Gowar Investments (Pty) Ltd v Section 3 Dolphin Coast Medical Centre CC and Another (474/05) [2006] ZASCA 136; 2007 (3) SA 100 (SCA) (30 November 2006)

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[2006] ZASCA 136
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Gowar Investments (Pty) Ltd v Section 3 Dolphin Coast Medical Centre CC and Another (474/05) [2006] ZASCA 136; 2007 (3) SA 100 (SCA) (30 November 2006)

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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
Case
no: 474/05
In the
matter between:
GOWAR
INVESTMENTS (PTY) LTD APPELLANT
and
SECTION
3 DOLPHIN COAST
MEDICAL
CENTRE CC 1
ST
RESPONDENT
MARLENE
ANITA CAMERON 2
ND
RESPONDENT
________________________________________________________________
CORAM: FARLAM, MTHIYANE, BRAND, HEHER JJA
et
COMBRINCK
AJA
DATE OF HEARING: 7 November 2006
DATE OF
DELIVERY: 30 November 2006
Summary: Sale of land – non-compliance with ss
2(2A) of
Alienation of Land Act 68 of 1981
– agreement voidable at
instance of purchaser
Sayer v Khan
2002 (5) 688 (C) overruled.
Neutral Citation: This judgment may be referred to as
Gowar Investments v
Section 3
Dolphin Coast and Cameron [2006] SCA
162 (RSA)
________________________________________________________________
JUDGMENT
________________________________________________________________
COMBRINCK
AJA/….
COMBRINCK AJA:
[1] Sub-section 2(2A) of the Alienation of Land Act 68 of 1981 (‘the
Act’) provides:
‘
The
deed of alienation shall contain the right of a purchaser or
prospective purchaser to revoke the offer or terminate the deed of
alienation in terms of section 29A.’
Is a deed of alienation which does not reflect the right to revoke or
terminate void as decided in
Sayers v Khan
2002 (5) SA 688
(C)
or voidable at the instance of the purchaser as held (per Olsen AJ)
in the present case (reported at
2006 (2) SA 15
(D))? This appeal
concerns the answer to that question.
[2] The
background facts are not in dispute. The appellant accepted that they
were correctly recorded in the judgment of the court
a quo
.
For ease of reference I quote the relevant passages:
‘
[1] When
this application was launched there were two applicants, each
representing the interests of a medical practitioner who had
decided
to buy his rooms on sectional title. Each set of rooms is situated in
a double-storey commercial development. One of the
practitioners
formed a close corporation, the first applicant, which concluded an
agreement with the respondent to acquire the proposed
sectional title
unit. The wife of the other practitioner is the second applicant. She
concluded a similar agreement with the respondent
to acquire the
proposed unit which is occupied by her husband. This application was
launched to secure an order compelling the respondent
to complete the
opening of the sectional title register, and to compel transfer of
the units.
. . . .
[4] The second applicant signed an offer to purchase the
proposed unit (that is to say her husband’s rooms) for R148 000 on
21 August
2001. The respondent accepted the offer over two months
later, by signing the offer document on 6 November 2001. The parties
are
agreed that the proposed unit qualifies as “land” for the
purposes of s 29A of the Act. (See, in this regard, para
(d)
(i)
(dd)
of the definition of “land” in s 1 of the Act.) The price of the
proposed unit being less than R250 000, and none of the other
exceptions set out in ss 29A(5) being applicable, the second
applicant therefore had the benefit of the so-called “cooling-off”
period allowed by s 29A of the Act.
[5] However, the agreement made no reference to s 29A of
the Act, nor to the rights of the purchaser under that section . . .
.’
To this I may add that it was only on the 29
th
November
2004 when appellant’s answering affidavit was received by second
respondent was she notified that the appellant considered
the
agreement to be null and void – some three years after conclusion
of the agreement. The first respondent is not a party to
the appeal.
By virtue of ss 29A(5)(b) the provisions of s 29A(1) are not
applicable to its transaction (the first respondent not
being a
natural person), and at the hearing of the matter appellant consented
to the grant of the order sought against it.
[3] The rights referred
to are in essence contained in ss (1) of section 29A. It reads as
follows:
‘
29A.
Purchaser’s right to revoke offer or terminate deed of alienation
– (1) Subject to subsection (5), a purchaser or prospective
purchaser of land may within five days after signature by him or her,
or by his or her agent acting on his or her written authority, of
(a)
an offer to purchase land; or
(b)
a
deed of alienation in respect of land,
revoke the
offer or terminate the deed of alienation, as the case may be, by
written notice delivered to the seller or his or her
agent within
that period.’
