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[2013] ZAWCHC 115
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Mottel and Others v Altmarr Properties and Others (19749/12) [2013] ZAWCHC 115 (20 June 2013)
REPUBLIC OF SOUTH AFRICA
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE HIGH COURT, CAPE TOWN)
Case no: 19749/12
In
the matter between:
WILLEM MOTTEL
.....................................................................
First
Applicant
BETTA MOTTEL
..................................................................
Second
Applicant
CALVIN APRIL
.........................................................................
Third
Applicant
JULIANA APRIL
....................................................................
Fourth
Applicant
and
ALTMARR PROPERTIES
.....................................................
First
Respondent
MARSHALL SKEI
............................................................
Second
Respondent
JAMES JACOBUS HAGAN
................................................
Third
Respondent
LEVONA THERESA HAGAN
............................................
Fourth
Respondent
STANDARD BANK LIMITED
................................................
Fifth
Respondent
ABSA BANK LIMITED
.........................................................
Sixth
Respondent
THE REGISTRAR OF DEEDS
........................................
Seventh
Respondent
Heard: 9
May 2013
JUDGMENT
DELIVERED: 20 JUNE 2013
savage AJ:
Introduction
In this application the applicants seek to have two deeds of sale
entered into with the third and fourth respondents, the subsequent
transfer of their immovable properties to the third and fourth
respondents and the lease agreements entered into in respect of
such
properties declared null and void
ab initio
. Pending the
outcome of the current application, eviction proceedings instituted
by the third and fourth respondents against
the applicants were
stayed by order of this Court.
At the outset of the matter the applicants argued that certain
disputes of fact existed on the papers which warranted the referral
of the matter to oral evidence. I was not satisfied that a referral
to oral evidence was required in the matter and the application
was
refused. The matter was accordingly considered with due regard to
the decision of Corbett JA in
Plascon-Evans Paints v Van Riebeeck
Paints
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634E-635D.
Material facts
The material facts are as follows. The applicants, Willem and Betta
Mottel (“the Mottels”) and Calvin and Juliana
April
(“the Aprils”), responded to the following advertisement
that had been placed in the
Son
newspaper:
Skuld-konsoliderings plan
Gee skuld u slapelose nagte?
Besit u eie huis?
Tweede Verbande
Agterstallig met u verband?
Gaan huis op veiling?
Naam op swartlys?
Agterstallig met kredietkaarte?
Skakel Marshall
Tel: 021-903 7999/8999
Fax: 021 903 9998 Cell: 082743 4688
Both couples were in financial difficulty and had fallen into
arrears in respect to their debts. The Mottels were unable to repay
their debts after the retirement of the first applicant. They owned
the house in which they lived for many years at 23 Cupido
Cloete
East Street, Eersterivier in respect of which they had an
outstanding loan of R145 000 with Standard Bank and other debts
of
R66 000. The Aprils had a bond registered over their property at 19
Swawel Street, Macassar in favour of First National Bank
for a loan
amount of R80 000. During January 2009 the Aprilshad debts of R68
000, with R6500 outstanding on their bond.
In response to the advertisement, the Mottels and the Aprils met
separately withthe second respondent, Mr Marshall Skei (“Skei”),
the sole proprietor of Altmarr Properties, whose name and contact
details appeared in the advertisement. Skei has since 1999
been
registered as an estate agent but is not a registered debt
counsellor.
After theirmeeting with Skei, the Mottels followed him to the
offices of Kruger Slabber Esterhuyse (“KSE”) attorneys
where on 2 May 2009 they signed a sale agreement in favour of James
and Levona Hagan (“the Hagans”) in terms of which
they
agreed to sell their property to the Hagans for R418 000. The Hagans
had signed this sale agreement on 1 May 2009. In terms
of clause 7
of this agreement all transfer costs were to be paid by the
purchaser. After signature, the Mottels accompanied Skei
to Nedbank
where he provided them with R20 000, being the only monies they
received from him in respect of the transaction.
On 6 May 2009, after signature of the offer to purchase bythe
Mottels they signed the following document in favour of Skei:
Altmarr Properties
Rehabilitation of
financial credibility
Mandate
Please note the following
:
The loan amount approved in
principle is based on information supplied by yourself-the valuation
by the financial institution
will confirm the value of your property
and will be accepted as the true and correct value.
Costs as set out below is NOT
payable upfront. This is deducted from the proceeds secured in the
selling of the property to an
investor (hereinafter referred to as
“the nominee”).
The seller must repurchase the
property from the nominee within eight months once their financial
credibility has been restored.
If the seller does not qualify for a
bond to repurchase the property (because the seller made more debt
after signing this agreement
or for any other reason), then Altmarr
Properties and the nominee will give the seller 2 (TWO) months
written notice of the intention
to sell the property privately to
the open market and also when the seller must vacate the property.
