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[2013] ZAKZDHC 49
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R.M v L.M and Others (9727/2013) [2013] ZAKZDHC 49 (23 September 2013)
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Note: Certain personal/private details of parties or witnesses
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IN
THE KWAZULU-NATAL HIGH COURT,
REPUBLIC
OF SOUTH AFRICA
CASE
NO: 9727/2013
In
the matter between:
R
M
Applicant
and
L
M
First
Respondent
CORPCLO
841 CC
Second
Respondent
MOONEY
FORD ATTORNEYS
Third
Respondent
JUDGMENT
THATCHER
AJ
[1]
The applicant and the first respondent, who
reside in Durban, have been married for many years. Some years
ago, while they
were married, the applicant had purchased a flat in
Cape Town. He caused the flat to be registered in the name of
the second
respondent, and the members' interest therein to be
registered in the names of their three children. Those children
are now
adults. The applicant's mother had lived in the flat
until she passed away approximately two years ago. After her
death,
the applicant had let the flat.
[2]
The applicant and the first respondent now
wish to be divorced and a divorce action is pending. They have
in the meanwhile
had discussions in an attempt to settle the
proprietary consequences of the divorce. During these
discussions, the first
respondent expressed the wish to vacate the
matrimonial home in Durban and to purchase a property for herself and
the applicant
resolved to sell the flat in Cape Town. He has
now done so, and it was transferred from the second respondent on the
8
th
August 2013. On the 17
th
April 2013, the first respondent concluded a contract to purchase a
flat in a sectional title scheme known as Farringdon in Durban
("the
Farringdon property"). In terms of that contract,
R2 691 000.00, the balance of the purchase price
(a deposit
of R137 500.00 already having been paid) was to have been
secured by the 10
th
August 2013. The occupation date was the date of registration
of transfer which was to be the 31
st
August 2013 or as soon as possible thereafter.
[3]
The balance of the purchase price has not
been secured as a dispute has arisen as to who is to pay it.
The third respondent,
the conveyancers nominated to attend to the
transfer of the Farringdon property, hold in trust the sum of
R2 877 836.61.
This amount is the proceeds of the
sale of a flat in Cape Town. The applicant says that he told the
first respondent that he was
prepared to sell the flat in Cape Town
and make available the balance of the proceeds of its sale towards
the purchase of the Farringdon
property, but only after the second
respondent's liabilities (which he says are his loan account and
obligations to SARS) have
been settled. These obligations total
R1 333 614.45.
[4]
He contends, moreover, that this was simply
part of the discussions they had towards reaching an overall
settlement of the divorce
action and was not to be a binding contract
operating independently of an overall divorce settlement agreement.
However,
he is willing to make available the nett proceeds of the
sale of the Cape Town flat (which I calculate to be R1 544 222.16)
towards the balance of the purchase price of the Farringdon
property. The first respondent, on the other hand, contends
that the applicant agreed to make available the entire proceeds of
the sale of the Cape Town property and that that agreement was
to
operate notwithstanding that no overall divorce settlement had been
concluded.
[5]
This dispute caused the applicant to
launch, as a matter of urgency, on the 3
rd
September 2013, an application for an order that, pending the
institution of an action to be brought by the applicant for,
inter
alia,
an order directing the second
respondent:-
(a)
to pay to the applicant R990 250.00
(the alleged amount of his loan account);
(b)
to use the proceeds of the sale of the Cape
Town flat, currently held in trust with the third respondent, to
discharge the second
respondent's debt to the applicant of
R990 250.00 and to pay the second respondent's liabilities to
SARS, the third respondent
be interdicted and restrained from paying
out the sum of R1 333 614.45.
[6]
If this application is granted, the first
respondent will be unable to pay the balance of the purchase price in
its entirety, and
she will be in breach of the sale contract.