The judgment of the court below contains a summary of the remaining
sub-section (2) to (10) inclusive of section 29A (paras [8],
[9] and
[10]).
[4] Before continuing it will be appropriate to set out the reasoning
in
Sayers
case as Olsen AJ in his judgment in the court below
deals with that case and indicates where he disagrees with the
reasoning and conclusion.
[5] It was, as in the present case, the seller in the
Sayers
matter who by way of a special plea sought to have a deed of sale of
a vacant piece of land in Cape Town declared null and void.
It was
accepted that the land was to be used for residential purposes and
that ss 2(2A) of the Act applied. The deed of sale did
not comply
with that sub-section. Van Heerden J took as her departure point that
the general rule of statutory interpretation is
that non-compliance
with a statutory prescription results in a nullity. She correctly
pointed out, however, that the crucial issue
is the intention of the
Legislature (P690G). She then by use of the semantic and
jurisprudential guidelines sought to determine such
intention (at
691A-693A). She concluded:
‘
The
so-called “semantic guidelines” for the determination of the
intention of the Legislature in enacting s 2(2A), as discussed
above,
point in different directions. Thus, while the wording of s 2(2A) has
an imperative character (“the deed of alienation
shall
contain” – my emphasis), the provision is expressed in positive
language. As regards the abovementioned “jurisprudential
guidelines”,
the Act contains no criminal sanction for
non-compliance with the provisions of s 2(2A). On the other hand, s
29A(7)
(b)
expressly provides that a waiver by a purchaser or
prospective purchaser of the rights conferred upon him or her in
terms of this
section is null and void (see too s 29 of the Act).’
(At 693C-D.)
The learned judge then gives three reasons for finding that the
Legislature intended visiting voidness on a deed of alienation which
does not contain a reference to the rights in s 29A. Firstly she
concludes that the object of the Legislature in inserting ss 2(2A)
read with s 29A would be frustrated or seriously inhibited in a
number of ways which she then enumerates:
●
‘it
would increase the likelihood of litigation by purchasers who were
unaware of the “cooling-off right” because it was not
reduced to
writing, in circumstances where they would have wished to exercise
such right within the time period specified, had they
been aware
thereof;
●
a burden would be placed on purchasers or prospective purchasers
extraneously to have knowledge of the contents of s 29A of the
Act.
The ordinary, plain and grammatical meaning of the wording of s 2(2A)
indicates that this is precisely what the Legislature
wished to
prevent by providing for the “cooling-off right” to be expressly
included in the written deed of alienation;
●
if
the “cooling-off right” as contained in s 29A is not expressly
written into the deed of alienation, then the purchaser or
prospective purchaser who has no knowledge of the provisions of s 29A
and who therefore fails to exercise the “cooling-off right”
within the prescribed period of five days, is effectively deprived of
the protection afforded by this right. This result is contrary
to the
intention of the Legislature, as indicated,
inter alia
, by the
prohibition on a waiver by a purchaser or prospective purchaser of
the “cooling-off right”.’
(At
694F-H.)
Secondly she finds support in the provisions of s 5 and 6 of the Act
which relate to the purchasers right to choose the language
in which
the contract is drawn up and the material terms which the contract
‘shall’ contain. In terms of s 24 substantial non-compliance
with
s 5 and 6 could result in the purchaser obtaining the relief set out
in ss 24(1)
(a)(b)(c)
or
(d)
from the court. There is no
equivalent to s 24 for non-compliance with ss 2(2A). This, so the
judge concludes, is a further indication
that non-compliance was to
be visited with nullity (at 694I to 695E).
Thirdly she points out
that the Credits Agreement Act 75 of 1980 also provides the purchaser
with a ‘cooling off’ period (s 13).
The wording of this section
‘shall’ appear in the credit agreement. It is, however,
specifically provided in the proviso to
ss 5(2) that on
non-compliance (the contract) ‘shall not merely for that reason be
invalid’. There is no corresponding provision
in the
Alienation of
Land Act which
indicates, so was concluded, that non-compliance with
ss 2(2A)
results in nullity (at 695F-H). The result was that the
special plea was upheld and the deed of sale was declared null and
void.
(For an analysis of the judgment see Lötz 2003
De Jure
446.)
