First Rand Ltd. t/a Rand Merchant Bank and Another v Scholtz NO and Others (373/06) [2006] ZASCA 99; [2006] SCA 98 (RSA); 2008 (2) SA 503 (SCA) ; [2007] 1 All SA 436 (SCA) (9 September 2006)

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[2006] ZASCA 99
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First Rand Ltd. t/a Rand Merchant Bank and Another v Scholtz NO and Others (373/06) [2006] ZASCA 99; [2006] SCA 98 (RSA); 2008 (2) SA 503 (SCA) ; [2007] 1 All SA 436 (SCA) (9 September 2006)

Links to summary

THE SUPREME COURT OF
APPEAL
OF SOUTH
AFRICA
Reportable
Case no: 373/05
In the matter between:
FIRST RAND LIMITED t/a
RAND MERCHANT
BANK
FIRST APPELLANT
BLYDE
RIVER WATER UTILITY
COMPANY (PTY) LTD
SECOND APPELLANT
and
DIEDERICK ARNOLDUS
SCHOLTZ N O FIRST RESPONDENT
GERT JACOBUS SCHOLTZ N
O SECOND RESPONDENT
PETRUS PAULUS ROOS
SCHOLTZ N O THIRD RESPONDENT
PIETER CHRISTIAAN
BARWISE FOURTH RESONDENT
________________________________________________________________
Coram: HARMS, FARLAM,
NUGENT JJA COMBRINCK
et
MALAN AJJA
Date of hearing: 24
August 2006
Date of delivery: 11
September 2006
Summary:
Mandement
van spolie – statutory water rights – contractual use of pipeline
– whether closure of pipeline spoliation
Neutral citation: This judgment may be referred to as
First Rand Ltd v Scholtz NO [2006] SCA 98 RSA
JUDGMENT
________________________________________________________________
MALAN AJA/….
MALAN AJA:
[1]
This is an application for leave to appeal which has been referred
for oral argument in terms of s 21(3)(c)(ii) of the Supreme
Court Act
59 of 1959 against the order of Bertelsman J; (1) declaring that the
termination of the water supply of the respondents
through the Lower
Blyde River Pipeline Network by the appellants on 31 December 2004
constituted a spoliation; (2) declaring that
any such future
termination without a final order of court would constitute a
spoliation; (3) interdicting the appellants from terminating
the said
water supply without a final court order; and (4) ordering the
appellants to pay the costs of the application. Bertelsman
J refused
leave to appeal, hence this application.
[2] The pipeline is a
steel and concrete construction some 130 kilometers long distributing
water from the Blyde River Dam through
an irrigation network to
farmers and other users over an area of about 460 square kilometers.
The first appellant, First Rand Ltd,
financed the construction of the
pipeline and the second appellant, Blyde River Water Utility Company
(Pty) Ltd, a wholly-owned subsidiary
of one of the first appellant’s
associated companies, is in control of the pipeline, its
infrastructure, operation and maintenance.
The first three
respondents are the trustees of a trust (the ‘Trust’). Both the
Trust and the fourth respondent own properties
in the area serviced
by the pipeline and use the water for their farming operations.
[3] The flow of water
from the pipeline to the individual farmers is controlled from a
control room situated close to the Blyde River
Dam wall and
containing an isolating valve. No water can be released into the
pipeline when the valve is closed. The second appellant
controls the
operation of the valve. On each of the properties provided with water
through the pipeline an irrigation off-take houses
the equipment
necessary to control the flow of water to those properties. The
supply of water to each of them is regulated by control
valves in the
irrigation off-takes which can be controlled either manually or
remotely by telemetry signals. Some time after midnight
on 31
December 2004 the water supply to the respondents was cut off by the
appellants’ shutting off the control valves in the irrigation
off-takes leading to their properties.
[4] By agreement
reached on the next day the supply of water through the pipeline to
the properties of the respondents was restored
pending resolution of
the application by the respondents for restoration
ante omnia
.
The respondents have as a consequence amended their notice of motion
to seek, not a restoration order, but an order declaring that
the
conduct of the appellants constituted spoliation. The essence of the
relief sought in prayer 1 therefore remained the same, ie
whether the
appellants’ conduct in terminating the water supply on 31 December
2004 constituted spoliation. The respondents have
since the filing of
their practice note and heads of argument abandoned paragraphs 2 and
3 of the order appealed against. The matter
is of considerable
practical importance to the parties and counsel for the respondents
correctly did not proceed with the argument
that the appeal would
have no practical effect or result as envisaged by s 21A of the
Supreme Court Act 59 of 1959.
