sequestrated . .
. .’ The Act would appear
to be concerned with future and not past
insolvencies. But this was not the basis on which Davis J dismissed
the application and
I shall not consider the point further.)
[17] It will be observed that ss 33(2)
consists of a single sentence. The advance contemplated in the
reference to ‘the debtor’
would therefore more naturally and
logically be to the advance referred to in the same sentence, ie the
advance referred to in paras
(a), (b), (c) and (d). Significantly, a
number of anomalous situations would arise were paras (d) to (h) to
be construed otherwise.
The most frequent event giving rise for the
need for the Bank to invoke the remedy in s 33 would be the debtor
falling into arrears.
In that event, as we have seen, the remedy
would be available only if the advance were made ‘in terms of this
Act’. It would
make no sense, for example, for the remedy to apply
also to advances under the 1944 Act because the debtor, instead of
being in arrear
with his or her payments, happened to be sentenced to
say short term imprisonment without the option of a fine for an
offence such
as one involving the driving of a motor vehicle, or for
that matter any offence (subpara (e)(ii)). Even more anomalous would
be the
situation where the debtor is a private company and one of its
shareholders was sent to prison in similar circumstances (sub para
(h)). Another example would be the case of the debtor against whom
judgment is obtained in respect of some other debt (para d (iii).
It
could never have been intended that in such an event the remedy in
s33 would apply to advances under both Acts, but if the debtor
were
in arrears with payments in respect of an advance made by the Bank,
the remedy would be applicable only if the advance had been
made
under the 2002 Act. It follows that in my view, properly construed,
paras (d), (e), (f), (g) and (h) are applicable only in
the case of
advances made in terms of the 2002 Act and the appellant’s
alternative argument must likewise fail.
[18] In the further alternative
counsel for the appellant sought to rely on two provisions in the
2002 Act dealing with transitional
matters. The first was ss 52(1).
It reads:
‘
(1) Anything validly
done in terms of the Land Bank Act, 1944 (Act 13 of 1944), continues
to be valid and of full force and effect
despite the repeal of that
Act by section 53 and any regulations made in terms of that Act
remain in force until repealed in terms
of section 49 of this Act.’
In my view the subsection does not
assist the appellant. It renders valid anything validly done in terms
of the 1944 Act despite its
repeal; it does not deem anything done
under the previous Act and which could have been done under the 2002
Act to have been done
under the latter Act. (An example of such a
deeming provision is to be found in s 42 of the Environment
Conservation Act 73 of 1989.)
Moreover, as observed by Davis J, in
his judgment refusing leave to appeal, the meaning sought to be read
into the subsection would
be contrary to the express wording of s 33.
[19] The other provision relied upon
is 52(7). It reads:
‘(7) Any reference in
any legislation to the Land and Agricultural Bank of South Africa or
the Land Bank Act, 1944, must be interpreted
as a reference to the
Bank or to this Act, as the case may be.’
The appellant’s contention is that
by reason of this provision the words ‘any advance made in terms of
this Act’ in ss 33(2)(a)
must be construed as including a reference
to an advance made in terms of the 1944 Act. There is no merit in
this contention. The
subsection says the very opposite. In addition,
the phrase ‘in any legislation’ logically and contextually can
only mean in any
legislation other than the 2002 Act.
[20] It follows that the appeal must
fail. It follows, too, that
Land and Agricultural Development Bank
v Venter NO, supra,
was wrongly decided.
[21] The appeal is dismissed with
costs.
_______________
D G SCOTT
JUDGE OF APPEAL
Concur:
ZULMAN JA
NAVSA JA
HEHER JA
NUGENT JA
:
[22] I agree with the order that is
proposed by my colleague but cannot agree with his reasons for doing
so. Because the meaning he
gives to the Act has profound consequences
for the future application of the Act I have found it necessary to
set out fully my reasons
for disagreeing.
[23] The conclusion reached by my
colleague is that the draftsman of the Act intended in s 33(2)(a) to
distinguish advances made after
the Act took effect from advances
that were made before then. The consequence of making that
distinction is that when the Act took
effect the Land Bank’s only
protection in respect of its unsecured advances immediately fell
away, with nothing to replace it,
and the Land Bank was reduced to a
concurrent creditor in respect of those debts. If the distinction
contended for by my colleague
was indeed intended by the draftsman,
it must have been calculated by him to bring about that result, for
there is no other reason
to make the distinction. My colleague is of
the view, based on the words that were used in s 33(2)(a), that the
draftsman indeed
wished to bring about that result. That is where we
differ. I think it is clear from the context within which the
section was enacted,
and from other indications in the Act itself,
that the draftsman did not wish to bring about that result and thus
he could not intended
the words to have the meaning that is now
contended for. In my view the draftsman must have intended the
remedies of s 33 to apply
to all the Bank’s advances, whether they
existed at the time the Act took effect, or were made subsequently.
The reason that the
Land Bank cannot succeed in the present case is
only that the debtor was sequestrated before the Act took effect.
[24] Construing a statute, Innes CJ
observed in
R v Detody,
1
‘is all a question of intention.’ And intention is established by
a process of inferential reasoning. Generally it can be inferred
that
the legislative intention is expressed by the ordinary meaning of the
words that were used. It can also usually be inferred
that words
were used with a consistent meaning, that they were not used
superfluously, and so on. But those are not rules of law.
They are
no more than logical inferences. And as with all inferential
reasoning the inference will not be correct if the premise
from which
the reasoning proceeds is unsound. That premise in the cases I have
mentioned is that the draftsman understood and intended
to use words
in their ordinary meaning, that he was indeed anxious to maintain
consistency, and that he used words carefully and
sparingly.