[6] I turn now to the judgment in the court below. The judge
disagrees with the proposition in
Sayers
that the intention or
purpose of the Legislature with the enactment of
ss 2(2A)
is best
served by a construction which results in the automatic invalidity of
the deed of alienation which does not comply with that
sub-section.
He also disagrees with the view expressed in that case that a
different construction would frustrate or seriously inhibit
the
object of the legislation (para 31). The judge’s reasons for these
conclusions are fully set out in the judgment. I shall attempt
merely
to summarize them. His departure point is the purpose sought to be
achieved by s 29A of the Act and the fact that its provisions
operate
wholly in favour of the purchaser (para 6). After referring to the
relevant considerations in interpreting statutory provisions
of this
nature laid down by this court in
Eastern Cape Provincial
Government v Contractprops 25 (Pty) Ltd
2001 (4) SA 142
(SCA) at
146F he reasons as follows:
(i) The language used in ss 2(2A) is in marked contrast to that used
in ss 2(1). Whereas the latter commences with ‘No deed of
alienation . . . shall . . . be of any force and effect’, the
former reads ‘The deed of alienation shall contain . .
. .’
Why
if the Legislature intended non-compliance with ss 2(2A) to be
visited with nullity was the same language not used as in ss 2(1)?
(Para 14.)
(ii) Sub-section 2(1) creates enforceable rights whereas ss 2(2A)
deals with rights created by s 29A which are already enforceable
by
virtue of that section. There was therefore no necessity for the
Legislature to require that they be set out in the deed of sale
to
make them enforceable. The sole intention with the enactment of ss
2(2A) was to bring the right of revocation and termination
to the
knowledge of the purchaser (paras 15 and 17).
(iii) It is clear that it was considered that an identified class of
persons, the purchasers enumerated in s 1
(d)(i)
required
special protection. Automatic nullity claimed by a seller where the
purchaser seeks to proceed with the sale would result
in ‘cognizable
impropriety or inconvenience’. No reason exists to conclude that
the Legislature while seeking to protect the
uncertain purchaser of a
small residential property would visit the same result on the
decisive purchaser. Logically the intention
of the Legislator would
rather be that the agreement was voidable at the instance of the
party for whose benefit the provision was
enacted (paras 18 and 19).
(iv) The benefit of the rights under s 29A is restricted to
purchasers and it must be concluded that the Legislature considered
that
sellers require no protection. To allow the seller to withdraw
from the agreement against the will of the purchaser would not accord
with the Legislature’s intention (para 22).
(v) One would have expected where non-compliance with a relatively
obscure provision results in automatic nullity that the Legislature
would have made it clear that this was its intention. It should not
be imputed if the benefit does not match the price paid for it.
The
judge expressed it thus:
‘
In
my view s 29A of the Act, read with ss 2(2A), has not achieved the
all-embracing protection in exchange for which the Legislature
might
have considered it worthwhile to interfere with the common law of
sale to the extent that it would have done by rendering void
all
contracts not in compliance with ss 2(2A) of the Act.’
(Paras
23 and 24.)
(vi) Section 29A through-out draws the distinction between a
signed offer by a purchaser and a deed of sale signed by him/her.
Sub-section 2(2A) requires that only the latter must contain
reference to the rights in terms of s 29A. To be valid an offer need
not contain a reference to the s 29A rights. This reinforces the
reasoning that the object of ss 2(2A) is not to create rights but
to
bring to the attention of the purchaser the existence of rights
(paras 25-29).
It was accordingly held that the agreement was voidable at the
instance of the purchaser. He had chosen to abide by it and was
therefore
entitled to the order of specific performance sought. (For
a more complete summary and discussion of the case see the article by
D J Lötz and C J Nagel in
2006 (69)
THRHR
501.)
[7] The principal attack on the judgment by the appellant is that it
was not the intention of the Legislature to bring the attention
of s
29A rights to the purchaser only. It was intended that the seller
should also be told of the existence of the rights. Whereas
s 29A was
enacted solely for the benefit of the purchaser, it does not follow
that ss 2(2A) was similarly so intended. It is important,
so the
submission went, that a seller also be aware of the ‘cooling off’
period. He may on the strength of the sale within the
5 days period
commit himself to the purchase of another property. The seller may
thus be as vulnerable and in need of protection
as the purchaser. If
the court’s reasoning is correct and the purchaser ignorant of the
s 29A rights could avoid the contract at
any stage up to the date of
transfer, the seller who conducts his affairs in the belief that he
has a valid agreement could be placed
in an invidious position.
