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[1992] ZASCA 110
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Commissioner for Inland Revenue v Collins (523/90) [1992] ZASCA 110; 1992 (3) SA 698 (AD); [1992] 2 All SA 294 (A) (1 June 1992)
CG
CASE
NUMBER: 523/90
IN THE SUPREME COURT OF SOUTH
AFRICA (APPELLATE DIVISION)
In the matter between:
THE COMMISSIONER OF INLAND
REVENUE
Appellant
and
RUSSELL KENNETH
COLLINS
Respondent
CORAM
: CORBETT CJ, BOTHA,
VAN HEERDEN, VIVIER et VAN DEN HEEVER JJA
HEARD ON
: 15 MAY 1992
DELIVERED ON
: 1 JUNE 1992
JUDGMENT VAN DEN HEEVER JA
2
Chemhold
Investments (Pty) Ltd ("Chemhold") sold fixed property to
the respondent. The contract consists of a printed form
headed "Cash
Deed of Sale" with spaces for the insertion of individual
particulars, such as the identity of seller and
purchaser (Chemhold
and respondent respectively), a description of the property (lots 995
and 998 in Pinetown Township), the price
(R725 000,00), and so on.
The form emanated from the firm of estate agents which brought seller
and buyer together, and clause 3
confers rights to commission on the
agent. The blanks having been filled in, clauses regarded redundant
deleted, and an "annexure
A" incorporated by reference, the
document was signed by respondent on 14 May 1987, on behalf of
Chemhold the following day,
and for the agent signifying acceptance
of the benefits conferred by the stipulatio alteri on 20 May 1987.
Clause 15
of the contract provides:
"Any
Agreement between the PURCHASER and SELLER to cancel, alter or add to
this 'Deed
3
of Sale'
shall not be binding and shall be of no force nor effect unless
reduced to writing and signed by the parties before witnesses."
Clause 21
incorporates by reference Annexure
A,
which lies at the root of the present dispute and
reads as
follows:
"This
agreement shall become binding upon the purchaser as a contract of
purchase of sale (
sic
) only if the purchaser shall not have
nominated a purchaser (hereinafter referred to as a nominee) who
shall validly have accepted
such nomination within ten days after the
date hereof and
(i) the
parties undertake that pending such nomination or the expiry of the
said period neither shall resile from this agreement unless
in terms
of specific provisions herein contained, (ii) upon such nomination
and acceptance hereof by the nominee the purchaser shall
by the
purchaser's signature hereto be bound as surety for and co-principal
debtor 'in solidum' with such nominee for the due and
faithful
fulfilment by the nominee of all the nominee's obligations as
purchaser in terms of this agreement including any that may
flow from
breach of contract hereby renouncing the benefits of all the legal
exceptions available to sureties with the full effect
of which the
purchaser acknowledges to be fully
4
acquainted, (iii) The date of sale
shall be the date of such nomination or the expiry of the aforesaid
period as the case may be."
The property has been transferred
from Chemhold to the respondent's "nominee",
NINE HAGART
ROAD (PROPRIETARY) LIMITED
("the company"), which has
paid transfer duty in respect of this acquisition.
Appellant contends that respondent
also is liable for transfer duty. Respondent approached the Durban
and Coast Local Division of
the Supreme Court for a declaratory order
that he is not obliged to pay any transfer duty arising out of this
Cash Deed of Sale.
In his founding affidavit respondent says that he
nominated the company as purchaser in terms of the agreement; that
the effect of
this was to bring the case within the provisions of
sec
5(2)(a)
of the
Transfer Duty Act No 40 of 1949
; and that he paid no
consideration for the purchase of the properties to Chemhold nor
received any from the company in respect of
its nomination.
5 In the
answering affidavit Mr Stoltz, on behalf of the Commissioner,
disputes respondent's conclusion of law. He fleshes the bare
bones
presented by respondent with the further fact, which is not disputed,
that the company was incorporated only on 10 June 1987.
Respondent
had made available to the Commissioner a document entitled
"Nomination and Acceptance of Purchaser" dated 9
July 1987.
Mr Stoltz attaches a copy of this to his affidavit, as annexure B. He
submits that, having regard to the date of incorporation
of the
nominee and the date of signature of annexure B, the nomination did
not comply with the provisions relating to nomination
in annexure A
to the Cash Deed of Sale, though purporting to have been made in
terms of that.
