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  • Body Corporate of Savannah Park v Brainwave Projects 1147 CC and Others (735/10) [2011] ZASCA 239; 2012 (2) SA 276 (SCA); [2012] 1 All SA 367 (SCA) (1 December 2011)
    to the fruits of the specified section of the common property In other words the developer can have no usufructuary rights over the common property until the relevant plan is registered and the unit included in the sectional title register The specified section of the common property over which the extension right was reserved therefore remained subject to the control administration and management of the body corporate in the interests of all of its members And because the developer had no usufruct over that portion of the property it could not lease it without the consent of the body corporate The developer therefore had no right to the income from the lease agreement Accordingly it is obliged to account to the body corporate for all remuneration and to disgorge any profits from the lease 8 Mr Rowan who appeared for the developer on the other hand contended that the extension right has a broader ambit than what the body corporate contended for and confers a real right on the holder of the right for all purposes The right therefore so it is contended entitles a developer not merely to mortgage the right and to alienate it but to lease the land over which the right is reserved This would include providing a third party with rights under usus habitatio or usufruct over the land for the duration of the right The high court upheld this contention 9 The narrow question that must be answered in this case is whether the right of extension includes a usufruct within its ambit This necessitates a consideration of the nature of the right Section 25 4 a provides that the real right reserved by the developer to extend the scheme is deemed to be a right to immovable property capable of being mortgaged 8 The right may also be transferred by registration of a notarial deed of cession 9 At the time when the developer reserved the right in 2007 s 25 5 further stipulated that this right may be exercised by the developer or his successor in title even if neither have an interest in the common property 10 An attempt to characterise the extension right was first made some two decades ago in Erlax Properties Pty Ltd v Registrar of Deeds others 10 At the time the Act precluded the developer from alienating this right This led Joubert JA to conclude that even though the right is a real right in land which is in principle registrable it was created in favour of the developer as a personal servitude but not a usufruct since it did not give the developer the right to use and enjoy the fruits of the land 11 His view was obiter because the majority judgment of Grosskopf JA in which Joubert JA also concurred held that whichever way the right was characterised it was not transferable 12 The Legislature thereafter explicitly made the right transferable 13 However the courts have continued to describe the right as a personal servitude 14 11 Academic writers on the other hand have been emphatic in their view that the right is not a personal servitude but should be construed as a statutory real right sui generis 15 Prof C G Van der Merwe for example argues persuasively that because the developer can transfer the right to a third party or transmit it to an heir this conflicts with the characteristic of inalienability inherent in a personal servitude Also when a developer s right to extend the scheme lapses it does not perish but vests automatically in the body corporate He stresses further that the purpose of a personal servitude is to entitle a person during his life time to use and enjoy the property and I would add its fruits of another person the purpose of a developer s extension right is different it is to enable the developer to obtain a mortgageable asset to finance further phases of the development 12 In the face of these compelling arguments I do not think that the characterisation of the right as a personal servitude is sustainable And considered against its purpose the right also cannot encompass a usufruct as Joubert JA correctly observed in Erlax The reserved right only gives a developer the right to develop further phases of a scheme In doing so the developer must comply strictly with the documentation 16 and plans 17 accompanying the application for registration of the sectional plan 18 Having exercised the right the developer must as I have mentioned earlier immediately after completing the relevant unit apply to register the relevant plan and the inclusion of the completed unit in the sectional title register It is therefore a limited real right 13 Properly construed the description of the right as a right to immovable property for all purposes does not change this The Act clearly does not contemplate the leasing of a unit or part thereof as would be the case with a usufruct or give the developer any right to exploit the unit commercially before completion 19 The Registrars of the Deeds Registries took the same view when they passed a resolution in 2007 stating that the Act did not provide for a usufruct to be registered over the right of extension 20 14 I am fortified in my view by subsequent amendments to the Act Section 25 5 was amended in 2010 21 to allow the developer to exercise the right of extension by the addition of the rights of exclusive use over the common property which appears to indicate a change of intention on the part of the legislature This addition was made subject to the rights of exclusive use being ceded either to the body corporate or to one or more registered owners in the scheme within twelve months of their creation It seems that the purpose of this amendment was to allow the developer to exercise the right of extension by exercising a right of exclusive use of the (2013-04-07)

