Brief Summary

Execution — Sale in execution — Interpretation of settlement agreement — Applicants sought order for Sheriff to sell property to satisfy arbitration award — First and Second Respondents opposed, claiming ownership rights and requiring their consent for sale — Court interpreted Clause 2.10 of the agreement, concluding it granted Applicants authority to enforce sale terms — Respondents’ arguments regarding ownership rights and lis pendens rejected — Court held that Applicants were entitled to sell property as stipulated in the agreement, affirming the validity of the order sought.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings were brought as a motion application in which the applicant sought enforcement-related relief flowing from an earlier dispute resolved through arbitration and a settlement agreement. The applicant asked the court to authorise the Sheriff to sell a particular immovable property interest, primarily by private treaty and, failing such sale, by public auction, with the proceeds to be applied in reduction of an indebtedness established by an arbitration award.

The applicant was Selad Cowies Hill (referred to in the judgment as “the Applicants”). The primary opposing parties were Brian Murray Mackay (first respondent) and Vision Homes Cowies Hill (Pty) Ltd (second respondent). Petrus Johannes Schoerie and Others NNO (third respondent) were cited as interested parties and abided the decision.

The application arose against the background of earlier litigation and a settlement agreement concluded in April 2010, as well as an arbitration award granted on 8 July 2011 and made an order of court on 31 August 2011. In addition, there was a pending action in the High Court, Pietermaritzburg under Case No. 10974/2011, in which similar sale-related relief had been pursued. Only the first and second respondents opposed the present application, and at the hearing the parties confined the dispute to four identified issues.

The general subject matter of the dispute was the enforcement of a contractual mechanism (contained in a settlement agreement) intended to secure satisfaction of the applicant’s claim following the applicant’s success in arbitration, specifically through the sale of Real Right 10 in the Belvedale Wood development.

Material Facts

The court treated the essential background as common cause. The applicant, Vision Projects, and the second respondent concluded sale agreements and development agreements, after which disputes arose and were referred to arbitration. Pending that arbitration, the applicant instituted an application in March 2010 seeking to interdict the first respondent from alienating certain properties, including Real Right 10 in Belvedale Wood, Cowies Hill, Durban.

During April 2010 the parties resolved those issues by entering into a settlement agreement. Under that agreement, it was recorded that Mackay was the owner of Real Right 10, described as undeveloped land on the market for sale. The agreement regulated the sale process and the handling of proceeds, including provisions requiring that if Mackay found a suitable purchaser he had to notify Selad and obtain Selad’s written consent, and that surplus sale proceeds would be held in trust as security pending finalisation of the arbitration (and any appeal).

A key term was clause 2.10, which provided that if the properties were not sold by the time the arbitration (and any appeal) concluded, and if Selad was successful with its claim, then Selad would be entitled to demand that the properties be sold “on terms that it stipulates”, with recoveries appropriated (on a without prejudice basis) toward the arbitration award indebtedness.

On 8 July 2011 the applicant obtained an arbitration award for R2 794 771,90 plus interest and costs, which was made an order of court on 31 August 2011. No appeal was noted or lodged. It was common cause that Real Right 10 had not been sold at the time the arbitration was concluded and had not been sold at all thereafter.

In the pending Pietermaritzburg action (Case No. 10974/2011), the applicant sought, in Claim 1, an order that Real Right 10 be sold by the Sheriff by public auction. In response, the first respondent pleaded that Real Right 10 ought to be sold by private treaty, failing which by auction, failing which transferred to the plaintiffs at an agreed consideration, and pleaded willingness to take steps to implement the sale.

For purposes of the present application, the court accepted that the material disputes had narrowed substantially: the respondents did not persist with various other defences initially raised, and the parties agreed that only four issues remained for determination, namely the interpretation of clause 2.10, the plea of lis pendens, an objection of non-joinder of the Sheriff, and the competency of the order sought.

Legal Issues

The central legal question was the proper interpretation of clause 2.10 of the settlement agreement, and specifically whether it empowered the applicant to procure the sale of the property on terms determined by the applicant, or whether it merely gave the applicant an oversight/approval role while the respondents retained the initiative and control over the sale process.

A further legal question concerned lis alibi pendens: whether, given the pending Pietermaritzburg action involving the same parties and closely related relief, the present application should be stayed (the respondents abandoning dismissal as a remedy and instead seeking a stay).