[25] There are also other facts from
which inferences might be drawn when construing legislative
intention. As pointed out by Schreiner
JA in
Jaga v Dönges;
Bhana v Dönges,
2
what is ‘no less important than the oft repeated statement that the
words and expressions used in a statute must be interpreted
according
to their ordinary meaning is the statement that they must be
interpreted in the light of their context’. He went on
to add that
‘”
the context”, as
here used, is not limited to the language of the rest of the statute
regarded as throwing light of a dictionary
kind on the part to be
interpreted. Often of more importance is the matter of the statute,
its apparent scope and purpose, and,
within limits, its background.’
3
[26] For one ought also, as pointed
out by Innes CJ in
Detody,
4
‘
take account
of…circumstances which are matters of well-known history and of
common knowledge, to note the mischief which the pass
laws were
intended to remedy, and in the light of that enquiry to ascertain the
meaning of the legislature as expressed in the [statute].’
In the same case Kotze JA said:
5
‘
It is a well-settled
canon of construction that the intention of a statutory provision is
to be ascertained from the words used, which
are to be understood in
their ordinary sense, unless there exists some satisfactory reason to
the contrary. Now the reason for modifying
or restricting the
ordinary meaning of general words may vary with the particular
instance before the Court. Thus general language
occurring in a
statute may be modified by some provision in it, showing the true
intent of the legislator; or the nature of the case
may require a
restrictive meaning; or the surrounding circumstances may necessitate
a departure from the ordinary meaning, or an
adherence to the literal
and ordinary meaning of the general language may lead to manifest
absurdity.’
He went on to refer with approval to
the following extract from the speech of Lord Blackburn in
River
Wear Commissioners v Adamson:
6
‘
In all cases the
object is to see what is the intention expressed by the words used.
But, from the imperfection of language, it is
impossible to know what
that intention is without enquiring farther and seeing what the
circumstances were with reference to which
the words were used, and
what was the object, appearing from the circumstances, which the
person using them had in view; for the
meaning of words varies
according to the circumstances with respect to which they were used’
.
[27] In similar vein Chaskalson CJ
said in
Minister of Health v New Clicks (SA)(Pty) Ltd:
7
‘
In
S v Makwanyane
and Another
8
I had occasion to consider whether background material is
admissible for the purpose of interpreting the Constitution. I
concluded
that
‘
where the background
material is clear, is not in dispute, and is relevant to showing why
particular provisions were or were not included
in the Constitution,
it can be taken into account by a Court in interpreting the
Constitution.’
Although it is not entirely clear
whether the majority of the Court concurred in this finding, none
dissented from it. I have no
reason to depart from that finding and,
in my view, it is applicable to ascertaining ‘the mischief’ that
a statute is aimed at
where that would be relevant to its
interpretation.’
[28] In
Dönges
Schreiner
JA elaborated on the relationship between the language of the statute
and its context by pointing out that the approach
to interpretation
may take either of two courses:
9
‘
Either one may split
the inquiry into two parts and concentrate, in the first instance, on
finding out whether the language to be
interpreted has or appears to
have one clear ordinary meaning, confining a consideration of the
context only to cases where the language
appears to admit of more
than one meaning; or one may from the beginning consider the context
and the language to be interpreted
together.’
After illustrating the two approaches
he went on to say the following:
10
‘
No doubt the result
should always be the same, whichever of the two lines of approach is
adopted since, in the end, the object to
be attained is
unquestionably the ascertainment of the meaning of the language in
its context. But each has its own peculiar dangers.
While along the
[latter] line there is the risk that the context may in a particular
case receive an exaggerated importance so as
to strain the language
used, along the other line there is the risk of verbalism and
consequent failure to discover the intention
of the law-giver. The
difference in approach is probably mainly a difference of emphasis,
for even the interpreter who concentrates
primarily on the language
to be interpreted cannot wholly exclude the context, even
temporarily; and even the interpreter who from
the outset tries to
look at the setting as well as the language to be interpreted cannot
avoid the often decisive first impression
created by what he
understands to be the ordinary meaning of that language. Seldom
indeed is language so clear that the possibility
of differences of
meaning is wholly excluded, but some language is much clearer than
other language; the clearer the language the
more it dominates over
the context and
vice versa
, the less clear it is the greater
the part that is likely to be played by the context.’
But the learned judge went on to
caution that
11
‘
[u]ltimately when the
meaning of the language in the context is ascertained, it must be
applied regardless of the consequences and
even despite the
interpreter’s firm belief, not supportable by factors within the
limits of interpretation, that the legislator
had some other
intention. So, too, if, when interpretation is complete, it is clear
that the legislator has failed to deal with
a class of case that in
all probability would have been dealt with if it had not been
overlooked, there is a
casus omissus
which the courts cannot
fill. But the legitimate field of interpretation should not be
restricted as a result of excessive peering
at the language to be
interpreted without sufficient attention to the contextual scene.
It is important not to mistake what
that means. It does not mean that the language of the statute must be
applied irrespective of
the consequences. It means only that the
true intent, once established, must be given effect to, no matter
that it has consequences
that were not foreseen. As pointed out by
Kotze JA in the passage that I have referred to, once the true intent
is established,
the language may need to be departed from, or given a
restricted meaning, in order to reconcile it with the true intent.
For words
are a tool for establishing intent, and not an instrument
to frustrate it once it is established.
[29] The Land and Agricultural
Development Bank of South Africa (which I will refer to for
convenience as the Bank) has been in existence
for almost a century.
It was established by the Land Bank Act 1912 for the purpose of
advancing loans to farmers and agricultural
co-operatives to promote
agriculture in the national interest.
[30] From the outset the legislature
has given the Bank a privileged status relative to other creditors to
ensure that the Bank’s
risk is kept to the minimum. By keeping its
risk to the minimum the Bank is able to lend money on terms that are
not available commercially.
The Act permitted loans to be advanced
to farmers only against the security of a first mortgage bond,
12
and it gave the Bank special rights in relation to moneys that were
advanced to co-operatives.