The
preamble of annexure B refers to the agreement between Chemhold and
respondent, though incorrectly alleging the date of that as
having
been 20 May 1987, and to the fact that the contract provides for
6
the
nomination of a purchaser by the respondent within
10 days of
the date of the signature of the contract.
It goes on
to state that on 25 May 1987 respondent
verbally
nominated the company as the purchaser, which
nomination
was duly accepted by the directors of the
company;
but, because it is necessary for the
nomination
and acceptance to be evidenced in writing,
respondent
now nominates the company as purchaser; and
in his
capacity as director of the company, duly
authorized,
confirms
"that
nomination as purchaser in the aforementioned Cash Deed of Sale has
been accepted. I further declare that (the company)
will comply with
all the terms and conditions contained in the Cash Deed of Sale
(3)
Notwithstanding the date of signature hereof, the date of nomination
being deemed to be 30th May 1987".
And
annexure B is then signed by respondent twice: once
personally
as nominator, and again, this time in his
representative
capacity, as nominee.
7 In his
replying affidavit respondent admits that the nomination was not
effected within the ten day period provided for in the contract.
Chemhold was however aware that respondent was taking steps to form a
company which he intended nominating as purchaser. When annexure
"B"
was delivered to Chemhold, the latter accepted this as a nomination
in terms of the Cash Deed of Sale, so that there
was a tacit
extension of the time limit within which he was empowered to nominate
a purchaser in his stead. Respondent annexed to
his own affidavit one
by Mr MacCullum, the group secretary of the group of companies within
which Chemhold falls. Mr MacCallum says
he vetted the contract before
it was signed. In approving it, he was fully aware that respondent
intended to nominate a company which
was in the process of being
formed, as purchaser. He was also aware that the written nomination
and acceptance on 9 July 1987 occurred
after the expiry of the ten
day period stipulated in Annexure A to the sale agreement.
8
Despite
this delay,
"(Chemhold)
... regarded the nomination ultimately made as being in terms of the
sale agreement and it accordingly transferred
the properties under
the agreement to the nominated purchaser".
The court
a quo granted the declaratory order sought, with costs. The judgment
is reported sv.
COLLINS
V
COMMISSIONER
FOR INLAND REVENUE
1990 (4) SA 619
(D).
It has
been pointed out more than once in the
past, that
the title of the
Transfer Duty Act No 40 of
1949
is a
misnomer. In terms of
section 2
, duty is not
levied on
the transfer of property, but on
"the
value of any property ... acquired by any person ... by way of a
transaction or in any other manner ...".
Definitions
in
s 1
relevant for present purposes are:
"'Property'
means land and any fixtures
thereon,
and includes -
(a) any
real right in land but excluding any right under a mortgage bond or a
lease of property other than a lease referred to in
paras (b) or (c)"
and
9
"'Transaction'
means an agreement whereby one party thereto agrees to sell, grant,
donate, cede, exchange, lease or otherwise
dispose of property to
another, or any act whereby any person renounces any interest in or
restriction in his favour upon the use
or disposal of property."
In
COMMISSIONER FOR INLAND REVENUE v FREDDIES
CONSOLIDATED
MINES LTD
1957 (1) SA 306
(A) it was held (p 311 B-D) that
"acquiring property" as envisaged by
s 2
means acquiring
the right to acquire the ownership of property.
Mr
Delport, for the appellant, argued that the Cash Deed of Sale
constituted a transaction by which respondent acquired property as
envisaged by
s 2
so that he was liable for duty unless he could bring
himself within the provisions of
s 5(2)(a)
, and that he had not done
so.
Paragraph
(a) provides:
"If a
transaction whereby property has been acquired, is, before
registration of the acquisition in a deeds registry, cancelled,
or
dissolved by the operation of a resolutive condition, duty shall be
payable only on that
10
part of
the consideration which has been or is paid to and retained by the
seller and on any consideration payable by either party
to the
transaction for or in respect of the cancellation thereof."
Had
respondent nominated the company within
the ten
day period afforded in annexure A to the deed of
sale,
respondent may well have escaped liability for
duty on
the basis that he did not acquire a ius in
personam
ad rem acquirendam against Chemhold. Despite
the
contract itself referring to him as the purchaser,
annexure A
in effect afforded him an election: whether
to be
bound to Chemhold as purchaser, or as surety. In
that
period, unless he intimated that he had exercised
his
election to be a purchaser in his own right,
Chemhold
could not have insisted on transferring to him
against
payment by him. The design of annexure A is not
on the
same lines as those of the more customary
contracts
of sale to a "purchaser or nominee" where the
purchaser
has been held bound immediately but with the
right to
assign subsequently. Cf
HUGHES v RADEMEYER
11
1947 (3)
SA 133
(A), 139.