[7]
Mr Crowe SC, who appeared for the first and
second respondents, raised two points
in
limine
. Firstly, he contended, no
grounds of urgency had been made out, and in any event any urgency
which may exist was self-created,
the applicant having delayed for
some three weeks before bringing the application. Secondly, he
contended, the application
was fatally defective because there had
been no proper joinder of the seller of the Farringdon property who
was an interested party
in the application. He submitted that
the applicant's endeavour to join the seller, Mr Jacobson, at the
commencement of the
hearing was not a proper joinder as it provided
no real opportunity to the seller to intervene in the application the
outcome of
which may be to his prejudice.
[8]
Dealing with the question of urgency, in my
view the matter is urgent. In particular, from Mr Jacobson's
and the first respondent's
point of view, the application should be
determined as soon as possible. And the applicant, having
brought the application
as a matter of urgency, presumably wishes it
to be determined as soon as possible as well. It is thus in no
one's interests
that the application not be determined. I did
not understand Mr Crowe to contend that the first and second
respondents were
in any way irreparably prejudiced by the manner in
which the application had been brought. There is therefore no
purpose
in not determining the application, and I will do so.
Ideally I would have liked more time to prepare this judgment, but
the parties wish for a ruling before the end of the day on the 23
rd
September 2013, and I do not wish to make a ruling without providing
reasons.
[9]
Insofar as the non-joinder point is
concerned, the application concerns a dispute between the applicant
and the first respondent
arising from the latter's obligation to
fulfil her obligation in terms of a contract which she has with
Mr Jacobson.
Whether the application is resolved in favour
of the applicant or the first respondent is, from Mr Jacobson's point
of view, irrelevant.
Mr Jacobson has the right in terms
of the contract to place the first respondent in
mora
to perform her obligations, which right he has irrespective of the
outcome of the application. I am advised that he has been
given
notice of the application. He is thus in a position to decide
upon his course of action, taking into account the application
and
its outcome. Therefore, the failure at the outset to join Mr
Jacobson as a respondent in the application is not fatal
and is no
obstacle to my determining the application.
[10]
I turn now to consider the application.
In doing so, I shall apply the test set out by Holmes, J (as he then
was) in
Olympic Passenger Service (Pty)
Ltd v Ramlagan
1957 (2) SA 382
(D) at
page 383C-G.
The
Applicant's prospects of ultimate success in the envisaged action
[11]
It is common cause that the parties
discussed the overall settlement of the patrimonial consequences of
the divorce and in the course
of those discussions the first
respondent expressed the desire to purchase a property in which to
live. The applicant states
as follows in his founding
affidavit:-
"13.
I told the first respondent that in
relation to that aspect I was happy to agree that the property in
Cape Town be sold, and that
the proceeds of the sale, obviously after
discharge of all the [second respondent's] liabilities, be utilised
for the purpose of
buying a new property for the first respondent.
14.
Although it was my understanding
that this agreement was only part of the overall attempts to settle
the divorce in its entirety
and not an independent agreement to
operate independently of an overall settlement, I am willing to abide
what (sic) we discussed.
15.
Our children were told that I had
agreed to dispose of the immovable property in Cape Town and to use
the abovementioned nett proceeds
towards the acquisition of the new
property for the first respondent. The first respondent will
allege that I also undertook
to pay the shortfall between those
proceeds and the amount required to purchase the property. I
immediately concede that
this was discussed although it was never
intended by me, nor understood by the first respondent, that she
could enforce that part
of our discussion without the divorce being
settled in its entirety. In other words the discussion on my
part to fund the
shortfall was part of an overall settlement, and to
date we have been unable to reach consensus, although we are still
making attempts
to do so. I am therefore under no obligation to
fund any shortfall.
...
20.
My agreement that the [second
respondent] will sell the immovable property in Cape Town, and that
the funds will be used for the
acquisition of the new property, was
always on the basis that the [second respondent's] debts would be
discharged first, and that
the available proceeds would be those nett
of those obligations.
...
22.