The
appellant further, argued that the court below failed to have regard
to where ss 2(2A) was placed in the Act by the amending legislation.

By placing it in the chapter dealing with ‘Formalities in Respect
of Deeds of Alienation’ the Legislature clearly indicated
that the
provisions of ss 2(2A) were formal requirements for validity and
non-compliance would have the same result as would non-compliance
with s 2(1). Furthermore the aim of s 2(1) was to minimize disputes
and litigation. This will not be achieved by allowing the purchaser
the right to elect to abide by the agreement or declare it void as
was held by the court below.
[8] Both in the
Sayers
case and the present case the judges
sought to determine the intention of the Legislature by the use of
the well-known criteria to
be used in the interpreting of statutes.
Case law authority for the criteria to be applied is extensively
quoted in the
Sayers
judgment. Less so in the court
a quo
.
It will serve no purpose to repeat the reference to these cases.
[9] I consider the point of departure to be to look at what the
Legislature said its purpose was with the amendment which it brought
about to the Act. Section 29A and ss 2(2A) were introduced by Act 103
of 1998. The definition of ‘land’ in s 1 was also amended.
The
long title of the amending Act reads:
‘
so
as to confer on a purchaser or prospective purchaser of land the
right to revoke an offer to purchase or to terminate a deed of
alienation in certain circumstances.’
The purchasers which the Legislator had in mind can be gathered from
the amended definition of ‘land’ in s 1 and in the new ss
29A(5).
They are purchasers
of property not exceeding R250 000;
who are purchasing:
land used or intended to be used for residential purposes;
an interest as defined in the Housing Development Schemes for
Retired Persons Act 1988 (Act 65 of 1988);
a share in a share block company which confers the right to occupy
land used mainly for residential purposes;
a sectional title unit
who are natural persons (trusts, companies, close corporations and
the like are excluded).
Regrettably the Legislature failed to restrict (iv) above to units
for residential purposes. Read
eiusdem generis
with the other
provisions this was probably the intention. The clear wording does
not however allow for such interpretation. Hence
the agreement by the
parties that despite the premises having been purchased for medical
rooms, s 29A applied.
This is a typical piece of consumer protection legislation which is
aimed at protecting the vulnerable uninformed small buyer of
residential property. The protection is afforded by altering the
common law by giving the purchaser a ‘cooling off’ period within
which he may reconsider and withdraw his offer or resile from the
agreement without penalty. A ‘cooling off’ period is not a
novel
concept and is well-known in both this country and internationally.
(See D J Lötz; Koper van Grond se Afkoelreg: Warm
Patat of Koue
Pampoen?
De Jure
2000 327 at 328.)
[10] Section 29A distinguishes between the signature by the
purchasers of ‘an offer to purchase’ (obviously emanating from
him)
and his signature to ‘a deed of alienation’ (an offer
emanating from the seller, on signature accepted by the purchaser).
The
five day
spatium deliberandi
commences
to run in
the case of the offer on the day succeeding the signing thereof by
the purchaser (ss 29A(2)) and will continue running and
will expire
five days later even if the offer is accepted within the five day
period. It is not intended that if the deed of alienation
comes into
being by acceptance of the offer by the seller within the five day
period the purchaser would have a further five days
following on that
date to resile from the agreement. This explains why ss 2(2A) refers
to the revocation of an offer even after acceptance
– which
juridically is nonsensical.
[11] As correctly pointed out in the court below, s 29A created
rights solely for the purchaser and the intention of the Legislature
in ss 2(2A) was to bring those rights to the attention of the
purchaser. He expressed it thus:
‘
[17] In
my view, having established the right of a purchaser, to a
cooling-off period, the Legislature’s intention in enacting ss
2(2A) was to bring the right of revocation or termination (as the
case may be) to the attention of the purchaser. As it is expressed
in
s 29A of the Act, the right has a finite life which is not dependent
upon or affected by a purchaser’s knowledge of it. There
is every
reason to make provision for steps directed at seeing that a
purchaser has knowledge of the certain and indisputable right
to a
cooling-off period established under s 29A.’
[12] There is no indication in either of the sections or elsewhere in
the Act to support the appellant’s argument that it was intended
that the purchaser’s ‘cooling-off’ rights be brought to the
notice of the seller too. Apart from stating the general proposition
that it would be inequitable if the seller were not afforded the same
notice, counsel was unable to refer to any provision in the
Act which
supported him. He was constrained to argue that such right had by
necessary implication to be read into ss 2(2A).
