Brief Summary

Contract — Rental agreement — Validity of rental agreement for operating permit — Applicant sought return of operating permit from Respondent, who failed to pay rental as per agreement — Respondent denied existence of rental agreement and claimed ownership through purchase — Court found rental agreement invalid under Section 77(1) of the National Land Transport Act, rendering Respondent's claims without legal force — Specific performance not granted due to the invalidity of the agreement.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter was an application (motion proceedings) in the Free State High Court, Bloemfontein, in which the applicant sought specific performance and ancillary relief directing the respondent to deliver and co-operate in the transfer of a taxi operating permit (operating permit number LFSLB12030/06) back into the applicant’s name, failing which the sheriff and registrar were to be authorised to act in the respondent’s stead.

The parties were Tyaleni Lawrence Vries (applicant) and Ndleleni Abel Ali (respondent). The judgment was delivered by Mhlambi AJ on 7 March 2013, after the matter was heard on 22 January 2013.

Procedurally, the application was decided on the papers. A key procedural question was whether alleged disputes of fact required a referral to oral evidence, which the respondent sought. The court ultimately determined that the matter could be resolved on affidavit evidence without oral testimony.

The general subject-matter concerned competing claims to entitlement in relation to a taxi operating permit and the respondent’s alleged refusal to return the permit and to sign transfer documentation. A further dimension was the legal effect of section 77(1) of the National Land Transport Act 5 of 2009, which prohibits the hiring out of operating licences/permits and renders transactions concluded in contravention invalid.

2. Material Facts

The court accepted that on 28 August 2008 the applicant purchased the operating permit from Ntselene Constancia Desemele for R15 000. This was treated as the foundational transaction from which the applicant’s entitlement flowed.

It was alleged that on 15 December 2008 the applicant and respondent concluded a written agreement in terms of which the respondent would rent the permit from the applicant for R2 000 per month, with an express term that the permit would be changed back into the applicant’s name if the applicant required it or if the respondent failed to pay. It was further alleged that the respondent failed to pay as agreed. The court, however, ultimately treated the rental arrangement as legally problematic (given section 77(1) of the Act), and did not grant relief on the basis that such hiring out could be enforced.

During July 2011, the applicant, respondent, and Alwyn Mtwazi allegedly entered into a verbal arrangement relating to rental payments flowing through to Mtwazi. The respondent allegedly underpaid (paying R1 000 for August, September, and October 2011). The applicant stated that he required the permit in order to have his taxi scrapped and that despite requests the respondent failed to return the permit.

The respondent’s central factual stance in answer to the application was that he denied the rental agreement(s) and contended instead that Desemele sold the permit to him on 25 November 2008, relying on an affidavit by Desemele dated 25 November 2008 stating: “I declare that I willingly transfer my permit to: Ali Ndleleni Abel”. He further asserted that he applied for transfer into his name and that the licence was issued to him on 26 March 2009. He also denied that he had signed the written annexures relied on by the applicant, alleging falsification.

In reply, the applicant produced confirmatory affidavits from the other parties and witnesses. Crucially, Desemele confirmed that she had sold the permit to the applicant for R15 000, denied having sold it to the respondent, and explained that her affidavit of 25 November 2008 was signed during negotiations leading to the arrangement reflected in the documents relied upon by the applicant, rather than evidencing a sale to the respondent. The court treated Desemele’s evidence as materially undermining the respondent’s version.

A decisive development occurred in oral argument when respondent’s counsel conceded that the respondent no longer relied on a sale agreement, but rather on a purported donation or some other form of alienation. The court treated this concession as fatal to the respondent’s pleaded defence, and as undermining any genuine dispute requiring oral evidence.

3. Legal Issues

The court was required to determine, in substance, whether the respondent was obliged to return the operating permit to the applicant and to sign the transfer documentation, and whether the applicant had established an entitlement to specific performance compelling those acts (with substitutionary authority for the sheriff and registrar in case of non-compliance).

A central legal question concerned the effect of section 77(1) of the National Land Transport Act 5 of 2009, namely whether agreements amounting to the hiring out of an operating permit could found enforceable rights, and whether a court could grant relief premised on such a transaction.

The dispute also raised a procedural issue: whether a real, genuine dispute of fact existed on the affidavits such that the matter should be referred to oral evidence, or whether the court could determine the application on the papers, including by rejecting denials considered far-fetched or untenable in accordance with motion-proceedings principles.

In character, the dispute involved both questions of fact (who acquired rights to the permit, whether the respondent signed the relevant documents, and whether he paid Desemele) and the application of law to fact (the impact of statutory invalidity under section 77(1), and whether the applicant could nonetheless obtain specific performance based on other legally cognisable grounds, including transfer under section 58).

4. Court’s Reasoning

The court approached the matter by first assessing the basis on which the applicant sought specific performance. It expressed difficulty with reliance on the alleged rental arrangement because section 77(1) prohibits the hiring out of an operating licence/permit, and section 77(1) read with section 77(4) (as quoted in the judgment) renders transactions concluded in contravention invalid and of no legal force. The court reasoned that enforcing the rental agreement would amount to endorsing a nullity. On this footing, the court held that specific performance could not be granted on the rental-agreement ground alone.

