About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, Mthatha
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, Mthatha
>>
2011
>>
[2011] ZAECMHC 25
|
|
African Bulk Earthworks (Pty) Ltd v LandMark Mthatha (Pty) Ltd and Others (1565/2007) [2011] ZAECMHC 25 (29 December 2011)
1
IN THE HIGH COURT
OF SOUTH AFRICA
(EASTERN CAPE
HIGH COURT: MTHATHA)
CASE NO:
1565/2007
In the matter
between:
AFRICAN BULK
EARTHWORKS (PTY) LTD/
NEW HEIGHTS 55
(PTY) LTD
…...............................................................
Plaintiff
And
LANDMARK MTHATHA
(PTY) LTD AND
OTHERS
…................................................................................................
Defendants
And
KING SABATA
DALINYEBO MUNICIPALITY &
2 OTHERS
…................................................................................
3
RD
Party 1, 2 & 3
JUDGMENT
DAWOOD J
BACKGROUND
The Plaintiff
herein instituted action against the Defendant wherein the
Plaintiff claimed damages arising out of a breach of
an Earthworks
contract that was concluded between the Plaintiff and the First
Defendant.
The Plaintiff
obtained default judgment against the Third and Fifth Defendants
and with the leave of court withdrew its claim
against the Fourth
Defendant.
It was agreed
between the Plaintiff and the First and Second Defendants that the
only issues that remained for adjudication
by this court were:-
Whether or not the
Plaintiff was aware of the claim; and
Accordingly whether
or not the Plaintiff was
bona fides
when it concluded the
agreement.
The First and
Second Defendant confirmed that the
bona fides
of the
Plaintiff was in dispute and in terms of
Section 11
of the
Restitution of Lands Act
the court has a wide discretion
with regard to the order to be made if there was no
bona fides
.
It was agreed by
the parties that the Plaintiff would be referred to as African
Bulk, the First Defendant as Landmarks Mthatha
and the Second
Defendant as Landmark Real Estate. Further that the First Third
Party would be referred to as the Municipality;
the Second Third
Party as the Province and the 3
rd
Third Party as the
National Government, and that the Second and 3
rd
Third
Parties would be referred to collectively as the Governments,
plural.
It is common cause
between Landmark Mthatha and the Municipality that it was an
implied term of the agreement that the Municipality
would give to
Landmark Mthatha vacant possession of the Land, in the sense that
the development work could be conducted and
completed lawfully.
Landmark Mthatha
alleges that the Municipality failed to do this and accordingly
breached the agreement in that it failed to
give vacant possession
which enabled Landmark Mthatha to conduct and complete the
development, lawfully as a result of the
unresolved land claims.
The First
Defendant’s further claim as against the Municipality was
inter alia that they pay an amount equal to the damages
that
Landmark Mthatha was directed to pay the Plaintiff, on the basis of
the breach of contract, alternatively as against the
municipality
or the governments on the basis of misrepresentation.
The First
Defendant alleged that it was accordingly entitled to claim
specific performance and delay damages arising out of
the First
Defendant’s inability to complete the work within the time
period stipulated in the agreement, due to the failure
of the
municipality to give the First Defendant vacant possession of the
land.
The First
Defendant claimed termination damages, in the event of the court
not granting specific performance and delay damages,
but instead
ordering termination of the lease.
The First
Defendant’s alternative claim against the Municipality is
based on misrepresentation arising from the fact that
the
Municipality knew about those claims over the land at the time they
concluded the lease agreement and failed to tell the
Landmarks
about them and therefore Landmark Mthatha suffered damages arising
out of the misrepresentation.
The Municipality
denied that they had this knowledge and accordingly Landmark
Mthatha filed a further alternative claim against
the Governments
alleging that in the event of it being established that the
Municipality had no knowledge, then the Government
must pay the
damages because they ought to have informed the Municipality about
the Land claims and it is their fault or as
a result of their
misrepresentation that the Municipality was not aware of Land
claims.
It was further
submitted that even if Landmark was unsuccessful as against the
Governments then the Municipality ought to pay
the costs since it
was the municipality’s fault that Landmark Mthatha had to
cite the Governments as conditional third
parties.
The municipalities
amended its plea and raised legal impossibility of performance as
one of its defences, in the event of Landmark
Mthatha establishing
that the municipality had failed to give vacant possession pleading
that it would be impossible for the
municipality to give vacant
possession of the subject land for the resumption of development
works.
The Municipality’s
counsel, Advocate Madlanga S.C thereafter argued for a separation
of the issues and wanted the issue
of:-
whether or not the
Municipality was aware of the Land Claims, prior to the conclusion
of the lease agreement, and
whether it ought
to have divulged that to Landmark, being determined first.
He argued that,
that it would be a matter of convenience to the court to hear this
evidence first before hearing evidence on
the quantum which is in
excess of a R300 million claim and that the court should
mero
motto
order separation of the issues in terms of Section 33
(4), without the necessity of a formal application for separation.
The Plaintiff
argued against a separation stating that this issue had been
debated at length at the pre-trial meeting prior
to agreement being
reached that there would be no separation.
The First
Defendant’s counsel argued that one of the witness’s,
Mr. Terry would testify on both the merits and the
quantum.
Separation was
refused and the matter ordered to proceed on both the merits and
quantum as it was not deemed necessary or convenient
to separate
the issues in this case. Such separation would and in fact result
in a further delay of the finalization of the
matter.
The Second and
Third 3
rd
party’s counsel Advocate Dukada S.C in
his opening address stated that the National Government had donated
the property
to the Provincial Government on the 1
st
of
April 1997 and the Provincial Government had in turn donated it to
the Municipality in December 1997 and the property was
eventually
transferred to the Municipality in January 1999.
The case of the
Governments is that at the time the Deed of Delegation was issued
no claims had as yet been lodged by any of
the claimants concerning
the property in question with the Regional Land Claims Commissioner
and accordingly no misrepresentation
was made by them when they
donated the property to the municipality since they had no
knowledge of any land claims.
It was conceded by
the Landmarks that as at the time the property were donated there
were no Land Claims against the property,
the first claim only
being lodged at the earliest in September 1998 and the others on
the 31
st
of December 1998.
EVIDENCE LED
The Plaintiff
thereafter commenced its case.
The Plaintiff
called
Mr. Francois De Klerk
in support of its case and he
testified as follows:-
He was a Mechanical
Engineer and the Chief Executive Officer of African Bulk Earthworks.
In terms of the
Bulk Earthworks contract they commenced work on the 7
th
of May 2007 and intended completing the work on the 10
th
of September 2007.
He was not aware of
any Land Claims at the time he commenced work.
They were required
to spend approximately R300 000 a day on average to complete the
contract.
A meeting was held
on the 17
th
of May 2007 and Mr Mike Merry from the
Municipality was also present and he made no mention of any Land
Claims.
The developer was
required to pay them within 7 days of issuing of the certified
payment certificate.
Mr. Markovitz
representing Landmark Mthatha informed them that financing was
delayed and he was arranging bridging finance.
He met with Mr.
Markovitz and the other shareholders on the 7
th
of June
2007 at Port Elizabeth and they agreed on the payment terms in
respect of certificates 1, 2 and 3 which was to be secured
by
bridging finance, as well as signing of suretyships by Mr. Markovitz
and the other shareholders of Landmark Mthatha for the
said payments
and the other outstanding payments.
He was told at this
meeting that the financing was being held up by the Surveyor General
diagram for subdivisions and some co-ordinates
as well as the Land
claims which would be resolved shortly. He thereafter under cross
examination conceded that he may have been
mistaken about Land
claims being mentioned and accepted Mr. Markovitz’s version
that what was discussed was that the delay
in securing finance was
caused by the Surveyor’s General plan and the securing of the
requisite number of leases prior
to obtaining ABSA finance. He
indicated that some time had passed and his main focus was on
receiving payment so he may have
been mistaken with regard to what
was discussed.
However in light of
the suretyship agreements concluded and the bridging finance
undertaken by Landmark they were willing to continue
working on the
project and they continued.
He received a
letter from Mr Markovitz on the 13
th
of August 2007
informing him that they could not secure the development finance and
suggested that he stops work as he would
not be in a position to pay
them and they accordingly immediately stopped working.
In the letter dated
13
th
of August 2007 Mr Markovitz indicated inter alia:-
“
That they had
discovered that 8 land claims were registered in 1998;
That the Land
Claims Commissioner of the Eastern Cape had done nothing about the
claims for 9 years.
That they were 5
intertwined court cases currently on the go; and
The municipality
had been aware of the land claims before they put up the land for
tender and had failed to disclose theses land
claims to Landmark and
suggested that the Plaintiff stop working on the site, pending
clarity and formalization of settlement.”
He testified that
the First Defendant could not raise the Land claims as a defence to
payment in terms of the contract.
“…
The
employer indemnifies and holds the contractor harmless against loss
in respect of all claims, proceedings, damages, costs and
expenses
arising from …
Clause 9.2.5
further reads the right of the employer to have the work or any part
thereof executed at the site;
Clause …
9.2.9 the use or occupation of the site by the works… ”
They accordingly
expected to get paid and were working on site.
There no questions
posed nor was he challenged with regard to his knowledge of Land
claims or
bona fides
by any of the parties, nor on the
quantum of his claim, placed in dispute.
The Plaintiff’s
case was thereafter closed.
The First and
Second Defendant thereafter commenced their case.
Mr. Adam Anton
Markovitz
was called as their first witness. His testimony was
briefly as follows:-
He was a property
developer and commenced developing property approximately 30 or 40
years ago. He was the Director of Landmark
Mthatha.
He had read the
advertisement with regard to three developments in the Sunday Times
Newspaper, in respect of a casino and hotel
development and
residential premises.
He was interested
in the shopping centre development and proceeded to comply with all
the formalities and was awarded the tender
in 2006. On or about 12
th
of October 2006 a lease agreement was concluded between Landmark
Mthatha and the Municipality.
The following were
inter alia
the express material terms of the agreement:-
That they had a
30 year lease and an option to renew the lease for a further 30
years. (clause 4)
That the tenant
was obliged to do all things lawful to achieve optimum development
within 60 months from date of signature; clause
6.1.1
The tenant was
entitled to use the premises for a retail shopping centre, clause
6.8
The tenant was
not allowed to allow the premises to stand empty, clause 6.11
According to him he
knew nothing about the Land claims.
On the 25
th
of October 2006 a letter was sent by the Quanza Group to the leasing
agent Gayle McArthur wherein it was stated that they had
a Gazette
in 1997 unopposed and a copy lodged with the Department of Land
Affairs that they intended developing a Shopping Centre
on the land
and it was not opposed by the Department of Land Affairs. The
Municipality had accordingly erroneously granted a
lease without
being aware of the Land claims process and of their intention to
proceed with the retail development.
The letter
indicated that Land claimants had already approached the Director of
Land Affairs in Mthatha and registered their objection
to the
proposed development taking place on land that rightfully and
legally now belongs to them and not the City Council of
Umtata (KSD)
Municipality.
They were requested
to immediately remove their advertising board and to desist from
marketing their retail development.
This was the first
time he became aware of a Land claim, upon receiving the letter.
He wrote to the
Municipality on the 1
st
of November 2006 and he requested
the Municipality to inform them in writing about the status of the
alleged claim failing which
they would apply to court for a remedy
including damages on account of the loss suffered due to the
development being delayed
or cancelled.
The Municipality
responded by letter dated 2
nd
of November 2006 stating
that the KSD Municipality had a real right in Erf 912, Mthatha
conferred upon it by the title deed which
shows that the property
was transferred by the province of the Eastern Cape.
It was also stated
in the letter that the land was advertised in the paper calling for
development proposals before an award for
the development was made.
They concluded by saying that development would not be hindered by
these frivolous claims.
He accepted the
Municipality’s assurance that this was frivolous and by letter
dated 7
th
of November 2006 requested them to keep him
informed of the response to their correspondence to the Quanza
Group.
Landmarks went on
to secure leases and refine the development and design of the centre
and signed a contract with the Plaintiff
during April or May 2007
for approximately R23 Million to commence work in terms of the
Earthworks contract.
He had no knowledge
of the letter dated
11
th
of May 2007
which was addressed by the Land Claims Commissioner Ms L Faleni to
the Municipal Manager of King Sabata Delinyebo Municipality
(KSD)
Mrs V Zitumane which reads as follows:-
“
A claim
for restitution of land rights was lodged as KwaLindile Trust,
Kapton, Fairland, Boziya, Tabase and Khambi farms, also including
the
pieces of land that are currently known as the Holiday Inn,
Ekululekweni, Myezo Park, Magwa House, Myezo Garage, Shell Garage
and
the former South African Embassy.
The claim was
lodged on the 3
rd
of September 1998 and was investigated
and found to be compliant in terms of Act 22 and is in the process of
being gazetted in
terms of
Section 11
of the
Restitution of Land
Rights Act 22 of 1994
.
It has been
brought to the attention of the commissioner that the land is being
developed by the aforesaid Municipality and such
actions are aimed at
defeating the object of the restitution to its rightful occupants.
In terms of
Section 11
(7) of the said Act once a notice has been published in
respect of any land no person may sell, exchange, donate, lease,
subdivide,
rezone or develop the land in question without having
given the Regional Land Claims Commissioner one months notice of his
or her
intention to do so.
Your actions are
in contravention of the said Act and you are requested to refrain
from such conduct, until you have proper representations
to the
Regional Land Claims Commissioner, failing which this matter will be
taken to court.”
According to a
letter dated 16
th
of May 2007 the attorneys for the
Regional Land Claims Commissioner wrote to the Municipality
indicating that the Municipality
was fully aware of the Land Claims.
By letter dated 2
nd
of June 2008 Ms Faleni stated that her investigations revealed that
there were at least two competing claims over the land in
question.
The KwaLindile claim and the Zimbane claim. Ms Faleni indicated that
the Zimbane claim had not yet been gazetted but
it would be done
shortly and that the KwaLindile claim had been published in the
Government Gazette and she intended to refer
both the claims as a
combined referral.