13
In addition it gave the Bank a speedy remedy for realising its
security whenever there was the prospect that the moneys might not
be
recovered. If the borrower, amongst other things, failed to pay any
amount that fell due, or did not apply the advance for the
purpose
for which it was made, or became insolvent, or breached a condition
upon which the advance was made, the Bank, after complying
with
certain formalities, was entitled ‘without recourse to a court of
law to enter upon and take possession of and sell by public
auction
the whole or any part of the security for the advance’ in order to
satisfy the outstanding debt. The rights of the Bank
were also
insulated from the ordinary consequences of the debtor’s
insolvency.
14
[31] The permitted activities of the
Bank, and its protection against risk, were extended over time. In
1940, for example, a provision
was added that created a pledge over
agricultural produce and products of a co-operative company when it
ceded its debts to the Bank
as security for an advance.
15
[32] In 1944 the 1912 Act was replaced
by the Land Bank Act, 1944. Its purpose was to consolidate the 1912
Act and its numerous amending
and related statutes. The 1944 Act
retained the principal features of the earlier legislation. Amongst
other things, s 25 permitted
the Bank to advance money only
against the security of real rights in land, except where the Act
provided otherwise, s 55 retained
the special remedy for
recovering debts, and the Bank’s rights continued to be insulated
from the ordinary consequences of the
debtor’s insolvency.
16
[33] But by then it was felt that the
Bank should also be permitted to advance working capital in certain
circumstances even if the
borrower could not provide real security.
Section 34 thus authorized the Bank to advance money to farmers,
notwithstanding the provisions
of s 25,
17
for the purposes of meeting costs incidental to the production,
cultivation, gathering or marketing of crops. When such an advance
was made, and after compliance with certain formalities, the crops
were deemed to have been pledged and delivered to the Bank as
security for repayment of the advance,
18
and were thus liable to be attached and sold by the Bank in
accordance with its special remedy.
[34] In 1975 s 34 was replaced. The
new section permitted the Bank to advance money for the purpose of
purchasing livestock and farming
machinery and equipment as well as
for establishing and harvesting crops. It also did away with
security in the form of a statutory
pledge. Instead a remedy for the
recovery of money that had been advanced, comparable to the remedy in
s 55, was introduced,
which permitted the Bank, in defined
circumstances, and without recourse to a court of law, to attach and
sell any property of the
debtor in satisfaction of the debt. (The
Bank was required first to act against movables, and only then
against immovable property.
If immovable property was mortgaged the
Bank was entitled to the balance after the mortgagee had been paid.)
[35] What stands out from the history
of the legislation is that for close on a hundred years the
legislature has consistently afforded
the Bank the greatest
protection against the risk of loss from defaulting debtors.
Advances were permitted only against substantial
security. Where
ordinary security might be lacking it was statutorily created. The
Bank was permitted to realise property in satisfaction
of its debts
by an extraordinary procedure that avoids delay. And on insolvency
of the debtor the Bank stood first in line for payment
subject only
to the rights of earlier mortgagees.
[36] In about 2000 the Bank’s
special procedures for recovering debts – created by s 34 in
relation to unsecured debts and
by s 55 in relation to secured
debts – came under scrutiny and were declared to be
constitutionally invalid by the Constitutional
Court.
19
What concerned the court was not the existence of those special
procedures but only that they excluded oversight by the courts.
The
objection, as it was expressed by Makgoro J, was that the procedures
‘allow the Land Bank to take the law into its own hands
and serve
as judge in its own cause’ and to ‘[decide] its own claims and
relief’.
20
So narrow was the objection that the Constitutional Court even
considered merely severing the phrase ‘without recourse to a court
of law’ as an alternative to invalidating the procedures as a whole
but ultimately it preferred the latter course.
21
[37] In the Constitutional Court the
Land Bank accepted that the procedures were invalid. Because it held
other security for advances
that were subject to the s 55 procedure,
and was thus not reliant on that procedure alone to secure the debts,
it did not oppose
the s 55 procedure being declared invalid with
immediate effect. But in relation to the comparable s 34 procedure
the position was
different. Most of the advances that were subject to
that procedure were unsecured and the Bank’s protection against
loss lay only
in its ability to realise the debtor’s property in
accordance with that procedure. If the procedure became invalid
before alternative
legislative protection was substituted the Bank
would be reduced to a concurrent creditor in relation to all the
advances it had
made without security. It goes without saying that
it would also have been reluctant to continue making such advances
until its
position was safeguarded.
[38] For that reason the Bank urged
the Constitutional Court to suspend the declaration of invalidity in
relation to s 34, to enable
Parliament to remedy the matter before
the relevant provisions fell away. The Bank’s dilemma was
summarised by Makgoro J as follows:
22
‘
The Land Bank accepted
the immediate effect of the High Court order of invalidity as it
pertains to s 55 but argued that in respect
of s 34 the
order should be suspended. Specifically, it urged this Court to
suspend the order of invalidity as to s 34(3)(b)
and (5) so as
to preserve the statutory security it enjoys over the proceeds of a
sale in execution. For this submission, the Land
Bank relied on the
fact that, unlike s 55 advances…s 34 loans are generally not
secured by contract. … Section 34 is exceptional
in that it
enables the Land Bank to make short- and medium-term advances to
farmers without pledges or collateral security. The
Land Bank
affirmed that the bulk of its s 34 loans are unsecured by formal
contract, and that these advances were made on the strength
of its
statutory security. It asserted that, should the order be confirmed
with immediate effect, it would lose its only form of
security and be
placed at high risk. This would, in turn, likely impair its capacity
to offer s 34 loans to the detriment of existing
and potential
clients.’