It is
however unnecessary to decide what is a hypothetical question. The
fact of the matter is that respondent did not nominate the
company
timeously so that at midnight on 25 May 1987 the contract itself made
the election on his behalf and willy-nilly the right
to acquire the
property vested in him with the corresponding obligation to pay as
the result of the transaction. He fell squarely
within the terms of
s
2
of the Act. The less said about the purported written nomination
plus acceptance of 9 July 1987, the better. Even assuming that a
company not yet in existence could have accepted the nomination and
that fiction could be converted into fact by a deeming clause,
the
fiction was faulty and the deemed date of the written nomination fell
outside the vital period.
Mr Wallis,
on behalf of respondent, did not abandon, but did not press, so much
of the judgment of the court a quo as may hold that
the transaction
between
12
Chemhold and respondent was dissolved by the operation of a
resolutive condition.
That "the
original purchaser was only intended to be bound pro tern until
replaced in toto by the accession of the third party"
(the
reported judgment at p 625 I-J) is, with respect, no basis for a
finding that the original transaction has been "cancelled,
or
dissolved by the operation of a resolutive condition", which is
what is required by
sec 5(2)(a)
before respondent is relieved of his
liability. That respondent is no longer bound in terms of the
original transaction is not enough
to achieve that effect.
Having
willy-nilly acquired a right that attracted duty, the facts that the
respondent did not propose to pursue that right and that
Chemhold did
not subsequently hold him to the corresponding obligations, can make
no difference vis-a-vis the fisc. The question
is not what the
intentions of the parties were, but (a) whether respondent acquired
property within
13 the
meaning of
s 2
of the Act; and (b) whether
(i) a
resolutive condition
scil
. contained in the transaction
itself; or (ii) cancellation of the contract terminated the
relationship between the parties so that
Chemhold would be free to
dispose of the property by a transaction with a stranger to
this
contract. (Cf
SECRETARY FOR INLAND REVENUE
V
HARTZENBERG
1966 (1) SA 405
(A) 409H.)
The answer
to (a) we already know. As regards b(i), there is no resolutive
condition which could operate after midnight on 25 May
1987 to
relieve respondent of the contract. Any alteration in the position of
the parties thereafter could not come about as a result
of the
provisions of the Cash Deed of Sale but only as the result of
concurrence of Chemhold.
14 As
regards b(ii), no cancellation was ever effected. Clause 15 of the
Cash Deed of Sale required that to be in writing. Accepting
in favour
of appellant that the contract could also have been cancelled orally,
or by conduct, nothing of the kind happened. There
is no indication
that either party contemplated releasing the other from the
agreement. As from 26 May respondent was the buyer in
terms of the
contract. After that he wanted the company to step into his shoes. He
could cede his rights to the company. Delegation
of his obligations
required the consent of Chemhold. Such a total substitution was
achieved, the company's right to transfer of the
fixed property being
derived from respondent, not from a new contract with Chemhold (as
would have been the case had there been a
cancellation). The Cash
Deed of Sale as such remained intact.
Neither of
the eventualities for which
section 5(2)(a)
provides having occurred,
the appellant is not released from the liability for duty incurred in
terms
15 of
section 2
of the
Transfer Duty Act by
his acquisition of the right to
property under the transaction with Chemhold.
The appeal
succeeds, with costs. The order of the court a quo is set aside and
there is substituted for it one dismissing the application
for a
declaratory order, with costs.
L VAN DEN
HEEVER JA
CORBETT
CJ)
VAN
HEERDEN JA) CONCUR
VIVIER JA)
LL
Case
No 523/1990
IN THE
SUPREME COURT OF SOUTH AFRICA
(APPELLATE
DIVISION)
In the
matter between:
THE
COMMISSIONER FOR INLAND REVENUE
Appellant
and
RUSSELL
KENNETH COLLINS
Respondent
CORAM
:
CORBETT
CJ, BOTHA, VAN HEERDEN,
VIVIER et
VAN DEN HEEVER JJA
HEARD
:
15
MAY 1992
DELIVERED
:
1
JUNE 1992
JUDGMENT
BOTHA JA:
2
I agree with VAN DEN HEEVER JA
that the appeal be allowed, for the reasons following.
