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1986
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[1986] ZASCA 133
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Shillings v Cronje and Others (462/85) [1986] ZASCA 133; [1988] 1 All SA 33 (A) (27 November 1986)
SHILLINGS C C
APPELLANT
and
ISAK JOHANNES ANDRIES CRONJE
AND FOUR
OTHERS
RESPONDENTS
CASE NO. 462/85
/CCC
IN THE ,SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the matter between
SHILLINGS C C
APPELLANT
and
ISAK JOHANNES ANDRIES CRONJE
FIRST
RESPONDENT
CASSIM MAHOMED CASSIM
SECOND
RESPONDENT
BENJAMIN JOHANNES VAN DER MERWE
THIRD
RESPONDENT
PARIS CALLIS
FOURTH RESPONDENT
ANDRIES
ESTERHUIZEN
FIFTH RESPONDENT
CORAM
: RABIE CJ, JANSEN, JOUBERT, HOEXTER JJA et NESTADT AJA
DATE HEARD
: 3rd NOVEMBER 1986
DATE DELIVERED
: 27 NOVEMBER 1986
JUDGMENT
/
2.
J U D G M E N T
NESTADT, AJA
The issue in this appeal
is whether an application brought by appellant in the Transvaal Provincial
Division for an order declaring
the five respondents, alternatively first,
third, fourth and fifth respondents, jointly and severally bound to it under a
written
lease of certain immovable property in Pretoria,was correctly
dismissed.
In terms of the agreement, which was entered into on 21 December 1984 for a
period of five years at an initial monthly rental of Rll
000, appellant, who was
the owner of the premises in question, let them to respondents "as trusteesfor a
Company to be formed". The
property comprised a factory building and
offices.
They/
3. They were to be used by the lessee for the purpose
of
manufacturing "soft-drinks and allied products". No
incorporation of any company having taken place, clause
36 of the lease became operative. It provides that in
this event:
"the Trustees shall be regarded as personally bound and liable, jointly and
severally and in solidum, to this Agreement of Lease,
in the same way as if
their names and not the name of the Company had been given as the LESSEE herein,
and in such event, they shall
be entitled, jointly and severally and in solidum
to all the benefits and subject to all obligations existing or created in this
Agreement, as if they had entered into it in person... It is clearly understood
that should the said Company not be formed ... then
and in that event the
signatories hereto shall be personally bound, jointly and severally to the
LESSOR as LESSEE."
It/
4. It was on the basis of this undertaking that appellant sought
tó hold respondents, each of whom signed the agreement, liable
as
co-lessees.
Respondents, however, failed to honour their obligations under
the lease. In justification of their repudiation thereof they contended
that it
was in conflict with sec 27(1) (a) of the Group Areas Act 36 of 1966 (the Act)
and was thus void for illegality.
The material part of sec 27(1)(a) reads:
"If any group area is in terms of a proclamation under section 23(1)(b) a
group area for ownership -(a) no disqualified person and
no disqualified company
... shall, on or after the relevant date specified in the proclamation, acquire
any immovable property
situate/
5
situate within that area, whether in pursuance of any agreement ... or
otherwise, except under the authority of a permit
..."
It will be seen that the
prohibition is against the
acquisition of immovable property (by a
disqualified
person or company). There is no bar in the section
itself to
the letting of property (to a disqualified
tenant). On behalf of appellant,
however, it was accepted
(a concession we assume to be correct) that, by reason of
"immovable property" being defined (in sec 1 of the Act)
to include "any lease" thereof, sec 27(1)(a) has this
effect and that a lease in contravention thereof, con-
stituting as it does an acquisition of immovable property,
is illegal and unenforceable. This is what was decided
in /
6.
in
Dorklerk Investments (pty) Ltd vs Bhyat's Departmental
Store (Pty) Ltd
1974(1) S A 483(W) (though the court was actually there
dealing with the corresponding provisions of the earlier Group Areas Act,
viz,
sec 24(1)(a) of Act 77 of 1957). Neither on appeal to the full bench of the
Transvaal nor, thence, to the Appellate Division
(the judgment of this court is
reported: see
Bhyat's Departmental Store (Pty) Ltd vs Dorklerk Investments
(pty) Ltd
1975(4) S A 88KA)), was the validity of this finding
challenged.
