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[1995] ZASCA 86
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Velcich and Others v Land En Landboubank van Suid-Afrika and Others (728/93) [1995] ZASCA 86; 1996 (1) SA 17 (SCA); (31 August 1995)
IN THE SUPREME COURT OF SOUTH AFRICA
APPELLATE DIVISION Case no 728/93
In the matter between
RALPH VELCICH First Appellant
EZRA MARTINS Second Appellant
JAN DE BRUYN BREEDT Third
Appellant
and
LAND EN LANDBOUBANK VAN SUID-AFRIKA First Respondent
JAMES
VAN RENSBURG NO Second Respondent
CHALMAR BEEF (PTY) LTD Third
Respondent
Coram:
JOUBERT, NESTADT, STEYN, VAN DEN HEEVER et SCHUTZ
JJA
Heard:
23 May 1995
Delivered:
31 August 1995
JUDGMENT
JOUBERT JA:
This is an appeal against the dismissal on 15 June 1993 by
the
2 Transvaal Provincial Division of an application by
the appellants for judgment
against the respondents. It is brought
with the leave of the Judge a quo
(ROUX J).
The relevant background facts may conveniently be tabulated as
follows:
1
On
18 August 1975 L.C. Moolman, and his brother D.J. Moolman, as lessors, entered
into a written lease ("the original lease") with
the first and second
appellants, as lessees, in respect of the arable lands on the farm Tweefontein
("the farm") as from 1 September
1975 for a period of 3 years. The lessees could
not sub-let the hired lands, or any portion thereof, without the prior consent
of
the lessors. At that stage the lessors were not the registered owners of the
farm.
2
On 10 November 1977
L.C. Moolman became the registered owner of the
farm.
3
L.C. Moolman as
mortgagor registered four mortgage bonds over the farm in favour of the first
respondent ("the Land Bank"). They were
expressly made subject to the provisions
of the Land Bank Act No 13 of 1944 ("the
Act").
3
4 The original lease was extended from lime to time until it was
finally
terminated on 31 August 1983.
5
On 19 September
1983 L.C. Moolman concluded a new written lease with the first and second
appellants, as lessees, in respect of the
arable lands on the (arm as from 1
September 1983 to 31 August 1988. The lessees were expressly precluded from
sub-letting any of
the hired lands, or any portion thereof, without the prior
written consent of L.C. Moolman as lessor. The period of this lease was
extended
by the parlies to 31 August 1991. On 9 September 1991 they extended it to 31
August 1993.
6
The estate of
L.C. Moolman was sequestrated on 26 February 1992 and the second respondent was
appointed trustee
thereof.
7
On 3 August 1992
the insolvent L.C. Moolman purported to consent in writing to the sub-letting of
the lands on the farm by the first
and second appellants. The latter then
purported during August 1992 to sub-let the lands for a year to the third
appellant who commenced
with the preparation of the lands Tor the planting of
crops early in September 1992 . The crops were planted during October/November
1992.
4 8 Upon the insolvency of L.C.
Moolman the Land Bank acting in terms
of sec 55 (2) (b) of the Act decided to sell the farm by public auction.
The
auction was advertised to be held on 1 October 1992 "vry van
enige
huurooreenkomste, bewoningsreglc, huurkoopooreenkomste en/of
vruggebruik."
It was auctioned as advertised. Since the bids received were inadequate
to
satisfy the secured claim of the Land Bank, the farm was bought
in by the
latter. On 17 December 1992 the Land Bank in terms of sec 72 (2) of the
Act
sold the farm to the third respondent.
The original notice of motion was dated 26 February 1993. During
the
hearing of the application by the Court
a quo
it was amended by the
applicants/appellants to claim a declaratory order viz.
1
that the new
agreement of lease of 19 September 1983, as extended from time to time to 31
August 1993, was still valid, binding and
enforceable as against the
respondents;
2
that the
agreement of sub-lease of August 1992 was valid, binding and enforceable, also
against the
respondents;
3
that the sale
of the farm on 1 October 1992 to the Land Bank
and
5 thereafter by it on 17 December 1992
to the third respondent was subject to the
aforementioned lease and sub-lease; and
4 that the third
applicant/appellant was entitled to reap the crops sown by
him on
the farm as at 22 April 1993.
On 22 April 1993 the third
applicant/appellant and the third respondent agreed that the crop which was
valued at R150 000-00 would
be reaped by the third respondent which would pay
the said amount to the third applicant/appellant in the event of a judgment
being
granted in his favour.