  • Body Corporate of the Pinewood Park Scheme No 202 v Dellis (Pty) Ltd (SCA) [2012] ZASCA 105; [2012] 4 All SA 377 (SCA); 2013 (1) SA 296 (SCA) (1 June 2012)
    counsel relied on the decision of this court in PCL Consulting Pty Ltd t a Phillips Consulting SA v Tresso Trading 119 Pty Ltd 2009 4 SA 68 SCA para 7 11 On the other hand counsel for the owner disavowed any support for the finding of the court of first instance that its jurisdiction was ousted by the Greenacres judgment which finding appears to have been accepted by the court a quo Counsel submitted instead that management rule 71 provides for compulsory arbitration where a dispute exists between the parties to a sectional title scheme This is clear he said from the use of the word shall in sub rule 1 Because of the stance taken by him that rule 71 provides for compulsory arbitration counsel had to contend that even though regulation 39 stipulates that the provisions of the Arbitration Act shall in so far as those provisions can be applied apply mutatis mutandis with reference to arbitration proceedings under the Act s 6 of the Arbitration Act does not apply in this case since provision is made in the rules for compulsory arbitration In those circumstances so it was contended the court has no discretion 12 For these submissions counsel sought support from the decision of Van Dijkhorst J in Independent Municipal and Allied Trade Unions v Northern Pretoria Metropolitan Substructure others 1999 2 SA 234 T IMATU judgment In that case an order was sought by the applicant IMATU declaring the first respondent the employer to be bound to comply with the terms and conditions of a collective agreement between it employer and three unions of which IMATU was one Among several points in limine raised by the employer one was that the court had no jurisdiction to decide the matter because the Labour Relations Act 66 of 1995 contained clear provisions about dispute resolution regarding collective agreements Section 24 1 of that Act provides that e very collective agreement must provide for a procedure to resolve any dispute about the interpretation or application of the collective agreement The provision stipulated that the procedure must first require the parties to attempt to resolve the dispute through conciliation and if the dispute remains unresolved to resolve it through arbitration Van Dijkhorst J held that wherever the Act with which he was concerned provided for dispute resolution by arbitration that concept in the context of the Act excludes resort to the ordinary courts of law for dispute resolution I can find no fault with this statement of the law at least in so far as it does not purport to suggest that resort to the ordinary courts is excluded even when the statute concerned does not prescribe that the decision of the arbitrator shall be final where one of the parties wishes to challenge the decision of the arbitrator 13 But the learned judge gave inter alia the following reasons for his statement It was the clear intention of the Legislature that a specialised set of fora should deal with labour related matters To this end it established an interlinked structure of inter alia trade unions employers organisations a variety of councils the Commission for Conciliation Mediation and Arbitration CCMA and the Labour and Labour Appeal courts The Act also creates procedures designed to accomplish the object of simple inexpensive and accessible resolution of labour disputes In this the role of the CCMA and the exclusive jurisdiction of the Labour Courts are important features Generally the scheme of the Act is that the Labour Court does not itself hear disputes as a court of first instance but neither does the Act confer exclusive jurisdiction on the CCMA vis a vis the Labour Court in all matters pertaining to labour disputes 9 He accordingly held that the court had no jurisdiction to adjudicate upon a dispute about the interpretation or application of a collective agreement as referred to in the Labour Relations Act 14 As to the present matter the Act and the regulations made under it do not prescribe a procedure for dispute resolution Section 35 1 of the Act simply provides that the sectional title scheme shall be controlled and managed by means of rules which may or may not provide for the resolution of disputes Section 35 2 directs that the rules shall provide for the control management and enjoyment of common property and that they may be substituted added to amended or repealed