If the property is not sold
after the 2 (TWO) months period and the
seller is still in the property then the seller will pay
occupational interest (monthly
in advance) in the amount of R3750
directly to Altmarr. This will be on a month to month basis until
the property is sold.
Altmarr Properties has
requested the nominee to purchase the property and obtain a mortgage
bond from the bank the amount of R
275 000
Altmarr Properties will arrange
for the seller to repurchase the property from the nominee at the
agreed price of R296 000
The seller agrees that they
will sign a Deed of Sale and sign all necessary documents when so
requested by Altmarr Properties
in order to affect the repurchase of
the property from the nominee.
The Seller will sign a 8
month’s lease agreement with the nominee.
The rent is R 3750 for the
period paid in advance to cover the bond of the nominee.
The seller authorises the
attorneys as appointed by Altmarr Properties to attend to the
transfers, to make payments of all accounts
as discussed with seller
to consolidate and settle debt to clear our names with the Credit
Bureaus (defaults and judgments) as
well as all fees commission and
cost to Altmarr Properties. Also the full balance of the purchase
price must be paid to Altmarr
Properties by the attorney. We hereby
authorise the attorney to make such payments and indemnify the
attorney against any claims
that may arise from making these
payments.
No costs will be payable should
the loan be declined for any reason whatsoever.
This irrevocable Sole Mandate
shall be binding from date of signature.
UNDERTAKING
:
I/We, the undersigned accept the
aforementioned transaction and confer a sole mandate on Altmarr
Properties to proceed with the
rehabilitation of my/our financial
credibility.
I/We the undersigned owners,
hereby grant Altmarr Properties permission to obtain outstanding
balances on our accounts with the
Bank regarding our mortgage bond,
personal Bank and Credit Bureaus to render this information to
Altmarr Properties forthwith.
I/We hereby agree to pay Altmarr
Properties the aforementioned fees on signing of documents R58900
I/We herewith grant Altmarr
Properties permission to apply at my existing Bank any other bank or
financial institution willing to
grant a bond to me/us after our
financial credibility has been restored.
Power of attorney to pass transfer was granted in favour of KSE
Attorneys by the Mottels apparently on 28 May 2009 at Tyger Valley
with the instruction to pass transfer signed on the same date.
The Aprils signed similar agreements. Following their meeting with
Skei in February 2009, they followed Skei to KSE attorneys
and
signed asale agreement in respect of their house in favour of the
Hagans in the amount of R394 000 before Skei took them
to Nedbank
where he handed them R25 000 as an ‘advance’.
On 19 February 2009 the Aprilssigned the same ‘Rehabilitation
of Financial Credibility Mandate’ that had been signed
by the
Mottels on 6 May 2009. Also on 19 February 2009, a lease agreement
with the Hagans was signed by the Aprils in terms of
which the lease
period commenced on 1 June 2009 for a period of eight months
terminating on 28 February 2010, with a rental amount
agreed with
R3750.
On 1 August 2009 a similar lease agreement was entered into between
the Hagans and the Mottels for the period until 31 May 2010
with
rental of R4534 for the period paid in advance. Both the Mottels and
April stated that they paid monthly amounts of R3900
and R3200
respectively, understanding that these payments were to settle their
debts.
Repeated attempts by the Mottels to contact Skei after eight months
were unsuccessful. By September/October 2010 the Mottels
realised
that their monthly payments had exceeded their outstanding debts.
The Aprils found Skei to be evasive after the eight-month
period had
elapsed. In September 2010 the Aprils found their municipal account
in their post-box addressed to Mr Hagan at the
Mottels address. They
visited the Mottels, who they previously did not know, and after
discussion with them concluded that they
had been victims of a
fraudulent scheme.
Mr Francois Kruger, an attorney, previously of KSE attorneys met
with the Mottels on 28 May 2009 and the Aprils on 13 March 2009
to
sign the necessary documents to effect transfer of the properties.
He was led “
to believe that Altmarr Properties would
consolidate the Applicants debts and pay same with the proceeds from
the sale
”. Both applicants asked for an advance of their
profit and bridging forms were signed by the applicants. He
confirmed that
the Mottels took an advance of R20 000 and the Aprils
took in advance of R 25 000. The Aprils were later contacted and
asked
to sign a consent form accepting liability for the cost of the
bond and transfer of registration. It was not clear whether the
same
occurred in respect of the Mottels. The amount of agents’
commission payable was not recorded in the document put
up by Mr
Kruger.
In a
pro forma
statement from KSE attorneys dated 17 July
2009 in respect of the Mottels’ transfer, the sale price of
R418 000 was recorded
against which the following amounts were
debited:
Cancellation costs R 1384.00
Cancellation amount R 145477.65
Agents commission R 54 900.00
Rates R 8452.00
Interest on rates R 709.80
Deposit ito Addendum R 62 700.00
Advance plus interest R 21 960.00
Transfer costs R 9894.00
Bond costs R 8532.00
Administration fee R 912.00
Cheque to yourself R 103 078.55
The “cheque to yourself” of R103 078.55 was paid to
Altmarr Roofing. Skei states that payment was made to him in
terms
of the agreement between the Mottels and himself to settle their
debts.