She went on to say
that the Municipality was aware of at least one, if not more claims
prior to the conclusion of the leases and
accordingly those leases
ought not to have been concluded, she would recommend to the court
that it would be appropriate to resolve
the claims by ordering the
leases be set aside and the land restored to the claimants or group
of claimants as the court decides.
She accordingly
concluded by saying that her office cannot countenance the proposed
developments continuing and that if that happens
she would consider
acting in terms of Section (6) (3) of the Act.
Mr. Markovitz
understood this to mean that she could cause the lease to be set
aside and therefore there would not have a lease
and he could
accordingly not risk building a Shopping Centre that would cost
approximately R322 Million where there was a risk
of the lease being
set aside.
In light of the
magnitude of the project he was unwilling to risk following the
advises of the Municipality’s representative,
to the effect
that the Regional Land Claims Commissioner’s stance was not in
accordance with the Act and that nothing prevents
the development of
the land.
Landmarks had
sought an indemnity from the Municipality. The Municipality never
responded to the numerous requests for an indemnity
nor did it
provide one.
Under cross
examination it was put to him that there was no secrecy in the
Municipality’s dealings with the Landmarks and
that it was Mr
Merry who brought their attention to the Interdict Applications.
His response was
that these disclosures were only made after July 2007.
He was referred to
a letter dated 29
th
of October 2003 written by Mr Mike
Merry to the Regional Land Claims Commissioner (RLLC) wherein he
inter alia
referred to the Zimbane claim and their letters
dated 21
st
of February 2003 and 25
th
of August
2003. Mr. Merry had stated
inter alia
that they could not
comment on the matter without conclusive mapping. However he
indicated that the Transkei Training Trust was
not situated on Erf
912 Umtata.
He specifically
requested information regarding whether or not any other claim had
been lodged in respect of Erf 912 Umtata known
as Umtata Commonage.
Mr. Merry had asked
specifically:-
“
Does the
claim exist or is the only claim in your possession the one over
Manpower Training Centre.”
Mr Merry’s
letter was inter alia in response to a letter which emanated from
Mr. Memela dated 25
th
of August 2003 which is headed:-
“…
Re: Zimbane
community claim – Erf 912 Umtata
Mr Memela’s
letter states that the Zimbane community had lodged a claim in
respect of land
commonly known as Erf 912 which covers the land
where there is an Institution that was known as Transkei Training
Trust.
Preliminary
investigations were conducted and the claim was accepted to meet the
criteria for restitution and was validated for
further processing.
They placed on
record their interest in the matter relating to sub-division,
rezoning or any other development on the land, as they
had a
statutory obligation to resolve the claim lodged with them. The
letter was addressed to the Director, Department of Transport,
Bisho
but was cc’d to Mr Mike Merry.”
Mr. Markovitz
disputed that the subject land was not rural as he stated that in
development terms the whole of Mthatha would be
regarded as rural.
It was put to him
that in terms of the Act development was not precluded if there had
not been any gazetting or any publication
of a land claim and he
stated that he had no knowledge.
Mr. Markovitz did
not dispute that the Zimbane claim was published some 10 years after
it had been lodged and the KwaLindile claim
9 years after, in 2007.
Mr. Markovitz
accepted that the claims were gazetted after the development project
or the lease agreement was concluded.
He accepted that
the Abathembu claim has not been published, to date.
It was put to him
that there were no claims lodged prior to 1998, Dhlato’s claim
was in September 1998 and the others in
December 1998 and he stated
that he could not comment on that.
It was put to him
that no permission to occupy can be granted in respect of surveyed
land that has an Erf number and he stated
that he had no knowledge
but knew that the Land Claims Restitution Act came to amend a whole
lot of previously legislated ownership
issues.
According to Mr.
Markovitz the subject land forms part of Ekululekweni Area and he is
unaware that it is referring to the Ekululekweni
Ministerial Complex
but that he cannot answer on behalf of the Commissioner but the
description of the area covers all the places
that surround the
subject land namely the Holiday Inn, Shell Garage and the Embassy.
It was put to him
that in absence of the Regional Land Claims Commissioner having
gazetted the Land Claims her statement to the
effect that “
your
actions are in contravention of the Act”
was incorrect.
His response was that he was unaware of what section she was
referring to.
He conceded that as
long as the interdict persisted, neither Landmark nor the
Municipality could do anything in furtherance of
the development.
Mr Markovitz
indicated that they would not have taken a loan at 15% per month
interest to pay the Plaintiff in respect of the
Earthworks contract
if they were aware of land claims and believed that the delays were
short term because of the Surveyor’s
Generals diagram on
subdivision and the failure to secure the requisite number of
leases.
It was only
subsequently discovered that the reason the Surveyor Generals
diagram was not forthcoming was because the Land Claims
Commissioner
had written to him on the 11
th
of May 2007 to tell him
not to subdivide.
He stated the
Municipality was aware of those claims prior to putting development
area two out to tender and knowingly proceeded
with the tender.
The Municipality
failed to disclose that there were such claims either when it
awarded the tender or when it concluded the lease
or even when it
received the letter from the Land Claims Commissioner dated 11
th
of May 2007 when the municipality was advised not to proceed with
the development without giving the commissioner notice.
He testified that
the municipality instead spurred the Landmarks on to proceed with a
R23 Million Earthworks contract and other
development work with
Landmarks being completely unaware of the notice.
Bam JP granted the
following interim order which prevented them from proceeding with
the development:-
“
The
interim interdict prayed for in paragraph 2.1 of case number
LC66/2007 is granted and is immediately operative pending the
finalization of serious and consultative negotiations with all
parties concerned but before 30
th
of November 2007.
In the event of
the negotiations reaching an impasse, on or before 30
th
of
November 2007, the First Respondent (KSD) is granted leave, if so
advised, to make an application in terms of
Section 34
of the
Restitution of Land Rights Act 22 of 1994
as amended.”
If the municipality
had given them an indemnity they would have gone back on site and
continued but due to the Commissioner’s
attitude and the
judgment of Bam JP they could not continue with the development.
He testified it
would be reckless to go back on site having regard to the
Commissioners attitude of threats of an interdict and
the cost
implications despite the Municipality’s response that she was
wrong even after the initial interdict lapsed.
Mr Markovitz when
he was recalled to answer further questions under cross-examination
stated the following:-
According to him at
the time they tendered they were a consortium and subsequently a
company was registered. The directors of
the company were him, Mr
Kisten, Mr Mabanga and Chief Mfundu Mtirara.
Chief Mfundu
Mtirara and Mr Mabanga were also shareholders and not just
directors.
He indicated that
he could not dispute that Chief Mfundu Mtirara was the son of the
late Chief Zondwa Mtirara who had signed the
claim form in respect
of the Abathembu people.
It was put to him
that Mabanga and Chief Mfundu Mtirara had knowledge of the land
claims prior to the conclusion of the development
contract between
the Municipality and Landmark and he indicated that he could not
dispute that but they never told him this and
he was running the
company and was effectively its Chief Executive Officer.
It was put to him
that Chief Mtirara had informed him of the existence of claims in
respect of the subject land prior to the conclusion
of the
development contract and he disputed that.
He testified that
the shareholding in the company was as follows:-
Landmark Real
Estate owned 45% of Landmark Mthatha;
Chief Mtirara owned
22.5%;
Mr Mabanga owned
22.5%; and
Sesfikile
Investment owned 10%; and
In addition
Landmark Real Estate also had a development agreement with Landmark
Mthatha which effectively gave the management
of the development,
for a fee, to Landmark Real Estate Services.
He was running the
company as the employee of Landmark Real Estate and the directors
were non-executive directors despite the
fact that they held
directors and shareholders meetings from time to time.
He was involved in
the day to day running of the business and at one point they even
signed a power of attorney to him.
The other
shareholders and Directors did participate in the meeting and
attended meeting but were not involved on a day to day
basis
Landmark Real
Estate saw the advertisement in respect of the tenders for
development of the subject land and Mr Tobojani came
down and met
with Mr Mabanga and Chief Mtirara.
It was
not
put to him that Mr Tobojani:-
enquired about land
claims; and
was informed of
land claims.
According to him he
only became aware of Land claims in 2007 and even ABSA bank had
never made land claims a requirement until
he told them about it.
The next witness
called was the Regional Land Claims Commissioner (RLCC),
Ms
Linda Faleni
.
She was referred
to the Delegation of Ministerial Powers where clause 4 requires
inter alia
the Municipal Council before commencing any
development to satisfy themselves beforehand that such development
will not result
in the dispossession of peoples
existing rights
(formal or informal, in or granted on or over such properties of
commonage land. It was a pre-requisite that social impact
agreements be concluded with the affected community to their
satisfaction and in consultation with the Department of Land
Affairs and only thereafter may the said development commence.
According to her
affidavit deposed to on the 22
nd
of May 2009 in
opposition to the Municipality’s
Section 34
applications and he confirmed thereof in 1998 she received 6 land
claims in respect of Erf 912.
She was not
present at a meeting held on the 18
th
of April 2007 but
Mr Memela was and so was Mr Merry as well as the Mayor of the KSD
wherein the issue of land claims particularly
in respect of Erf 912
was raised.
A meeting was held
on the 7
th
of October 2002 with the Municipality wherein
she personally informed the Municipality about the claims over Erf
912 and the
Umtata Commonage and they were accordingly obliged to
give notice of any developments in terms of
Section 11
.
She stated in her
affidavit in opposition to the
Section 34
Application:-
“…
I
wish to state that between 2005 and 2006 when the Applicant concluded
the lease and development agreements …, it
was
already aware of the land claims lodged
by the claimant communities … the Applicant
omitted
to inform the lessees
of the
land
claims.
In so doing the Applicant had taken an unnecessary risk in involving
the developers without disclosing material informalities”
(my
underling)
According to her
in the spirit of corporate governance it was necessary for them to
inform the RLCC and in terms of the condition
imposed in the Deed
of Delegation the Municipality was obliged to consult with the land
claimants and the RLCC prior to any
development.
She indicated that
even if she had not published she could approach the court to stop
development but that would be the last
step as in the spirit of
co-operative governance she would first try to negotiate and come
up with a solution as the Government.
She confirmed the
contents of the letter dated 11
th
of May 2007 which she
had addressed to the Municipal Manager informing them about the
claims and requesting them to make representations
with regard to
developments.
She indicated that
even at present she had no intention of withdrawing the
Section 11
notice and would bring an application for an interdict if
development were to recommence. She also confirmed that there were
still other land claims pending.
She also confirmed
the contents of the other letters that emanated from her which were
referred to during the course of Mr Markovitz’
testimony.
She was referred
to the letter that the municipality had written dated 24
th
of July 2008 wherein they had inter alia stated that the impugned
development falls within urban land and is an area earmarked
for
development and it is not feasible to restore the land to any
claimant community and that they would persist with the development
unless they receive an interdict in terms of
Section 6
(3) of the
Act interdicting the development they intended proceeding with
development.
Her response was
that the contents of the letter would defeat the objective of the
Act which was restoration of the land and
the development would
have defeated that objective.
According to her
two claims were gazetted and 4 more were still to be investigated
but had been duly lodged.
According to her
the claimant have a legitimate restitution claim but are not
opposed to a retail complex which will enhance
the economy of
Mthatha, however they wish to be involved in the conceptualization
and development of such a retail complex.
The claimants have
legitimate claims and cannot be excluded from getting involved in
economic opportunities which are available
and which result from
their claimed land and that the municipality was obliged to consult
with communities who had informal
rights or restitution rights in
terms of the Ministerial delegations relating to the donation of
the land.
According to her
if the
Section 34
Application succeeds then the claimants
would be compensated by National Government.
She re-iterated
under cross examination that since development would affect the
passage of the claim and render restoration
unfeasible she would
oppose it.
She indicated that
she had not read the advertisement in the Daily Dispatch dated the
18
th
of October 2005 or the 25
th
of October
2005 regarding advertising for development on Erf 912.
She conceded that
when a claim was lodged it was possible that the claim may be found
to be frivolous or vexatious and that
people may assume until
gazetting that the claim may be frivolous or vexatious.
She conceded that
the agreements were concluded on the 12
th
of October
2005 whereas the First Gazetting only took place on the 25
th
of May 2007 after an application had been brought in the High
Court.
She however
indicated that in this case the Municipality was informed of the
claims and in the spirit of Co-operative Governance
she expected
the Municipality to inform them.
She conceded that
the publication within a reasonable time would put beyond question
the issue of land claims but that she was
dealing with a number of
claims at that time.
According to her
she was unaware of whether or not anyone had responded to Mike
Merry’s letter wherein he had enquired
about claims lodged in
respect of Erf 912.
Under cross
examination she was referred to the issue of existing rights and
questioned whether or not she was aware of any
existing rights as
opposed to rights that were still being asserted and her response
was that she was not aware of any.
She was referred
to the judgment of
Petse J
(as he then was) in
No-Italy
Mtirara v Landmark Mthatha (Pty) Ltd and 10 Others
case
number 607/2007
wherein he stated that clause 4 referred to
existing rights.
At paragraph 32
the learned Judge stated
inter alia
:-
“
There
can be no doubt that this clause cannot be construed to encompass
someone who has lodged a claim with the Land Claims Commissioner
for
the restitution of land of which the claimant was disposed after 1913
as a result of past discriminatory laws or practices
as provided for
in the
Restitution of Land Rights Act because
in my view the mere
lodgment of a land claim with the Land Claims Commissioner is by
itself an acceptance by the claimant that
he/she does not have
existing rights in the land in respect of which a claim is made
having been disposed thereof “as a result
of past
discriminatory practices” hence the claim for Restitution of
that land”
It was put to her
that the provision of
Section 11
(1)
was that once a notice
had been published no person may in an improper manner obstruct the
passage of the claim.
“
(aA) no
person may … lease … or develop the land in question
without having given the Regional Land Claims Commissioner
one
month’s written notice of his or her intention to do so”
Her response was
they were obliged to consult with her and negotiate after giving
notice so that they can be sure that the passage
of the claim is
not affected.
She stated that
she would not resort to applying for an interdict because in terms
of the Constitution she is obliged to deal
with the agent of
Government before going to court.