The defence raised by respondents rested on the following undisputed facts.
The area in which the property is situate was, in terms
of sec 20 of Act 77 of
1957, being the provision corresponding to
sec/
7.
sec 23(1) of the current Act, by proclamation 150
of 1958
(as contained in Government Gazette 6167
of 6 June 1958 and, by virtue of sec
49(2) of the Act,
deemed to have been made under it) declared to be
óne
for ownership by members of the White group; second
respondent, a member of the Indian group, is accordingly,
in relation to it, a disqualified person; no permit
authorising the lease has been issued.
Appellant's answer to the point taken by
respondents was a two-fold one, viz (i) that the lessee
was a company within the meaning of the Act and as such
not a disqualified one; accordingly the lease was not
illegal and all five respondents were bound to it there-,
under/
8
under; (ii) alternatively, even if second respondent as a disqualified
person was not liable to appellant, the others were. First,
second, fourth and
fifth respondents for their part, in notices filed by them under Supreme Court
Rule 6(5)(d)(iii), opposed the
application.
(Third respondent did not oppose the application, nor was he a party to this
appeal). This they did on certain
legal bases, the nature whereof will appear shortly.
They were upheld by the court a
quo
. Hence, with its
leave, this appeal.
The first issue, relating to appellant's
first prayer, concerns the status or identity of the
lessee. It entails a consideration of the meaning of
the expression "disqualified company" in sec 27(1)(a).
Certain/
9.
Certain further definitions contained in sec 1 of the Act are
relevant in this regard. "Company" is stated to in-clude
inter alia
"any
corporate of unincorporate associa-tion of persons" ("'n ingelyfde of
oningelyfde vereniging van persone"). A "disqualified
company" in relation to
immovable property, land or premises means a company "wherein a controlling
interest is held or deemed to
be held by or on behalf of in the interest of a
person who is a disqualified person in relation to such property, land or
premises".
"Controlling interest", in the case of an association of persons, is
"deemed to be held by a person of the same group as the majority
of the members
thereof".
The submission advanced on
behalf/
10. behalf of appellant, but contested by respondents, was that
they were an (unincorporate) association of persons and therefore
a company.
Plainly, if this be so, it was not a disqualified one. First, third, fourth and
fifth respondents, being the majority
of the members of the alleged association,
belong to the White group; the controlling interest would therefore be deemed to
be held
by a person of that group; they were qualified to acquire (including
lease) the immovable property in question. On this basis, I
understood it to be
common cause that all five respondents would be bound in terms of the lease
because, by implication, second respondent
would no longer be subject to the
prohibition against disqualified persons acquiring immovable property in
terms/
11.
terms of sec 27(1)(a).
The vital question thus is whether
respondents were indeed an association of persons with-in the meaning of that
phrase as used in
the Act and whether it was such association which was the
lessee.
The ánswer depends on the meaning of "association of persons".
This concept, together with the deeming provision of "controlling
interest", was
introduced into the first Group Areas Act, 41 of 1950, by an amendment thereto
brought about by sec 1 of Act 65 of
1952. The reference there was to "any
incorporate or unincorporate association of persons". In the sub-sequent Group
Areas Act, 77
of 1957, it was changed to
its/
12. its present form of "any corporate or unincorporate association
of persons". Obviously the difference between "incorporate" and
"corporate" is
immaterial.