A similar
pro forma
invoice was prepared by KSE attorneys in
respect of the April transfer. The Aprils’ house was sold for
R394 000. Their
debts at the outset amounted to R59 569.00 before
inclusion of eight monthly rent instalments of R4535.00 per month
totalling
R36 272.00; and they were charged for seven debt
clearances at R2600 each totalling R18 200. The cheque paid to Skei
was in the
amount of R173 680.60 apparently to settle debts of R122
204.21. It was accordingly recorded that they received payment of
R173
680.60 less an advance of R 29 500. The balance of R3276.39 was
to be paid to the Aprils on registration of transfer of the
property.
Ownership of both properties was transferred to the Hagans.
In his affidavit Skei indicated that the Mottels and the Aprils
agreed that a loan amount would be approved in principle and
that
their property would be sold to an investor for a rehabilitation
period of eight months, following which they could repurchase
their
property in eight months once their financial credibility had been
restored. Skei would then assist them in applyingfor
a mortgage bond
on their behalf. A mandate was given to Altmarr Properties to
proceed with the rehabilitation of their financial
credibility,
taking control of their debts in a financial rehabilitation process.
After the eight-month period had elapsed, bond
applications were
submitted by Skei on behalf of the Aprils to Nedbank and Capitec
without success. No similar applications were
made by Skei on behalf
of the Mottels.
In their answering affidavits the Hagans stated that they met Skei
at church between 1998 and 2000. He informed them that he
operated a
business as an estate agent and helped individuals who had fallen on
hard times to deal with debt by selling their
houses. Skei indicated
that his clients were all government employees and that they were
provided with a period of eight months
to raise funds to buy their
houses back once their debts had been discharged.The Hagans were
compensated R10 000 or R15 000 by
Skei per transaction for the
“trouble” so as to make it attractive for them to
investin the scheme. The Hagans purchased
the homes belonging to the
Mottels and Aprils, with funds loaned from Standard Bank and ABSA to
do so and with mortgage bonds
then registered over both properties.
In addition, they purchased three other properties in this manner
through Skei.
The fifth respondent, Standard Bank was joined in these proceedings
by reason of its interest in the Mottels’ property,
given the
mortgage bond in its favour registered over the property as security
for the loan amount advanced of R418 000.00.
Applicants’ case
The applicants contendedthat the agreements in terms of which they
sold their properties to the Hagans were unlawful in that
these
agreements constituted an impermissible
lex commissoria
and a
breach of the National Credit Act 34 of 2005 (“NCA”),
alternatively were induced by false misrepresentations
made by Skei:
namely, that he was a debt counsellor and that their properties
would not be sold. It was argued further that given
that the price
of immovable property is a material term of a contract of sale in
terms of section 6(1)(e) of the Alienation of
Land Act 68 of
1981,the sale agreement is voidas a result of the re-purchase price
not being recorded in the agreement.The applicants
contended that
given the illegality of the scheme it follows that the agreements
fall to be declared void and the applicantsare
therefore entitled to
restitution.
Respondents’
case
The first and second respondents opposed the application and argued
that the contradiction in the applicants’ pleadings
in the
current proceedings and those in the eviction proceedings was
material and determinative of the matter. This contradiction
related
to the version that the applicants did not intend to sell their
properties at all in the current proceedings and the
version that
they did so but only for eight months in the eviction proceedings.
It was argued further that the applicants signed
the sale and other
agreements, that no misrepresentations were made by Skei and that
the agreements must accordingly be upheld.
The Hagans denied that the agreements were unlawful. They argued
that the applicants were free to contract on any basis and were
aware that they were selling their properties to the Hagans. No
misrepresentations were proved and the Hagans were unaware of
any
allegedmisrepresentations. Fraud by a third party does not permit a
sale to be set aside unless the Hagans acted with Skei.
Karabus
Motors (1959) Ltd v Van Eck
1962 (1) SA 451
(O).The possibility
of abuse is not sufficient to hold that an agreement is against
public policy (
Juglalv Shoprite Checkers (Pty) Ltd
2004 (5)
SA 248
(C) at 258) and the agreements have not been shown to be
contra bonos mores
. The payment of commission to Skei was
permissible in that he acted as estate agent and paid expenses on
behalf of the applicants.
Given that the transfers were not
prohibited in law, they do not fall to be set aside and in the event
that they are, the Hagans
stand to be compensated.