[5] The respondents are
members of the Blyde River Water Users Association (the ‘WUA’),
the successor to the Blyde River Irrigation
Board which is
responsible for the supply of water to the respondents.
1
Before the construction of the pipeline the Irrigation Board and its
successor, the WUA, supplied water to those entitled to it by
means
of a canal system and, to that effect, servitudes were registered in
favour of the Irrigation Board over the land of the water
users.
Because the canal system was inefficient the Irrigation Board in
March 1995 initiated a project to construct an irrigation
network by
means of the pipeline, and the first appellant was approached by the
Department of Water Affairs and Forestry to finance
it. The Minister
approved the construction of the pipeline and first appellant
provided the finance for it.
[6] To give effect to
the project a series of agreements was entered into between the first
appellant and the Irrigation Board: a
partnership agreement between
them; a construction agreement in terms of which the Irrigation Board
undertook to oversee the construction
of the pipeline as agent for
the partnership; a works lease agreement in terms of which the
completed works were leased to the Irrigation
Board against periodic
rental payments; and a land lease agreement in terms of which
servitudes over the land of the water users
in favour of the
Irrigation Board were leased to the partnership. For reasons that are
not material the Irrigation Board withdrew
from the project and the
first appellant resolved to continue with the project as principal,
completed the construction of the pipeline
and appointed consulting
engineers to operate it. The right of the appellants to possess,
operate and occupy the pipeline as well
as the validity of the
agreements in terms of which the pipeline was constructed and its
ownership are the subject of other contested
proceedings between the
parties.
[7] From March 2003
water was supplied to certain farmers within the irrigation area by
way of the pipeline pursuant to interim agreements
concluded by the
first appellant with each of them. In January 2004 eighty farmers,
including the Trust and the fourth respondent,
each concluded an
agreement known as the Lower Blyde River Irrigation Pipeline Water
Conveyance Agreement with the second appellant
governing the
conveyance of water to them against payment of a fee for the period
until 31 December 2004. The agreements expired
on that day. Because
the parties were unable to agree on the fee payable for the
conveyance of water for 2005 the appellants indicated
that they would
cease such deliveries from 1 January 2005 and indeed did so after
midnight on 31 December 2004.
[8] The relevant terms
of the Water Conveyance Agreement are the following:
‘
3.
Use
3.1 The
water user requires the use of the pipeline for the conveyance by the
water user for primary purposes on the farm/property
specified in the
schedule in respect of that number of hectares specified in the
schedule (“the listed hectarage”).
3.2 The
water utility company [the second appellant] agrees, subject to the
terms and conditions set out in this agreement, to make
use of the
pipeline available to the water user for conveyance by the water user
of the water which the water user requires in the
manner and to the
property referred to in clause 3.1, and the water user accepts such
use from the water utility company.
4.
Duration
The right
of the water user to use the pipeline for the conveyance of water by
the water user in terms of this agreement -
shall commence on 1 January 2004 (“the commencement
date”);
shall, unless terminated earlier in terms of this
agreement, terminate on 31 December 2004.
5.
Consideration
5.1 As
consideration for the use by the water user of the pipeline for the
conveyance of water by the water user in terms of this
agreement, the
water user shall pay to the [second appellant] R 193 per hectare of
the listed hectarage per month.’
[9] The respondents
allege that they or their predecessors enjoyed rights to water under
the repealed Water Act 54 of 1956 and that
their properties were
reflected in the schedule drawn by the Irrigation Board as containing
rateable areas in respect of the Board’s
irrigation district and
registered in terms of s 88 of that Act.
2
These properties were subject to water charges levied by the
Irrigation Board on the basis of their total rateable areas. The
Minister
of Water Affairs determined in 1957 that 9900 cubic metres
water per hectare could be supplied annually in respect of each
rateable
hectare of land on the properties in question.
3
These rights, they allege, were ‘subsumed’ into rights under the
National Water Act 36 of 1998
and their use of such water was
authorized in terms of
s 22(1)(a)(ii)
read with s 32 of the 1998 Act
as a ‘continuation of an existing lawful water use’.
4
[10] The respondents
allege that interference with these rights, their ‘statutory water
rights’, constituted a spoliation and
that the supply of water to
their properties is an incident of the occupation and farming
operations and therefore incidental to
the physical occupation of the
properties. They aver that they had undisturbed access to delivery of
the water from the Blyde River
and Blyde Dam or
quasi possessio
of the water supply through the pipeline and need not in spoliation
proceedings establish the rights relied upon nor show that they
had a
right to use the pipeline.
Quasi possessio
, they submitted, is
established by the physical use of the water: the water flows in the
pipeline by gravitation and, provided the
pipeline remains open,
there is a continuous supply of water to their properties.
