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[2008] ZAWCHC 260
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Milprops 462 CC v Sevenstone Investments 118 (Pty) Ltd, Lubbe v Sevenstone Investments 118 (Pty) Ltd (3983/2008, 3982/2008) [2008] ZAWCHC 260 (4 September 2008)
IN
THE HIGH COURT OF SOUTH AFRICA
(CAPE OF GOOD HOPE PROVINCIAL
DIVISION)
DATE
:
4
SEPTEMBER 2008
In
the matter between:
CASE
NUMBER
:
3983/2008
MILPROPS
462 CC
Applicant
versus
SEVENSTONE
INVESTMENTS 118
(PTY)
LTD
Respondent
And
CASE
NUMBER
:
3982/2008
ALBERTUS
JOHANNES LUBBE
Applicant
versus
SEVENSTONE
INVESTMENTS 118 fPTY) LTD
Respondent
JUDGMENT
BOZALEK.
J:
On
1 September 2008, by way of the semi-urgent roll, two applications
came before me for temporary interdictory relief pending
the outcome
of actions still to be instituted for specific performance. The
causes of action in both cases are very similar,
namely agreements
to purchase fixed property in a Sectional Title development
alongside the Sreede River near Fort Beaufort.
The
agreements were in each case concluded with Sevenstone Investments
118 (Pty) Limited, the respondent in the applications and
the owner
and developer of the properties.
In
one case the applicants are the trustees of the Albert Lubbe Trust
and the property in question is Section 65 in the Scheme,
whilst in
the other matter the applicant is Millprops 462 CC and the property
is unit 64. The sections in question are now either
completed or
largely completed. The applicants purchased the properties in terms
of written agreements of sale concluded in January
and July 2006,
one of the respondent's obligations in terms thereof being to build
the residential units in question within a
stipulated period.
According
to both applicants respondent encountered financial problems and was
unable to complete the building timeously. This
led to each
applicant concluding a fresh agreement to purchase the respective
properties for reduced sums, but with the obligation
to complete the
remainder of the building work devolving upon the purchaser. These
agreements, the applicants aver, were concluded
with respondent in
the period May to July 2007. It is common cause that with effect
from the end of July 2007 the respondent
was taken over by its
present directors, Messrs Loubser and Greyling. Prior to this the
sole director was a Mr Derek Erasmus
who was provisionally
sequestrated on the 21
st
of February 2007 and which order was made final on the 28
lh
of
November 2007. Prior to his provisional sequestration Erasmus
emigrated to the United Arab Emirates and remains resident there.
In
or about August 2007 respondent instructed the attorneys, whom it
had apparently mandated to pass transfer to the properties
to the
applicants, not to do so and shortly thereafter terminated that
firm's mandate. Correspondence ensued between the applicants'
and
the respondent's legal representatives and the aforementioned firm
of attorneys. From this correspondence it appeared
inter
afia
that
respondent took the view that the relevant agreements of sale were
a
ab
initio
invalid
and of no force or effect" notwithstanding that the applicants
had performed in terms of the agreements in the form
of the payment
of deposits and the furnishing of letters of guarantee. Strangely,
beyond the assertion that the agreements were
invalid, and despite
requests from the applicants for its grounds for so asserting,
respondent refused to furnish the reasons
why it took the view which
it did.
In
March this year applicants learnt that the properties in question
were being marketed for sale by a new estate agent. Upon
the
respondent refusing to furnish an undertaking not to alienate the
properties pending the outcome of actions to enforce the
sale
agreements applicants launched these urgent applications for a rule
nisi
in
the following terms; that pending the finalisation of the action for
specific performance to be instituted against the respondent
by the
applicants pursuant to the agreements of sale of Sections 64 and 65
of the Breede River Lodge Sectional Title Scheme,
concluded between
the parties and the respondent in June 2007, alternatively, the
earlier agreements of sale, the respondent
be interdicted and
restrained from alienating, encumbering, or dealing with Sections 64
and 65 in any way prejudicial to the
rights of the applicants in
terms of the either of the aforementioned agreements of sale.