It was argued for Standard Bankthat it holds a mortgage bond over
the property previously owned by the Mottels as security for
its
loan of R418 000 to the Hagans, which amount would not have been
advanced in the absence of this security.It is inconceivable
that
the applicants could have signed the cancellation of their bond and
transfer of their property without appreciating what
they were
doing. However, the Bank has no objection to the transfer of the
properties to the applicants provided that the bond
currently
registered in its favour is cancelled against payment of the full
amount of R380 912.58 secured by such bond.
Discussion
Contrary to public policy
The principle of
pacta sunt servanda
has been held by the
Constitutional Court in
Barkhuizen v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC) at para 87 to be a “
profoundly moral principle, on
which the coherence of any society relies
”, but that the
“
general rule that agreements must be honouredcannot apply
to immoral agreements that violate public policy
”. In
Brisley v Drosky
2002 (4) SA 1
(SCA) Cameron JA stated at
para 93 that –
‘
neither the Constitution nor the value
system it embodies give the courts a general jurisdiction to
invalidate contracts on the
basis of judicially perceived notions of
unjustness or to determine their enforceability on the basis of
imprecise notions of good
faith
”.
In
Eastwood v Shepstone
1902 TS 294
at 302 it was stated
that:
‘
(T)his Court has the power to treat as
void and to refuse in anyway to recognise contracts and transactions
which are against public
policy or contrary to good morals. It is a
power not to be hastily or rashly exercised; but once it is clear
that any arrangement
is against public policy, the court would be
wanting in its duty if it hesitated to declare such an arrangement
void. What we have
to look at is the tendency of the proposed
transaction, not its actually proved result
.’
The effect of the judgments in
Botha (now Griessel) v
Finanscredit (Pty) Ltd
1989 (3) SA 773
(A) and
Sasfin (Pty)
Ltd v Beukes
1989 (1) SA 1
(A) is that public policy generally
favours the utmost freedom of contract; public policy properly takes
into account the necessity
of doing simple justice between persons;
the power to declare a contract or term in a contract contrary to
public policy and
therefore unenforceable should be exercised
sparingly and only in the clearest of cases; and a contract or term
may be declared
contrary to public policy if it is clearly inimical
to the interests of the community, or is contrary to law or
morality, or
runs counter to social or economic expedience, or is
plainly improper and unconscionable, or unduly harsh or oppressive.
Heher JA stated in
Juglal NO v Shoprite Checkers (Pty) Ltd
2004 (5) SA 248
(SCA) at 258 that –
‘
Because the courts will conclude that
contractual provisions are contrary to public policy only when that
is their clear effect…
it follows that the tendency of a
proposed transaction towards such a conflict… can only be
found to exist if there is a
probability that unconscionable, immoral
or illegal conduct will result from implementation of the provisions
according to their
tenor. (It may be that the cumulative effect of
implementation of provisions not individually objectionable may
disclose such a
tendency)…An attempt to identify the tendency
of contractual provisions may require consideration of the purpose of
the
contract, discernible from its terms and from the objective
circumstances of its conclusion
’.
In advertising a debt consolidation plan, Skei on his own version,
drew the applicants into a scheme aimed atresolving their
debt
through the sale of their homeson an interim basis to “an
investor”. Both the Mottels and the Aprils signed
the sale
agreement with the Hagans as investorprior to their signature of the
mandate to Skei to rehabilitate their “financial
credibility”.
This mandate recorded the nature of the scheme that had been agreed:
that the applicants’ homes would
be sold to the investor, the
applicants debts settledby Skei, with agreed fees paid to Skei,and
that after eight months the applicants
would re-purchase the
properties, by then debt-free, subject to their obtaining a bond
which if not obtained would lead to the
sale of the properties on
the open market. Skei confirmed thisto be the nature of the scheme
agreed in these proceedings. The
sale agreements with the Hagans
were thereforesigned, even on Skei’s version, on the basis of
the underlying agreement
recorded in the mandates signed later. The
receipt by the Hagans of payments of R10 000 to R15 000 from Skei as
an incentive
for their “trouble” and so as to make it
attractive for them to invest in the scheme confirms their role as
investor
recorded in the mandate. These payments and the number of
properties purchased by them through Skei on the same basis,
illustrates
that they were knowing and willing participants in the
scheme.
The applicants responded to Skei’s advertisement in order to
resolve their debt, yet the scheme came at a cost with large
fees
and commissions paidoff the proceeds of the sale by the applicants
to Skei. The applicants therefore lost ownership of their
homes in
order to settle debts in a substantially lesser amount than the sale
price of the properties at great additional cost
to themselves. The
result was that they found themselves lessees in their homes having
to stave off eviction proceedings instituted
against them by the
Hagans. The conclusion that the scheme preyed on economically
vulnerable people, capitalising on their naivety
and leaving them
worse off than they had been before in having been stripped of their
one major asset and source of physical
security in the form of their
home, is accordingly justified.