In the meantime the first
respondent has signed a purchase and sale agreement of a new property
of her choice, and she is looking
to me for the proceeds from the
sale of the Cape Town property, and she is also looking to me to pay
for the balance of the purchase
price, plus alterations and various
new appliances, whatever the shortfall."
[12]
The first respondent, in answer to the
allegation that the agreement was that the funds to be used for the
purchase of the new property
was always on the basis that the second
respondent's debts would be discharged first, avers (at paragraph
20.2) that she would
never have committed to the purchase of the
Farringdon property if those allegations were correct. In
support of this she
refers to an email, annexure "J1" to
which I will refer later in this judgment. The first respondent
alleges (in
paragraph 22.1) that she signed the Farringdon sale
agreement after the applicant had agreed to the terms upon which she
would
conclude that purchase, and subject to the condition that she
would resign as a trustee of his family trust, which she has done.
[13]
In reply, the applicant does not dispute
that the first respondent recorded that as far as she was concerned
the purchase would
not be contingent on an overall divorce
settlement. Indeed he cannot do so because the first respondent
stated as much in
an email to which I will also refer later in this
judgment. He denies however that this was his attitude.
He maintained
his stance that they had never reached final consensus
on the divorce settlement and that the Farringdon purchase was part
of that
intended settlement.
[14]
In evaluating the parties' respective
versions, it is appropriate to examine what the parties actually said
at the time in emails
shortly before and after the conclusion of the
contract for the purchase of the Farringdon property.
[15]
The first relevant email is annexure "J1"
to the answering affidavit. It was sent by the first respondent
to the
applicant on the 10
th
April 2013. The contents of that email indicate that at this
time, a decision had been taken to sell the flat in Cape Town
and the
first respondent had found a flat, the Farringdon property, which she
thought was suitable. She had apparently told
the applicant of
it and the applicant had put questions to her about it. The
email is as follows:-
"Dear R.
In answer to your various questions
about the Farringdon flat I have done some further investigation and
have been able to find
out the following:-
·
the asking price is R2.995 million.
...
·
levies and rates together are around
R5,000 per month ...
·
on top of this would be: transfer duties
which I believe would be around R160,000 ... and the costs of
refurbishment and curtains,
carpets etc I have taken Mario there and
asked him for a guestimate which was between R200,000 and R250,000"
There
followed estimated costs of re-carpeting and items of pieces of work
to be done in the kitchen and bathrooms. Thereafter
she stated
as follows:-
"There are some things –
small – that I have not looked at properly eg some taps may
need to be replaced ... but
this I will do later as it does not
constitute repairs or renovation.
Is there anything else you would
like to know? ...
Finally while we both agree that
the Farringdon flat would be ideal, this decision cannot be
contingent on my acceptance of your
overall settlement offer as you
know that I don't think that it is sufficient to maintain my standard
of living (particularly if
I am to bear the rates and levies on the
flat) and still have no idea whether what is wanted is within your
assets and my legal
rights. So if we did go ahead with this now
it would have to be an interim step and the overall settlement would
still need
to be negotiated / agreed. I do think though that my
overall needs should be significantly reduced living in a flat
(compared
to the house) and so hopefully it will be easier to
negotiate a final settlement on this basis.
Please let me know how you want to
go forward.
I really appreciate your trying to
help me.
Yours sincerely
L"
[16]
On the following day, the applicant replied
by way of an email (annexure "J2") as follows:-
"Subject: Re: Farringdon
Thanks for the info. As I
have said before I don't care in whose name you put it in and as you
have a string of advisers more
knowledgeable than I. ...
Are all those figures thumb suck or
have you had actual quotes, because once I agree, I will not increase
any amounts. ...
One aspect is NOT NEGOTIABLE is
that you must resign as a trustee of my trust. ...
I really don't think you need to
get the carpets through Mario, we have done well in the past with
buying direct from the carpet
companies. What would your
plumber charge to replace baths, or will that mean replacing tiles.
I have seen Bathroom
Doctor's work on fixing baths and it is good,
not sure who you got quotes from.