by the developer Although s 35 2 a directs that the rules shall comprise management rules prescribed by regulation regulation 30 1 only tells us where to find the rules and which parts thereof may not be substituted added to amended or withdrawn by the developer when submitting an application for the opening of a sectional title registrar 10 The fact that the rules may be jettisoned in part by a developer and in toto and others substituted for them by unanimous resolution of a body corporate indicates clearly in my view that the Legislature intended the rules to be of a contractual nature 15 In Wiljay Investments Pty Ltd v Body Corporate Bryanston Crescent another 1984 2 SA 722 T Spoelstra J had occasion to consider the status and nature of rules governing body corporates under the Act s predecessor 11 Section 27 2 a ii of that Act stipulated that the rules shall provide for the control management administration use and enjoyment of sections and the common property and shall include the rules contained in Schedule 2 which may be added to amended or repealed by special resolution of the members of the body corporate Spoelstra J said the following These rules are clearly not intended to define or limit the ownership of individual owners of sections units or common property The rules read with the provisions of the Act contain a constitution or the domestic statutes of the body corporate In this sense it could properly be construed as containing the terms of an agreement between owners inter se (2013-04-07)

  • Body Corporate of the Sectional Title Scheme Seascapes v Ford and Others (639/07) [2008] ZASCA 109; 2009 (1) SA 252 (SCA) ; [2009] 1 All SA 429 (SCA) (23 September 2008)
    units in the scheme were transferred to their respective purchasers The other three remained the property of the developer until they were subsequently transferred 9 Before the opening of the register and the transfer of the units to the purchasers and in order to procure the registration of the servitudes agreed to with the objectors the developer had obtained with the exception of one the signatures of the purchasers of the 18 units which were transferred on 24 December 2002 to a document which purports to be the minutes of a meeting The document reads as follows Minutes of a meeting of the members of the Body Corporate of the Sectional Title Scheme Seascapes still to be established at which meeting the following special resolution had been passed in terms of section 29 read together with the definition of special resolution in section 1 of the Sectional Titles Act 95 of 1986 Resolved that 1 The Body Corporate enter into a Notarial Agreement together with Cynthia Ann Ford Ocean View Heights Body Corporate SS32 1989 Conrad Peter Eland Hansen and Rupert Taillefer du Toit Oliver Court Body Corporate SS62 1987 and Ben Roma Body Corporate SS206 1989 as per the draft agreement annexed hereto marked A and initialled for purposes of identification 2 Michael Joseph Vietri be and he is hereby duly authorised to sign all documents and do all things necessary to give effect to the resolution in 1 above I shall refer to the document as the minutes and to the content thereof as the resolution After the opening of the sectional title register and the transfer of the 18 units on the same day the owners who had signed the minutes constituted more than 75 of all the members of the appellant reckoned in number and more than 75 of all such members reckoned in value 10 The purchasers who signed the minutes had been kept informed of the nature of the construction delays caused by the objections and the negotiations taking place and were aware that the developer was obliged to grant servitude rights to six parking bays as a quid pro quo for obtaining the necessary consents from the objectors 11 Subsequent to the opening of the sectional title register Vietri who had been authorised to give effect to the resolution procured the registration of a notarial agreement in terms of which the appellant i granted to the first respondent the second respondent the third and fourth respondents jointly and the fifth respondent the right to use parking bays 4 2 1 and 3 respectively ii granted to the sixth respondent the right to use parking bays 5 and 6 and iii granted rights of way to provide access to the parking bays 1 2 The appellant contends that the notarial agreement is invalid because a special resolution directing it to execute the agreement as is required by s 29 had not been adopted by the members of the appellant and because even if the minutes constituted a special resolution by the members of the appellant a different agreement to the one authorised had been entered into 1 3 The respondents submitted that the resolution qualified as a special resolution as defined in the alternative definition of special resolution ie that part of the definition which requires the resolution to have been agreed to in writing by at least 75 of the members reckoned in number and value The appellant on the other hand submitted that no resolution by members could have been adopted as the minutes were signed at a time when the signatories were not members of the appellant and could not have