[11] Bertelsman J
upheld the respondents’ contentions and said:
‘
Regarding
the nature of the [respondents’] rights, Mr Maritz SC emphasized on
behalf of the [respondents] that their water rights
include the right
to the use of the water. This in turn depends upon the fact that
applicants’ farms have been registered under
the irrigation scheme
aforesaid.
The right
to the use of the water is clearly associated with and is dependent
upon the possession of the land that has been registered
for
irrigation.
The
right to water that applicants enjoy, however, defined, is an
incident of the possession of each farm as defined in
Impala Water
Users Association v Louwrens NO and Others
[2004] 2 All SA 476
(SCA).
Applicants’
right to water is not only contractual. Indeed had they not possessed
land registered in terms of the irrigation scheme,
first respondent
would not have been interested in entering into any contract with the
applicants. Applicants’ rights to water
are therefore of a
quasi-possessory
nature and capable of protection by the
mandement of spolie
.’
He characterized the
respondents’ entitlement as a quasi possessory right to the
continued supply of water. The issue, he said,
was whether the rights
of the respondent consisted of more than a contractual claim for the
delivery of water through the pipeline.
In finding for the
respondents he remarked that it was common cause that the respondents
had some or other right to water against
the government (and against
the WUV since early 2002) although the appellants denied knowledge of
the exact nature of the rights.
[12] The
mandement
van spolie
is a remedy to restore to another
ante omnia
property dispossessed ‘forcibly or wrongfully and against his
consent’.
5
It protects the possession of movable and immovable property as well
as some forms of incorporeal property.
6
The
mandement van
spolie is available for the restoration of
quasi possessio
of certain rights and in such legal
proceedings it is not necessary to prove the existence of the
professed right: this is so because
the purpose of the proceedings is
the restoration of the
status quo ante
and not the
determination of the existence of the right.
7
The
quasi possessio
consists in the actual exercise of an
alleged right
8
or as formulated in
Zulu v Minister of Works, Kwazulu, and others
9
in ‘die daadwerklike uitoefening van handelinge wat in die
uitoefening van sodanige reg uitgeoefen mag word’.
[13] The
mandement
van spolie
does not have a ‘catch-all function’ to protect
the
quasi possessio
of all kinds of rights irrespective of
their nature.
10
In cases such as where a purported servitude is concerned the
mandement
is obviously the appropriate remedy,
11
but not where contractual rights are in dispute
12
or specific performance of contractual obligations is claimed:
13
its purpose is the protection of
quasi possessio
of certain
rights. It follows that the nature of the professed right, even if it
need not be proved, must be determined or the right
characterized to
establish whether its
quasi possessio
is deserving of
protection by the
mandement
.
14
Kleyn
15
seeks to limit the rights concerned to ‘gebruiksregte’ such as
rights of way, a right of access through a gate or the right to
affix
a name plate to a wall
16
regardless of whether the alleged right is real or personal.
17
That explains why possession of ‘mere’ personal rights (or their
exercise) is not protected by the
mandement
.
18
The right held in
quasi possessio
must be a ‘gebruiksreg’
or an incident of the possession or control of the property.
[14] This is
illustrated by
Telkom SA Ltd v Xsinet (Pty) Ltd
19
a case that concerned Telkom’s supply of a telephone and bandwidth
system to Xsinet to enable the latter to conduct its business
as an
internet service provider. Telkom alleged that Xsinet was indebted to
it in respect of one of the other services provided by
it and
disconnected Xsinet’s telephone and bandwith system. There was no
suggestion that Telkom had interfered with Xsinet’s
physical
possession of its equipment nor that it had entered onto the premises
of Xsinet to do so. Jones AJA
20
did not accept that the use of the bandwith and telephone services
constituted an incident of the possession of the property as the
use
of water and electricity may in certain circumstances be even though
these services were used on the premises.
21
There was no interference with Xsinet’s physical possession of the
equipment and there was no evidence that it was ever in possession
of
any of the mechanisms by which the equipment was connected to the
internet. He remarked
22
that it would be both artificial and illogical to conclude that the
use of the telephone, lines, modems or electrical impulses gave
Xsinet possession of the connection of its corporeal property to
Telkom’s system. He rejected counsel’s contention that the
quasi
possessio
of the right to receive Telkom’s services could be
restored by the
mandement
. This right, he said,
23
‘
is
a mere personal right and the order sought is essentially to compel
specific performance of a contractual right in order to resolve
a
contractual dispute. This has never been allowed under the mandement
van spolie and there is no authority for such an extension
of the
remedy.’