It was put to her
that the Municipality’s witness would testify that in October
2002 meetings the claims were referred
to in broad generalized
terms and there was no specificity with regard to the exact nature
of those claims. She responded by
saying that they were given a
list of the claims.
She confirmed that
the description in the claims were inelegant or confusing but
referred to in one way or the other directly
to Erf 912.
When questioned by
Mr Friedman she indicated that the delays were caused because they
had 17 000 claims to deal with and had
to prioritise them.
She confirmed that
Erf 912 was specifically discussed at the meeting on the 7
th
of October 2002 and Mr Memela took the minutes.
She confirmed that
the Municipality was obliged to give them notice if they intended
developing any land under claim even though
no land claims had been
gazetted.
The Municipality
had agreed that they would work together at the meeting in 2002 and
that they were required to give notice
if they wanted to develop.
She insisted upon
further cross examination by Advocate Madlanga S.C that the meeting
took place on the 7
th
of October 2002 and not as
reflected on the minutes of the 8
th
of October 2002.
It was put to her
that the meeting was in fact on the 8
th
of October 2002
and she insisted that the meeting was on the 7
th
of
October 2002.
According to her,
there were other claims over where large portions of the town were
claimed and she referred to Port Saint
Johns as one of them.
She confirmed that
Erf 912 in fact covers the bulk or large part of Mthatha.
She testified that
in terms of Section 6 (2) she should give priority to claims which
affect a substantial number of persons
or persons who have suffered
substantial losses as a result of dispossession or persons with
particular pressing needs.
She however
followed the strategy adopted by her office to finalise urban
claims that were quicker and then focus on the ones
that need more
detail. The strategy was to focus on the rural claims or those that
were more difficult to deal with and they
have settled some of
those namely Port Saint Johns and Bizana where the town was also
claimed. They also settled a claim in
Nyandeni Town.
She indicated that
the claims in respect of Mthatha were catergorised as rural claims
because these people where coming from
farms and the commonage and
the land that they lost at the time of dispossession was farm land
and grazing land which is under
rural claims at the office despite
it being urban areas now.
She did not
concede that their strategy was contrary to the prescripts of the
Act which defined the circumstances under which
prioritisation
should occur stating that those urban claims also affected a number
of people.
It was put to her
that the claims relating to Erf 912 affected a number of people and
accordingly ought to have prioritised
and her response was these
were developed properties and the commission and the claimants were
not taking developed property.
She was not
prepared to accept that no developments that would enhance the
economy of Mthatha could occur because of the 12
year delays that
emanated from her office, stating that they did not delay and that
they were dealing with other claims prioritised
in accordance with
the Act.
The next witness
was
Mr.
Robert Phillip Terry:-
He was a
consultant to Landmark Real Estate and he was brought into
Landmark Mthatha to oversee or manage the development
aspects of
this project.
On the 14
th
of June 2007 a meeting was held between Landmark and the
Municipality and he recorded the contents of the meeting.
Under land claims
it was noted.
“
The status
of the current land claim was discussed. The Municipality assured the
meeting that there was no substance to this case
and gave an extended
explanation as to the history of Erf 912 and the reasons why the land
claim was invalid.”
They were only
aware of the No-Italy claim at that time and were not aware of any
previous correspondence with regard to land
claims prior to that
date and equated this as being the same frivolous claim referred
to previously.
According to him,
Landmark Mthatha could not continue with the development under
threat of an interdict. It would be unlikely
for their financiers
to continue to fund the development with a threat of restoration
of this land hanging over their head.
He stated that it
would have been foolhardy in the extreme for Landmark to have
entered into or continued with contractors
and with other
professionals in the high likelihood that Landmark would have been
stopped and therefore unable to fulfill
obligations to the
contracting parties.
He stated that
the project was a R300 Million one and it was like an oil tanker,
which had over a hundred retail tenants and
you would have to
start re-negotiating with the tenants which vary in size from some
of South Africa’s largest corporations
to individual Mom and
Pop stores, that is, smaller stores.
He was aware that
the Landmarks had suggested that if the Municipality was so
certain that the land claims were frivolous
and of no substance
then the Municipality should indemnify Landmark against any
damages that it might incur as a result of
these land claims
actually coming to fruition. Landmark had written to the
Municipality but had got no response to their
request, for an
indemnity.
He aptly
demonstrated that he was adequately qualified to express an
opinion on the quantum of damages having regard to his
extensive
experience.
He explained the
formula utilized to calculate delay damages and termination
damages.
The Landmark
position was that total termination damages would be in the raised
sum of R 205 126 073 made up of loss of profit
and wasted costs
inclusive of legal fees, wasted salaries, travel and
accommodation, professional fees, African Bulk certificates
1 and
2, claims from tenants and Bridging Finance interest; and delay
damages would be the sum of R272 839 849-00 which constituted
loss
of profits and the factors listed above under termination damages
and in addition increased costs to re-commence.
There was
agreement between the experts with regard to legal costs, travel
and accommodation and salaries and the increased
costs of
re-commencement of the project.
The disputed
aspects between the experts were the following:-
Professional Fees
in respect of delayed damages where the municipality’s expert
believed that an amount of only R1.37 Million
was wasted and
Landmark expert stated that the entire amount of R6.8 Million had
been wasted in respect of the engineers and
architects etc. and he
motivated their stance by stating that:-
Their original
professional team, the architects and the engineers who are the
largest contributors to that professional team
indicated that they
would not be reappointed to this project under any circumstances,
whereas Professor Nkado believed that
only 20% of the costs would
be lost; and
According to him
they would have to start the project afresh, and incur 100% of the
costs and this was the stance of Professor
Botha as well
considering interdicting the fact that:-
The Earthworks
would have to be removed because they cannot tell what damage the
percolating water may have done to those earthworks
and they can’t
build a Shopping Centre on unstable ground conditions;
The change in the
market interest rates and shopping trends impacts directly on
demand for their product, which is retail space;
and
The design would
change; as the puzzle would change and some retailers may take
bigger space whist others would take smaller
spaces.
Damages in respect
of claims by tenants was placed at R5.3 Million by the
municipality’s expert Professor Nkado on the basis
that a 3
month cancellation should have been negotiated whereas Landmarks
claimed that the amount would be R68 Million –
R70 Million and
referred to the penalty clauses in Edcon Group contract which
provided for payment of a penalty in the event
of delay at rate of
R14-00 per square meter per day which he calculated over a 42 month
period.
Bridging finance
was also in dispute and said to be excessive by Professor Nkado, who
utilized the prevailing interest rate as
the one which he considered
reasonable. He indicated that this was a calculated risk taken to
ensure timeously delivery so that
they were not hit by penalty
clauses by both the municipality and the tenants, that is, so that
they would start earlier and
finish on time. It was akin to an
insurance policy of R20 million for a R300 Million rand project.
Professor Nkado the
Municipality’s expert opinion was that their loss of profits
would only be 15, 5% whereas he stated
that on the advice they had
received, Landmark should be placed in the position it would have
been in but for the breach by the
Municipality, and that would
amount to a loss of all their profits.
The occupancy of
the Shopping Centre was also in dispute where Professor Nkado stated
that it would be at 80% throughout and although
he believed that it
would be at 100% from commencement as a compromise placed it at 80%
for the first year, 90% for the second
year and 100% for the third
year and subsequent years.
According to him
the legal fees that are being claimed were the legal fees expended
by Landmark Mthatha in respect of the land
claims in defending its
position in court as a party to various cases and that was agreed
with Professor Nkado as being wasted
costs.
They entered into
an agreement with the private financier to lend money for what was
anticipated to be a period of two months
in order to finance
payments to the Earthworks contractor, African Bulk in respect of
the first 2 certificates for R8 155
000-00.
His evidence was
that if Landmarks was aware of land claims they would not have
entered into such an agreement had there been
even a hint of them
not being able to proceed with the development.
According to him
the
in duplum rule
has kicked in, in respect of Landmarks
calculations and limits the interest to an amount equal to the
capital which has already
arrived but has not as yet with regard
to the Municipality’s expert’s calculations which is
based on the normal
rates of interest on the borrowings of R8,15
Million.
In the event of
the court exercising its discretion to terminate the lease
agreement between Landmark Mthatha and the Municipality
then a
different set of damages flows. They need to calculate their
damages with reference to the value of the asset that
they
developed, the capital value of the Shopping Centre and take away
from that the cost of having developed that Shopping
Centre and
this had been agreed between the experts based on the Rhoda Report
and the JPA report which determine property
yields.
He used a yield
of 7.7% as being the initial yield whereas Professor Botha used a
yield of 8,1% and Professor Nkado 9%, and
after robust debate on
the issue between the experts they applied the capitalization rate
of 8,1%.
He also added the
amount being claimed by African Bulk in respect of the unpaid
certificates in the event that the court awards
those and stated
that there is agreement with regard to these amounts.
He read out the
judgment by Bam JP in respect of the S
ection 34
Application
wherein the following order was made in terms of
Section 34 (5)
(c)
of the Act.
“
(i) The
remainder of Erf 912 Mthatha shall not be restored to any claimant or
prospective claimant.
…
The resumption
and the initiation of all development projects upon any portion of
the remainder of Erf 912 Mthatha by the Applicant
shall only proceed
with full and exhaustive consultation with the 4
th
,
5
th
and present
and prospective claimant respondents.
Developers and
prospective developers must ensure that whatever agreements reached
with the Applicant in respect of Remainder
of Erf 912, Mthatha are
in compliance with paragraph (iii) of this order and should revise
and restructure such agreement accordingly.
They must also ensure
compliance with the spirit and letter of the Delegation, the
constitution and the Act on the part of the
Applicant and the 4
th
and 5
th
Respondent.
The Applicant
and the 4
th
and
5
th
Respondents
are ordered and are expected to take their responsibilities
seriously and take the initiative and lead in reaching
consensus.
They should jointly research projects and lay down the criteria for
the advertising and acceptance of tenders for
developments on the
remainder of Erf 912, Mthatha.
There is no
order as to costs.”
According to him
this order involves exhaustive and consultative discussions
between the municipality and any claimant or
prospective claimant
in respect of the land before they could even start to have their
own consultative discussions with
the municipality and to his
understanding no discussions took place between the Municipality
and the claimants.
The judgment in
any event is subject to an application for leave to appeal by the
7
th
and 10
th
Respondents and the
Municipality as well as cross appeals.
He confirmed
under cross examination that there was no cession of rights by
Edcon Group to Landmark nor was there a letter
of demand or any
legal action instituted by Edcon against Landmark. According to
him the money would be handed over when
Landmark faced the
inevitable. He however cannot speak for Landmark as to whether or
not Landmark would pocket the money
if it was not claimed by
Edcon.
He was aware that
one of the terms upon which ABSA was prepared to grant the loan
was that there should be no land claims,
in respect of the
property and that was an important factor for the granting of the
loan.
He conceded that
it would be easy for the borrower to go to the Land Claims Office
to determine whether or not there was a
land claim but since they
were dealing with a municipality he would have expected them to be
in a position to give vacant
possession when putting a property
out for tender and conclude leases and that the municipality had a
duty to inform the
developers accurately.
He stated that
the municipality knew about the land claims but chose not to
explain their significance or to give them accurate
information.
He was not aware
of whether or not other entities were approached for bridging
finance and whether 15% per month is comparable
to what is out
there in the market place.
He also accepted
that the rate of interest that a bank would charge an individual
would vary from borrower to borrower depending
on their track
record.
That concluded
his testimony.
The next witness
was
Zama Zamegile Memela.
He is the Director
for Operational Management employed by the Land Claims Commissioner.
A meeting was held
on the 7
th
of October 2002 by the Regional Land Claims
Commissioner and the King Sabata Dalindyebo Municipality (KSD).
According to him
the date of the meeting should have been the 8
th
of
October 2002 and the 7
th
was a mistake or a misprint and
that he drafted the minutes which correctly reflect what transpired
at the meeting.
He confirmed that
the mayor raised concerns that Erf 912 had been identified for
development purposes so the concern was that,
may be the two claims
would block the development.
According to him
there were no other minutes in respect of this meeting and they were
the ones taking the minutes not the municipality.
He also confirmed
that he was the author of the letter that was addressed to the
Department of Transport and CC’D to Mr
Merry referred to by Mr
Markovitz during the course of his testimony but he does not know
how or why it was sent to Mr. Merry.
A meeting was held
on the 18
th
of April 2007 where Mr Merry and the Mayor of
the Municipality were also present.
They presented the
status of the land claims in Mthatha in the Mthatha region at this
meeting and specific references were made
to the Zimbane,
Ncambedlane, Chief Njemla and the rest of the forestry claims.
He explained that
the land under restitution claim may not be developed or leased and
that the Municipalities were required to
make enquiries with the
Land Claims Commissioner each time they wanted to develop any land
whether there is a claim or not.
He confirmed under
cross examination that none of the claims had been validated at the
time the meetings were held and no decision
was taken as to whether
or not the claims were valid.
He confirmed that
the minutes were not forwarded for the Municipality to consider and
confirm as being an accurate reflection
of what happened at the
meeting and that he was not officially appointed the secretary but
simply took the minutes.
He however stated
that they did usually send the minutes to the Municipality, not for
confirmation but just, to say that, that
was what they had discussed
at the meeting. He however cannot recall who faxed it because of the
time lapse and accordingly cannot
say that it was faxed with
certainty.
He confirmed that
it was usual practice to confirm the minutes of a previous meeting
at a subsequent meeting but it was not done
here perhaps because
they was no immediate meeting after that.
According to him
the meeting that reflects the 18
th
of April 2007 was in
fact held on the 2
nd
of April 2007 and is an error. It
was pointed out to him in re-examination that the attendance
register is dated 2
nd
of April 2007.
He agreed that
there was an inordinate delay in processing, investigating and
eventually gazetting these claims, relating to Mthatha.
He conceded that
none of the claims described the property or the subject development
land with any degree of precision.
He conceded that
the Technikon has got nothing to do with the locality of the present
subject property but stated that that property
also falls under Erf
912 and the subject land also falls under the same Erf number.
He does not know
whether Mr Merry’s letter was replied to and cannot dispute
that it was not responded to or whether his
office received it.
He conceded that
there was no provision in the Act that prevented the leasing or
developing of land prior to the claim being gazette.