The first question to be decided is whether or not the new lease survived
the sale in execution of the farm on 1 October 1992. I have
already indicated
supra
that the farm was auctioned as advertised without mention of the
lease. It is common cause that the mortgage bonds were registered
over the farm
prior to the conclusion of the lease. Mr
Pauw
, on behalf of the
appellants, contended that the lease survived the auction sale since the Land
Bank failed to adopt the accepted
procedure to protect the interests of the
first and second appellants as lessees viz. first to put up the farm subject to
the lease
but to sell it free of the lease if the highest bid did not cover the
Land Bank's claim. See
Lubbe v
6
Volkskas Bpk
[1992] ZASCA 97
;
1992 (3) SA
868
(A)
at p 875 C-H. Failure to adopt the
accepted procedure at
a sale in execution of mortgaged property will, however,
not
necessarily result in invalidity of the sale. Thus in
Wiber v
Mahodini
(1904) 21 SC 645
a lease was executed alter a
mortgage bond had been passed
over a property. When the sale in
execution of the property took place no
mention was made of the
lease. The property was sold at the highest bid
obtained which was
far less than the mortgage debt. DE VILLIERS CJ held
at p
647:
"It is obvious that if the property had been put up subject to the lease,
the
highest bid would have been still lower. I consider, therefore, the
mortgagee
is now entitled to claim that the sale of the property free From the
lease shall
be sanctioned by the Court." ROUX J acted on a similar assumption:
"Even
if the farm was sold according to the accepted procedure the result would
have
been the same. The effect is that the lease ended on 1 October 1992." In
the
particular circumstances of the present case I agree with the approach
and
conclusion by the Court
a quo
that the lease did not survive the
sale in
execution of the farm. It follows that the sale of the farm by the Land
Bank
7 to the third respondent on 17 December 1992 was accordingly
free of the lease.
The next question raised related to the validity
of the sub-lease. The new lease of 19 September 1983 expressly prohibited the
first
and second appellants as lessees from sub-letting the hired lands, or any
portion thereof, without the prior written consent of the
lessor (L.C. Moolman).
After the sequestration of his estate the latter without the consent of the
trustee (second respondent) purported
to consent in writing to the sub-letting
of the lands by the lessees (first and second appellants). During August 1992
the latter
sub-let the lands to the third appellant. It is common cause that
L.C. Moolman never obtained the consent in writing of his trustee
to authorise
him to consent to the sub-lease of the lands between the appellants.
Is the sub-lease valid as against the Land Bank and the
third
respondent? Insolvency does not deprive the
insolvent of his contractual
capacity but limits it in several respects as provided for in the
Insolvency Act.
See 23 (2) reads as follows:
"The fact that a person entering into any contract is an insolvent, shall
not affect the validity of that contract: Provided that
the insolvent does not
thereby purport to dispose of any property of his insolvent estate; and provided
further
8
that an insolvent shall not, without the consent in writing of the
trustee of his estate, enter into any contract whereby his estate
or any
contribution towards his estate which he is obliged to make, is or is likely to
be adversely affected, but in either case
subject to the provisions of
sub-section (1) of section twenty-four."
Since sec 24 (1) deals with assets acquired by the insolvent after
sequestration
of his estate, it is irrelevant for purposes of this
appeal. If an unrehahilitated
insolvent were without the consent of his trustee to enter into a
contract which
falls within the ambit of the provisos to sec 23(2)
such contract would
according to our case law be voidable only and
not void. See LAWSA vol 11
(1981) s.v. Insolvency, para 210 at p 157
for a full exposition with reference
to the case law. Unfortunately this matter has not been dealt with by
counsel
in their written heads of argument. In my judgment there is, however, a
very
simple basis on which the matter may be resolved. At the sale
in execution no
mention was made at all of the existence of the sub-lease. It was not
a
registered sub-lease and the Land Bank at all relevant times had no
knowledge
of its existence. The Land Bank in fact bought in the farm with a clean
title
free of the sub-lease and subsequently sold it with a clean title to the
third
respondent. It therefore follows that the sub-lease is not binding upon
nor
9 enforceable against the Land Bank and/or the third respondent.
For purposes
of this appeal it is irrelevant whether or not the
sub-lease is valid as regards the first and second appellants.
That
would really dispose of the appeal hut for an argument advanced hy Mr
Pauw
for the first time on behalf of the third appellant in this court.
He asserted that the third appellant as a
bona fide
occupier of the lands
had a lien on the crops which was based on unjust enrichment. In my judgment
this contention is misconceived
on the facts of this appeal. The
causa
of
the application is based on contract, viz. the existence of the new lease and
the sublease as contracts. No facts were pleaded
as a basis for unjust
enrichment giving rise to a lien on the crops. In the light of the aforegoing
the appeal is dismissed with
costs.
C.P. JOUBERT JA
CONCUR
NESTADT JA
STEYN JA
VAN DEN HEEVER JA
SCHUTZ JA