In the Court
a quo
it was
common cause that the respondent would have been liable to pay
transfer duty, in terms of
section 2(1)
of the Act, in respect of the
sale of the property by Chemhold to him, were it not for his
nomination of the company ("Nine
Hagart") as the purchaser
on 9 July 1987 and Chemhold's subsequent acceptance of such
nomination as substituting Nine Hagart
for the respondent as
purchaser. On this footing the only issue was whether or not these
events served to relieve the respondent
of liability by virtue of the
provisions of
section 5(2)(a)
of the Act.
In argument before this Court,
however, counsel for the respondent sought to change tack. He argued
that the transaction between Chemhold
and the respondent had not
attracted liability for transfer
3
duty on the part of the
respondent, by reason of the
terms of Annexure "A" to
the deed of sale. The
argument is without merit. The effect of
Annexure
"A" was clearly to make the contract of sale
between
Chemhold and the respondent subject to the fulfilment
of
a suspensive condition, which was expressed in the
words: "only
if the purchaser shall not have nomi
nated a purchaser who
shall validly have
accepted such nomination within
ten days after the
date hereof " The provision
in paragraph (i) of
Annexure "A" that
"pending such nomination or the expiry of the said period"
neither party "shall resile
from this agreement" does not
detract from the suspensive operation of the condition in relation to
the contract of sale (cf
Badenhorst v Van Rensburg
1986 (3) SA
769
(A) at 779D). The condition would fail if a nomination and
acceptance occurred within the stipulated period of ten days, or it
would
be
4
fulfilled on the expiry of the period without such
nomination
and acceptance having occurred. With reference to the position
pending the failure or the fulfilment of the condition,
there is
certainly room for an argument that no liability for transfer duty
could arise, on the ground that no personal right to
acquire the
ownership of the property had yet accrued to either of the
alternative potential purchasers. Similarly, if the condition
had
failed, there would certainly have been room for an argument that the
respondent had not incurred liability for transfer duty,
on the
ground that no right to acquire the property had ever accrued to him.
It is not necessary, however, to express a definite
opinion in
regard to those situations, for, in the event, the condition was
fulfilled. When once the condition was fulfilled, there
was no longer
any room for the argument that the respondent did not incur
liability for
5 transfer
duty. The legal effect of the fulfilment of
the
condition was that the contract of sale became binding upon the
respondent, and in consequence he became vested with the right
to
acquire the property. Hence, the conclusion is inescapable that he
"acquired" the property within the meaning of
section 2(1)
of the Act.
That being
so, it does not avail the respondent to contend that there was a
tacit extension of the ten day period or a waiver
of it, nor his
counsel to argue (as he did) that by the subsequent nomination and
acceptance of a new purchaser the parties were
in substance merely
giving effect to Annexure "A". As a matter of law, that is
not what happened. The legal effect of the
fulfilment of the
condition could not be undone otherwise than by means of a tripartite
agreement involving the three parties, by
which the rights and
obligations of the
6
respondent under the contract of sale were transferred to the
new purchaser. That, in law, was what was accomplished by the
respondent's nomination of Nine Hagart as purchaser, by the letter's
acceptance of it, and by Chemhold's consent to it. Of itself,
this
re-arrangement could not serve to extinguish the respondent's already
incurred liability to pay transfer duty. Whether or not
it had that
effect can be determined only with reference to the provisions of the
Act.
The
crucial question, then, is whether the events under consideration
fall within the purview of
section 5(2)(a)
of the Act. Two situations
are postulated in the section: where a transaction is cancelled, and
where it is dissolved by the operation
of a resolutive condition. The
latter situation cannot possibly arise on the facts of this case. As
to the former, I do not find
it necessary to consider
7 the
possible effect of clause 15 of the deed of sale, requiring writing
and the signatures of the parties for a cancellation of
it, on the
issue to be decided; I shall simply assume in favour of the
respondent that the terms of the clause do not militate against
the
arguments advanced on his behalf.
The gist
of the argument for the respondent on this aspect of the matter was
that the events under consideration constituted a delegation
of the
respondent's obligations under the contract of sale to Nine Hagart;
that delegation is a species of novation, by which the
respondent's
obligations to Chemhold were discharged; and that (quoting from
counsel's written heads of argument) "a termination
of the
contract by novation is a cancellation for the purposes of this
section" (section 5(2)(a)). The argument requires, first
of all,
a consideration of the meaning of the concept of the "cancellation"
of a
8
contract,
in general, and then a consideration of the sense in which the word
"cancelled" is used in
section 5(2)(a).