It was put to him
that witnesses for the Municipality would testify that no specific
mention was made with regard to Erf 912.
His response was that that
wouldn’t be true because there were specifics around Erf 912
and the forest and they were specified
in all the discussions.
He however
confirmed that the municipality was not furnished with any maps.
According to him he
was not sure that he received the letter addressed by Mr Merry but
the Municipality was furnished with a list
of claims at the meeting
on the 18
th
of April.
He conceded that
KSD would have been in the dark as to exactly what was being claimed
if the letter was not responded to.
Professor
Pieter Cornelius Botha
thereafter testified
He did not know
any of the parties to this litigation prior to being instructed to
express an opinion.
He was given Rob
Terry’s report and he investigated Mr Terry’s
methodology and the way that he calculated his
delayed and
termination damages and adopted a similar approach because he
agreed with what Mr Terry had done but there were
points of
departure particularly with regard to the capitalization rate
whereby Mr Terry had a lower cap rate and he had
a higher cap rate
which he based on the Rode Report and that was the rate agreed
upon by the parties.
According to him
the wasted legal costs were in relation to the proposed
development for rezoning and what had to be done
for the
contracts, he was asked this specifically by Mr Coetzee and merely
confirmed it, this is different from the evidence
of Mr Terry who
stated it was in respect of litigation in respect of land claims,
and it was subsequently put to him and
it was also in respect of
costs for case 66 and 69 and he agreed.
He went on to
testify with regard to the points of agreement and departure
between Mr Terry and him on one side and Professor
Nkado on the
other hand.
He testified that
he would not use the old documents as a Quantity Surveyor as he
would be responsible professionally for
any mistakes so he would
do a new comprehensive survey himself.
He had no
knowledge of short term loan agreement rate of 15% per month
because that is something that is out of the ordinary
and was
Landmarks endeavours and responsibility.
He indicated that
5 years after the principal debt was incurred the interest charged
would not make a difference whether it
was 15,5% per annum or 15%
per month in light of the
in duplum rule.
He reiterated
that their stance of 80% for the first year 90% for the second
year and 100% for the 3
rd
year was reasonable and a
compromise because they still believed that they would have had
100% occupancy from year one and
he was of the view that the 80%
of Professor Nkado throughout was not reasonable having regard to
the stature of the developer
in this case.
He confirmed the
amounts of the revised delay and termination damages as stated by
Mr Terry.
That concluded the
First Defendant’s case.
The Municipality
thereafter called its witnesses.
Mr
Michael
John Merry
was thereafter called as the first witness on
behalf of the municipality.
Mr Merry
briefly testified as follows:-
He commenced
employment with the Municipality on the 1
st
of March
1989 as the Principal Planning Officer and his section is the one
that is central to development occurring in or
within KSD’s
area of jurisdiction.
According to him
he had received a letter dated 25
th
of August 2003
written by Mr Memela from the land claims commissioner relating to
the manpower Training Centre which was
purported to be on Erf 912.
This claim was subsequently validated in 2007.
He responded to
this letter by letter dated 29
th
of October 2003
wherein he stated that the claim was specific in relating to the
Manpower Training Centre and that particular
facility is not
situated on Erf 912 and he then asked if there are any claims on
Erf 912 because of that reference to Erf
912 in the letter dated
23
rd
of August 2003.
He also tried to
point out in his letter that the remainder of Erf 912 possibly did
not qualify to be validated as a claim
because it was there prior
to 1913, owned by the Colonial Government since 1883 prior to the
cut off date of the Restitution
Act, which was 1913.
He thereafter
read the proclamation relating to Mthatha from the Government
Gazette of the Cape of Good Hope issued on October
27
th
1883 which was not invalidated but subsequently amended in 1906
detailing the boundaries of Mthatha Municipality and a further
amendment in 1931 insofar as the amended boundaries are concerned
and the diagram demonstrates that the subject land of this
dispute
falls within the boundaries.
According to him
the subject land abuts the Ministerial complex, Ekululekweni; the
subject property is on the other side to
the East of Ekululekweni
and it was not part of Ekululekweni.
The subject land
would accordingly be part of the Mthatha Commonage according to
this description.
According to him
Dr Dlovo had towards the end of 2004 brought him a copy of the
land claim that had been submitted on the
31
st
of
December 1998 on behalf of the Thembuland Kingdom.
The claim form
and annexures related to various areas in Mthatha but was
described as rural area.
Upon receiving
this claim form he wrote to the land claims commissioner on 10
th
of November 2004 wherein he requested to be furnished with the
status of the claim. The heading of the letter refers to erf
912
Zimbane land claims, the letter
inter alia
reads as
follows:-
“
The
claimants have verbally stated that the remainder of Erf 912 Umtata
belongs to the Thembuland Kingdom and they have requested
negotiated
settlements on the ownership of this land. Has this claim been
rejected?
Please can you
urgently respond to this letter in writing, as the matter needs to be
finalised once and for all.”
The letter was
written by him but signed by the Municipal Manager.
He did not
receive any response to the letter.
The Abathembu
claim has not been validated.
At the time of
the tender he was aware of the Zimbane claim which he considered
not to relate to erf 912 but rather to Manpower
Training Centre
and the Abathembu claim which he believed would not have qualified
for validation but also had not been validated.
He did not become
aware of any other land claims during the tender or the leasing
stage of the subject land.
He attended a
site meeting on the 17
th
of May 2007 before
commencement of the development works.
There was a
meeting held with the Land Claims Commissioner during April 2007
as a result of the impending development where
the Land Claims
Commissioner intimated that there was a claim on the land.
The municipality
was admonished by the Land Claims Commissioner for not consulting
them when they were supposedly aware of
claims but in the same
breath stated that the RLCC is still to validate these claim.
There were no
specifics given and they did not know who was claiming.
He became aware
of the Kwalindile claim after the interdict was served and the
Zimbane much later.
He confirmed that
after the interdict Landmark Mthatha did not enjoy occupation of
the subject land in the sense that it could
develop and complete
the Shopping Centre lawfully.
He conceded that
the land under development was only defined in 2005 whereas the
claims were lodged in 1998 and accordingly
it would not be
possible to make specific reference to “the land under
development”.
He conceded that
the only enquiries he made about land claims to the Commissioner
were in respect of the remainder of erf
912 which covered a
substantial portion of Mthatha and not specifically the “land
under development”.
He was unaware of
whether anyone else at the Municipality made specific enquiries in
respect of the property under development.
He indicated that
the municipality had served a S
ection 11 (7)
notice on the
Commissioner but was not aware that as at the date of service the
interdict was still pending and was still
in existence when the 30
days expired.
He was also aware
of the Section 34 Application whereby the Municipality sought an
order that the land not be restored to
the successful claimants.
He was referred
to the order of Bam JP wherein the learned Judge had
inter alia
stated that prior to recommencement of development there had to be
consultations with the claimants and prospective claimants
and he
indicated that he was not aware of any consultation.
He conceded that
it would not be responsible for Landmark to go back on site in
light of the order and the Land Claims Commissioner
threats.
According to him
the clause in the Deed of Delegation relating to existing rights
was complied with in that the Municipality
had consulted with the
Transitional Rural Council who was represented by the communities
in the rural areas and the traditional
authorities before the
donation could take place.
He indicated that
there were meetings between the Municipality and Land Claims
Office but no specific mention was made of
Erf 912.
It was put to him
that in the letter written on behalf of the Municipality on the
15
th
of December 2010 that the subject land is on part
of the Ekululekweni portion of the remainder of Erf 912 and his
response
was that this was at odds with the description which he
described only as being the fenced area of the Ministerial
Complex.
He confirmed that
he considered the delegation to be binding on the Municipality but
he believed that it had already been
complied with.
He disagreed with
Ms Faleni’s view that the Mpenweni claim was wide enough to
cover Erf 912 and his comment was that
this land is north of the
river and has no relevance to Erf 912 at all.
He confirmed that
the Zimbane claim was headed Erf 912 Zimbane AA District of
Mthatha, South Africa and conceded that it would
be reasonable to
interpret that claim form as including something with regard to
Erf 912 and that possibly the claimants
wanted to claim Erf 912
and were unaware that the Zimbane AA fell outside Erf 912.
He conceded that
if someone had this form that person would know that there was a
risk that Erf 912 may be claimed.
He confirmed that
if a developer was aware of this they would not spend R55 000
000-00 to go on site and start building a
Shopping Centre on the
land.
He indicated that
he does not think he was present at the meeting of the 7
th
of 8
th
of October 2002 and did not receive a list of
claims or he would have known about them.
He confirmed that
the letter dated 25
th
of August 2003 referred in the
heading “Re: Zimbane Community Claim – erf 912
Umtata”.
He however was of
the view that because the body of the letter referred to the
Training Trust which did not form part of Erf
912 it did not refer
to Erf 912 and he was not given the claim form which specifically
referred to Erf 912.
According to him
they got no response to the letters and assumed that the silence
meant that there were no claims backed up
by the fact that they
believed that any claims on Erf 912 could not be validated because
the land had been in the possession
of the Colonial Government
prior to 1913 and that the Commissioner had acknowledged that by
their silence.
He conceded that
the municipality did not communicate their stance or the existence
of the claim to landmark or the stance
of the Land Claims
Commissioner with regard to the subject land.
When he wrote the
letter in 2004 which is headed. “Re: Land claim Zimbane AA –
erf 912”, it was on the basis
that the possibility existed
that the Abathembu claim related to the subject land and he
therefore wanted clarity.
He confirmed that
but failed to mention this letter or this claim to Landmark.
He conceded that
the Municipality as at 2004 was aware of not only one but possibly
two claims which had not yet been published
and that the claimants
in respect of the Abathembu claim verbally stated that they
intended their claims to relate to Erf
912.
The municipality
however made the assumption because of the lapse of time from the
date that the letter was sent to the Commissioner
that there were
no claims.
He conceded that
three months later on 25
th
of February 2006 the
Municipality advertised for proposals to develop Erf 912, without
any follow up letters or meetings
called nor any telephonic
enquiries pursued after the initial letters were sent, one in 2003
and the other in 2004 prior
to the advertising of the development.
He conceded that
there was no other co-operative governance between the
Municipality and the Commissioner aside from writing
these two
letters.
At the meeting of
the 18
th
of April 2007 according to him Mr Memela
stated how dare the municipality develop without consulting them
and he thinks it
was with regard to Erf 912.
He confirmed that
the Municipality was aware that the attitude of the Land Claims
Commissioner is that there may not be development
on Erf 912, as
at the meeting of the 18
th
of April 2007.
It was put to him
that if at this stage Landmarks were informed it would limit the
damages and prevent incurring of Millions
of Rands of expenditure
and it was possible to stop.
He conceded that
the failure to tell the landmarks about this meeting constituted
keeping something secret.
He confirmed that
at the meeting in April he did not deal with the RLCC’s
failure to respond to his letters.
He conceded that
the Municipality did not inform the Commissioner of their
intention to develop directly but merely advertised
the
development.
The commissioner
was accordingly not directly informed that the land was going to
be developed but was expected to gain such
knowledge from reading
the advertisement and Landmark did not know the attitude of the
commissioner.
It was put to him
that the Bulk Earthworks contract was signed on the 30
th
of April 2007 and he saw the vehicles going onto the land and
still did not inform anyone that there is a risk and that the
Regional Land Claims Commissioner says that you are not allowed to
do this and he confirmed this.
He confirmed that
he did not inform the Landmarks of the Application to interdict
the development on the 9
th
of May 2007 or the letter
dated 11
th
of May 2007 that was written to the
Municipality by the Regional Land Claims Commissioner.
He conceded that
there was an obligation upon the Municipality to conduct its
affairs transparently and that they did not
in this instance do so
which according to him was because they did not think it was
necessary to do so.
He still
maintains that the Commissioner’s stance was wrong.
The Commissioner
had failed to tell them about land claims and even when she did he
failed to inform Landmarks and he conceded
that they were
negligent in this regard and they were not as co-operative as they
could have been with the Land Claims Commissioner
without the need
for interdicts and court cases and having attorneys exchange
letters.
Professor
Raymond Naemeka Nkado
thereafter testified.
He listed his
extensive experience that aptly demonstrates his expertise.
He indicated that
he had altered his calculations with regard to the loss of profits
and he was now
ad idem
with the Landmarks experts on this
point in terms of loss of profits being the sum of R 105 739 795 in
respect of termination
damages.
He assumed with
regard to the legal costs that the figures were correct and conceded
that the calculations were done by the developer’s
experts.
He went on to
justify his stance with regard to why only 20% of the professional
costs would be considered wasted when dealing
with delayed damages.
According to him
the bridging finance of 15% per month was excessive and would amount
to about 400% per annum. He accepted that
bridging finance would
attract a different rate of interest because it is usually very
short term financing, however no documentation
had been furnished to
suggest that alternative sources of financing was sought and that
this was the best rate obtainable.
He was referred to
a letter written by Mr Markovitz on behalf of Landmark Real Estate
to the ABSA property finance person wherein
it was suggested that
the projected sale yield or cap rate would be 8,5%.
He indicated that
the developer would have to try to impress on the bank that the
project is highly profitable and that it would
command the highest
resale value. It would be a reasonable guess but nothing too high
because you would like to maintain your
credibility with the
financier.
He stated that if
he was aware of this letter and that rate of yield he would have
been firmer on his lower yield expectation
of 9 %, when they were
negotiating.
He however failed
to state what factors were taken into account and on what basis the
concession was made nor did he amplify his
reasons for stating that
he would have been firmer on his lower yield expectations.
He calculated delay
damages as being R179 176 344-47 and termination damages as being
R151 022 438-25.
He was questioned
with regard to the Rode Report which put the yield at 8,1% for East
London Shopping Centres which is the closest
town referred to in the
report as Mthatha is not in the report.
He confirmed that
the IPD put the yield for Eastern Cape at 7,3% for retail during
2007.
He conceded that Mr
Markovitz was not a Quantity Surveyor and that Mr Terry had put his
yield at 7,7% but in the spirit of give
and take had increased it to
8,1%.