[15]
Impala Water
Users Association v Lourens NO and Others
24
was an appeal against a decision of the High Court granting a
spoliation order directing the appellant to remove locks, chains and
welding works from certain sluices and to restore the flow of water
to reservoirs on the respondents’ farms. There was a dispute
between the parties concerning the legality of certain water charges
assessed by the appellant and relating to the costs of financing
the
construction of a dam. Although proceedings to recover these charges
were pending the appellant decided to exercise its powers
in terms of
s 59(3)(b)
of the
National Water Act 36 of 1998
and restricted the
flow of water to the respondents by locking the sluices. The first
question the court had to consider was whether
the rights on which
the respondents relied were merely contractual. Farlam JA said:
25
‘
[18]
The first question to be considered, in my view, is whether the
rights on which the respondents relied were merely contractual
and
whether the
Xsinet
decision (
supra
) can be applied. In
my opinion, it is not correct to say that the rights in question were
merely contractual. It will be recalled
that the respondents or the
entities they represent were all entitled to rights under the
previous Water Act 54 of 1956, which rights
were registered in terms
of the schedule prepared under section 88 of that Act. These rights
were clearly not merely personal rights
arising from a contract. The
individual respondents and the entities represented by the other
respondents all automatically, in terms
of paragraph 7.2 a of the
appellant’s constitution, became founding members of the appellant.
It is clear therefore that the rights
to water which belonged to the
individual respondents and the entities represented by the other
respondents, in so far as they were
replaced by or, perhaps more
accurately put, subsumed into rights under the Act, cannot be
described as mere personal rights resulting
from contracts with the
appellant. It follows that, on that ground alone, the
Xsinet
decision . . . is not applicable.
[19] The
facts of this case also differ in another material respect from those
in the
Xsinet
case. There it was held . . . that the
respondents’ use of the bandwidth and telephone services in
question did not constitute
an incident of its use of the premises
which it occupied, with the result that the disconnection by Telkom
of the telephone lines
to Xsinet’s telephone and bandwidth systems
did not constitute interference with Xsinet’s possession of its
equipment. In the
present case, however, the water rights interfered
with were linked to and registered in respect of a certain portion of
each farm
used for the cultivation of sugar cane, which was dependent
on the supply of the water forming the subject matter of the right.
The
use of the water was accordingly an incident of possession of
each farm which was, in my view, interfered with by the actions of
the appellant’s servants.’
[16] The respondents’
rights, whether they be described as statutory rights to water or
rights to a water supply or as
quasi possessio
of a water
supply, may well be incidents of their possession or control of their
properties. However, what the respondents were dispossessed
of was
not any of these rights but of an erstwhile contractual right that
expired on 31 December 2004 against the appellants to convey
their
water entitlements. This right was and is no incident of the
possession or control of their properties but a contractual right
that came about long after the respondents became entitled to their
statutory water rights. This conclusion is illustrated by the
very
contentions advanced by the respondents in their founding affidavit
where they refer not only to the agreements entered into
with the
second appellant for the conveyance of water that expired on 31
December 2004 but also to water supply agreements they have
concluded
subsequently with the WUV and effective from 1 January 2005. The
source of any rights the respondents may have had to the
use of the
pipeline is contract. They were deprived not of the
quasi
possessio
of their statutory water rights which they still have
and may exercise in any manner they wish but of an expired
contractual right
for the conveyance of water through the pipeline.
Any obligations the appellants had to the respondents and any rights
the latter
had in this respect terminated when the Water Conveyance
Agreements with them expired. These rights, arising from contract,
are not
incidents of the possession or control of their properties
but were mere contractual rights relating to the use of the pipeline.
The parties could just as well have agreed that the appellants would
convey water to the respondents by means of a fleet of water
trucks.
Neither the use of the pipeline nor use of the fleet of trucks would
have been an incident of the possession or control of
the properties
of the respondents.
[17] It follows that
leave to appeal should be granted and the appeal upheld.
The following order is
made –
(1) the application for
leave to appeal is granted and the appeal is upheld with costs,
including the costs of two counsel;
(2) the order of the
court a quo is set aside and replaced with the following order
‘The application is dismissed with costs, including the costs of
two counsel.’
FR Malan
Acting Judge of Appeal
CONCUR:
HARMS JA
FARLAM JA
NUGENT JA
COMBRINCK AJA
1
Section
98(7)
of the
National Water Act 36 of 1998
provides that ‘[u]pon
the publication of a notice under subsection (6), every property,
right and liability of the board becomes
a property, right and
liability of the relevant water user association’. The Irrigation
Board was transformed into the WUA by
GN 42,
GG
23037, 25
January 2002.