[13] Destructive of the appellant’s argument is the clear
distinction drawn in ss 2(2A) between an offer and a deed of
alienation.
It is the latter which ‘shall’ contain the revocation
or termination right and not the former. As the judge observed, the
distinction
is so clear that it is difficult to attribute it to
legislative oversight (para 27). Once it is accepted that to
constitute a valid
offer it does not have to make reference to the s
29A rights it must follow that the Legislature did not intend to
afford the seller
the same right of notice as the purchaser. As
remarked in the court below, an offer not containing reference to the
s 29A right can
be amended by the seller inserting such reference and
a binding agreement will come about. The insertion will not amount to
a counter-offer.
The addition of a clause to a contract which merely
reflects the existing state of the law cannot be construed as a
counter-offer
(para 29). A seller adding to a deed of sale already
signed by the purchaser that the sale is
perfecta
on signature
and that the risk passes is not making a counter-offer.
[14] The appellant’s further argument that the placing of ss 2(2A)
in the chapter dealing with formalities and the knowledge that
non-compliance with ss 2(1) results in nullity is indicative of the
fact that non-compliance with ss 2(2A) was also intended to be
visited with nullity is in my view met by the reasoning referred to
in para [6ii] above. In short, to repeat what was said in the
court
below, if the Legislature intended this consequence why did it not
commence ss 2(2A) with the same words as ss 2(1).
[15] The perceived potential prejudice to the seller if it is held
that the purchaser in the given circumstances has a right to avoid
the contract is more illusionary than real. Parties who conclude
agreements of sale of land invariably see an attorney to have a
formal document drafted. They in any event are obliged to see a
conveyor to effect transfer. If ss 2(2A) has not been complied with
and the five day period has expired the attorney or conveyencer would
be expected to draw to the attention of the purchaser his choice
to
abide by or to resile from the agreement. The seller could then be
able to place the purchaser on terms to make an election within
a
reasonable period – five days would be reasonable – and the
purchaser would then be bound by his election.
[16] I consider that
Sayers
case was wrongly decided. A narrow
semantic and linguistic approach was adopted in interpreting the
section instead of as in this
case, determining in the first place
the overall intention of the Legislature and seeking to interpret the
section in such a way
as to give effect to such intention. It would
appear from a reading of the
Sayers
judgment that voidability
at the instance of the purchaser on non-compliance was not
considered. Had it been it would, I think, have
assuaged the judge’s
fears that the object of the Legislature would be frustrated or
seriously inhibited if the deed were to be
valid (see para 5
above). The reasons
given in the court below for not accepting the
Sayers
judgment
are persuasive. It was said (
inter alia
):
‘
The
construction of ss 2(2A) approved in
Sayers
allows a seller
the opportunity to withdraw from a contract against the will of the
purchaser. Such an outcome does not accord with
the restriction of
the benefit of rights under s 29A to purchasers only. Sellers also
have second thoughts, and may also fall victim
to unfair practices
where commissions are to be earned. Notwithstanding that, the
Legislature left sellers out of the reckoning in
s 29A, and a
construction of ss 2(2A) in conformity with that is to be preferred.’
(Para 22.)
[17] Apart from the argument referred to in para [14] above, the
appellant did not seek to rely on any of the other ground found
in
the
Sayers
judgment to justify the interpretation that the
agreement is void. Nor did he attack any other of the reasons given
by the court
below for reaching its conclusion.
[18] The court
a quo
gave cogent and compelling reasons for
reaching its finding. The grounds relied upon are more fully
articulated in the judgment.
The brief summary in this judgment does
not do the careful and logical reasoning justice. The full judgment
should be read in conjunction
with this judgment.
[19] The answer to the question posed at the beginning of this
judgment is therefore that a deed of alienation which does not comply
with ss 2(2A) is not
ipso facto
void but at the instance of
the purchaser.
[20] The deed of sale made provision for costs on the attorney and
client scale in the event of litigation.
The appeal is dismissed with costs. The costs are to include the
costs of
two counsel and shall
be on the attorney and client scale.
_______________
P C COMBRINCK
ACTING
JUDGE OF APPEAL
CONCUR:
FARLAM JA
MTHIYANE JA
BRAND JA
HEHER JA