If the taps are cr...y you should
think of changing them while the workers are there.
Once you have
confirmed all the figures and let me know what you intend to offer I
will give you the go ahead."
[17]
Five days later, on the 16
th
April 2013, the first respondent signed an offer to buy the
Farringdon property. One can only conclude that the first
respondent
did revert to the applicant with the figures and what she
intended to offer, and that these met with the applicant's approval.
I say so because there is nothing to indicate that in the months that
followed, the applicant raised any objection to her concluding
the
contract.
[18]
Subsequently, on the 2
nd
June 2013, the applicant sent an email to one Geert-Jan Nijhuis, an
accountant at PKF Durban Incorporated, a firm of chartered
accountants. Mr Nijhuis was obviously familiar with the
applicant's tax affairs. That email is as follows:-
"Dear Gerry
The Cape Town flat owned by [the
second respondent] went on the market on Tuesday and I accepted
R3,050,000.00 on Friday. ...
Can you give me an estimate of the
CGT, and any other amounts that I may have to pay, so I can plan how
much I will need to fund
L's flat in Durban. I know you are
working on the balance sheet at present. ...
R"
[19]
If the applicant is correct that there was
an agreement that he would make the proceeds of the sale of the Cape
Town flat, after
the discharge of the second respondent's
liabilities, available to buy the Farringdon property, one must ask,
firstly, why he would
need to know from Mr Nijhuis what the nett
proceeds of the sale of the Cape Town flat are, and secondly, what he
meant when he
said he needs to know
"so
I can plan how much I will need to furnish L's flat."
He would only have to know what the nett proceeds are if he had
agreed to make up the shortfall between the balance of the
purchase
price and the nett proceeds from the sale of the Cape Town flat.
In the email of the 2
nd
June 2013, he seeks this information. The seeking of this
information by the applicant is inconsistent with his version that
the agreement was that he simply had to make available the nett
proceeds of the sale of the Cape Town property.
[20]
There is a further series of emails which
are significant, and those are the emails marked "F1" to
"F3" which
appear at pages 73 and 74 of the papers.
On the 10
th
June 2013, the first respondent sent the applicant an email in which
she discusses what she may wish to take from the house by
way of
furniture and fittings. She then goes on to state as follows:-
"I am sure we can resolve the
finances amicably without having to go the litigation route and
thanks for your promise of payment
for the stove. I am getting
formal quotes for other expenses that you said you would meet.
I assure you that no aggressive
lawyer's letters are on the cards.
Hopefully once I have settled in Farringdon we will be able to get a
realistic handle
on my needs and hopefully we will be able to reach
an amicable arrangement without the intervention of lawyers."
Here
again the first respondent is repeating the notion expressed in her
email, "J1", that the purchase by her of the
Farringdon
property will make it possible to estimate with more accuracy her
living expenses so that an overall divorce settlement
may be
reached. I will deal with the significance of this later.
[21]
On the 12
th
June 2013, the applicant sent an email to the first respondent.
While it is not obvious that this email is a response to
the one from
the first respondent on the 10
th
June 2013, it does not express any disagreement with the contents of
that email. It certainly does not express the view that
the
contract for the purchase of the Farringdon property should not have
occurred or proceed as there had been no overall divorce
settlement.
[22]
On the same day, at 12.54pm, the parties'
daughter, one L F, an attorney practising in Cape Town, sent an email
to the applicant
as follows:-
"Hi Dad this issue around the
CC seems to be really bothering you. We absolutely have no
ulterior motives (and certainly
no one had thought that by retaining
Farringdon in the CC would have any impact on whether or not you were
liable for rates and
levies etc) – our approach was simplicity
and the desire to avoid initial costs.