Costs orders were also sought.
In
each case the respondent filed what was styled a preliminary
opposing affidavit. By agreement the applications were postponed
to
a date on the semi-urgent roil, the order making provision
inter
alia
for
applicants and respondents to supplement their founding papers or
opposing affidavit. In the event neither did so, applicants
contenting themselves with filing a replying affidavit. In each case
the content of the preliminary opposing affidavit was much
the same.
Respondent attacked the validity of each of the initial agreements
on a number of grounds. In relation to the trust
it was contended
that trustee who represented the trust in concluding the initial
agreement had no authority to do so for want
of a letter of
authority from the Master of the High Court. This was later admitted
by the trustee who contended nevertheless
that this was not a fatal
defect to the conclusion of the agreement.
In
the case of Millprops, respondent contends that the 2006 agreement
was discharged by the 2007 agreement and could not be revived.
On
different grounds however it contends that the 2007 agreement was
invalid, thereby raising the somewhat curious notion of
the 2007
agreement being valid for one purpose, but invalid for another.
In
the case of both 2007 agreements respondent contends that a certain
Mr Hebbert, a one time financial director of respondent
who
purported to sign and conclude these agreements on behalf of
respondent, was not authorised to do so. However, this defence
is
not unequivocally or fully raised by respondent, which points out
that its records are incomplete and that the present directors
have
no direct knowledge of these matters since they appear to have taken
place before or around the time when they took control
of the
respondent company.
To
compound matters, respondent explains, the previous sole director,
Erasmus, has emigrated and contact with him has been minimal.
To
further complicate matters respondent introduced a company
resolution purporting to give the necessary authority to Hebbert,
but which appears not to tie up, date-wise, with the conclusion of
the second agreement with Millprops. Respondent contended
that for
various reasons the resolution's authenticity was suspect. In reply
the applicants produced an earlier, but identical,
company
resolution, which appears to resolve the question of timing but the
applicants did not contextually explain from where
this second
resolution emanates.
In
short, there are on these papers a number of serious questions
regarding the ultimate validity of the agreements relied on,
as well
as both Erasmus's and Hebbert's authority to conclude such
agreements on behalf of the respondent. Not only are there
factual
questions which cannot be answered on these papers but a number of
potentially difficult legal questions are likewise
raised but which
cannot be dealt with in a factual vacuum. It seems clear that only
the hearing of evidence will clear the path
to the answers to these
questions.
In
the face of this situation applicants contend that they have
established a
prima
facie
right
to the relief to be eventually sought, although open to some doubt.
They contend furthermore that without the interim interdict
relief,
they have a well grounded apprehension of irreparable harm, that the
balance of convenience favours the granting of the
interdict and
they have no other satisfactory remedy. In this regard the
applicants contend that without the interdictory relief
respondent
will sell the properties to
bona
fide
purchasers
and they will be left with nothing more than an action for damages.
For
its part the respondent contends that the additional three
requirements for the interdictory relief need not even
be considered because serious doubt is cast on the basic right being
claimed by the applicants and therefore applicants have
failed to
meet the threshold test of establishing a
prima
facie
right.
The
respondent's submissions in this regard turn largely around what it
argues is the unsatisfactory late raising and treatment
by
applicants of the authority of Hebbert to represent respondent, and,
in particular, the lack of any explanation for the production,
at a
late stage furthermore, of the company resolutions allegedly
evincing Hebbert's authority.
There
are unsatisfactory aspects to the applicants' handling of this
question, including their failure to supplement their founding
papers, as they were entitled to do after receipt of respondents
preliminary opposing affidavit, in which Hebbert's allege lack
of
authority was raised for the first time. However, what must also be
taken into account in this regard is that prior to launching
the
applications respondent had, despite being requested, failed to set
out on precisely what basis it alleged the sale agreements
were
invalid and void
ab
initio.
in
these circumstances the applicants could not be faulted for
initially relying solely on the written agreements and, although
this is more arguable, only dealing with the question of Hebbert's
authority in reply.