Section 26 of the Constitution guarantees the right
to
have access to adequate housing, requiring the state to take
reasonable legislative and other measures, within its available
resources, to achieve the progressive realisation of this right.
The
importance of this right is evidenced in its entrenchment in the
Bill of Rights. It follows therefore that contractual schemes
that
serve to remove, undermine or diminish this right are clearly
inimical to the interests of the community, and are plainly
improper
and unconscionable. This is more so in a society in which numbers of
people find themselves caught in a spiral of debt,
often causing
them to expose themselves to undue risk in financial arrangements
that are immoral, unjust or unduly harsh in their
consequences.
While the power to declare a contract or term in a contract contrary
to public policy and therefore unenforceable
should be exercised
sparingly and only in the clearest of cases, I am satisfied that
this is such a case. Were this Court not
to conclude in the
circumstances of a case such as this that public policy provided a
basis upon which to refuse to sanction
such schemes, the protection
provided by law to the vulnerable would be unduly limited in
circumstances that it should not.
It follows therefore that the sale agreements, the mandates and the
lease agreements are found to be contrary to public policy.
In such
circumstances it follows that the two deeds of sale entered into
with the third and fourth respondents, the subsequent
transfer of
their immovable properties to the third and fourth respondents and
the lease agreements entered into in respect of
such properties fall
to be declared null and void
ab initio
.
Misrepresentation
The principle of
caveat subscriptor
expressed
in
Burger v Central South African Railways
1903 TS 571
at 578 and
George
v Fairmead (Pty) Ltd
1958 (2) SA 465
(AD) at 472A that “(w)
hen
a man is asked to put his signature to a
document he cannot fail to realise that he is called upon to
signify, by doing so, his
assent to whatever words appear above his
signature
”is subject to the important qualification
that a person seeking to hold another bound by contract must have
held a reasonable
belief that the signatory intended to be bound by
such contract.This is more so when signing a complex document with
drastic
consequences. It is for this reason that t
he
rule has been held not to apply where
a
contract was signed without being read when it contained terms which
no reasonable person would expect to find in it.
Keens
Group (Pty) Ltd v Lötter
1989 (1) SA 585
(C);
Aetiology Today
CC v Van Aswegen
1992 (1) SA 807
(W) at 810G;
Dlovo v
Brian Porter Motors Ltd
1994 (2) SA 518
(C) at 525A–D; and
Fourie
v Hansen and another
[2000] 1
All SA 510
(W).
In
Brink v Humphries & Jewell (Pty) Ltd
[2005] 2 All SA
343
(SCA) Cloete JA stated that -
‘
The law recognises that it would be unconscionable for a
person to enforce the terms of a document where he misled the
signatory,
whether intentionally or not. Where such a
misrepresentation is material, the signatory canrescind the contract
because of the
misrepresentation, provided he can show that he would
not have entered into the contract if he had known the truth. Where
the misrepresentation
results in a fundamental mistake, the
“contract” is void ab initio. In this way the law gives
effect to the sound principle
that a person, in signing a document,
is taken to be bound by the ordinary meaning and effect of the words
which appear over his/her
signature, while at the same time
protecting such a person if he/she is
under a justifiable
misapprehension, caused by the other party who requires such
signature, as to the effect of the document
.’
Even if I am wrong that the contracts are contrary to public policy,
I am satisfied that the scheme wassold to the applicants
as a debt
consolidation plan, who signed the sale agreements on the basis of
an interim sale to an investor. The applicants were
not informed by
Skei of the payments to the Hagans, the fact that there existed no
obligation on the Hagans to sell the properties
back to the
applicants after eight months or at all and that the sale agreements
amounted to a binding and permanent sale of
their respective
properties.
The general rule remains that expressed
i
n
Karabus Motors
(
1959
)
LPD vVan Eck
1962
(1) SA 451
(C) at 453D by Watermeyer J that:
‘
...if the fraud which induces a contract does not proceed
from one of the parties, but from an independent third person, it
will
have no effect upon the contract. The fraud must be the fraud of
one of the parties or of a third party acting in collusion with,
or
as the agent of, one of the parties (see Wessels, Law of Contract,
para 1122)
.”
However, a
n independent third person’s
misrepresentation may render a contract void
ab
initio
if it induces the representee
to enter into the contract in ignorance of its true nature and
effect.
Standard Credit Corporation Ltd
v Naicker
1987 (2) SA 49
(N) 52–53
.
This was echoed in
Saambou-Nasionale
Bouvereniging v Friedman
1979 (3) SA
978
(A) at 999H-1000D in which it was held that in certain
circumstances a contracting party may rely upon the fraud of a third
party.