[39] The Constitutional Court acceded
to the Bank’s request and suspended the declaration of invalidity
in relation to the s 34
procedure for two years. The reasons for
acceding to the Bank’s request were expressed as follows:
23
‘
It is reasonable to
believe that, if the statutory security were removed without any
interim remedial measures, the Land Bank would
incur monetary losses.
The Bank may then be forced either to raise interest rates, as the
applicant suggested in argument before
this Court, or decline future
s 34 advances. Even if it is only a perceived risk, the Land
Bank may be compelled to protect
itself from projected losses and
transfer the burden onto its clients. This would undermine the
intended role of the Land Bank to
provide commercially unviable
financial services. Because there exists a potential to impede the
work of the Land Bank and the advantages
it provides to struggling
farmers and the national agricultural sector, it is not unreasonable
in the interests of sound public policy
to preserve its current form
of security under s 34 by suspending the order of invalidity.’
[40] The effect of the suspension was
that unsecured advances that had been made until then, and advances
that were made thereafter
(until the suspension expired) would
continue to be protected by the s 34 procedure. But when the
suspension expired those advances
would be unprotected unless and
until they were protected by alternative legislation.
[41] As it turned out the 1944 Act was
repealed entirely and replaced by the
Land and Agricultural
Development Bank Act 2002
. The 2002 Act was assented to on the day
before the suspension expired, and it was brought into operation to
coincide with the expiry
of the suspension at midnight on 9 June
2002. The effect of the expiration of the suspension was that the s
34 procedure became
invalid with effect from the time the
Constitution came into effect on 4 February 1997.
24
(That is why the Court intended its declaration of invalidity not to
affect ‘attachments and sales in execution already completed’,
25
though that intention seems not to have been expressed in its order.)
[42] It is clear from that history
that one of the purposes of the 2002 Act was to continue to protect
unsecured advances that existed
at midnight on 9 June 2002 (when the
suspension expired) and to protect future advances. Indeed, there
was no reason for the new
Act to have been introduced so as to
coincide with the expiry of the suspension other than to protect
unsecured advances that existed
at that time. But for that the 2002
Act could have been introduced at any time without material
consequences. There can be no doubt,
then, that the ‘mischief’
that the 2002 Act was aimed at was, amongst other things, to protect
the Bank’s past and future advances.
It is against that background
that I turn to the provisions of the 2002 Act.
[43] Far from retreating from its
long-standing practice of giving the greatest protection to the Bank
the legislature increased that
protection. The protection that it
afforded no longer distinguished between secured and unsecured
advances, as it had done under
the 1944 Act. In respect of both it
placed a statutory pledge on agricultural produce and products of
debtors, whether or not the
debts were secured, for so long as the
debtor ‘owes the Bank any money by virtue of an advance in terms of
this Act’ (s 30(1)).
(No such pledge existed immediately before
the 2002 Act took effect.) It also created remedies to protect the
Bank if one of a
number of specified events occurred in respect of
‘advances that [the Bank] has made,’ whether or not the advances
were secured
(s 33(1)). In that respect, too, it increased the
protection of secured advances, because the new remedies entitled the
Bank to
recover the debt from all property of the debtor and not
merely from the security that it held.
[44] The remedies that were created by
s 33 were twofold, depending upon whether moneys had been advanced
and were outstanding, or
whether the Bank had approved the advance of
moneys but the moneys had not yet been advanced. Where the Bank had
approved the advance
of moneys, but they had not yet been advanced,
it was entitled to refuse to advance the moneys (s 33(3)(a)). Where
moneys had been
advanced and were outstanding, various procedures
were created for their speedy recovery, including summary execution
against all
property of the debtor under the supervision of a court
(s 33(3)(b) and following). Those remedies were to accrue to the
Bank upon
the occurrence of one or other specified event. One of the
events that would trigger these remedies was the failure of the
debtor
to pay any sum of money ‘due in respect of any advance made
in terms of this Act’(s 32(a)). The Act also provided for the
continued
validity of advances that had been made before it took
effect (s 52(1)).
[45] It would be anomalous if the Act
created a pledge in respect of a particular advance, but
simultaneously precluded the Bank from
realising the pledge in
accordance with the newly created procedure. It would also be
anomalous if the Act created remedies to protect
a particular
advance, but simultaneously precluded the triggering-events from
occurring in relation to that advance. Those anomalies
are avoided
only if the advances that are subject to the pledge, the advances
that are subject to the new remedies, and the advances
that are
subject to the triggering-events, coincide. Yet in each case the
draftsman used different language to describe the advances
concerned.
The pledge was created in respect of ‘advances in terms of this
Act’. The remedies were created in respect of ‘advances
that [the
Bank] has made’. And the triggering-event is related to ‘advances
made in terms of this Act’.
[46] If those anomalies were not
intended (and there is no reason to think that they were intended)
the draftsman must have used all
three phrases with the same intended
meaning. It is thus clear that the draftsman was neither careful in
his manner of expression
nor consistent in his use of language. I
see no reason in the circumstances to assume that he used the words
‘made in terms of
this Act’ with any precision.
[47] The three phrases that I have
referred to, which must all have been used with the same meaning, are
textually distinguishable
primarily by the use of the phrase ‘in
terms of’ in two of them. That phrase originated with a precise
meaning in mathematics,
but from that technical use, according to
Fowler’s Modern English Usage,
26
‘came at first a trickle and, after the 1940s, a flood of imitative
uses by non-mathematicians’. By 1985 it was described as
‘a vague
all-purpose connective’. It is vague because it conveys no meaning
by itself: the meaning emerges only from the elements
that it
connects. It is ‘all purpose’ because it is used, as is evident
from everyday experience, to connect any manner of things,
even where
there is little discernable connection. Because it is so lacking in
definition, and merely encourages lazy expression,
it is
understandable why the phrase has been said to represent ‘the
lowest point so far in the present degradation of the English
language’.