The expression is not defined in the Act. In an attempt to
construe it, counsel for appellant re-ferred us to certain other legislative
enactments such as secs 3, 21 30 and 31 of the Companies Act, 61 of 1973 and
Supreme Court Rules 4(l)(a)(vii) and 14(1) in which
it or rather "association"
is used. Counsel for respondents in turn embarked on a survey of the historical
antecedents of the Act
coupled with certain submissions as to the probable
reasons for the widening of the defini-tion of company to include "association
of persons". I
do/
13. do not find either approach helpful in determining
its
meaning. Nor is it necessary to consider whether an
association
(corporate or unincorporate) might not, in
any event, have fallen under
"person" in sec 27(1)(a) !
regardléss of the alteration to the
definition of company
(seeing that "person" is defined by sec 2 of the Inter-
pretation Act, 33 of 1957, to include "any body of persons,
corporate or unincorporate"). Because we are dealing only
with an alleged
unincorporate association, I also leave
aside the significance (if any) of "any registered or
unregistered corporate body" (which is a further part
of the definition of "company") and the question whether
"unregistered corporate body" might not encompass a
corporate association of persons.
Save/
14. Save for the case of
Group Areas Development Board vs
Hurley N 0
1961(1) S A 123(A)
(to which I refer later), the meaning of
"any corporate or unincorporate association of persons" as used in the Act (and
its predecessors)
has not, so far as I am aware, previously been considered by
our courts (although it was adverted to in
Southern Durban Civic Federation
vs Durban Corporation and Another
1972(2) S A 133(D) at 138 C - E). The
various text books dealing with the sub-ject, whilst drawing attention to it
being part of
the definition of "company", do not attempt to explain its meaning
(save that in some cases certain organisations are given as examples
of an
association). However, as Van Blerk JA, when dealing with the meaning of
"person"
in/
15. in the Interpretation Act,observed in
C I R vs Witwatersrand
Association of Racing Clubs
1960(3) S A 291(A) at 296 E,"oningelyfde
assosiasies van persone wat nie gemeenregtelike
universitates
is nie,
(is) nie aan ons regstelsel vreemd ... nie". This is borne out by the frequent
use of the term and in particular "association
of persons" in other legislation.
Examples, besides the ones already mentioned, are those as far afield, in both
time and subject
matter, as Cape Act 3 of 1873 (dealing with Deeds
Registration),
sec 332(7)
of the
Crimi-nal Procedure Act, 51 of 1977
, sec 1 of
the Heraldry Act, 18 of 1962 and sec 10(1)(cB) and (e) of the Income Tax Act, 58
of 1962.
The/
16.
The use of "persons" in conjunction with "association" is
probably superfluous. "Unincorporate" refers to an association "which does
not
have a legal
persona
separate from its constituent members" (per Ogilvie
Thompson JA in
C I R vs Witwatersrand Association of Racing Clubs
,
supra
at 302 A - B). "Corporate" would have a correspondingly opposite
meaning. The central enquiry is the meaning of "association" ("vereniging").
It
is defined in substantially the same terms by a number of dictionaries to which
we were referred. I confine myself to the following.
According to Black's
Law
Dictionary
(5th ed):
"It is a term of vague meaning used to
indicate/
17.
indicate a collection or organization of persons who have
joined together for a certain or common object ... An unincorporated society;
a
body of persons united and acting together without a charter, but upon the
methods and forms used by incorporated bodies for the
prosecution of some common
enterprise."
The Afrikaanse Woordeboek of Terblanche and Odendaal
gives the meaning of
"vereniging" (and it was the
Afrikaans version of the Act that was signed)
as:
"saambinding, saamvoeging; vrywillige organisasie van "n aantal persone met
'n bestuur aan die hoof en statute en gerig op 'n doel
wat nie met die openbare
orde in stryd mag wees nie; die saamkom en saamwerk van persone tot 'n bepaalde
doel, samekoms, geselskap,
genootskap, maatskappy, klub".
(See, too,
Nibo (Edms) Bpk vs Voorsitter van die Drank
-
raad/
18.
raad en Andere
1984(2) S A 209 (NCD) at 213 E -
fin, where certain other dictionary definitions of the word are considered in
relation to "any association
of Coloureds or Asians" in sec 23(1)(b) of the
Liquor Act 87 of 1977. Some brief amplification of the criterion that
"association"
takes the form of an (organised) body of persons and its equation
to a society is desirable. The appropriate
Oxford English Dictionary
definition of "body" is "a number of persons taken collectively; an aggregate of
individuals". In
Group Areas Develop
-
ment Board vs Hurley N O
,
supra
,Steyn CJ, in rejecting an argument that certain persons were "an
association" within the meaning of "company" in the Group Areas
Act
(or/
20.