Taking
these various factors into account I have come to the conclusion
that applicants have established a
prima
facie
right,
namely to specific performance in terms of the sale agreements,
albeit open to some doubt. In these circumstances the remainder
of
the requirements for temporary interdictory relief play an important
role. To my mind the applicants' case for irreparable
harm and on
the question of another satisfactory remedy is by no means
watertight. If the properties are, in the absence of an
interdict,
sold to a third party, as seems quite likely, although applicants
will forego the properties they should, without
much difficulty,
obtain satisfaction for their losses through an appropriate damages
award.
In
these circumstances the final requirement the balance of convenience
assumes a particular importance. Mr
Howie
,
for the applicants, initially contended that an interdict would
cause limited, if any, prejudice to the respondent. That patently
is
not so. An interdict cast in the wide terms sought by applicant
could freeze the properties as economically productive assets
for at
least two years, if not longer, given that the actions have yet to
be commenced and the state of this Court's rolls. It
takes little
imagination to realise the financial prejudice which the respondent
might suffer should its opposition to the actions
eventually prove
successful. A compensatory damages order in this scenario may well
also be problematic since applicant's could
raise the defence that
they were armed with a court interdict and therefore their actions
in freezing the properties should attract
no liability.
However,
perhaps in recognition that the balance of convenience was more
evenly balanced than he initially contended, Mr
Howie
amended
the relief which he sought in two material respects. Firstly, he
narrowed the scope of the interdict by restricting it
solely to an
alienation of the properties or dwellings, as opposed to the much
wider concept of a restriction on "encumbering
or dealing with"
the unit "in any way prejudicial to the rights of the
applicants". Secondly, the applicants made
an open tender that
the disputes could, at the election of the respondent, be arbitrated
and not simply determined in High Court
actions. This tender opens
up the possibility of the factual and legal disputes being
determined within a timeframe of as little
as six months, rather
than the years which High Court actions might entail.
In
these circumstances the balance of convenience is in my view tilted
towards the applicants. Taking all the circumstances into
account,
therefore, I have concluded that the Court is justified in
exercising its ultimate discretion in favour of granting
the interim
interdictory relief sought, subject to the amended relief now being
sought by Mr
Howie
on behalf of the applicants.
There
remains the question of costs. Two possible cost orders suggest
themselves. Firstly, in the light of the uncertainty concerning
the
merits of the applicant's actions the costs thereof, the cost of
these proceedings, could be further reserved for determination
in
the actions or the arbitrations. Alternatively, costs should follow
the result of these applications and be awarded at this
stage. In
choosing between these alternatives I take into account that the
applicants had (ittle alternative, given the respondent's
steps to
re-market the properties and its refusal to give any undertakings
not to dispose of the properties pending the outcome
of actions, but
to institute the two interdict applications. They have moreover, ie
the applicants, been substantially successful
in these applications.
In
the circumstances I have come to the conclusion that it would be
appropriate and equitable to grant applicants their costs
to date.
In
the result the following order is made in case number 3987/2008;
1.
Pending
the finalisation of the action for specific performance, the action
to be instituted against the respondent by the Albert
Lubbe Trust
pursuant to;
1.1
the
agreement of sale of Section 65 of the Breede River Lodge Sectional
Title Scheme concluded between the trust and the respondent
in June
or July 2007, alternatively;
1.2
the
agreement of sale of Section 65 of the Scheme concluded between the
trust and respondent on 25 January 2006.
The
respondent is interdicted and restrained form alienating Section 65.
2.
The
action shall be determined by way of High Court proceedings or by
way of arbitration, with the applicant openly tendering
to resolve
the dispute by way of arbitration, which tender the respondent is
obliged to accept or reject by way of formal written
notice within
15 (fifteen) days of the date of this order.
The
action shall be instituted within 15 (fifteen) court days of
applicant exercising its choice in terms of paragraph 2 above.
The
respondent shall pay the costs of this application.
A
similar order is made in case 3983/2008, with the appropriate
changes to cater for the different circumstances. These orders
are
available from my registrar.
BOZALEK,
J