been members of the appellant as the appellant was not in existence yet 14 It is true that the resolution was adopted by non members but the signatories by signing the resolution indicated that they agreed that the appellant which according to the resolution still had to be established should once it had been established enter into the draft agreement annexed to the resolution When the appellant was established and their units were transferred to them the signatories became members of the appellant None of them revoked his or her agreement consent in writing it remained his or her agreement in writing and having become a member it then constituted an agreement in writing by a member Consequently after transfer of their units to the purchasers the resolution constituted a resolution agreed to in writing by the requisite majority of members that the appellant should enter into a notarial agreement as per the draft agreement annexed to the minutes and that Vietri should give effect to the agreement That was still the position when the notarial agreement was concluded on 5 June 2003 15 The appellant submitted that a special resolution as defined had nevertheless not been adopted as there is no evidence that every member had been given an opportunity to consider the resolution He could however not point to any indication in the Act that that was required for a special resolution according to the alternative meaning of special resolution In the result I am satisfied that a special resolution as defined had been adopted 16 There are differences between the draft agreement and the registered notarial agreement The appellant relies on the differences summarised as follows in one of the affidavits filed by it a The first respondent was given a servitude right to one parking bay The third and fourth respondents were jointly given a servitude right to one parking bay The sixth respondent was given a servitude right to two parking bays In respect of each such parking bay the square metreage differs between the draft agreement and the notarial agreement b The notarial agreement records a servitude right of way both in favour of the third and fourth respondents and in favour of the fifth respondent Neither servitude is contained in the draft agreement c The notarial agreement makes provision for the second respondent (2013-04-07)

  • BOE Bank Ltd v City of Tshwane Metropolitan Municipality (240/2003) [2005] ZASCA 21 (29 March 2005)
    not argued in the court a quo namely that s 118 3 must be read to incorporate the time limit stipulated in s 118 1 and that the charge contemplated in subsection 3 is therefore limited to debts that became due during the immediately preceding two years I propose to deal with the latter contention first 7 In considering whether the time limit stipulated in s 118 1 should be read into s 118 3 it must be borne in mind that the two sections provide the municipality with two different remedies Although the purpose of both is to ensure payment of the municipal claims that fall within the stipulated category the mechanisms employed to achieve that purpose are different Provisions such as those contained in s 118 1 sometimes referred to as embargo or veto provisions can be traced back to provincial ordinances concerning local authorities passed many years ago see eg Pretoria Stadsraad v Geregsbode Landdrosdistrik van Pretoria 1959 1 SA 609 T 613E F Stadsraad van Pretoria v Letabakop Farming Operations Pty Ltd 1981 4 SA 911 T 917C H While the effect of these embargo provisions is to afford the municipality a right to veto the transfer of property until its stipulated claims are met they do not render the municipality s claim preferent to existing mortgagees in the case of a sale in execution That much was held in Rabie NO v Rand Townships Registrar 1926 TPD 286 see also Nel NO v Body Corporate of the Seaways Building and another 1995 ZASCA 83 1996 1 SA 131 A 134B 135C First Rand Bank Ltd v Body Corporate of Geovy Villa 2004 3 SA 362 SCA 369F 370E If the legislature intended to create such a preference so Greenberg J held in Rabie NO at 290 it must do so in specific language and not leave such charge to be inferred from the mere existence of an embargo on transfer The Transvaal legislature s response to this decision was to create such a charge in specific language as suggested by Greenberg J in s 50 2 later s 50 3 of Ordinance 17 of 1939 T Whereas s 50 1 of the ordinance contained an embargo or veto provision similar to s 118 1 s 50 2 provided for a charge similar to s 118 3 which has since been described as amounting to a tacit statutory hypothec see eg Stadsraad Pretoria v Letabakop Farming Operations Pty Ltd supra 918C G First Rand Bank Ltd v Body Corporate of Geovy Villa supra 368J 369A C G van der Merwe 1996 59 THRHR 378 Like s 118 3 s 50 2 specifically declared its purpose to be to afford the municipality a preference over any mortgage bonds registered against the property Unlike s 118 3 however s 50 2 expressly limited such preference to debts referred to in s 50 1 which applied only to debts that became due during the preceding three years Consequently both the veto and the hypothec provided for in ss 50 1 