Mr Dowa Vena
Mgudlwa testified as follows
:-
He was the
executive mayor of KSD from 2001 to 2004. He was not the Mayor when
the lease was concluded.
He attended a
meeting on the 7
th
of October 2002 on Communal Land
Rights held at the instance of the Department of Land Affairs.
It was a briefing
on land rights and the Act. There was land that was being claimed by
Zimbane people. There was no specific mention
of the particular area
on which the development was taking place and they settled that
dispute with regard to where construction
could take place.
The minutes were
never sent to the Municipality so it is difficult to accept the
authenticity of the minutes because they never
read it and he saw it
for the first time in court since 2002.
He did not agree
with the statement that a list of claims was shared and that that he
raised concerns regarding the claims by
Zimbane, KwaLindile and
Abathembu communities over Mthatha Commonage Erf 912.
According to him
the claim was in reference to what was already actively claimed by
the Zimbane community, which is where they
were building the houses.
He
could not
remember being furnished with any claim forms
by anyone and no
list was presented.
He indicated that
Ms Faleni spoke about land claims in a generalized fashion, and that
they had referred to the Zimbane, KwaLindile
and Thembuland
community.
Henderson
Mpumelelo Mabanga
thereafter testified briefly as follows:-
He is a businessman
and was a 22 ½ % shareholder of Landmark Mthatha.
He identified prime
land for development close to the N2 adjacent to Ekululekweni.
He consulted with
Advocate Sishuba to investigate the land and discovered that the
KwaLindile community had an interest in the
land when Mr Sishuba
made enquiries from Land Affairs.
They spoke to Chief
Njemla and community members during the latter part of 2004 or early
2005 who indicated that they had a land
claim.
He informed them he
was interested in developing the land and they indicated that they
do not oppose development of the land and
they were promised a
percentage of the development of the land.
They agreed to form
a Community Trust.
Whilst they were
still in the process of sorting out the Trust the Municipality
advertised the land in 2005 and he dumped the
KwaLindile community
when he realized that the Municipality held the title deed to the
land.
He went to Chief
Mfundo Mtirara one of the Abathembu Chiefs.
Chief Mtirara
informed him that Abathembu also had a claim over the land but the
Municipality had the Title Deed of the land.
He requested Chief
Mfundu to join him in developing the land with his friend Dennis
Tobojani who resided in Johannesburg who was
with Landmark Real
Estates.
He telephoned
Dennis and informed him about this piece of land and the
advertisement.
Tobojani was
interested and they agreed to form a consortium.
They then held
several meetings where Mr Adam Markovitz was present but they
predominantly dealt with Mr Tobojani.
They appointed Mr
Markovitz to take over from Tobojani because of his experience
coming from a big company and
they did not possess the experience
which he possessed.
He and Mfundo were
aware of land claims relating to the subject land by the KwaLindile
community and the AbaThembu community.
He confirmed that
he knew Mr De Klerk of African Bulk as they were neighbours and he
had assisted Mr De Klerk to get the contract
with the landmarks.
He did not tell Mr
De Klerk about land claims and they never spoke about land claims.
According to him
the only person who was aware of the land claims was Mr Tobojani who
was representing Landmarks real estate.
He did not tell
Mr Markovitz about the land claims
because the Municipality held
the Title Deed and he had been dealing with Mr Tobojani.
He had informed Mr
Tobojani that he had dumped the Kwalindile community who had a land
claim and invited Mfundo Mtirara who also
had a land claim.
He accepted that he
signed a suretyship in respect of Mr De Klerk but did so because Mr.
Markovitz advised them to sign.
According to him
the bridging finance was taken from a company which Mr Markovitz’
father was a part and they had taken
their 55% share.
He confirmed that
Mr Markovitz was the person who really managed Landmark Mthatha, and
communicated with the banks and signed
cheques.
He knew that the
KwaLindile claim extended over the land but did not know that it
could affect the feasibility of the proposed
development.
He thought that the
land claimed belonged to the Kwalindile Community and then it
transpired that the Municipality had the Title
Deed over the land.
He indicated that
he did not know if Mr Markovitz knew about the land claims which
would constitute a risk to the development.
He initially denied
that he signed anything pertaining to the bridging finance agreement
but when the resolution signed by him
was shown to him where he had
consented to the bridging finance at 15% per month and he accepted
that he had signed it.
He confirmed that
he did not tell Mr Tobojani that one or both of the land claims
could hinder the proposed development because
it was said that the
Municipality held a Title Deed on the land.
It was put to him
that Mr Markovitz signed a bridging finance agreement, agreed to
sign suretyship agreement for money owed to
African Bulk Earthworks
and for the money borrowed and would not have done so if he was
aware of land claims. His response was
that he did not dispute that.
He confirmed that
he also signed the suretyships and agreed to the bridging finance
and it was put to him that he was not concerned
that the two land
claims would constitute a risk to the development and he agreed that
it did not concern him because he knew
that there was a Title Deed
which was in possession of the Municipality.
It was put to him
that it was not put to any of landmarks witnesses that Mr Tobojani
held discussions with him and was aware or
told about two land
claims.
Chief Mfundo
Mtirara
was called as the next witness, he testified as
follows:-
His father was
Chief Zondwa Zwelakhe Mtirara who signed the claim form on behalf of
the AbaThembu.
He was approached
by Mr Mabanga about becoming involved in developments.
He went to the
Municipality to confirm whether or not the property belonged to the
Municipality and he met with Mr Mike Merry
who confirmed that it
belonged to the Municipality.
He was aware of the
land claim by the AbaThembu since his father was the one who made
the claim and Mr Mabanga mentioned the KwaLindile
claim where they
alleged that the property belonged to them.
According to him Mr
Tobojani first mentioned land claims by asking whether this land has
any land claims because they sometimes
find having gone a long way
that the land they develop is under claim.
According to him Mr
Tobojani asked about the property and he responded by saying that
the only claim he knew was the one made
by his father.
He met Mr Markovitz
after they succeeded in being awarded the tender.
He confirmed that
Mr Markovitz ran Landmark Mthatha.
According to him a
meeting was held at the Bumbane Great Place with Mr Gwanya, the
National Land Claims Commissioner because the
AbaThembu wanted to
know about the progress of their claim and he had informed Mr
Markovitz about this meeting prior to them
concluding the lease
agreement.
He indicated under
cross examination that when he was questioned about land claims made
by his father stating that it was an old
one and he was not sure
whether it still existed and in any event his father could not be
against the business which he was involved
in.
He conceded that it
would be fair to say that Mr Tobojani was comfortable with what he
told him since he was the Chief.
He indicated that
he was not concerned about land claims constituting a risk to the
development until the No-Italy application
came to his homestead and
he informed Mr Markovitz about this.
According to him he
sent the documents pertaining to the No-Italy matter to Mr Adam
Markovitz who informed him that the Land claim
issue was serious.
According to him he
received the No-Italy papers before they signed the surety for
African Bulk and surety for the 15% a month
loan and agreed to the
15% per month bridging finance.
He confirmed that
he only informed Mr Markovitz of the Abathembu claim and not the
KwaLindile claim and re-iterated that he was
not concerned about the
Abathembu claim because it was done by his father who would not go
against his business.
He conceded under
cross examination that after his conversation with Mr Merry he was
not concerned that there were land claims
over the land which could
constitute a risk to the development.
He indicated that
Mr Mike Merry had told him that he had on many occasions enquired
from the Commissioner whether there were claims
and he was going to
advertise the land because there was no response from the Land
Claims Commissioner.
It was put to him
that it was never put to Mr Markovitz that No-Italy documents were
sent to him and neither was there any documentation
furnished to
confirm dispatch of the documents to him.
It was also not put
to landmarks witnesses that Mr Tobojani informed him that landmark
had previously had problems with land claims
or that he enquired
about land claims.
According to him
Advocate Sishuba requested him not to sign the suretyship agreements
but they nonetheless did because they saw
greener pastures and
thought that the ABSA finance will come in shortly because the
Surveyor’s General diagram was going
to be okay.
The No-Italy claim
was dismissed, he was present in court.
He was unaware of
any claims of substance on the 11
th
of June 2007.
Mr Qina
thereafter testified that he was a control building Inspector
employed by the KSD Municipality and he gave evidence with regard
to the various areas mentioned during the course of the testimony
of the other witnesses.
Dr Delarey
Mkhatshwa testified as follows:-
He was the
executive mayor of KSD from August 2004 to June 2007.
He indicated that
he was not aware of any land claims during his tenure in respect of
the subject property and the discussions
were general without any
specific reference to Erf 912.
He was unaware of
any of the letters written to the Municipality or by the
Municipality but according to him the policy was that
they respond
promptly to all correspondence.
According to him
there was a meeting during April 2007 but even then there was no
mention of Erf 912 specifically but the Regional
Land Claims
Commissioner said that the Municipality should not proceed with land
under claim.
They did not in his
presence say that if the Municipality wanted to know if there was a
claim over any specific land they should
ask the Commissioner.
He recalls the
Zimbane land claim being mentioned, the KwaLindile and the AbaThembu
claim.
He denied that the
Municipality was admonished and said the relationship between them
was very good and no one was admonished
in his presence but he was
present throughout the meeting.
According to him
the Mayor does not take decisions with regard to sale or lease of
land and they are not even involved in the
bid processes or
questions of budget or by laws which would be done by council for
and on behalf of the Municipality.
He did not have the
power nor was the power conferred upon him to deal with the issue of
the lease of land in Mthatha.
Mrs Vuyo
Zitumane
was the last witness called on behalf of the
Municipality:-
She was the
Caretaker Municipal Manager of KSD Municipality from 31
st
January 2007 to 31
st
October 2007.
She was unaware of
any disputes with regard to land in Mthatha prior to becoming
Municipal Manager.
In her affidavit
in opposition to the relief sought in the No-Italy matter she
stated at,
“
7.2.2.3” I
re-iterate that the portion of the remainder of Erf 912 Mthatha
upon which the development is occurring does
not form the subject
matter of any land claims. Claim is being laid only to portions of
the remainder of Erf 912 excluding
the portion that is being
developed.”
The application
was dismissed and attempts to appeal were also unsuccessful.
The interdict
application by No-Italy was launched on the 8
th
of May
2007 and she opposed that Application as well on the basis of lack
of
locus standi
.
In her affidavit
she stated that the land claims were not published and the mere
lodging of a claim does not translate into
a recognizable existing
right in land.
She also stated
that the claim is frivolous and vexatious.
She became aware
of the claim when there were responding to the Application that was
lodged by No-Italy Mtirara against the
KSD, the first Application.
According to her
New Ekululekweni is the fenced area of the Ministerial Complex and
has nothing to do with the subject land
and accordingly the claim
in question had nothing to do with the land about to be developed
and it was on the basis of legal
advice at the time that they
reached that conclusion.
She was then
referred to case number LCC 66 of 2007 launched by Mr Njemla in the
Land Claims Court for an interdict and she
filed an affidavit
opposing the relief sought.
In this affidavit
she stated that the Deed of Transfer of Ownership to the
Municipality was valid and their purported claim
had not been
validated and did not relate to the subject land which is located
between the fence of Ekululekweni and the N2
National road.
She went on to say
that Petse J found that the Applicant No-Italy did not show that
the land claim made on behalf of Thembuland
Kingdom encompasses Erf
912 Mthatha on which the development that the Applicant seeks to
interdict is taking place.
She confirmed that
she never told anyone at Landmark about any claims.
She confirmed that
she did not inform the landmarks about the No-Italy claim.
She was referred
to her affidavit in case 69 wherein she made reference to
proceedings on the 18
th
of 19
th
of April 2007
at paragraph 12.10.2 where Mr Memela had requested an audience with
the municipality and were accorded audience
during the lunch hour
where she stated that it was an informal audience and the
Commissioner’s representatives
furnished them with
documents pointing to claims allegedly in respect of remainder of
Erf 912 which were still the subject of
investigation and research.
According to her a
scanty document exists somewhere within the Municipality where
reference was allegedly made to the remainder
of Erf 912.
She then went on
to say that they received one document with scanty information on
portions of land which were under claim and
that information had
got nothing to do with the remainder of Erf 912.
She went on to
indicate that Erf 912 was not mentioned in that document and
therefore she subsequently requested this information
from the Land
Claims Commissioner.
She indicated that
the Commissioner could have furnished them with documents but those
documents are irrelevant in terms of
the issue of the land claim in
question or else she would not have written to the Land Claim’s
Office to request information
which was not clear at the time.
She was not sure
that the letter from the Land Claims Commissioner dated 11
th
of May 2007 related to the subject land and therefore they
requested the Land Claims Commissioner to specifically define the
land they were talking about. She accordingly confirmed receipt of
the letter.
There was
accordingly no basis why they should have asked landmark to stop
when the land in question was not under threat
in terms of their
understanding
or to tell them of the dispute.
She persisted that
the Municipality was not aware of any land claims in respect of the
subject land, remainder of Erf 912.
She did not deem
it necessary to inform Landmark Mthatha about the misunderstanding
between the Land Claims Commissioner and
the Municipality because
there was no threat as far as the Municipality was concerned and
they would have informed Landmark
if the Land Claims Commissioner
had responded to their queries.
According to her
the Judge made a ruling to say:-
“
Land claims
go back to the drawing board because your notice is confusing.”
It was put to her
that this was not useful to Landmark who were bound by the
interdict which reads:-
“
The interdict
prayed for in paragraph 2.1 is granted and is immediately operative
pending the finalization of serious and consultative
negotiations
with all parties concerned but before 30
th
of November 2007.”
She indicated that
she wouldn’t respond to that question and she does not know,
but because there was confusion they would
not have informed
Landmark about this because there was no threat to the land.
It was put to her
that the land claims forms could not refer specifically to
remainder of Erf 912 or the property under development
because it
was only identified approximately 5 years after the claim forms
were lodged.
She stated that
she would not respond to that question.
That concluded her
testimony and the case for the municipality.
Evaluation
Mr. De Klerk
was a good witness who gave his testimony in a frank and forthright
manner.
His testimony was
not challenged under cross examination save with regard to the
issue of being told about the Land Claim
and his explanation that
he was mistaken appears to be genuine.