In
general, the word "cancellation" in the field of the law of
contract is a well-known technical term of art. It covers
both
cancellation by agreement between the parties (consensual
cancellation) and cancellation by one party on the ground of the
other
party's breach of contract (
Van
Streepen & Germs
(Pty) Ltd v Transvaal Provincial
Administration
1987 (4)
SA 569
(A) at 588H). In both instances, speaking generally, it
connotes the undoing of the contract in its entirety, and the
extinction
of all the rights and obligations of both parties as they
existed in terms of the contract. In the case of a consensual
cancellation
the usual consequences of the cancellation may, of
course, be modified by the terms of the agreement of
9 cancellation; and in the case of
a unilateral cancellation on breach it is to be noted that secondary
rights and obligations flowing
from the contract and its breach, e g
in regard to damages, may be said to remain (
Atteridgeville Town
Council and Another v Livanos t/a Livanos Brothers Electrical
[1991] ZASCA 139
;
1992
(1) SA 296
(A) at 304D). Those qualifications apart, the
"cancellation" of a contract normally means the wiping out
of the entire
contract and all the parties' rights and obligations
under it.
In
section 5(2)(a)
the expression
used is: "If a transaction . ... is .... cancelled ...". On
the face of it, there is no reason to think
that the Legislature
intended by that expression to convey anything other than the
ordinary, well-understood meaning of the concept
of the cancellation
of a contract. That this is indeed what the Legislature had in mind,
is to some extent pointed to by the
10 further
provisions of the section. The reference to
consideration
paid to and retained by the seller contemplates a cancellation in the
ordinary sense, because it is only in such a case
that restitution
and an obligation to restore consideration paid would arise, but for
the provisions of a particular contract. And
the position next
referred to, where consideration is payable "for or in respect
of the cancellation", is most frequently
encountered in cases of
a consensual cancellation in the ordinary sense. In any event, there
is nothing in the section itself to
suggest that the Legislature
intended the word "cancelled" to be understood in a sense
other than in accordance with its
ordinary meaning. Nor is any
indication to that effect to be found in any of the other provisions
of the Act, or in the context of
its scope and object as a whole. In
my view, therefore, the cancellation which is dealt with in
11
section
5(2)(a)
is of a kind which brings to an end
the entire
transaction in question, and hence the rights and obligations of both
of the parties in terms of it. This view finds support
in the
interpretation which was placed on
section 5(2)(a)
, read with
section
5(2)(b)
, in the judgment in
Secretary for Inland Revenue v
Hartzenberg
1966 (1) SA 405
(A) at 409C-410D. It was held that
for an agreement to qualify as a cancellation of a transaction as
contemplated in the section,
it was necessary that the
jus in
personam ad rem acquirendam
acquired under the transaction be
extinguished, and the seller's full rights of disposal over the
property be restored. That is, of
course, in accordance with the
notion of cancellation as ordinarily understood.
Applying
the views expressed above to the facts of this case, it is clear that
the arrangement
12
by which
Nine Hagart was substituted as the purchaser in place of the
respondent did not constitute a cancellation of the contract
as
envisaged in
section 5(2)(a).
The legal effect achieved by the
nomination and acceptance of the new purchaser was merely the
transfer to it of the respondent's
rights and obligations. Those
rights and obligations were not extinguished and they did not come to
an end. Nor was the contract
wiped out; all of its terms (embodying
the "transaction" as such) remained intact and operative as
between the seller and
the substituted purchaser. It is true, as was
stressed in the argument for the respondent, that the delegation of
the respondent's
obligations brought about their discharge, but that
does not mean that they ceased to exist; they were transferred to the
new purchaser.
Counsel's pivotal submission that there was a novation
which resulted in "the
13
termination of the contract" can at best reflect only on the
position that the respondent ceased to be bound by it; but for
the
purposes of applying
section 5(2)(a)
it is futile to focus only on
the position of the respondent. Since the contract itself and the
rights and obligations under it did
not come to an end, the further
argument that, because of the novation, there was a cancellation of
the contract for the purposes
of the section, is wrong, and must be
rejected.
For the
reasons given above I consider, with respect, that the reasoning in
the judgment of the Court
a quo
was flawed, and that the
result arrived at was wrong. Accordingly I concur in the order made
by VAN DEN HEEVER JA.
A S
BOTHA JA CORBETT CJ
VAN
HEERDEN JA
CONCUR
VIVIER JA