and 50 2 were expressly limited to municipal claims not older than three years The inference to be drawn from this is clear The veto in s 118 1 and the charge in s 118 3 are two different entities They may be subject to the same time limit but this need not be so 8 Moreover s 118 3 is on its own wording an independent self contained provision It does not require the incorporation of the time limit in s 118 1 to make it comprehensible or workable It was therefore rightly conceded by the bank that the introduction of such time limit into s 118 3 is not a necessary implication Accordingly the bank s contention was not that the interpretation suggested by it constituted the only or even the most plausible reading of s 118 3 What it contended was that its interpretation was a plausible one which was rendered most likely by reason of other considerations Included amongst these was the consideration that this narrower reading of s 118 3 would be more in conformity with the guarantee of property rights in s 25 1 of the Constitution cf Mkontwana v Nelson Mandela Metropolitan Municipality and another 2005 1 SA 530 CC para 45 It would also be the reading so it was contended that avoids the total negation of bondholders rights that may result from the more expansive interpretation of the section as aptly demonstrated by the facts of this case It is clear however that these considerations will only come into play if the construction of s 118 3 contended for by the bank is indeed a plausible one This flows from the settled principle that considerations outside the wording of a statutory provision including considerations of constitutional validity do not permit an interpretation which is unduly strained see eg National Director of Public Prosecutions and another v Mohamed NO and others 2003 ZACC 4 2003 5 BCLR 476 CC para 35 9 The vital issue is therefore whether a construction of s 118 3 which allows for the introduction of the s 118 1 time limit would or would not be unduly strained The bank s proposal was that the opening for such introduction is to be found in the expression an amount due in s 118 3 as opposed to all amounts due in s 118 1 As the starting point to its argument the bank referred to the fact that exactly the same words are used to describe the debts involved in s 118 1 and s 118 3 that is municipal service fees surcharges on fees property rates and other municipal taxes levies and duties and that the debts concerned in the two sections are therefore exactly the same Shorn of unhelpful references to the numerous dictionary meanings of an and to various rules of interpretation stated in the abstract the bank s argument then proceeded along the (2013-04-07)

  • BoE Bank Ltd v Ries (247/2000) [2001] ZASCA 132; [2002] 2 All SA 247 (A) (27 November 2001)
    2 SA 301 C and Pretorius and Others v McCallum unreported CPD 24 April 1995 The latter decision by Conradie J should in my opinion have been reported for the benefit of readers ahead of others that were 11 Putting aside the analogy of the disappointed beneficiary what is really in issue in this case is whether Mrs Ries has proved wrongfulness negligence and causation Wrongfulness 12 Years ago Mrs Ries would have been faced by two insuperable obstacles that her claim was for pure economic loss without injury to person or corporeal property and that it was based on an omission namely Groenewald s failure to obtain and lodge a signed change of beneficiary form Today neither of these obstacles is insuperable but they are often still difficult to surmount Administrateur Natal v Trust Bank van Afrika Bpk 1979 3 SA 824 A recognized that in appropriate cases pure economic loss can be recovered although whereas physical injury to the person or corporeal property is prima facie unlawful causing economic loss is not Zimbabwe Banking Corporation Ltd v Pyramid Motor Corporation Pvt Ltd 1985 4 SA 553 ZSC at 563 A C Lawsa First Reissue Vol 8 1 para 59 Similarly loss caused by an omission can be actionable where there is a legal duty to act positively But where the conduct complained of takes the form of an omission such conduct is prima facie lawful Lawsa para 56 See also Cape Town Municipality v Bakkerud 2000 3 SA 1049 SCA 13 In most delict cases that come before the courts the element of wrongfulness is uncontentious and may not deserve a mention the only real issues being negligence and causation But in the case before us it is the first issue particularly because the claim is for pure economic loss and is based on an omission Foreseeability alone cannot provide the answer Nor if one might consider that a moral duty rested on Groenewald to do more than he did is that in itself enough Something more is needed The court must be persuaded that the legal convictions of the community demand that the conduct ought to be regarded as unlawful Minister van Polisie v Ewels 1975 3 SA 590 A at 597 A C Minister of Law and Order v Kadir 1995 1 SA 303 A at 317 C 318 A and Cape Town Municipality v Bakkerud 2000 3 SA 1049 SCA at 1054 G 1057 G Put another way the court has to be persuaded that the defendant owes a legal duty and not only a moral duty to the plaintiff This involves forming a value judgment 