In any event this
does not adversely impact upon his bona fides or his awareness of
the Lands claim at the time he concluded
the agreement or
commenced working on the land.
Further, even if
he was made aware of the land claim in June 2007, his explanation
for his continuation beyond that date is
acceptable in that he was
paid and the suretyship agreements were concluded.
Any person would
reasonably believe that this would not have been done if there was
a danger or genuine fear that land claims
would be an impediment
to continuation of the work.
I accept further
that this was a small business and he would not have taken the
risk if he was aware of any impediment to
his continuation of the
work.
I have no doubt
whatsoever that the Plaintiff was bona fide and was unaware of any
land claims at all material times.
The evidence
proffered on behalf of the First and Second Defendant did not
gainsay the Plaintiff’s testimony.
Mr Markovitz
was an excellent witness.
He impressed the
court as being an astute businessman who would not have entered into
the development if he had been aware of
the land claims nor would he
have borrowed monies at 15% interest per month despite his father
being associated with the company
that loaned the monies, nor would
he have signed suretyship agreements on behalf of Landmark Real
Estate in respect of the loan
and Landmark Mthatha’s
indebtness to the Plaintiff if he was aware of land claims.
He did not
contradict himself under cross examination and gave his responses in
an honest and forthright manner.
His explanation for
not continuing with the project was perfectly acceptable as was his
statement to the effect that he would
have continued if the
municipality had provided the indemnity.
It is accepted and
reasonable that it would not make economical sense to return to a
development where a threat of an interdict
hanging over your head
and the possibility existed that the lease would be cancelled and
reinstatement ordered.
It was evident
that
Ms Faleni
was making excuses for her delay in
finalizing the claims.
If she had
expedited and finalized the claims timeously and had not caused the
inordinate delay the present situation may not
have arisen since
clarity would have resulted with regard to land claims.
However I accept
her testimony that she had informed the municipality about the
claims and that they related to Erf 912.
Whether or not
documents were furnished to the municipality does not detract from
the fact that she personally and in writing
informed them of the
existence of the claims.
I accept her
evidence with regard to what transpired at the meetings despite the
fact that the “minutes” had not been
confirmed and can
at best be referred to as the Land Claims Commissioners written
recording of events.
However her
testimony with regard to what transpired is accepted and she is
found to be a credible witness.
The municipality
could have and should have informed the Regional Land Claims
Commissioner of their intention to develop or brought
the Section 34
application earlier prior to developing the land. I accept that they
failed to do so both having regard to her
testimony and that of the
Municipalities witnesses.
Their awareness of
the claims obliged them to do so especially in light of the fact
that they had a contrary view to that of the
RLCC and ought to have
referred the matter to court for clarity or held meetings with the
RLCC to discuss the issue and gain
clarity from them.
The Municipality
cannot rely upon the delays of the RLCC in publishing the claim as
an excuse for their failure to inform the
First Defendant of the
existence of the claims and the attitude of the RLCC whether or not
they believed her stance to be right
or wrong.
It was evident from
her testimony that the municipality did not notify her or her office
in writing or verbally about the proposed
development despite being
aware of “claims” and despite the request that they
should be consulted.
The municipality
may not have been obliged to inform the RLCC in terms of the Act but
was most certainty obliged to do so in terms
of the Constitution
which imposed an obligation to do so in the spirit of co-operative
governance.
They failed to do
so and it is this failure that has given rise to the present
situation and the present action not the delays
caused in finalizing
the land claims. I accept her testimony to the effect that the RLCC
was not opposed to the development at
all but wanted the Land
Claimants to have a say in whether or not such development would
occur and the terms and conditions thereof.
Mr. Terry
was an impressive witness and gave his responses in an honest and
forthright manner. It is noteworthy that:-
he stated that the
amount in respect of the agreed legal cost related to litigation
over land claims; and
there was no
cession or demands or summons issued in respect of damages that may
arise out of Edcon’s penalty clauses.
He was able to
justify why bridging finance was necessary and that even though the
interest on the face of it was excessive, it
was intended to be for
a short period of time and may well have saved them money at the end
of the day by ensuring that the work
was timeously completed.
Mr Memela
was a good witness who willingly made concessions and I have no
hesitation in accepting his testimony that he did inform the
municipality that there were claims over erf 912 and had requested
the municipality to check with them prior to developing
any areas,
which the municipality on its own version failed to do. As already
indicated his “minutes” cannot be
regarded as formal
minutes but he has confirmed that it records what was said at the
meeting and appears to be what was discussed
at the meetings.
Professor Botha
was a good witness and to a large extent confirmed what Mr Terry
had already testified to.
He conceded that
he had no idea of the costs orders but simply relied on what was
given to him by Landmark.
He conceded that
the costs were not presented to him and he cannot express an
opinion as a matter of law whether or not the
municipality would
be liable to reimburse the Landmarks for these costs.
He also conceded
that he was not aware of the bridging finance interest rate in
respect of short term loans.
Mr Merry
gave his evidence in frank and forthright manner and readily made
concessions.
It was evident
from his testimony that the municipality was aware of the fact
that there were claims over erf 912 Mthatha.
The issue of
whether or not the municipality believed these claims to be
legitimate or not was not within the purview of the
municipality
but rather the Regional Land Claims Commissioner (RLLC) and
accordingly the municipality was not justified in
rejecting the
views of the RLLC based on the interpretation Mr Merry placed on
it.
If they believed
that the RLLC was incorrect they had the right to challenge this
in court or to seek clarity on the issue
prior to developing the
land.
They had a duty
to make follow up inquiries or at least inform the RLLC of their
intention to develop, being aware that reference
had been made to
erf 912 and that they had not received any clarity on the issue
one way or the other.
Mr Merry conceded
that he failed to make inquiries prior to advertising the land for
development.
They accordingly
failed to discharge their obligations of co-operative governance
as provided for in the constitution.
Mr Merry’s
responses confirm this and his concession that the municipality
was negligent having regard to the facts
appears to be a valid
one, both in failing to inform the RLCC of the proposed
development and in failing to inform Landmark
Mthatha in the
circumstances of this case.
His subjective
belief of whether or not the claims were legitimate or not are
irrelevant.
Professor Nkado
was a good witness but:-
Did not
satisfactorily justify his stance that the bridging finance was
unreasonable and that his reference to normal interest
was
reasonable, having regard to his concession that short term loans
usually attracted higher interest rates.
If this was
conceded then his reference to normal interest rates appear to be
incorrect and the court is left with Mr. Terry’s
testimony
which justifies the higher interest rates in respect of the bridging
finance.
Landmark Mthatha
had not provided information regarding whether or not other short
term loans were available at lower rates but
does not necessarily
imply that the amount of interest and the obtaining of the loan was
unreasonable in the circumstances.
It does seem
excessive on the face of it but Mr Terry explained why it was
obtained and how it was justified. Professor Nkado
did not gainsay
Mr Terry’s testimony in this regard.
Professor Nkado’s
intended withdrawal of his concession on the basis of new evidence
being the letter emanating from Mr
Markovitz with regard to the 8,5%
yield does not appear to be justified.
It is evident that
the experts being quantity surveyors took into account all relevant
factors when discussions were held and
that concessions were not
lightly made.
Mr Markovitz was
not a Quantity Surveyor and no evidence was led with regard to how
he arrived at his yield.
However the experts
had a foundation or basis for their figures which was accepted norms
in the industry.
The Landmarks
expert were not given an opportunity to fully address the court on
this point since it was a point upon which the
experts had agreed
save that Mr Terry was still insistent that his position was
correct.
Professor Nkado did
not provide any cogent reason for wanting to withdraw his
concession.
Mr Mgudlwa
did not appear to have had a clear recollection of what had
transpired.
His testimony
however confirmed that land claims were mentioned in respect of
the Zimbane, Lindile and Thembuland communities
but in generalized
terms without specific reference to erf 912.
He however did
not furnish any reason or explanation why the Regional Land Claims
Commissioner would incorrectly record what
had transpired.
In any event the
likelihood exists that he simply could not recall the event since
he did not have his own recording of the
proceedings.
The testimony of
Mr Memela and Ms Faleni are in the circumstances to be preferred
on the issue of whether or not erf 912 was
mentioned, especially
if one accepts that these communities who had made land claims
that referred to erf 912 in some form
or the other were on his
version mentioned at the meeting.
Mr Mabanga’s
testimony revealed:-
that Mr Markovitz
was the person involved in the day to day running of Landmark
Mthatha;
He did not inform
Mr Markovitz of the land claims.
He in fact he
himself did not believe that the claims he was aware of would
hinder development due to the fact that the municipality
held the
title deeds and had informed them that they were the owners of the
land.
Chief Mtirara’s
testimony:-
Confirms that Mr
Markovitz ran the company.
He himself was
not concerned about the Abathmebu claim
According to him
he apparantly only mentioned the Abathembu to Mr Markovitz
That he did not
mention what he told Mr Markovitz about this meeting at the Great
Place nor did he explain why he would do
so in light of the fact
that he did not consider it to be a threat to the development of
land.
There does not
appear to be any reason for him to have done so and Mr Markovitz’
testimony that no mention was made
of land claims by Mr Mtirara
appears to be more probable in this regard.
His statement
that Mr Markovitz considered the land claims to be serious when he
received the No-Italy application flies in
the face of his
contention that shortly thereafter a meeting was held to discuss
payment to African Bulk and signing of Suretyship
and the only
impediment discussed on his version was the SG plans.
Land claims did
not appear to have been a factor taken into account when making
the decision to take the loan and sign the
Suretyship agreements.
No land claims
were on his version discussed and it is unlikely that even with
his limited experience in business that he
would have agreed to
sign Suretyship if he was concerned about land claims.
Accordingly his
statement to the effect that Mr Markovitz considered the land
claims to be a serious issue appears to be improbable.
In any event this
was not put to Mr Markovitz for his comment during his testimony.
Insofar as there
are differences between his testimony and that of Mr Markovitz, Mr
Markovitz’s testimony is preferred,
to the extent that he
was unaware of land claims and not informed of any by Chief
Mtirara.
Dr Mkhatshwa
appears to be in disagreement with Mr Merry testimony as to what
was said at the meeting at which he was present from start
to
finish.
The possibility
exists accordingly that he could have forgotten or may not have a
proper recollection of precisely what was
discussed at meetings
with the Regional Land Claims Commissioner.
Accordingly the
testimony of Mr Merry and particularly Ms Faleni and Mr Memela is
to be preferred over his testimony in the
circumstances of the
case that erf 912 was mentioned.
Ms
Vuyo
Zitumane:-
She most
certainly believed that the municipality was correct in their
approach and that the Regional Land Claims Commissioner
was wrong.
However the Act
gives the RLLC the power to validate claims and not the
municipality to determine whether the claims are proper
or not.
I accept that erf
912 was mentioned and the fact that the municipality chose to
believe that it did not refer to the subject
land does not
derogate from the fact that erf 912 was mentioned.
She also conceded
that they did not inform Landmark Mthatha of the RLCC attitude or
the claims.
She did not state
who “alleged” that the claims related to erf 912 and
why she considered reference thereto to
be alleged.
The municipality
failed to produce the documents that she referred to as being
scant information that was furnished and in
possession of the
municipality.
She however
confirmed that something was furnished by the RLCC and the court
is left in the dark as to what this is.
Her stance
indicates that practically there was not, even at this stage,
co-operative governance between the municipality
and the RLCC
despite their attorneys paying lip service to the term and that
they failed to discharge their respective obligations
in terms of
the Constitution.
Absolution from
the instance
It is appropriate
to furnish the reasons for granting Absolution against the two
Governments at this stage.
The Provincial and
National Government applied for absolution at the close of the
First Defendant’s case and it was granted
with costs of two
counsel with reasons said to follow.
Absolution was
sought and granted and the reasons for making that order are
briefly set out hereinafter:-
It was argued by
Mr. Dukada that there were no land claims in existence at the time
that the National Government donated the land
to the Provincial
Government, nor when the Provincial government donated the land to
the municipality and accordingly there could
not have made any
misrepresentations to any parties or to the municipality or failed
to disclose the existence of the land claims
by the governments.
The Deed of
Donation did make specific reference to the Restitution of Land Act
and made provision for consultations before any
development.
It was argued that
in terms of Rule 13 (7) (a) that where there is a 3
rd
party claim, the party issuing the notice becomes the Plaintiff and
the party against whom the notice is issued becomes the Defendant.
The two Governments
applied for absolution on the basis that there was no evidence
implicating the two Governments in this matter
and the fact that
they are sued in the alternative does not mean that the court can
ignore the fact that no evidence whatsoever
has been led against the
two Governments.
Mr. Dukada
submitted that Landmark Mthatha had to make out a prima facie case.
He argued that the
proper test is whether there is evidence against the government.
There was in fact a
concession made by the First Defendant’s counsel, Mr Coetzee
S.C, that the property was donated prior
to the coming into
existence of the land claims and took place in 1997.
He conceded that
Landmark Mthatha had not proved a case against the Governments but
because the municipality said they did not
know and somebody did not
tell them, the First Defendant was obliged to join the Governments
as parties to the proceedings.
His argument was
accordingly that if during the course of the Municipality’s
case they prove that they did not know because
the land claims
commissioner kept it secret from them or the Provincial Government,
not linked to the delegation or transfer,
then they would be
entitled to rely on such misrepresentation.
He conceded that he
had not proved a case against the Governments save for a reference
to a letter where a question was posed
with regard to land claims
over the property that was unanswered.
There was however
no evidence tendered that this letter was indeed received by the
land claims commissioner nor was there any
proof of delivery
tendered.
Mr Memela testified
that he had not received the letter.
The reason for
granting absolution was simply that no evidence was tendered by
Landmark Mthatha against the governments that
established a prima
facie case against the Governments on the basis of
misrepresentation having regard to inter alia to the
dictum in
Gordon Lloyd Page and Associates v Rivera and Another
2001 (1)
SA 88
(SCA) where Harms JA held at page 92 E – H
as
follows:-
“
[2] the
test for absolution to be applied by a trial court at the end of the
Plaintiff’s case was formulated in
Claude
Neon Lights (SA) Ltd v Daniel
1976
(4) SA 403
(A) at 409 G – H in these terms:-
“…
when
absolution from the instance is sought at the close of the
Plaintiff’s case, the test to be applied is not whether the
evidence led by Plaintiff establishes what would finally be required
to be established, but whether there is evidence upon which
a court,
applying its mind reasonably to such evidence, could or might (not
should, nor ought to) find for the Plaintiff (Gascoyne
v Paul &
Hunter
1917 TPD 170
at 173; Ruto Flour Mills (Pty) Ltd v Adelson (2)
1958 (4) SA 307
(T).