2
See
s 88(1)(b)
and (4) of Act 54 of 1956.
3
GN
1207,
GG
10758, 5 June 1987.
4
Section
32(1) defines ‘existing lawful water use’ as a water use ‘(a)
which has taken place at any time during a period of
two years
immediately before the date of commencement of this Act and which –
(i) was authorized by or under any law which was
in force
immediately before the date of commencement of this Act . . .’.
Section 34 provides that (1) ‘[a] person, or that
person’s
successor-in-title, may continue with an existing lawful water use,
subject to – (a) any existing conditions or obligations,
attaching
to that use . . .’.
5
Nino
Bonino v De Lange
1906 TS 120
122 approved in
Bon Quelle (Edms) Bpk v Munisipaliteit van Otavi
1989 (1) SA 508
(A) 511H–512B.
6
Nino Bonino v De Lange
above
122;
Tigon Ltd v Bestyet Investments (Pty) Ltd
2001 (4) SA
634
(N) 640H–642D.
7
Bon Quelle
513B–516C approving the view of Duard Godfried Kleyn
Die
mandement van spolie in die Suid-Afrikaanse reg
LLD dissertation
University of Pretoria (1986) p 395 that to require proof of the
right would entail ‘dat die hof op die meriete
van die geskil sal
moet ingaan, wat ontoelaatbaar is in die lig van die karakter van
die mandement as besitsremedie.’ Also
Van Wyk v Kleynhans
1969
(1) SA 221
(GW) 223D-H.
8
Bon Quelle
514I.
9
1992
(1) SA 181
(D) 188C.
10
Duard
Kleyn ‘Possession’ in Reinhard Zimmermann and Daniel Visser
Southern Cross: Civil Law and Common Law in South Africa
(1996) 819 at p 830; JC Sonnekus ‘Mandement van spolie en
ongeregistreerde serwitute vir water’
2006
TSAR
392
p 400;
MJ de Waal ‘Naidoo v Moodley
1982 4 SA 82
(T)’
1984 (47)
THRHR
115
p 118.
11
Bon Quelle
514D-E
and see
Zulu v Minister of Works Kwazulu
188D.
12
Parker v Mobil Oil of Southern
Africa (Pty) Ltd
1979 (4) SA
250
(NC) 255B-C;
Rooibokoord Sitrus (Edms) Bpk v Louw’s Creek
Sitrus Koöperatiewe Maatskappy Bpk
1964 (3) SA 601
(T)
607A-B. Cf
Slabbert v Theodoulou and another
1952 (2) SA 667
(T).
13
Kotze v Pretorius
1971
(4) SA 346
(NCD) 350D-E.
14
See
the approach of PC Combrinck J in
Tigon Ltd v Bestyet Investments
(Pty) Ltd
2001 (4) SA 634
(N) 642D–643C.
15
Die mandement van spolie in die
Suid-Afrikaanse reg
above
393-394; Kleyn ‘Possession’ above 830 and PJ Badenhorst, Juanita
M Pienaar, Hanri Mostert assisted by Marisa van Rooyen
Silberberg
and Schoeman’s The Law of Property
4 ed (2003) p 275.
16
Shapiro v South African Savings
& Credit Bank
1949 (4) SA
985 (W) 991.
17
Duard
Kleyn ‘Ntshwaqela v Chairman Western Cape Regional Services
Council
1988 3 SA 218
(K)’ 1989
De Jure
154 pp 162-163.
18
Impala
Water Users Association v Lourens NO and others
[2004]
2 All SA 476
(SCA) 481
a-b
;
Telkom SA Ltd v Xsinet (Pty)
Ltd
2003 (5) SA 309
(SCA) 314C-D;
Zulu v Minister of Works,
Kwazulu, and Others
1992 (1) SA 181
(D) 190F-I;
Plaatjie and
Another v Olivier NO and Others
1993 (2) SA 156
(O) 159J–160G.
19
2003
(5) SA 309
(SCA).
20
At
314B-C para 12.
21
See
eg
Naidoo v Moodley
1982 (4) SA 82
(T) and the discussion by
JC Sonnekus ‘Mandement van spolie - Kragtige remedie by
kragonderbreking’
1985
TSAR
331
p 337 and MJ de Waal
‘Naidoo v Moodley
1982 4 SA 82
(T)’ 1984 (47)
THRHR
p 115
and cf
Shoprite Checkers Ltd v Pangbourne Properties Ltd
1994
(1) SA 616
(W) 620E-G.
22
At
314E-F para 13.
23
At
314G-H para 14.
24
[2004]
2 All SA 476
(SCA).
25
At
480
f
-481
a
.