14 Applying these principles to the facts before us in relation to the Old Mutual policy there does not appear to me to have been a professional relationship between the deceased and Groenewald in terms of which the deceased relied upon Groenewald s special skills The Liberty Life policy was taken out at the instance of the bank not the deceased It is true that Groenewald obtained competing quotations for the deceased and it may be that if Groenewald had acted negligently in respect of this policy his conduct as against the deceased would have been wrongful as against the plaintiff even though it was the bank that had asked for the policy But that possibility in relation to the Liberty Life policy did not constitute Groenewald the deceased s regular broker And when he took the unsigned will to the deceased this was not because of any relationship between them He delivered the will as a service or courtesy to a colleague in the bank He did not know of the Old Mutual policy and he did not visit intending to discuss insurance business His involvement with that policy such as it was arose in passing The deceased did not discuss the policy with him He realized that having Groenewald in his office he could use him as a messenger to convey to Old Mutual his decision to change the beneficiary There was no question of a fee for this small service which was presumably performed to promote the goodwill of the bank and Groenewald Neither Groenewald nor the bank had any interest in this policy Doing a favour in such circumstances did not in my opinion give rise to a contract with the deceased All of this is very different from the formal engagement of an attorney to draw a will 15 There is another important difference between the service which Groenewald provided and that provided by the postulated attorney When an attorney is engaged to draw a will the client does so in order to have the benefit of his skill There was no skill involved in what Groenewald did The deceased could have done it for himself but found it more convenient to use a person who had access to the necessary form and was in regular contact with the insurer Again if the deceased had entrusted Groenewald with a completed form for delivery to the insurer and Groenewald had negligently failed to deliver it there could have been talk of wrongfulness But those are not the facts 16 The judge a quo was of a different view He listed five numbered factors at 969 D 970 H in support of his conclusion that wrongfulness had been established The crucial paragraph is that numbered 2 at 969 G H That numbered 1 foreseeability is supportive of it The others deal with possible reasons for restricting liability in some cases and have little bearing on the current enquiry 17 The word analogy as used in logic is defined in the SOED as meaning a Resemblance of relations or attributes as a ground of reasoning b Presumptive reasoning based on the assumption that if things have some similar attributes their other attributes will be similar These definitions have only to be expressed for it to become apparent that conclusions reached by analogy alone are precarious That was (2013-04-07)

  • BOE Bank Ltd. v Bassage (445/04) [2006] ZASCA 50; 2006 (5) SA 33 (SCA) ; [2006] 4 All SA 105 (SCA) (31 March 2006)
    purposes ceases to be a creditor of the estate The bank was in fact in that position Remarks to similar effect were made in Absa Bank Ltd v The Master 2 In both cases the liability of a surety for the debts of the company being wound up were not in issue The comments were directed to the position of a secured creditor who elects not to share in the free residue and looks only to the proceeds of its security for the satisfaction of its claim The dictum of Galgut AJA merely means that any shortfall between the eventual net amount recovered by a creditor from the proceeds of its security cannot be recovered from or is not enforceable against the company or paid out to the creditor from any free residue The words He for all practical purposes ceases to be a creditor of the estate must be read in their context They do not mean that the debt is extinguished or wiped out entirely for all purposes more particularly for the purposes of enforcing a claim for any shortfall for example against a surety 7 Consistent with what was held in Bank of Lisbon the liquidation and distribution account and encumbered asset account shows the abandonment of the company s immovable property to the appellant in an amount of R800 000 and confines the award to the appellant R76 535 78 to the surplus on the account without any concurrent claim The account nowhere states that the balance of the claim has been abandoned or it no longer exists It merely reflects the fact that the appellant has no concurrent claim to any part of the free residue 8 Section 89 2 of the Insolvency Act does not state that the effect of a creditor who elects to rely on its security in proof of its claim results in the claim being extinguished entirely The election is merely an election to execute on the claim or to prove the claim in a certain way The object of the section is to confer a benefit on a secured creditor it enables it to recover