In practice their union and consent usually take place by the
approval and adoption of a constitution (LAWSA, Vol 1, s v
"
Associations
", para 498, p 287), providing for membership of the
association, office bearers and/or a committee and a name of the
association.
In most cases there will be little diffi-culty in identifying a
body of persons as an association within the meaning of the definitions
referred
to. The prime example of a corporate one (under the common law) is the
universitas
and (by statute) those registered as companies under sec 21
of the Companies Act. Illustrative of an unincorporate one is the well-known
voluntary association in all its diverse forms. It
was/
21. was not contended on behalf of appellant that re-spondents were
an association of this latter kind. It was submitted, however,
that the
undisputed alle-gations contained in the founding affidavit established that, in
signing the lease, respondents had combined
together as a body of persons whose
common purpose was its conclusion; their relationship was one of partners who,
through the medium
of a company, were to jointly conduct a business venture (ie
a bottling factory) on the premises; this constituted an association
of
persons.
Now I suppose that in a manner of speaking and despite an undertaking of
joint and several liability, it may be said that réspondents
joined
together (with the stated
objective)/
22.
objective) and that this was done pursuant to an agree-ment
or undertaking
inter se
(as opposed to their acting independently of each
other, as could happen; see Wessels'
Law of Contract in South Africa
, 2nd
ed, vol 1, para 1494). To this extent they were associated with each other for a
common purpose. However, the argument that
they were an association of persons
within its proper meaning is untenable and must be rejected. To hold otherwise
would be an unwarranted
extension of its ambit. They were in no sense members of
an organised body. They were not an aggregate of persons. They did not join
together and act collective-ly. They were simply five individuals who
contracted
personal/
23. personal liability (in the event of the company
not
becoming the lessee). Joint contracting parties per se are not an
association.
Appellanfs reliance on a partnership |
requires special mention. I accept
in this regard that the contemplated formation of the company was not
inconsistent with the existence
of a partnership and that, despite the absence
of any actual mention in appellant's papers that respondents were co-partners,
this
was established. What was stated was that there was a "joint venture"
(involving second, third, fourth and fifth respondents). There
would not,
however, appear to be any meaningful difference between it and
partnership/
24.
partnership (Bamford,
The Law of Partnership
and Voluntary Association in South Africa
, 3rd ed, pp 11-12). The question
is whether a partnership is an association. Funk and Wagnall's Standar
d
Dict
ionary includes a part-nership in the definition of "association". So
does the
Oxford English Dictionary
sv "society" which is given as a
synonym for "association". Black states that an unincorporated association may
be profit making.
The baldly stated view of Van Reenen,
Land, Its Ownership
and Occupation in South Africa
, para E 3.29 at p 141 is that a "partnership
would naturally be included in an association". In
R v Milne and Erleigh
(7) 1951(1) S A 791(A) and 830 - 831 it was held that a partnership fell within
the scope of an "association of persons"
as/
25. as used in sec 384(7) of Act 31 of 1917 (corresponding to sec
332(7) of the present Criminal Procedure Act). Of course, it by
no means follows
that a similar interpretation is to be given to this phrase as used in the Group
Areas Act. Moreover, in the light
of the definitions referred to earlier, it may
be doubted whether a partnership can constitute an association of persons within
its
ordinary meaning. It is, how-ever, unnecessary to express any opinion on the
point and I do not. Even assuming that it does, it cannot
assist appellant. It
would only do so if the partnership was the lessee, thus justifying the
conclusion that there had not been a
prohibited
acquisition/
26.
acquisition (in the form of a lease) by a disqualified person
or company. But there is no question of the lessee being the partnership.
The
envisaged company not having been formed, clause 36 became operative. Its effect
was to render respondents liable under the lease
as joint contracting parties
(who had undertaken liability in
solidum
). This circumstance
per
se is not sufficient to establish a partnership. Juristically, joint contracting
parties are not necessarily partners (
Henwood and Co v Westlake and Coles
5 SC 341
at 346;
Summers vs Oudaille
1914 S R 91 at 92; Bamford, p 5;
LAWSA vol 19, para 375, p 269).