In dealing with the applicant’s reliance on Khokho v Makgetla and Others (3049/2012) [2012] ZAFSHC 139 (8 August 2012), the court distinguished that matter. It noted that the learned judge there did not pronounce on the effect of section 77(1) on hiring-type transactions and that the issues in Khokho concerned acceptance of an offer to cancel a sale agreement. The present case, by contrast, required direct engagement with section 77(1) and the enforceability of a rental arrangement.

The court then evaluated the respondent’s defence that Desemele had sold (or transferred) the permit to him, and his denial that he signed the documents relied upon by the applicant. The court placed weight on the confirmatory affidavit by Desemele, which (as summarised by the court) confirmed the sale to the applicant, denied any payment by the respondent, denied any sale to the respondent, and explained the context of her 25 November 2008 affidavit. The court regarded this evidence as dispelling doubts about the applicant’s purchase and as undermining the respondent’s claim to have acquired rights.

A significant evaluative step in the court’s reasoning was its treatment of the respondent’s counsel’s concession that the respondent no longer relied on a sale, but on an uncertain notion of donation or other alienation. The court agreed with the applicant’s submission that the respondent’s defence had “fallen away” in consequence, and considered the remaining position insufficient to generate a genuine factual contest.

On the procedural question of referral to oral evidence, the court applied the established motion-proceedings approach. It reiterated that courts must scrutinise alleged disputes of fact to prevent fictitious disputes from delaying relief, and that denials which do not raise a real, genuine and bona fide dispute may be rejected on the papers, particularly where the respondent’s version is far-fetched or untenable. Applying these principles, the court held that the matter could be determined without oral evidence.

Finally, having rejected enforcement based on the rental agreement, the court nonetheless concluded that the applicant had shown entitlement to relief grounded in the applicant’s purchase from Desemele and the respondent’s participation in subsequent arrangements, and that the applicant was entitled to have the permit transferred into his name in terms of section 58 of the National Land Transport Act 5 of 2009. The court held that, on the strength of Desemele’s evidence and the contents of annexure “C”, the applicant was entitled to succeed on specific performance on that basis.

5. Outcome and Relief

The court granted the application. It ordered the respondent to deliver the operating permit (number LFSLB12030/06) to the applicant within 10 days, and to sign all documents necessary to transfer the permit back into the applicant’s name within 10 days of request by the applicant’s attorney. It further authorised the sheriff to attach and return the permit should the respondent fail to comply, and authorised the registrar to sign transfer documents should the respondent fail to do so.

The court also ordered the respondent to pay the costs of the application, by granting prayers 1 to 5 of the notice of motion.

Cases Cited

Peterson v Cuthbert & Co, Ltd 1945 AD 420

Mahomed v Malk 1930 TPD 615

Hilleke v Levy 1946 AD 214 at 219

Wiese v Joubert 1983 (4) SA 182 (O)

Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A)

Khokho v Makgetla and Others (3049/2012) [2012] ZAFSHC 139 (8 August 2012)

Legislation Cited

National Land Transport Act 5 of 2009 (sections 58 and 77(1))

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that an agreement amounting to the hiring out of an operating permit is invalid and unenforceable in light of section 77(1) of the National Land Transport Act 5 of 2009, and that specific performance could not be granted on the basis of such a rental agreement alone.

It further held that the respondent’s opposition did not raise a real, genuine dispute of fact requiring referral to oral evidence, particularly in light of the confirmatory affidavits (including Desemele’s) and the concession abandoning reliance on an alleged sale to the respondent.

On the accepted facts and affidavits, the court held that the applicant had purchased the permit from Desemele and was entitled to relief compelling the respondent to deliver the permit and sign documents required to effect transfer in terms of section 58 of the Act, with substitutionary authority granted to the sheriff and registrar in the event of non-compliance, and with costs awarded against the respondent.

LEGAL PRINCIPLES

Section 77(1) of the National Land Transport Act 5 of 2009 prohibits the ceding or alienation of operating licences or permits except through a statutory transfer mechanism (including transfer under section 58) and expressly prohibits the hiring out of such operating authority; a transaction concluded in contravention is invalid and has no legal force, and a court will not enforce it through specific performance.

In motion proceedings, a court must determine whether an alleged dispute of fact is real, genuine and bona fide and incapable of fair resolution on affidavit; a referral to oral evidence is not warranted where denials are not genuine or where the respondent’s version is far-fetched or clearly untenable, in which event the court may decide the matter on the papers applying the established principles associated with Plascon-Evans and related authorities.

Where an applicant establishes entitlement to performance on a legally cognisable basis, and the statutory framework contemplates transfer through prescribed procedures (such as transfer under section 58), a court may grant specific performance compelling co-operation in the transfer process, including authorising substitute signature or attachment mechanisms to ensure efficacy of the order if the respondent refuses to comply.

Vries v Ali (3684/2012) [2013] ZAFSHC 38 (7 March 2013)