27
[48] The court below, and my
colleague, construe the phrase as having been used in the present
context to connect, on the one hand,
the Bank’s act in making an
advance and, on the other hand, the authority conferred by the 2002
Act to do so. On that basis they
construe the term to refer to
advances made after the Act took effect, and not to advances that
were made under preceding legislation,
and that were preserved by s
52(1). That is a common use of the phrase in legislation. Indeed,
the draftsman of the 2002 Act used
the phrase as a tool to convey
that meaning in various parts of the Act.
28
But the draftsman also uses the phrase ‘in terms of’ as a tool
for conveying other meanings. He uses it to convey the effect
of a
section,
29
or of a regulation,
30
and also to convey that one thing conforms with another.
31
On one occasion he uses it merely to identify something by reference
to its description elsewhere.
32
I would be most hesitant to infer of a draftsman who uses the phrase
to achieve various effects that he must necessarily have used
it in s
33(2)(a) with the clear and definite purpose contended for by my
colleague.
[49] I pointed out earlier that if the
draftsman meant s 33(2)(a) to have the meaning that the court below
and my colleague contend
for he it must have been calculated by him
to forego the Bank’s security in relation all advances that existed
at the time the
Act took effect. For there could be no reason to
distinguish advances that existed at that time from advances that
were made subsequently
other than to preclude the former from the
remedies of s 33. Indeed, my colleague acknowledges that in
paragraph 14 of his judgment,
in which he points out that the
legislature could hardly have been unaware of the consequences of
limiting the arrear payments contemplated
in s 33(2)(a) to advances
made under the authority conferred by the Act. If that was indeed
the true intention with which the words
– and in particular the
word ‘made – were used in s 33(2)(a) then effect must be given to
that intention. But if the draftsman
did not intend them to have
that meaning, and consequently that effect, but instead used the
words without appreciating that they
would be construed in that way,
then it is his true intention that must prevail and not his
inadvertence.
[50] I have already pointed out that
throughout its history the Bank has had the greatest legislative
protection against loss. Moreover,
the order of invalidity was
suspended precisely to avoid the Bank losing its protection, and was
clearly brought into effect to avoid
that occurring. What is more,
the 2002 Act increased the protection afforded to the Bank, by
creating a pledge when none had existed
before, and by allowing for
execution against all property of even a secured debtor. Against
that background I find it startling
that the draftsman might have
intended to bring about the result that the Bank should be reduced to
a concurrent creditor in respect
of all unsecured advances that
existed when the Act took effect. My colleague finds it conceivable
that the legislature intended
that result. I cannot agree. I can
conceive of no reason at all why it should want that result. But I
must nonetheless examine
the language to establish whether it shows
that that was indeed the result that was intended.
[51] I have already pointed to two
anomalies that would arise if that was the correct construction of s
33(2)(a) but they bear repeating.
[52] The first is that without the
same construction being placed on s 30(1) (where the phrase ‘advances
in terms of this Act’
is used, without express reference to the
‘making’ of the advance) it would mean that the draftsman created
a pledge in relation
to advances that were made before the Act took
effect. Had the draftsman wanted to forego all the Bank’s
protection in relation
to advances that were made before the Act took
effect he would surely not have created a pledge in relation to the
self-same advances.
Least of all would he create such a pledge and
simultaneously exempt the debtor from the remedies of s 33. I see no
reason to reconcile
the two phrases by extending the construction
that has been given to s 33(2)(a) to the advances referred to in s
30(1). That would
mean adding the word ‘made’ in s 30(1) or,
possibly, implying it. If the draftsman had indeed been intent on
protecting debtors
with reference to when the advance was made, and
used the words in s 33(2)(a) with that purpose in mind, he would
surely have been
astute also to expressly relate the Act to the
‘making’ of the advance in s 30(1), and not have left that to
implication. In
my view he used the phrase ‘in terms of’ in s
30(1) merely to convey that he was referring to advances that
conformed with the
provisions of the Act, as Nicholas AJA construed
the phrase in
Oosthuizen v Standard Credit Corporation Ltd,
33
(where the phrase ‘in terms of’ was said by Nicholas JA merely to
connote conformity) and Hathorn J construed it in
C Ltd v
Commissioner of Taxes,
34
(where it was said to be merely descriptive) and not to
distinguish between advances depending upon when they were made.
[53] The second is that unless that
construction of s 33(2)(a) is also extended to s 33(1) it will mean
that the draftsman proclaimed
his intention in s 33(1) to afford a
remedy to the Bank in respect of all advances while simultaneously
intending to deny that remedy
in relation to some advances in the
following subsection. I do not think that could have been his
intention. Had his mind been directed
to bringing about the result
that advances existing when the Act took effect were precluded from
the remedies of s 33 he would undoubtedly
have expressed that clearly
in s 33(1). Again I see no reason to reconcile s 33(1) and s
33(2)(a) by incorporating in the former
the words used in the
subsequent subsection, which is subsidiary to s 33(1). If they are
to be reconciled there is no reason why
the primary provision should
not prevail.
[54] But there are other anomalies
that arise from construing s 33(2)(a) (and the subsections that
follow) as applying only to advances
made after the Act took effect.
I have pointed out that s 33 creates two remedies upon the occurrence
of a triggering-event, depending
upon whether moneys have been
advanced, or whether they have simply been approved but not yet
advanced. In the latter case s 33(3)
entitles the Bank to ‘refuse
to pay any portion of an advance which has been approved, but which
has not yet been paid.’ It
is apparent that the word ‘advance’
is used in that subsection with two simultaneous meanings. It is used
to describe undertakings
that have been given by the Bank to advance
moneys (an ‘advance which has been approved’) as well as to
describe moneys that
have been advanced in consequence of such an
undertaking (an ‘advance…which has not yet been paid’). (In
subsections 30(1)
and 33(1) the word ‘advances’ also has both
those meanings.) From its context it is clear, however, that in s
33(2)(a) the word
‘advances’ is used to refer only to moneys that
have been advanced. It is important to appreciate in what form
unsecured advances
are made.