Additional issues were procedural and remedial in character. The court had to determine whether the Sheriff had to be joined as a party (non-joinder) given that the Sheriff was to be authorised to sell and sign transfer documents. The court also had to determine the competency of an order authorising the Sheriff to sell by private treaty (failing which auction) and to sign documents necessary to give effect to transfer.

These issues largely involved questions of law (contractual interpretation; the requirements and discretionary treatment of lis pendens; competency of relief), together with the application of legal standards to largely common-cause facts, particularly in relation to the discretionary component of lis pendens and costs.

Court’s Reasoning

On interpretation, the court applied the approach articulated by Wallis JA in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA). The court emphasised that interpretation is an objective process of attributing meaning to the language used, read in context and with regard to purpose and attendant circumstances, preferring a sensible meaning that avoids insensible or unbusinesslike results.

The applicant contended that clause 2.10 entitled it, after success in arbitration and if the property remained unsold, to require that the property be sold on terms and conditions it stipulates. The respondents contended that clause 2.10 merely entitled the applicant to require the respondents to take steps to sell, leaving the respondents’ ownership rights intact and relegating the applicant to an oversight role, with sale proceeding only with the applicant’s approval.

The court considered the ordinary meaning of “stipulate”, referring to a dictionary definition indicating specification of something as an essential part of a contract and insistence upon an essential condition. Against that linguistic background, and taking into account the structure of clause 2.10, the court concluded that the sensible and businesslike meaning of clause 2.10 was that it conferred on the applicant the right to enforce the sale of the property on terms and conditions determined by the applicant, with proceeds to be appropriated toward the arbitration indebtedness.

The court rejected the respondents’ construction as inconsistent with the language of the clause and as requiring an impermissible rewording that would introduce concepts (such as “necessary steps”) not present in the text. The court also rejected the submission that the applicant’s interpretation improperly denuded the respondents of core ownership rights, reasoning that the respondents had, in the settlement arrangement, accepted that successful arbitration in the applicant’s favour could entail loss of the property as a means of satisfying the claim; this was part of the contextual circumstances informing clause 2.10.

On lis pendens, the court accepted that the requirements were met: there was pending litigation between the parties in relation to substantially the same subject matter and cause, and the relief in both proceedings was, in substance, aimed at effecting the sale of Real Right 10 in order to reduce the indebtedness. Although the applicants argued there was a difference because the earlier action sought sale by public auction while the application sought sale by private treaty, the court did not accept that this difference meant the proceedings were not the same for lis pendens purposes, and noted that the application was supported by admissions in the respondents’ plea.

However, the court treated lis pendens as a defence involving judicial discretion. Relying on Richtersveld Community v Alexkor Ltd and Another 2004 (1) SA 337 (LCC), the court accepted that even where the technical requirements of lis pendens are present, considerations of convenience and equity underpin the decision whether to allow the later proceedings to continue. On the facts, the court exercised its discretion to allow the application to proceed. The court’s reasons included that there was no longer a material factual dispute in light of concessions, that trial delays would unnecessarily postpone implementation of rights that had become common cause, that the affidavits suggested deliberate frustration of the sale by the first respondent (with reference to the withdrawal of an offer and the likely fate of another), and that the applicant undertook not to pursue Claim 1 in the Pietermaritzburg action pending the outcome and to withdraw it if successful.

On the non-joinder of the Sheriff, the court rejected the point, holding that the Sheriff had no interest in the outcome and would merely perform duties in terms of the court order. The court therefore found the joinder objection without merit.

On the competency of the order, the respondents relied on City of Johannesburg v Changing Tides 74 (Pty) Ltd and Others 2012 (6) SA 294 (SCA) for the proposition that the Sheriff’s functions are statutorily prescribed and do not extend to orders of the kind sought. The court distinguished that authority on the basis that it concerned an order requiring the Sheriff to enter a building and compile information about occupiers, which was not part of the Sheriff’s function. By contrast, the court held that it is recognised practice to authorise the Sheriff to sign documents where a party’s signature is difficult to compel, and this practice was recognised in Van Aardt and Another v Weehuizen and Others 2006 (4) SA 401 (N) and Carmel Trading Company Ltd v Commissioner, South African Revenue Service and Others 2008 (2) SA 433 (SCA). The court concluded it was competent to authorise the Sheriff to effect the sale in the manner sought.