To sum up so far, respondents, in leasing
the/
27.
the premises were, in my opinion, not an association of
persons. Appellant's main prayer was therefore correctly refused.
I turn to a
consideration of appellant's alternative cause of action referred to earlier,
namely, that first, third, fourth and fifth
respondents are bound to it (under
clause 36 of the lease). The question that arises in this regard is the effect,
if any, on their
liability of second respondent being a disqualified person.
Does it follow, as respondents contended, that appellant has no claim
against
any of them?
The answer depends, in the first place,
on/
28.
onthe effect of the contract being illegal
vis-a-vis
one of the lessees (ie second respondent) and in particular whether the
whole contract is thereby rendered unen-forceable. This is
what the court below
found. The liability undertaken by respondents was rn
solidum
. Where this
occurs each of the joint and severally liable debtors can, at the creditor's
option, be sued for the full debt. Nevertheless,
there is only one debt or
obligation although several debtors or
vincula juris
(Wessels, para 1512;
Christie,
The Law of Contract in South Africa
p 249) or, as De Wet and
Yeats, "
Kontrakte
-
reg en Handelsreg
" 4th ed, p 120 say, "meerdere
ver-bintenisse... almal op een en dieselfde prestasie
gerig."/
29.
gerig." It follows that if the obligation itself
is
vóid, or the debt extinguished,all the debtors are
absolved (Wessels,
paras 1513, 1525 and 1534). But
their fates need not necessarily be the same.
Their
respective obligations may differ as when one contracts
unconditionally, another
sub
die and a third
sub
condicione
(De Wet and Yeats p 124). Even where
their obligations are the same there may be situations
where only that of
the one debtor is defective and
those of the others remain unaffected. This will be
the case where a defence is personal to him. Wessels,
para 1552, states in this regard:
"Every debtor who is sued can either raise a defence personal to himself
(
pactum
/
30.
(
pactum in personam
), e.g., that his obligation is
conditional or voidable as far as he is concerned, or else he can set up a plea
common to all (
pactum in rem
), e.g., that the whole obligation is void,
but he cannot set up a defence personal to some of the other creditors e.g.,
that he is
not bound because the debt is void as regards some other debtor."
Illegality may, of course, be the reason for the whole
contract being
void. It will, however, not always
have this conseguence. Illegality may be
personal
and confined to one of the contracting parties.
Christie
recognises this. At p 248 it is said:
"(I)f one of the joint debtors has a good defence against the creditor's
claim, or if the contract, as between him and the creditor,
is voidable or even
void ab
initio
the liability of
the/
31.
the other joint debtors will remain unaffected if the
contracts between them and the creditor, looked at separately, can be seen to
be
free of the defect existing in the one debtor's contract. Thus a defence such as
misrepresentation or lack of contractual capacity
may well affect one joint
debtor only, whereas a defence such as illegality will probably (but not
necessarily) affect all joint
debtors equally."
As is apparent, joint debtors are being dealt with but
the same would apply, a
fortiori
, to joint and several
debtors. It is a question of whether the vice goes
to the root of the
whole obligation (Wessels, para 1495).
If it does not, there can be a type of severance, not,
as is usual,of
terms, but of debtors.
Applying these principles to the present
matter/
32.
matter, there can, in my view, be no question of the whole
lease being vitiated by second respondent's dis-qualification. The need
for him
to have had a permit was personal to himself; the consequence arising from the
fact that he did not, does not affect the
validity of the obligations of the
other. respondents. It was not suggested that such a conclusion would defeat the
object of the
legislation. It would not. Nor is the liability of the remaining
respondents to appellant in any way tainted by the illegality attaching
to the
transaction between appellant and second respondent. It may be that first,
third, fourth and fifth respondents' rights of
contribution against each other
(and second
respondent)/
33. respondent) are curtailed by second respondent not being
liable to appellant. If this be so, it might affect their liability to
appellant. There is authority that, on the release of one of two co-debtors, the
liability of the remaining debtor to the creditor
is reduced by the amount of
the former's proportionate share (see
Dwyer vs Goldseller
1906 T S 126
at
129;
Boyce N 0 vs Bloem and Others
1960(3) S A 855(T) at 857 F - H; Kahn,
Gratuitous Release of a Co-debtor Liable in Solidum
,
1961 SAW 25
, though
cf De Wet and Yeats p 123). It is, however, unnecessary to pursue this point.