This implies that
a Plaintiff has to make out a prima facie case, in the sense that
there is evidence relating to all the elements
of the claim –
to survive absolution because without such evidence no court could
find for the Plaintiff (
Marine & Trade Insurance Co. Ltd v Van
Der Schyff
1972 (1) SA 26
(A) at 37 G – 38 A,
Schmidt
Bewysreg 4
th
Ed at 91 – 92).”
This judgment
authoritively sets out the trite position with regard to the test
to be applied when absolution is sought.
It is evident
applying the test set out in this case, that Landmark Mthatha has
failed dismally in establishing a
prima facie
case against
the Governments.
Landmark Mthatha
cannot rely upon the speculation or hope that the municipality
would make out its case for it against the Governments.
The test at the
close of its case is, has a case been made out against that party
and it was conceded that they had not.
Absolution from
the instance was for these reasons granted in respect of the two
Governments against Landmark Mthatha.
Landmark Mthatha
was directed to pay the costs of the action, such costs to include
the costs of two counsels. Execution of
the costs order was to be
stayed pending finalisation of the action in order to allow
Landmarks to argue that the municipality
ought to pay the costs
that it was ordered to pay in respect of the governments.
Issues to be
determined
There is no need
to delve into the Plaintiff’s case against the First and
Second Defendant as it was evident from the
testimony even of Mr.
Mabanga that the Plaintiff did not know and was not informed of any
land claims and accordingly that
there is no evidence to suggest
that he was
mala fides
.
Landmark Mthatha’s
main cause of action against the municipality is breach of
contract, and if this is decided in favour
of Landmark there is no
need to consider the issue of misrepresentation.
Landmark Mthatha
pleaded and the municipality denied:-
that the
municipality has breaching clause 3.2.1 of the lease by failing to
give continued vacant possession of the subject land
to Landmark
Mthatha in terms of which the development work could be conducted
and completed lawfully; and/or
the municipality
breached clause 3.2.2 in that it knew or ought to have known that
there were and are land claims in terms of
the restitution of Land
Rights Act 22 of 1994 “ The RLRA” over the subject land
and the Landmarks were unaware thereof.
Wunsh J
,
In Maswanganyi v First National Western Bank Ltd
2002
(3) SA 365
(wld) at 367 H - 368 A
held:-
“
One of the
fundamental obligations of the seller is to guarantee the purchaser
free and undisturbed possession, described as the
warranty against
eviction. In the words of Norman’s ‘Purchase and Sale in
South Africa’, 4
th
edition
at 287 eviction ‘means any inference with vacua possessio,
whether on the part of the vendor himself or a third party,
or any
lawful threat thereof.’
The learned
Author quotes the analysis by Demante ‘Cours Analytique de code
Civile’ vol7 at 83 of the guatantee of guarantee
as follows:-
‘
The duty
of guaranteeing against eviction resolves itself into three
obligations:-
abstaining from
any act which would tend to disturb the purchaser’s
possession;
protecting him
against any attempts at such disturbance, undertaking his defence
in any action brought to interfere with his
rights.
if unsuccessful
in protecting him, indemnifying him against loss’
In Alpha Trust
(Edms) Bpk v Van Der Watt
1975 (3) SA 734
(A) 748 F Botha JA quoted
the statement of Schreiner JA in Lammers and Lammers v Giovannoni
1955 (3) SA 385
(A) at 390 B
‘
If (the
seller) fails to shield the buyer against eviction he must restore
the price and pay the damages suffered by the buyer as
a result of
the eviction’.”
It is evident in
this case that the municipality failed to give Landmark Mthatha
vacuo possession of the land since it was and
still is under lawful
threat until a final pronouncement is made with regard to the issue
of land claims and section 34 (1)
reads as follows:-
“
Any
national, provincial of local government body may, in respect of land
which is owned by or falls within its area of jurisdiction,
make
application to the court for an order that the land in question or
any rights in it shall not be restored to any claimant
or prospective
claimant.”
The regional land
claims commissioner has threatened and still threatens to invoke
the provisions of section 6 (3) of the RLRA
if the landmarks
continue with the development.
Section 6 (3)
reads as follows:-
“
(3) where
the regional land claims commissioner having jurisdiction or an
interested party has reason to believe that the sale,
exchange,
donation, lease, subdivision, rezoning or development of land which
may be the subject of any order of the court, or
in respect of which
a person or community is entitled to claim restitution of a right in
land, will defeat the achievement of the
objects of this Act, he or
she may:-
After a claim
has been lodged in respect of such land; and
After the
owner has been notified of such claim and referred to the
provisions of this subsection, on reasonable notice to
interest
parties, apply to the court for an interdict prohibiting the sale,
exchange, donation, lease, subdivision, rezoning
or development of
the land, and the court may, subject to such terms and conditions
and for such period as it may determine,
grant such an interdict
or make any other order it deems fit.”
It is accordingly
evident from the aforegoing that the municipality has breached its
obligation to provide vacant possession
of land to enable Landmark
Mthatha to complete the development, since the land is under threat
and subject to unresolved land
claims. There is no court order
prohibiting the development but practically there is an impediment
in the form of a threat
of an interdict and of restoration of the
land, to the development.
The issue of
whether or not the municipality acted wrongfully or culpably in
breaching the contract in that it knew about the
land claims and
failed to disclose them or even of Landmark Mthatha being aware of
the claims at the time of concluding the
lease agreement, is
irrelevant having regard to the judgment by
K Pillay AJA in
Scoin Trading (Pty) Ltd v Bernstein
2011 (2) SA 118
SCA
where
the learned Judge at paragraph 17 held:-
“…
that
mora interest is sometimes regarded as a kind of penalty for a
failure to pay on due date does not mean that the breach of
contract
is a delict, or that a breach of contract is only established if the
debtor acted wrongfully or culpably.”
The fact of the
matter is until the present time landmark Mthatha cannot return to
the subject land to continue development
since a threat of the
interdict hangs over its head and it will be extremely unreasonable
to expect them to return to the premises
and continue development
at a cost of R55 Million in the circumstances, until finality is
reached in the matter.
The issue of
whether or not the municipality and/or Landmark Mthatha was aware
in light of the dictum in
scion supra
, is not relevant.
However since it was pleaded it is appropriate to briefly deal with
the issue.
It was evident from
Ms Faleni and Mr Memela’s testimony as well as the testimony
of Mr Merry that the Municipality was aware
of land claims over Erf
912 Mthatha, although factually Mr Merry stated that he did not
believe that it covered erf 912 or was
valid and requested clarity
on the issue which was not forthcoming.
There was a dispute
with regard to whether Erf 912 was at the meetings specifically
mentioned.
I have already
indicated that I am disposed to accept the testimony of Mr Memela
and Ms Faleni in this regard.
Even on the
municipality’s version Mr Merry had received a letter
specifically mentioning Erf 912 and he was told in respect
of the
Abathembu claim that this related to erf 912.
He did not follow
up on his queries either telephonically or in writing from the date
that he sent the letter until the date that
he advertised the land
for development or subsequent thereto nor did he or anyone else at
the municipality deem it appropriate
to even convey the
municipality’s intention, directly to the land claims
commissioner, with regard to their intention to
develop.
I accordingly have
no hesitation, on the facts and evidence led, in accepting that the
Municipality was aware of Land claims over
the Erf 912.
I accept further
that there could not have been specific reference to the subject
land which was the remainder of Erf 912 since
it was not subdivided
at the time that the claims were made.
I accept that the
claims may well have been inelegantly drafted but it was evident
that the land claims commissioner believed
them to relate to erf 912
and that this incorporated the subject land.
Even if there was
uncertainty prior to April 2007, even on the municipality’s
version as at that date they were admonished
for developing without
consulting the RLCC.
They nonetheless
failed to even at this stage mention the land claims to Landmark
Mthatha causing it to conclude the Earthworks
contract, take
bridging finance and causing its members to sign suretyships.
These expenses
could even at that stage be averted if the municipality informed
them of the Land claims commissioners stance.
The municipality could
have further brought the section 34 Application at that stage
instead of remaining supine and ignoring
the RLCC stance because
they believed it to be wrong and instead contended themselves with
writing letters.
The other issue is
whether or not Landmark Mthatha was aware of the claims at the time
they concluded the lease.
Two of the
directors and shareholders of landmark Mthatha indicated that they
were aware of at least 2 land claims.
Mr Mabanga
however testified that he did not convey this to Mr Markovitz.
Chief Mtirara
testified that he had told Mr Markovitz about the Abathembu claim
after a meeting held at the King’s Place
prior to the
conclusion of the lease.
He however did
not furnish any details about precisely what he told Mr Markovitz.
It was in any
event evident that he did not believe that this claim was a threat
to the development because it was made by
his father who would not
interfere with a business that he was involved in.
He further stated
that he had forwarded the first set of papers in the No-Italy
matter to Mr Markovitz in May 2007 shortly
after African Bulk’s
machinery had gone onto the land.
According to him
Mr Markovitz had told him that these were now serious land claims.
He nonetheless
elected to continue with the development and obtain bridging
finance and sign suretyship without mentioning
land claims when
these decisions were taken.
It seems highly
improbable that Mr Markovitz would have done all this if he had
considered these threats to be serious.
In any event this
version was never put to Mr Markovitz and accordingly little or no
weight can be attached to it in determining
the issue of knowledge
on the part of Mr Markovitz.
Mr Markovitz’s
testimony to the effect that he did not know nor was he informed
of any land claims is to be preferred
over that of Chief Mtirara
since his version, in light of their subsequent conduct, is far
more probable.
Both Mr Mabanga
and Chief Mtirara confirmed that Mr Markovitz’s testimony to
the effect that he was so to speak the
“corporate head”
or the managing director or the directing mind of Landmark
Mthatha.
The knowledge of
the other directors or shareholders with regard to the land claims
accordingly in the circumstances of this
case does not constitute
knowledge of Landmark Mthatha.
In
Consolidated
News
Agencies (Pty) Ltd (In liquidation) v Mobile Telephone
Networks (Pty) Ltd
And Another
2010 (3) SA 382
SCA,
that the essence of the judgment is that in every case the
location of the directing mind depends on the nature of the matter
under consideration, the relative position of the office or agent,
and the relevant facts and circumstances of the case.
It is evident as
already indicated that Mr Markovitz was the directing mind of the
company from the time that the lease was
concluded, through to
obtaining finances and signing the earthworks contract.
I have no
hesitation in finding that he, as opposed to the other directors,
based on their own testimony as well, was at all
material times
the directing mind of the company.
They have not
indicated that they prepared the tender documents or negotiated
the terms of the lease and their presence at
the meetings does not
make them the directing minds of the company.
There was no
dispute that Landmark Real Estate, represented by Mr. Markovitz
was engaged to conduct the development operation.
Accordingly Mr
Mabanga and Chief Mtirara cannot be considered as the directing
minds of the company at the material time of
concluding the lease.
I have already
indicated that I accept Mr Markovitz’s testimony to the
effect that he had no knowledge of the land claims
over the
subject land at the time of the conclusion of the lease and was
informed by the municipality that the one land claim
that he
became aware of was frivolous.
I accordingly
accept that he had no knowledge of land claims and my view in this
regard is fortified by his subsequent conduct
of:-
obtaining bridging
finance at 15% per month;
having landmark
real estate signing surety for the bridging finance;
Also signing a
Suretyship agreement in respect of Landmark Mthatha’s
indebtedness to the Plaintiff.
An astute
businessman of Mr Markovitz’s caliber and years of
experience would not have done any of this if he was aware
that
the development was under threat.
The municipality
confirmed that it had not informed him of the land claims
commissioner’s attitude even after the meeting
of April 2007
or after receiving the letter of 11 May 2007, and in fact none of
the directors were aware of this and none
of them believed that
the municipality’s title could be challenged.
I accordingly
accept that the directing mind of the company and accordingly the
company had no knowledge of the land claims.
The next issue is
accordingly whether or not the municipality can rely upon the
defence of impossibility of performance to avoid
being found liable
to compensate the first defendant for damages, arising out of the
proven breach of contract.
The municipality
raised the conditional defence of impossibility of performance
during the trial in November 2010 by seeking
to amend its plea to
incorporate it as a defence.
It is trite law
that the party who relies upon the defence of supervening
impossibility bears the onus to prove it.
In
M V Snow
Crystal Transnet Ltd t/a National Ports Authority v Owner of M V
Snow Crystal
[2008] ZASCA 27
;
2008 (4) SA 111
SCA,
Scott JA held,
it is
always possible, as a matter of law, for a party to raise the
defence of impossibility of performance, the onus for establishing
that defence is upon the party raising it.
Mr Coetzee
submitted that the defence of impossibility is in conflict with the
municipality’s repeated purported tender
of performance.
This tender has
been contained in several of the correspondence by the
Municipality’s attorney referred to during the
course of the
trial and confirmed by the stance adopted by the witnesses called
to testify on behalf of the municipality.
Mr Coetzee
conceded that as a general premise a party cannot be compelled to
do the impossible.
In
Nuclear
Fuels Corporation of SA (Pty) Ltd v ORDA AG
1996 (4) SA 1190
SCA at
1206 C –E Howie AJ
quoted with approval the dictum of
Strafford J, in Hersman v Shapiro and Co
1926 TPD 367
at 372 where
it was held:-
“
Indeed, it
seems clear that it is impossible to disregard the nature not only of
the contract, but of the cause of impossibility,
because
those causes might be in the contemplation of the parties,
or,
again, they might be such as no human foresight could have foreseen.
That distinction between different kinds of causes of impossibility
must be a feature to be regarded before applying this doctrine of
impossibility of performance without qualification.