On costs, the court rejected the respondents’ submission that the application should have been avoided because they were willing to sell. The court reasoned that despite asserted willingness, the respondents had not sold the property and the first respondent had delayed and frustrated the applicant’s recovery efforts. Given the nature of the defences advanced (most not pursued and regarded as without merit), the court held that a punitive costs order was justified.

Outcome and Relief

The court granted an order directing that Real Right 10 in the Belvedale Wood development be sold by the Sheriff on terms stipulated by the applicants through acceptance and signature of any written offer to purchase placed before the Sheriff by the applicants, and failing sale within thirty days, that the sale proceed by public auction.

The Sheriff was authorised and directed to carry out the sale, to sign all documents, and to do what was necessary to furnish transfer to the purchaser. The Sheriff’s fair and reasonable charges and expenses were declared a first charge against the proceeds, with provision for reimbursement to the applicants to the extent that they had funded such costs in the meantime. The Sheriff was directed to pay the balance of proceeds to the applicants, who were entitled to appropriate the proceeds in reduction of the indebtedness under the arbitration award. The Sheriff was also authorised to approach the court for further directions if necessary.

The first respondent was ordered to pay the applicants’ costs on the attorney and client scale.

Cases Cited

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA)

Richtersveld Community v Alexkor Ltd and Another 2004 (1) SA 337 (LCC)

City of Johannesburg v Changing Tides 74 (Pty) Ltd and Others 2012 (6) SA 294 (SCA)

Van Aardt and Another v Weehuizen and Others 2006 (4) SA 401 (N)

Carmel Trading Company Ltd v Commissioner, South African Revenue Service and Others 2008 (2) SA 433 (SCA)

Legislation Cited

No specific statute was expressly cited by name in the judgment.

Rules of Court Cited

No rules of court were expressly cited in the judgment.

Held

The court held that, properly interpreted, clause 2.10 of the settlement agreement conferred on the applicants the entitlement, after success in arbitration and where the property remained unsold, to demand that the property be sold on terms stipulated by the applicants, with proceeds appropriated toward the arbitration award indebtedness.

The court further held that although the technical requirements of lis pendens were satisfied due to the pending Pietermaritzburg action, considerations of convenience and equity justified allowing the application to proceed rather than staying it.

The court held that the Sheriff did not need to be joined as a party, and that it was competent to authorise the Sheriff to sell the property (by private treaty, failing which by auction) and to sign documents necessary to give effect to transfer.

Finally, the court held that the conduct and defences of the opposing respondents warranted a punitive costs order, granted against the first respondent on an attorney-and-client scale.

LEGAL PRINCIPLES

The judgment applied the modern South African approach to contractual interpretation articulated in Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA), namely that interpretation is an objective process in which meaning is attributed to words by considering language, grammar, context, purpose, and attendant circumstances, with preference for sensible and businesslike outcomes over insensible or unbusinesslike ones.

In relation to lis alibi pendens, the judgment applied the principle that even where the formal requirements of the defence are met, a court retains a discretion whether to stay later proceedings, and that this discretion is guided by considerations of convenience and equity, as reflected in Richtersveld Community v Alexkor Ltd and Another 2004 (1) SA 337 (LCC).

On remedial competency, the judgment recognised a practice endorsed in prior authority that, where necessary to give effect to obligations (particularly where a party frustrates performance by withholding a signature), a court may authorise the Sheriff to sign documents and take steps required to implement a sale and transfer, with reference to Van Aardt and Another v Weehuizen and Others 2006 (4) SA 401 (N) and Carmel Trading Company Ltd v Commissioner, South African Revenue Service and Others 2008 (2) SA 433 (SCA), and distinguishing City of Johannesburg v Changing Tides 74 (Pty) Ltd and Others 2012 (6) SA 294 (SCA) on its facts.

On costs, the judgment applied the principle that a punitive costs order may be justified where opposition and the defences advanced are without merit and where the conduct of a party frustrates or delays enforcement of rights established by an arbitration award and settlement framework.

Hill v Mackay and Others (1242/13) [2013] ZAKZDHC 35 (11 July 2013)