[55] The authority to make unsecured
advances was first conferred on the Bank by s 34 of the 1944 Act.
That section authorised the
Bank to advance moneys on what were
referred to as ‘cash credit accounts’.
35
A ‘cash credit account’ was ‘an account through which moneys
may, from time to time, during its currency…be drawn from or
repaid
to the Bank so that the total amount owing to the Bank under such
account shall not at any time exceed a maximum amount to
be fixed by
the board’. In effect, it was an overdraft facility, that could be
drawn upon from time to time to meet the costs
of planting and
harvesting crops, and the outstanding balance could be reduced when
funds were available to do so. Section 34 was
substituted in 1975.
The substituted section was in wider terms. It no longer referred
expressly to ‘cash credit accounts’ but
authorised the Bank to
make ‘advances’ to farmers for planting and additional purposes.
There is no reason to think that the
Bank did not continue making
those advances in accordance with its earlier practice, bearing in
mind the seasonal nature of the expenditure
for which the moneys were
advanced. Indeed, the remedy in s 33(3)(a), which was not altered in
1975, contemplates that it would
continue to do so.
[56] Thus it can be expected that at
midnight on 9 June 2002 overdraft facilities had been granted to
farmers running to many millions
of rand, but not all had been drawn
on to the full limit. If s 33(2)(a) is confined to moneys that were
advanced after the Act took
effect the following would occur in
respect of all facilities that existed at the time the Act took
effect: Where the farmer had
drawn on the facility before midnight
on 9 June 2002, and defaulted thereafter, the remedies of s 33 would
not accrue to the Bank.
Notwithstanding that the Bank was then at
its highest risk it would also not be entitled to refuse to allow
further drawings on
the facility. But if a withdrawal was made on the
self-same account after midnight on 9 June 2002 the Bank would be
entitled to invoke
the s 33 remedies, but only in respect of that
withdrawal, and only if the farmer defaulted on repayment of that
withdrawal, and
not on default in respect of a withdrawal made before
the Act took effect. How the Bank is to determine whether the
default relates
to one withdrawal rather than another, and why it
should wish to recover one withdrawal but not another, even though
they are made
from the same account, is difficult to explain.
Indeed, it would not be possible to distinguish between withdrawals
for the purpose
of bringing the remedies into effect. The problem is
compounded in relation to the other triggering-events. That the
draftsman intended
to grant or deny the Bank the remedies of s 33 in
relation to a particular debtor depending upon whether moneys were
drawn before
or after midnight on 9 June 2002 is in my view absurd.
He must have intended the triggering-events in s 33(2) to apply to
all advances,
whether in the form of mere approvals or in the form of
moneys actually advanced, that existed at the time the Act took
effect, and
those that were made subsequently. (Similar anomalies
arise in relation to the pledge that is created by s 30(1), bearing
in mind
that the ‘advance’ that is referred to in that subsection
encompasses an undertaking to advance moneys that might have been
given
before the Act took effect and that is utilised to produce
agricultural produce far into the future.)
[57] All those anomalies are resolved
– and no other anomalies arise – if s 33(2)(a) was intended
to apply to all advances
that existed when the 2002 Act took effect
and to subsequent advances.
[58] I pointed out earlier that where
the true intention, once established, conflicts with the language of
the statute, the language
of the statute must give way. As it was
expressed by Steyn CJ in
Capnoziras v Webber Road Mansions (Pty)
Ltd,
36
in relation to construing a contract, in which the principles are
the same:
‘
While it is of course
true that in construing a contract the Court must give effect to the
grammatical and ordinary meaning of the
words, and that cogent
reasons would be required for doing violence to plain words, it is
likewise settled law that a departure from
such a meaning is
justified where it clearly appears from the contract that the parties
intended a different meaning.’
Similarly in
S v Tieties
,
37
Smalberger JA said the following:
‘
It follows from the
above principles that, whereas a Court may in appropriate cases
depart from the ordinary meaning of the words
used in a statute, or
even modify or alter such words, it may only do so where this is
necessary to give effect to what can with
certainty be said to be the
true intention of the Legislature. Once such intention has been
established the Court should not hesitate
to give effect thereto. The
correct approach in this regard is, in my view, that set out in Steyn
Die Uitleg van Wette
5
th
ed at 68 as follows:
“
Binne die beperkte
gebied waarin die afwykende wetgewende wil wel met sekerheid
vasgestel kan word bestaan daar egter geen genoegsame
rede om terug
te deins vir ‘n woordverandering wat daardie wil sal uitvoer nie.
Die beswaar dat dit nie die taak van die Regbank
is om wette te maak
nie, vloei voort uit ‘n foutiewe opvatting aangaande die werklike
aard van ‘n Wet. Die mening van
Donellus
dat die wil, en nie
die word nie, die Wet maak, lyk gesond. Vir wie daardie mening
onderskryf, tree ‘n Hof nie wetgewend op as
hy woordwysigende
uitleg toepas nie, maar wel wanneer hy ‘n word wat nie die
bedoeling weergee nie en daarom geen Wet is nie, tot
Wet verhef.”
The principles enunciated
above have ben consistently followed and applied in our Courts.
Instances thereof are to be found in the
cases conveniently collected
and referred to in
Steyn
(
op cit
at 58-61 including
footnote 33). It is clear from these principles, and the cases that
the Legislature intended something different
from the ordinary
meaning conveyed by the words used in a statutory enactment, a
departure from such meaning is justified, even if
it involves an
alteration or substitution of the words used. The key requirement is
that the Legislature’s contrary intention must
be clearly
established with regard to such circumstances as the Court may
properly take into account.’