Therefore, the
rule that I propose to apply in the present case is the general rule
that
impossibility of performance does in general excuse
the
performance of a contract,
but does not do so in all cases,
and that we must look to the nature or the contract, the relation of
the parties, the
circumstances of the case
, and the
nature
of the impossibility involved by the defendant,
to see whether
that general rule ought, in the particular circumstances of the case,
to be applied.”(my underlining)
At 1207 G
:-
“Here,
too, it is not certain
whether foresight of the event rendering performance impossible
serves to rule out vis major or is an important
factor in determining
whether, vis major having supervened, it must be inferred, as a fact,
that the debtor assumed the risk of
impossibility due to vis major.
Either way, it is clear from the judgments in Baryley v Harwood that
what is relevant is actual
foresight, or reasonable foreseeability of
the event which causes impossibility not the consequences of such
event, as Ramsden
(op cit), would have it. If you foresee vis major
you must necessarily foresee impossibility of performance. See, too,
the dictum
in
Wilson V Smith and
Another
1956 (1) SA 393
(w) at 396 D
(cited
in the reported judgment at 83 E-F), where
the
stress is on foresight of the event, not foresight of the
consequences.”
Temporary
impossibility does not bring a contract to an end unless the
foundation of the contract has been destroyed to the extent
whether
all performance is or would inevitably become impossible or where
part of the performance has become or would inevitably
be impossible.
I accept that:-
The municipality
could have brought a section 34 Application prior to developing,
whether or not such claims were precisely defined
to obtain
certainty and develop without any impediment;
The Municipality
could also have brought it after the meeting of April 2007;
Or even immediately
after it was served with the section11 notice;
If indeed there is
a supervening impossibility it has, having regard to the aforegoing,
been created by the municipality’s
own conduct and they cannot
hide behind the alleged impossibility to escape a damages claim in
the circumstances of this case;
In any event the
interdict was not an absolute legal impediment but rather precluded
development pending negotiations and was
for a limited period of
time;
the interdict
subsequently lapsed and there was no legal impediment;
The section 34
order was granted, prior to application for leave to appeal,
permitted development subject to consultations with
the claimants
and with the developers;
Even then the
Municipality chose to ignore the order and instead simply requested
Landmark to resume work on the subject land
without consulting;
I accept the
argument advanced on behalf of the Landmarks that after 21
st
of January 2008 the problem was not illegality per se, but the
re-establishment costs of R55 Million and the threat of the RLCC
initiating new interdict proceedings and recommending the setting
aside of the lease, that prevented development;
The municipality
was aware of the land claims and having regard to the facts of this
case could or should have clarified the situation
irrespective of
whether they believed the claims to be valid or not especially since
it was not the responsibility of municipality
to determine the
validity or otherwise of a land claim. This was peculiarly within
the purview of the RLCC who indicated that
they considered the
claims valid;
The municipality
accordingly could not rely on their subjective belief nor could they
hide behind the fact that the claims were
not published to justify
their actions having regard to their obligation in respect of
co-operative governance, as provided for
in the constitution;
The Municipality
despite knowing about the claims and the fact that the Regional Land
Claims Commissioner believed them to relate
to Erf 912 nonetheless
failed to directly notify the RLCC of the proposed development or
engage in consultations. This may not
have been necessary in terms
of the Act but most certainly was in terms of the constitution;
I accept that in
this case performing became onerous but it is not impossible since
there is no order prohibiting it;
I accordingly
reject the defence of supervening impossibility in this case; and
Landmark Mthatha
has accordingly established that the Municipality has breached the
lease agreement by failing to give Landmark
vacant possession that
would enable them to lawfully complete the development.
The next issue is
accordingly what relief the court should grant the first Defendant
arising out of the breach of contract.
Landmark Mthatha’s
main claim is for specific performance and payment of the delay
damages.
Mr Coetzee conceded
that the court is not bound to order specific performance.
The court has a
discretion to decline specific performance. In
Tamarillo (Pty)
Ltd v BN Aitken (Pty) Ltd
1982 (1) SA 398
(A) at 440 G –H
Miller JA held
“
That a
court is not bound to grant specific performance when the claimant
has established the defendant’s contractual liability
to
perform is clear. As De Villiers AJA said in Haynes v King
Williamstown Municipality
1951 (2) SA 371
(A) at 378: “It is…
settled law with us that although the court will as far as possible
give effect to a Plaintiff’s
choice to claim specific
performance it has a discretion in a fitting case to refuse to decree
specific performance and leave the
Plaintiff to claim and prove his
id quod interest. The discretion which a court enjoys although it
must be exercised judicially
is not confined to specific types of
cases, nor is it circumscribed by rigid rules. Each case must be
judged in the light of its
own circumstances.””
Mr Coetzee
correctly, in my view conceded that in this case ordering specific
performance would be unreasonably difficult.
The following
factors play a role in determining whether or not to grant specific
performance:-
The uncertainty
with regard to the outcome of the appeal and cross appeal of
section 34 application and the terms and conditions
imposed in
that order; and
The infringement
or curtailing of the rights of the claimants or potential
claimants in respect of the subject land without
them having a say
in the matter or being consulted.
The circumstances
of this case clearly warrant me in the exercise of my discretion to
refuse to grant specific performance and
delay damages.
I accordingly
order that the contract between Landmark Mthatha and the
municipality be cancelled or terminated.
The question now
arises with regard to what termination damages should be awarded to
Landmark Mthatha.
All the experts
were helpful and were found to be credible witnesses and gave
cogent explanations for the stance they adopted.
The municipality’s
expert sought to go back on his concession with regard to using a
yield of 8,1% based on what Mr Markovitz
had submitted to the bank
in this regard which was an 8,5% yield.
Mr Markovitz is
not an expert nor was he tested with regard to why he had made this
averment.
It was evident
from Mr Terry’s testimony that he reluctantly agreed to this
percentage being utilized and that there was
some robust debate
between the experts in this regard prior to consensus being
reached.
I am not disposed
to nor was I convinced that any basis existed to deviate from the
yield or capitalization rate agreed upon
by the experts, being
8,1%.
I accordingly
accept that the loss of profits is the sum of, as agreed by the
experts, R105 739 795-00.
I accept the
argument by the Municipality’s counsel that Landmark has no
locus standi
to sue on behalf of Edcon who have not even
issued a letter of demand against landmark and the court has no
idea what defences
can be raised against Edcon if it were to
institute proceedings or what quantum of damages would actually be
awarded to Edcon.
There was further
no evidence that Landmark would actually pay over these monies to
the Edcon group and accordingly the issue
of unjust enrichment may
arise.
I am not satisfied
that Landmarks is entitled to a claim for damages arising out of a
prospective claim from Edcon. Edcon has
done nothing thus far for
whatever reason to recover any damages from Landmark Mthatha.
Landmark Mthatha or the Municipality
may well be able to raise
valid defences against such an action if and when raised.
I am unwilling to
speculate on whether or nor Edcon would succeed or what damages
would be awarded. There is however no valid
claim against Landmark
by the Edcon group at present.
Landmark has
accordingly failed to establish that they have suffered damages
under the head “claims from tenants”.
This head of
damages is accordingly excluded altogether.
I accept the
municipality’s contention that Landmarks entitlement, to
their head of damages, in respect of legal costs,
has not been
established.
The acceptance by
the municipality’s expert does not derogate from Landmark’s
obligation to establish their claim
in this regard especially since
none of the experts have any experience in legal costs.
More importantly
however if one accepts Mr Terry’s evidence, where he stated
that these costs were in respect of land
claims.
These matters were
before another court which would have made costs orders which if
made in favour of Landmarks can be taxed,
and if there were not
there is no basis for this court to make such order nor was any
cogent evidence presented to suggest
that this court should do so.
There was further
no quantification of the costs that Professor Botha stated, as a
result of a direct question from the Landmarks
counsel, relating to
developmental legal costs.
I am accordingly
not in a position to assess how much, if any, of the costs claimed
under this head related directly to the
development and
unfortunately I’m constrained to refuse all the costs under
the head “legal fees”.
Professor Botha
indicated that he did not have expertise in the area of short term
financing and professor Nkado also stated
that he was unaware of
what rates of interest were charged in respect of short term loans.
He further failed to indicate why
he then utilized the usual
interest rate to calculate the extent of the loss under this head.
Mr Terry indicated
the reasons for taking the bridging finance and explained the
benefits to the company in the long run in
the ordinary course of
events.
His explanation
was reasonable and I am satisfied that in the circumstances
Landmark was justified in obtaining the loan at
the interest rate
they did which has already been hit by the
in duplum rule
. I
accordingly grant the bridging finance in the amount of R8 150 000.
The first
Defendant is accordingly awarded the sum of R8 150 000 in respect
of the bridging finance.
There was no
dispute with regard to the other heads of wasted costs namely:-
Wasted salaries:
R 2 641 667-00
Travel and
Accommodation: R 161 832-00
Professional Fees
: R 6 857 516-00
African Bulk
certificates 1&2: R 6 970 243-00
I am also
satisfied that the damages claimed by the Plaintiff against the
first Defendant arose directly from the municipality’s
breach
and accordingly that the municipality should be ordered to pay the
amount that the court ordered the first defendant
to pay to the
Plaintiff together with costs.
I am however not
satisfied that the first defendant has established a sufficient
basis for the court to order the “Bullock”
type order
against the municipality, in respect of the costs order made
against Landmark Mthatha when absolution was granted
in favour of
the Governments.
The first
defendant was on its own admission aware that it did not have
evidence to substantiate a claim against the governments
but
nonetheless elected to cite them as parties and seek relief against
them albeit in the alternative.
Even a finding in
favour of the municipality would not of necessity have implied a
finding against the governments without any
evidence being adduced
against them by the party alleging misrepresentation.
I am not persuaded
that I should exercise my discretion and order that the
municipality should be directed to pay the costs
that Landmark
Mthatha was ordered to pay the governments upon absolution being
granted.
I accordingly will
not make such an order.
The municipality
had an arguable case in respect of the defences raised which were
not spurious or frivolous and accordingly
no basis exists for the
making of a punitive cost order against it. Their handling of this
matter can most certainly be criticized
and frowned upon but such
criticisms most certainly do not warrant the making of a punitive
costs order against them.
I accordingly make
the following order in the circumstances:-
ORDER
The First Defendant
is directed to pay to the Plaintiff the sum of R 11 260 148-85
together with interest thereon at the rate
of 160% of the ruling
bank rate from the 13
th
of October 2010 to date of
payment.
The Second
Defendant is directed to pay to the Plaintiff the sum of R4 107
742-95, together with interest at the rate of 160%
of the ruling
bank rate from the 13th of October 2010 to the final payment date
(that is 45% of R 9 128 317-66 as agreed between
the parties),
jointly and severally with the First Defendant, the one paying the
other to be absolved.
The Second and
Third 3
rd
Parties, the Governments, are granted
absolution from the instance as against the First Defendant.
The First
Defendant, Landmark Mthatha, is directed to pay the Second and Third
3
rd
parties costs of suit such costs to include the costs
of two counsels.
The First 3
rd
Party, the Municipality is found to have breached the implied term
of the agreement in that it failed to give the First Defendant
vacant possession of the subject land in order to lawfully complete
the development.
The agreement
between the municipality and Landmark Mthatha is accordingly hereby
cancelled.
The First 3
rd
party, namely the municipality is directed to pay to the First
Defendant the sum of R 130 521 053-00 as termination damages made
up
as follows:-
Loss of profits
called at 8,1% of yield: R 105 739 795-00
Professional
fees: R 6 857 516-00
Wasted salaries:
R 2 641 667-00
Travel and
Accommodation: R 161 832-00
African Bulk
certificates 1&2: R 6 970 243-00
Bridging
Finance: R 8 150 000-00
The Municipality is
directed to pay the First Defendant interest on the aforesaid sum at
the rate of 15.5 % per annum from 16
th
January 2012 to
date of payment.
The Municipality is
directed to pay to the First Defendant the sum of R11 260 148-85,
together with interest thereon at the rate
160% of the ruling bank
rate from the 13
th
of October 2010 to date of payment,
that being in respect of the Plaintiff’s claim as against the
First Defendant.
The Municipality is
directed to pay the First Defendant’s and the Plaintiff’s
costs of suit in this action.
____________________
DAWOOD J
(JUDGE OF THE HIGH
COURT)
DATE HEARD
(JUDGMENT RESERVED):
22 JUNE 2011
JUDGMENT HANDED
DOWN: 29 DECEMBER 2011
FOR THE PLAINTIFF:
MR FRIEDMAN
75 SECOND AVENUE
NEWTON PARK
PORT ELIZABETH
CARE OF: HUGHES
CHISHOLM & AIREY INC
14 PARK ROAD
MTHATHA
REF: GERALD FRIEDMAN
FOR THE DEFENDANT:
ADV COETZEE S.C
INSTRUCTED BY: HUGO
COLE INC ATTORNEYS
FIRST FLOOR
SOUTH BLOCK OFFICES
THRUPPS CENTRE ILOVO
204 OXFORD ROAD
JOHANNESBURG
REF: G HUGO/L134
TEL: 011 268 2026
CARE OF: J F HEUNIS
AND ASS
26 BLAKEWAY ROAD
MTHATHA
REF: JFH/JH 4201
FOR THE 3
RD
PARTY 1: ADV MADLANGA S.C;
ADV MBENEGE S.C;
ADV DA SILVA; AND
MR SAKHELA
INSTRUCTED BY :
MNQANDI INC
18 OWEN STR
MTHATHA
REF: NPM/VD/9482
TEL: 047 531 4400
FOR THE 3
RD
PARTY 2 & 3: ADV DUKADA SC;
ADV MSIWA; AND
ADV BODLANI
INSTRUCTED BY: THE
STATE ATTORNEY 3
RD
FLOOR PERMANENT BUILDING
42-48 OXFORD STR
CNR TERMINUS STRE
EAST LONDON
REF: MR MLOLA
–893/07 P8
CARE OF: CAPS PANGWA
& ASS
SUITE 302 OFFICE 311
& 312
CITY CENTRE BUILDING
COMPLEX
YORK ROAD
MTHATHA