To the extent that Skei acted as estate agent in
a contract to provide a special service to the applicants (
Gluckman
v Landau & Co
1944 TPD 261
at
267), he owed a duty to the applicants as his principals to act in
good faith towards them in their conclusion of the sale
agreements.Given Skei’s representations regarding the basis of
the debt consolidation scheme as recorded later in the mandate
signed by the applicants, it is clear to me that Skei was obliged to
draw to the
applicants attention the terms of the sale agreements that could not
reasonably have been expected in light of previous
representations
he had made to the applicants, namely that the properties were to be
sold permanently without reference to an
eight month sale period
(See
in this regard Afrox Healthcare Bpk v Strydom
2002
(6) SA 21
(SCA) at para 36
)
.
This
was so particularly given that the applicants had responded to an
advertisement to consolidate their debt and not to sell
their homes,
yet on the same day were taken to Skei’s attorney to sign
agreements permanently selling their properties
to the Hagans, who
they had never met and who Skei failed to disclose he had paid to
engage in the scheme.
The n
on-disclosure
of a fact is fraudulent if the guilty party foresees the possibility
that failure to disclose the fact will cause
harm to the other
party, for instance, by inducing such to enter into a prejudicial
transaction (
LAWSA 393
).
I am satisfied that this is such a case in that had Skei disclosed
these facts to the applicants, it is highly improbable that
they
would have signed the sale agreements. I accept in the circumstances
the dictum of Jessel MR in
Redgrave
v
Hurd
1882
51 LJ Ch. 113
at page 117 referred to by Milne JP in
Standard
Credit(supra)
Milne JP at 51
and
Sampson
v.
Union and Rhodesia Wholesale Ltd
(
in
liquidation
) 1929
AD468 at 479
- 480that:
‘
If a man is induced to enter into a contract by a false
representation, it is not sufficient answer for him to say: “if
you
had used due diligence you would have found out that the
statement was untrue”.’
In
Du Toit v
Atkinson’s Motors Bpk
[1985]
2 All SA 149
(A) Van Heerden JA referred to Denning, LJ, in
Curtis
v
Chemical
Cleaning and Dyeing Co Ltd
(1951)
1 All ER 631
, 634,
in the context of an exemption clause:
‘
In my opinion, any behaviour by words or conduct is
sufficient to be a misrepresentation if it is such as to mislead the
other party
about the existence or extent of the exemption. If it
conveys a false impression, that is enough. If the false impression
is created
knowingly, it is a fraudulent misrepresentation; if it is
created unwittingly, it is an innocent misrepresentation. But either
is sufficient to disentitle the creator of it to the benefit of the
exemption. It was held in R. V. Kylsant (Lord) (3) that a
representation
might be literally true but practically false, not
because of what it said, but because of what it left unsaid. In
short, because
of what it implied. This is as true of an innocent
misrepresentation as it is of a fraudulent misrepresentation
.’
Skei’s representations during his respective meetings with the
applicants, the content of which was echoed in the mandates
later
signed, illustrates prior conduct that caused or contributed to the
false impression. See
Dibley v Furter
1951 4 SA 73
(C); and
Cloete v Smithfield Hotel
(
Pty
)
Ltd
1955 2 SA 622 (O).
On the facts before this Court it follows that a
false impression was created knowingly by Skei and that this
constituteda fraudulent
misrepresentation which induced the
applicants to enter into the sale agreement on the terms that they
did in ignorance of the
true nature and effect of the agreements.
As
a consequence of this misrepresentation a fundamental mistake arose
on the part of the applicants regarding the nature, terms
and effect
of the agreements. It would therefore be
unconscionable
to enforce the terms of the sale agreements in the circumstances and
such contracts fall to be declared void
ab
initio
on the basis of fraudulent
misrepresentation.
The Hagans are not insulated as innocent purchasers in these
transactions. On their own version they were paid by Skei in order
to participate in the scheme and signed sale agreements which did
not record the true nature of the entire transaction agreed.
Accordingly, while they were under no misapprehensions as to the
basis of the scheme, they failed to ensure that the sale agreements
recorded that the intended re-purchase after eight months of the
properties by the applicants in spite of this having been the
intention of the parties. It is material that in the absence of such
an agreement, the scheme was not capable of implementation
in that
the applicants were unable to rely on any rights between themselves
and the Hagans.
In
Maize Board v Jackson
2005 (6) SA 592(SCA)
at 596 Ponnan
JA stated that:
‘
The true enquiry in a matter such as
this is to establish whether the real nature and the implementation
of these particular contracts
is consistent with their ostensible
form. In pursuit of that enquiry one must strive to ascertain, from
all the relevant circumstances,
the actual meaning of the contracting
parties. It therefore becomes necessary to examine in greater detail
the agreements in question
and the manner in which they were
implemented.”
It follows that sale and lease agreements signed did not give effect
to the true nature of the agreement between the parties.