[59] From whichever point one
commences construing the phrase the result is the same: The draftsman
could not have intended to leave
the Bank exposed as a concurrent
creditor in respect of all unsecured advances that were in existence
at the time the Act took effect,
and to have used the words ‘made
in terms of this Act’ in s 33(2)(a) to achieve that purpose. Yet
that could have been the only
reason to use the words with the
meaning contended for by my colleague. To set about achieving that
result would have been in conflict
with consistent practice over
nearly a hundred years, inconsistent with the purpose for which the
invalidity of the s 34 procedure
was suspended, inconsistent with the
additional protection that he introduced into the Act, commercially
insupportable, produces
anomalies, and would leave the Bank with
irresoluble difficulties when it came to applying s 33. In my view
he must have used the
word ‘made’ inadvertently and not with that
meaning in mind. That he used the word inadvertently is not unlikely,
bearing in
mind the lack of precision with which he used language
generally in the Act as a whole. That he did so on this occasion is
abundantly
clear when it is viewed in the context of the Act as a
whole and the clear purpose it was aimed at achieving. And in law,
as Lord
Steyn observed in
R v Secretary of State for the Home
Department, ex parte Daly,
38
– ‘context is everything.’
[60] But that does not end the enquiry
in the present case. All the provisions of the Act indicate that it
was intended to apply prospectively
in relation to advances that
existed at the time it took effect and subsequent advances. Nothing
in the language of s 33(2) suggests
that it was to apply
retrospectively to triggering-events that had occurred before the Act
took effect. Some of those events are
of a continuing nature (in
particular those referred to in subsections (a), (b), (c), (d), and
(g)). If they had commenced before
the Act took effect they would
inevitably continue to occur thereafter, thereby triggering the
remedies of s 33. But other triggering-events
are the occurrence of
a particular event. The event that is material for present purposes
is if ‘the debtor…is sequestrated’.
The clear language of that
subsection contemplates a sequestration after the Act took effect and
there is nothing in the context
to suggest that it was intended to
interfere with rights that had accrued to creditors consequent upon
the
concursus
of an earlier sequestration. If the failure of
the Bank to use the remedies of the earlier Act when the
sequestration occurred has
left it exposed as a concurrent creditor
once the 2002 Act took effect and those remedies fell away, as in my
view it has, that is
no more than an unintended consequence of the
clear intention of the Act. It is for that reason alone that I would
dismiss the appeal.
__________________
R. NUGENT
JUDGE OF APPEAL
HEHER JA
:
[61] I agree with the judgment of
Scott JA but wish to add my own observations concerning the
interpretation of s 33.
[62] First, as to context. Some two
years passed between the declaration of unconstitutionality in
First
National Bank v Land and Agricultural Bank of South Africa Ltd and
others
and the operative date of Act 15 of 2002 (‘the new
Act’). The Bank had ample time to investigate the consequences of
the declaration
upon the future conduct of its business and,
particularly, the extent of its existing commitments and the
sufficiency of security
held by it and the protections provided for
in relation to advances made, deriving, one assumes, from contracts
(since such advances
did not fall ripe and ready from the statute
into the hands of borrowers). Contractual obligations were not
invalidated by the declaration
and, in so far as the terms were
valid, were preserved with full force and effect by s 52(1) of the
new Act. Such contracts would,
of course, continue to govern advances
paid after the operative date of that Act. I have no doubt that it
duly investigated the matter.
If, the Bank regarded itself as
seriously in need of protection or security in respect of its
commitments under such contracts (as
distinct from arrangements
subject to the new Act) it is inconceivable that it would not have
ensured that such protection or security
was provided in unequivocal
terms in the pending legislation. However, the Bank placed no facts
before the court
a quo
which justify any inference that it had
ground to fear such prejudice. The court was not told, as one might
have expected, of the
extent of the Bank’s exposure at the date of
operation of the new Act. In the circumstances it seems to me that
reliance simply
upon the historical protections which have over the
years been included in legislation affecting the Bank is a tenuous
and, perhaps,
unreliable, means of establishing the context of s
33(1) and (2). This is an especially significant matter when, as
Nugent JA demonstrates,
the context defines the intention to an
extent where the words of the statute must be strained to serve its
ends.
[63] Second, as to interpretation of
the text of the new Act. What is certain is that if the real
intention of the legislature was
to apply s 33 to advances made under
the 1944 Act there is no reason why it should not have said so in the
simplest and clearest
terms. What it did however was in my respectful
judgment to disclose the contrary intention with great clarity.
However unsatisfactory
the phrase ‘in terms of’ may on occasions
be, in the combination ‘advances made in terms of this Act’ the
meaning seems to
me to be crystal clear: such advances are those
approved and paid under the authority and in accordance with the
prescriptions of
the Act in which the words appear.
[64] It seems to me, moreover, that
the legislative draftsman has been consistent in his use of language.
The use of the perfect tense
in the phrase ‘in respect of advances
it has made’ in s 33(1) is simply an indication of the historical
fact that the Bank has
made an advance. It does not refer to the time
of the advance whether before or after the commencement of the Act
but it leaves the
matter to be regulated by the existence of the
circumstances envisaged in ss (2) (‘the triggering event’ as
Nugent JA calls
it). One must therefore look to ss (2) in order
to decide whether the circumstances do or do not include an advance
made before
the Act came into operation. It is, with respect, not
accurate to talk of a ‘denial’ of the remedy in ss (1) by what
appears
in ss (2)(a). Nor is s 33(2) ‘subsidiary’ to ss 33(1). On
the contrary, if one is to give proper weight to the words ‘if any
of the circumstances envisaged in subsection (2) exist’ then it is
clear that the apparently unlimited breadth of the phrase ‘in
respect of advances that it has made’ must be subordinated to such
limitations as the legislature has placed on the circumstances
in s
33(2) which trigger the Bank’s right to take action.