If what you are saying is that you
will declare the dividend arising on the sale of Ma's flat,
distribute it to us 3 children (as
is required in law), pay the
dividends withholding tax and then arrange for us 3 children to lend
the dividend on to Mom to enable
her to part pay the purchase price
for Farringdon
and make up any shortfall on the purchase on
Farringdon
and then pay all the CGT and costs of winding up the
CC, then by all means I am happy to chat to Louis Simon [the
conveyancer attending
to the transfer] to see if he can arrange for
the transfer to be effected to Mom directly and not to the CC.
Is that what
you have in mind?
Please let us know so that I can
deal with Louis as soon as possible.
Thanks
L"
(My
underlining)
[23]
At 3.03pm on the same day, the applicant
replied as follows:-
"Of course
that is what I have been saying all along."
[24]
The contents of the applicant's email
cannot be reconciled with his contention that an agreement subsisted
in terms of which he
is obliged to make available only the nett
proceeds of the sale of the Cape Town property (after repayment of
his loan account
and the amounts due to SARS) for the acquisition of
the Farringdon property and that he has no obligation to fund any
shortfall
between the balance of the purchase price on the Farringdon
property and the nett proceeds of the sale of the Cape Town property.
[25]
I have a further difficulty with the notion
that such an agreement was concluded. It is that he alleges the
conclusion of
an agreement without any reference to the time when it
was concluded or where it was concluded. In this regard I refer
to
the last sentence in paragraph 13 of his founding affidavit where
he states as follows:-
"I told the first respondent
that in relation to that aspect I was happy to agree that the
property in Cape Town be sold, and
that the proceeds of the sale,
obviously after discharge of all the [second respondent's]
liabilities, be utilised for the purpose
of buying a new property for
the first respondent."
He
also does not disclose the first respondent's reaction to this and
nor does he explain why it was obvious to her that what would
be
available would be the nett proceeds.
[26]
Mr Stokes argued that it was highly
unlikely that the applicant would settle a part of the divorce by
agreeing to finance the purchase
of a property for the first
respondent while leaving her to mount a further claim against his
estate without taking into consideration
what she had already
received in partial settlement. In this regard, Mr Stokes
advised that in the divorce action, the first
respondent had made a
claim in terms of
section 7(3)
of the
Divorce Act, No. 70 of 1979
,
which empowers a court granting a decree of divorce to order one
party to transfer assets or parts of assets to another party.
(I interpose to state that this does not appear from the papers
before me. Mr Stokes advised me of this and assured me that
this was the case, his instructing attorney in this application being
the applicant's attorney in the divorce trial. Mr Crowe
declined to place any reliance upon this. I am of the view that
I may have regard to this notwithstanding that it does not
form part
of the papers.)
[27]
It is clear however, that the first
respondent does not view the purchase of the Farringdon property as
being irrelevant to her
proprietary claim in the divorce action.
She accepts that the Farringdon property purchase will have an
influence on the
terms of any future settlement or proprietary
claim. Mr Crowe also submitted that the purchase of the
Farringdon property
was not aside from or irrelevant to the claim in
the divorce action.
[28]
The first respondent's view is expressed on
two occasions, in writing, in her emails I have referred to. In
those she made
the point that if she purchased the Farringdon
property, it would resolve the question of her future accommodation
whereafter the
parties would be better placed to estimate her living
expenses, thereby making it easier to achieve an overall divorce
settlement.
This is logical.
[29]
When a court is asked to make an order
transferring assets from one party to another, in terms of
section
7(5)
of the
Divorce Act, it
may take into account,
inter
alia,
the existing means and
obligations of the parties, and
"any
other factor which should in the opinion of the court be taken into
account"
. I have no doubt
that the court hearing the divorce action would regard it has highly
relevant the fact that the first respondent
had taken transfer of a
flat in which she intended to stay after the divorce, particularly
when it is clear from the papers in
the application that the parties
would not regard the value of the Farringdon property as being a
trivial part of the applicant's
estate. Thus I do not share Mr
Stokes' view that the agreement contended for by the first respondent
is improbable.
[30]
In summary, the right contended for by the
applicant is by no means clear and is open to considerable doubt.