I was referred by the applicants to the case of
Ditshego and
others v Brusson Finance (Pty) Ltd
5144/09
[2010]
ZAFSHC 68
(22 July 2010) in which Jordaan J held
that there
existed a simulated transaction with funds lent to the applicants
with the assistance of investors and that the agreement
was unlawful
and void to the extent provided in section 89 of the NCA given that
the credit provider was unregistered. While
the applicants sought a
similar conclusion in the current matter, the facts of this matter
are distinct insofar as
there occurred an
outright sale of immovable property with debts extinguished from the
applicants’ own proceeds of such
sale. I am not persuaded
therefore that there has been the provision of
“
credit
”
defined in the NCA to mean “
(a) a
deferral of payment of money owed to a person, or a promise to defer
such a payment; or (b) a promise to advance or pay
money to or at
the direction of another person
”
,
or that the provisions of the NCA apply in this matter.
The conduct of Skei’s attorney, Kruger, requires mention. As
an officer of this Court, it was incumbent upon to Kruger
not only
to satisfy himself that the applicants were aware of the contracts
they were signing but also to satisfy himself as
the nature and
lawfulness of the entire underlying transaction and to place before
this Court all relevant documents justifying
deductions made from
the proceeds of the sale. Transfer costs were deducted from the
applicants when the sale agreement specified
differently and no
other document was put up to justify the unusual payment of such
costs by the applicants as sellers. Furthermore,
the fact that the
net proceeds of the sale were then paid to a related company,
Altmarr Roofing, with very little of the funds
finding their way to
the applicants should reasonably have raised alarm, which it appears
it did not.
Relief
With regards to appropriate relief, I was referred by counsel for
the Hagans to the case of
Legator McKenna Inc and another v Shea
2010(1) SA 35 (SCA) in which the effect of invalidity of an
agreement of sale in respect of immovable property that had been
transferred to a third party was considered with reference to
therule expressed in
Wilken v Kohler
at para 26:
‘
Succinctly stated, the rule provides
that, if both parties to an invalid agreement had performed in full,
neither party can recover
his or her performance purely on the basis
that the agreement was invalid. The “rule” has its origin
in an obiter dictum
by Innes JA in Wilken v Kohler
1913 AD 135.
In
context, Innes JA was dealing with performance under sales of land
that were invalid for want of compliance with a statute requiring
the
contract to be in writing. In the course of his judgment he then
stated (at 144) obiter, as it turned out, that:
‘
It by no means follows that because a
court cannot enforce a contract which the law says shall have no
force, it would therefore
be bound to upset the result of such a
contract which the parties had carried through in accordance with its
terms. Suppose, for
example, an…[oral] agreement of sale of
fixed property… a payment of the purchase price and due
transfer of the land.
Neither party would be able to upset the
concluded transaction on the mere granted that… it was in
reality an agreement
to sell, invalid and unenforceable law, at which
both seller and purchaser proposed to carry out
.’
(at para 28) ‘…
In the light of this explanation,
which I find persuasive, I believe the time has come for this Court
to express its unequivocal
approval of the Wilken v Kohler rule.
Moreover, although on the facts of Wilken v Kohler, Innes JA was
dealing with statutory formalities,
I can see no reason why the rule
should not apply in a case where, despite the non-existence of any
agreement, the parties’
intention has been achieved. In both
cases the condictio indebitii would normally be available because the
transfer was motivated
by a mistaken belief relating to the validity
or the existence of the underlying agreement. And in both cases
Wilken v Kohler would
constitute an exception to the condictio
indebitii for the same reason, i.e. that the purpose of the
transaction had been achieved.
’
McCall AJ in
Joosub v JI Case SA (Pty) Ltd (now known as
Construction and Special Equipment Co (Pty) Ltd and others 1992(2)
SA 665 (N) at 674G
found that “
where there was no
sale-in-execution or where the sale-in-execution which purported to
have taken place was a nullity, then it
could not have served to
pass any title to the property concerned to the purchaser or to any
successor-in-title into whose name
the property was subsequently
transferred: “the plaintiff [the judgment debtor], as owner of
the property, would be entitled
to recover the [property] by way of
a rei vindicatio
.”
In
Menqa and another v Markom and others
[2008] 2 All SA 235
(SCA) at para 17 Van Heerden JA stated in relation to a sale in
execution that “(a)
n applicant wishing to impeach a sale
must prove bad faith or knowledge of the defect on the part of the
purchaser at the time
of purchase
”. At para 24 the learned
judge stated that “(i)
fthe sale-in-execution is null and
void because it violates the principle of legality, as in the
present case, then the sheriff
can have no authority to transfer
ownership of the property in question to the purchaser who will thus
not acquire ownership
despite registration of the property in his or
her name
.”
Cloete JA concurred with Van Heerden JA in
Menqa (supra)
and
stated at para 49:
‘
It is not necessary to consider the position at common law
any further because to require Markom to pay Menqa the price paid by
the latter for the property, or to pay the execution creditor the
full debt owed together with accrued interest, as a prerequisite
to
his being allowed to recover the property, might altogether preclude
him from obtaining the property and thereby
possibly affect
his and his family’s constitutional right to access to adequate
housing. That would be unconstitutional and
therefore impermissible
.’