[65] Nugent JA assumes that the
draftsman used the expression ‘any advance made in terms of this
Act’ in a sense meaning ‘in
conformity with this Act’, or at
worst, without a real appreciation of its consequences. (I do not
know what sort of advance conforms
to the provisions of the Act. To
which provisions and in what manner is there to be conformity?) But
that seems to secondguess the
intention. The phrase must surely bear
the same connotation (
mutatis mutandis
) as other substantially
similar phrases in other parts of the statute such as ‘made in
terms of this section’ (s 27(2); s 31(2)(a))
and ‘an advance in
terms of this Act’ (s 30(1) and (2); s 33(6)).
[66] Examination of the context shows
that all such uses are prospective in the sense that they can relate
only to acts which may
be done after the commencement of the Act. Why
then must it be inferred that the draftsman became confused when he
arrived at s 33(2)?
It should be pointed out that none of the
sections in which comparable language is used (including s 30)
benefits from the influence
of the allegedly unlimited words of s
33(1) from which Nugent JA draws support for his interpretation.
[67] Nugent JA attaches significance
to the effects of the pledge which is created by s 30. He finds that
unless one reads into the
words ‘an advance in terms of this Act’
a meaning that includes advances made before the Act the efficacy of
the protection will
be substantially eroded. I do not agree. The new
pledge is designed to create security in produce and products
manufactured with
money advanced by the Bank and in produce purchased
with money advanced by the Bank (s 30(1)) as well as in agricultural
produce
held under a silo certificate. Such produce or products are
by their nature constantly being disposed of and replaced. The
duration
of an indebtedness of such a nature arising from advances
made before the Act came into effect must be very limited. The thrust
of
s 30 is, as it states unequivocally, directed to protecting debts
arising from advances made ‘in terms of the Act’ not to advances
made under any repealed legislation. In addition, of course, the
pledge provided a new form of security for the Bank. The effect
of
applying it to advances made prior to the Act would be to impose
ex
post facto
a burden on the recipient of the advance after the
contractual terms have been negotiated. I find no indication in the
Act to suggest
that the legislature intended such a consequence.
[68] In summary, not only is the
assumption of the legislative intention on which Nugent JA grounds
his interpretation unproved but,
in order to satisfy the unprovable,
one is required to give s 33(2) an artificial construction which the
language cannot bear.
___________________
J A HEHER
JUDGE OF APPEAL
SCOTT JA ) Concur
ZULMAN JA )
NAVSA JA )
1
1926 AD 198 202.
2
1950 (4) SA 653 (AD) 662C
3
Cited with approval in
S v Makwanyane
[1995] ZACC 3
;
1995 (3) SA 391
(CC)
para 13.
4
203.
5
228.
6
2 AC 743 763.
7
2006 (2) SA 311
(CC) paras 200 and 201.
8
1995 (3) SA 392
(CC) para 19.
9
662H-663A.
10
664B-F.
11
664F-H.
12
Section 21(1).
13
Sections 28(3) and 32(1).
14
By s 78 of the Insolvency Act 1916 (at least from 1916) and
thereafter by
s 90
of the
Insolvency Act 1936
.
15
Section 26(6)(c) of the Land Banks Acts Further Amendment Act 1922
as amended by s 17 of Act 32 of 1924 and s 7 of Act 12 of 1940.
16
By
s 90
of the
Insolvency Act 1936
.
17
See the analysis of the two sections in
Land and Agricultural
Bank of SA v Janse van Rensburg NO
[2004] 4 All SA 596
(SCA).
18
Section 34(1)
-(4).
1
STYLE="font-size: 8pt">
19
First National Bank of SA Ltd Land and Agricultural Bank of
South Africa Ltd and Others; Sheard v Land and Agricultural Bank of

South Africa and Another
[2000] ZACC 9
;
2000 (3) SA 626
(CC).
20
Para 5.
21
Para 15.
22
Para 7.
23
Para 11.
24
Minister of Health v New Clicks South Africa (Pty) Ltd
(2),
unreported judgment of the Constitutional Court in Case number CCT
59/04 decided on 30 September 2005, para 17.
25
Para 18.
26
3
rd
ed by RW Burchfield 406
27
Fowler, page cited.
28
See, for example the definition of ‘Chief Executive Officer’
in
s 1
, which refers to the person ‘appointed in terms of
s
17(1)’.
By that he means that the person has been ‘appointed in
the exercise of the authority conferred by
s 17(1)’.
The meaning
emerges from the nature of the two elements that are connected, in
this case the empowering section, on the one hand,
and the act that
has followed from the exercise of that power, on the other. Other
examples appear from
s 2(1)
,
s 15(1)(b)
,
s 31(2)(a).
29
">
29
See
s 4(1)
, which refers to a person who is not ‘disqualified in
terms of
s 10’
, by which is meant a person who
s 10
does not
disqualify’. Similarly
s 9(2)(b).
30
">
30
See
s 49
(1)(c), which refers to anything that is ‘prohibited in
terms of any regulation’, by which is meant anything ‘that a
regulation
prohibits’.
31
See
s 30
(2), which refers to ‘produce held…in terms of a silo
certificate’, by which is meant that his holding conforms with a
silo
certificate.
32
See
s 31(7)
, which refers to ‘liability which attaches…in
terms of that certificate’, by which is meant only that the extent
of his liability
is referred to in the certificate.
33
[1993] ZASCA 59
;
1993 (3) SA 891
(AD).
34
1962 (1) SA 42
(SR) 45C-D
35
Section 34 of the
1944 Act.
36
1967 (2) SA 425
(AD) 434A-B.
37
[1990] ZASCA 4
;
1990 (2) SA 461
(AD) 464A-F.
38
[2001] UKHL 26
;
[2001] 3 All ER 433
(HL) at 447a