Nevertheless,
the applicant may still be entitled to the protection
of an interdict if he has a well grounded apprehension of irreparable
harm
and the balance of convenience is in favour of his being granted
interim relief.
The
balance of convenience and irreparable harm
[31]
The applicant contends that, following the
sale of the Cape Town property and the proceeds of the sale of that
property being, in
broad terms, used to pay the purchase price of the
Farringdon property, the second respondent has no assets nor income
with which
to repay the applicant's loan account, and that he, as the
representative tax payer of the second respondent, is exposed to
having
to pay SARS' dividend tax and capital gains tax as the second
respondent will not be in a position to do so. I have some
difficulty with this notion. Firstly, Ms F, who is an attorney,
denies that the second respondent will be a shell. She
is
doubtless the source of the instructions to the second respondent's
attorney. In a letter from the second respondent's
attorney,
annexure "D" to the founding affidavit, and written on the
19
th
August 2013, it is stated that the second respondent will meet its
tax obligations to SARS in respect of capital gains tax and
dividend
tax
"as and when they are due for
filing and payment"
.
Moreover, Ms F has stated in her affidavit that the second respondent
has every intention of complying with its lawful obligations
to SARS
and to the applicant. Moreover she asserts that there is no
danger of the applicant having to liquidate the second
respondent as
she and her siblings will ensure that the second respondent complies
with its lawful obligations. it is therefore
difficult to see
how the applicant will be irreparably prejudiced given that Ms F has
furnished an undertaking that she and her
siblings will ensure that
the second respondent complies with its lawful obligations, which
includes the repayment of the applicant's
loan account which she says
is repayable on the 1
st
March 2014.
[32]
In any event, if, contrary to Ms F's
assertions, the applicant is obliged to pay the obligations of the
second respondent to SARS,
I do not believe that he will be
irreparably prejudiced thereby. I say so because of the broad
discretion which a court has
in making an order to transfer assets in
terms of
section 7(3)
of the
Divorce Act. The
events
surrounding the sale of the Cape Town property and the acquisition of
the Farringdon property as well as the applicant's
relationship to
the second respondent and the latter's financial obligations are all
highly material in the exercise of the court's
discretion whether to
distribute assets in terms of
section 7(3)
of the
Divorce Act.
Thus
any financial loss which the applicant may suffer (and it is by
no means certain that he will do so) will be taken into account
by
the court hearing the claim in terms of
section 7(3).
[33]
The applicant's position is to be
contrasted with that of the first respondent should the proceeds of
the sale of the Cape Town
property not be available to pay the
balance of the purchase price of the Farringdon property. The
first respondent is currently
in breach of the sale agreement.
Mr Jacobson has the right to place the first respondent in
mora
,
and if she fails to remedy her breach of contract, he has the right
to cancel the contract and to sue her for damages. The
first
respondent has apparently commenced material building works in the
Farringdon property and has materially altered its interior.
The applicant is not in a position to dispute these allegations.
[34]
While there is no evidence that the first
respondent has or will be placed in
mora
to perform in terms of the contract, the consequences for the first
respondent should Mr Jacobson either demand specific performance
from
the first respondent or cancel the contract and seek her eviction
from the flat which she has begun to renovate, do in my
view
constitute prejudice to the first respondent which would exceed any
prejudice to the applicant if he does not obtain the interdict.
[35]
In the result, the applicant's application
for an interdict is refused.
[36]
Insofar as the question of the costs of
this application is concerned, after considering the facts of this
case I, in the exercise
of my discretion, make no order as to costs.
The order I make is thus the following:-
The application is dismissed.
_____________________________
THATCHER
AJ
Application
heard on:
20
th
September 2013
Counsel
for the applicant:
A.
Stokes SC
Instructed
by:
Shepstone
& Wylie
Counsel
for the first and second
respondents
M.A.
Crowe SC
Instructed
by:
Ashersons
Judgment
handed down on:
23
rd
September 2013