Given my findings with regards to public policy and
misrepresentation above, I am not persuaded that the conduct of the
applicants
has been negligent insofar as they failed to act where
their immovable property was transferred in the name of the Hagans,
or
that this negligent misrepresentation allowed another to rely on
it to its detriment, as was held in
Oriental Products (Pty) Ltd
Limited v Pegma 178 Investments Trading CC and others
2011 (2)
SA 508
(SCA) at para 21 and 22. In such circumstances I am unable to
conclude that the applicants stand to be estopped from attacking
the
validity of the sale of their properties to the Hagans.
I am satisfied that the contracts formed part of a scheme
constructed by Skei in which the Hagans participated and that, for
the reasons set out above, the agreements are void
ab initio
.
It follows therefore that the
status quo ante
must be
restored and the applicants
are entitled to
restitution of their properties. However, simply to direct the
Registrar of Deeds to re-register the property
in their name would
not properly take into account the fact that the Hagans paid for the
properties and that, by virtue of the
extinction of the applicants’
bond and other debts, the applicants may have been unjustifiably
enriched at the Hagans’
expense.At the same time, the Hagans
appear too to have been enriched in the amount of monthly payments
made to them by the applicants.
The interests of justice therefore
require that the respective claims of the applicants and the Hagans
be dealt with, preferably
simultaneously, on the same papers, duly
amplified in due course.
With regard to the loan advanced to the Hagans by Standard Bank,
secured by a mortgage bond over the property previously owned
by the
Mottels, I accept that real rights are created in favour of the
mortgagee by the registration of the mortgage bond and
that in
Standard Bank of South Africa Limited v Saunderson and others
2006 (2) SA 264
(SCA) at paras 1-3 the Court emphasised that the
mortgage bond is an indispensible tool for spreading home ownership
and that
the value of a mortgage bond as an instrument of security
lies in the confidence that the law will give effect to its terms.
I am satisfied however that given the circumstances, the Bank’s
remedy is not against the applicants but against the Hagans
who
entered into the loan agreement with the Bank and who on their own
version own a number of other properties, some of which
obtained
through the same scheme constructed by Skei. The interests of
justice dictate that the risk to which the Bank is exposed
in this
regard does not bar the applicants from being granted their relief.
Costs
There exists no reason as to why costs should not
be orderedin favour of the applicants against the first four
respondents,
jointly and severally. I am
satisfied that these costs be granted on the scale as between
attorney and client given the circumstances
of this matter and the
conduct of the first to fourth respondents.In addition, there is no
reason as to why the third and fourth
respondents should be not be
held liable for the fifth respondent’s costs.
Order
In the result, the following order is made:
The sale agreement entered into between the first and second
applicants and the third and fourth respondents in respect of erf
4180 Kleinvlei, situate at 23 Cupido Cloete East Street,
Eersterivier,is declared to be void
ab initio
and is set
aside.
The sale agreemententered into between the third and fourth
applicants and the third and fourth respondents in respect of erf
2329 Macassar, situate at 19 Swawel Road, Macassar, is declared to
be void
ab initio
and is set aside.
The third and fourth respondents are directed to transfer erf 4180
Kleinvlei, situate at 23 Cupido Cloete East Street, Eersterivier,
to
the first and second applicants, unencumbered and without charge,
within two months of date of this Order.
The third and fourth respondents are directed to transfer erf 2329
Macassar, situate at 19 Swawel Road, Macassar, to the third
and
fourth applicants, unencumbered and without charge, within two
months of date of this Order.
The third and fourth respondents are directed to sign all documents
and take all necessary steps and pay all necessary transfer,
bond
cancellation and all other reasonable costs without delay to effect
thetransfer and registration of the immovable properties
referred to
in paragraphs 4 and 5 above, failing which the sheriff is authorised
and directed to do so in the name and stead
and at their cost.
The lease agreements entered into between the applicants and the
third and fourth respondents are declared void
ab initio
and
are set aside.
The applicants and the third and fourth
respondents are granted leave to approach this Court on the same
papers, duly amplified,
for judgment in the amount representing the
sum to which the other has been unjustly enriched.
The first, second, third and fourth respondents are directed jointly
and severally, the one paying the other to be absolved,
to pay the
costs of the applicants and the fifth respondent on the scale
between attorney and client.
KM SAVAGE
ACTING JUDGE OF THE HIGH COURT
Appearances
:
For applicants: J A Nortje
Instructed by Chantal Nicholas Attorneys
For first and second respondent: J P van Niekerk
Smit Kruger Inc.
For third and fourth respondent: D van Reenen
Instructed by BM Attorneys
For fifth respondent: F Sievers
Instructed by William Inglis Attorneys