Appellant's (alternative) prayer is simply
for a declaration that the lease is
binding on first, third, fourth and fifth
respondents/
34.
respondents (jointly and severally). We are not concerned
with the exact
quantum
of such liability. The second and remaining matter
that requires attention is whether, considered from the point of view of the
intention
of the parties, the non-liability of second respondent had the effect
of in-validating the agreement
vis-à-vis
the remaining co-lessees.
It is open to question whether respondents' notice under rule 6(5)(d)(iii)
covers this point, but I take
it that it does. The principle relied on by
respondents was that which has been applied where a contractual document is
signed by
less than the full complement of intended signatories. In a number of
cases, mostly of suretyship, it has been
held/
35.
held that in these circumstances those that signed were not
bound - though in others an opposite conclusion was come to (see
Just It
(Pty) Ltd vs Phillips
1984(3) S A 922(C) where the authorities are referred
to and discussed). I am not sure that the same principle applies where all
parties to a contract sign but one is not bound because of illegality. I assume
it does. Even so, it is unnecessary to examine the
cases. The problem is one of
interpretation. And this depends on the wording of the particular document under
consideration. What
has to be ascertained is whether the parties,judged by the
language used, intend a joint contract (in the loose sense that unless
all are
bound none will be) or whether,
on/
36.
on the other hand, they intend to be bound separately and
individually (as well as jointly). In the present matter, despite the use
of
"lessee" (ie in the singular), I am satisfied that clause 36 is to be construed
as rendering first, third, fourth and fifth respondents
liable irrespective of
second respondent not being bound. Not only does this conclusion accord with the
rule that courts incline
to a construction which renders the contract operative
rather than inoperative (
McCullogh vs Fernwood Estate Limited
1920 A D
204
at 209) but it finds support in the language used. The undertaking is to be
personally bound "as if their names... had been given
as the lessee". This is to
be contrasted with
the/
37.
the use of the collective pronoun "we" in the cases referred
to where, mainly on this basis, it was held that the liability of the
co-debtors
was not individually undertaken. Mr
Swart
, on behalf of respondents,
stressed that it was apparent from the founding affidavit that second respondent
played a leading role
in the negotiations leading up to the entering into of the
lease and that he was obviously one of the main participants in the venture.
But
this is a far cry from concluding that, if for some reason, he could not be
sued, the others were freed of liability.
For these reasons the court a
quo
, in my judgment, incorrectly refused
appellant's alternative
prayer./
38. prayer. It should have been granted.
Second respondent will have been successful
in resisting this appeal. He is therefore entitled to his
costs both in this court and in the court below. Despite
the failure of the appeal against the refusal of the main
prayer, it was not disputed that in the event of it succeeding
on the alternative prayer appellant is entitled to its costs
of appeal against the other respondents (excluding third
respondent).
The following order is made:
(l)(a) As against first, third, fourth and fifth re-
spondents the appeal succeeds and is upheld.
(b) First, fourth and fifth respondents are jointly
and severally to pay appellant's costs of appeal
(including the fees of two counsel).
(2)/
39.
(2)
As against second
respondent the appeal fails and is dismissed with costs (including the fees of
two counsel);
(3)
The order of the court below
is set aside. There is substituted the following
order:
(a)
The agreement of
lease,Annexure Cl to the papers, is declared to be binding on first, third,
fourth and fifth respondents jointly
and severally;
(b)
First, fourth and fifth respondents are to pay the costs of the
application
jointly/
40. jointly and severally; (c) Applicant is to pay second respondent's
costs.
NESTADT, AJA
RABIE, CJ )
JANSEN, JA )
JOUBERT, JA )
HOEXTER, JA )