the value of its security without rendering itself liable for the costs of sequestration The section goes no further than that There is nothing to justify the construction that a creditor by electing to rely solely on its security abandons or waives the balance of the claim and is thereby precluded from proceeding against a surety for the balance Indeed if such a far reaching consequence had been intended by the legislature it would have said so in unequivocal terms The section means no more than that a creditor may limit the extent to which he will participate in the assets of the insolvent estate to the value of the asset which is his security Once having made that election he is bound by it he may not participate in the free residue even if his security should prove to be without value Both the Bank of Lisbon and Absa Bank cases decide no more than this But this does not mean the balance of the claim no longer exists or has been waived It remains extant There is no good reason why it cannot be enforced against a surety who has waived the defence of excussion as is the position in this case 9 It is well established that if a creditor waives a portion of the debt the surety is to that extent discharged 3 In the present matter there was no intention on the part of the appellant to waive the debt to the extent that it exceeded the proceeds of the realisation of the security Nor in my opinion does s 89 2 effect such a waiver The operation of the section was to bring about a pactum de non petendo in terms of which the appellant agreed not to proceed against the company for the balance of its claim It is true that the claim for the balance became unenforceable against the company but the consequence is not as the respondent s counsel submitted it was that the suretyship became unenforceable An unenforceable debt provided it does not arise from a prohibited transaction is a natural obligation which is capable of supporting a suretyship 4 10 Scott JA aptly describes the typical surety in modern society in these terms in Jans v Nedcor Bank Ltd 5 a case dealing with the question whether interruption or delay in the running of prescription in favour of the principal debtor interrupts prescription in favour of the surety The typical surety in modern society is one who binds him or herself as co principal debtor and guarantees the debts of a company or close corporation which has little in the way of share capital or assets but is dependent on credit in order to conduct its business More often than not the business is that of the surety or a spouse who for various reasons chooses to conduct it through the medium of a company or close corporation with limited liability A creditor will ordinarily refuse to afford credit to such a legal persona in the absence of a personal suretyship and few businesses can operate successfully without credit The very existence of the debt is therefore dependent upon the existence of the suretyship while the object and function of the latter is of course to ensure proper payment of the former It would not make sound commercial sense if it were to be held that a creditor who elects to rely on its security in proof of its claim thereby and without more waives or abandons any rights that it has against the surety 10 If one were notionally to think away the insolvency of the company then if the appellant had proceeded against the company relying upon the mortgage bonds for recovery of what the company owed it and had obtained a judgment against the company but upon issuing a writ (2013-04-07)

  • BOE Bank v Grange Timber Farming Co (Pty) Ltd (252/2006) [2007] ZASCA 4; [2007] SCA 4 (RSA) (5 March 2007)
    to it The ambit of disagreement was limited to the meaning and legal consequences of clause 6 3 11 The defendant s contention which had found favour in both lower courts was that the exercise of the election brought the bank s obligation to advance further moneys to an end but did not terminate the agreement as a whole according to the plain wording the obligation to repay the whole indebtedness on the date fixed by clause 6 1 remained no other repayment date being stated or implied in clause 6 3 The plaintiff s action to recover its debt was therefore premature 12 The bank s stand by contrast was that the exercise of the election terminated the whole agreement and the full indebtedness at the review date became immediately due and payable 13 The principles of interpretation appropriate to the resolution of the dispute are those summarised by Joubert JA in Coopers Lybrand v Bryant 2 The correct approach to the application of the golden rule of interpretation after having ascertained the literal meaning of the word or phrase in question is broadly speaking to have regard 1 to the context in which the word or phrase is used with its interrelation to the contract as a whole including the nature and purpose of the contract as stated by Rumpff CJ supra 2 to the background circumstances which explain the genesis and purpose of the contract ie to matters probably present to the minds of the parties when they contracted Delmas Milling Co Ltd v Du Plessis 1955 3 SA 447 A at 454G H Van Rensburg en Andere v Taute en Andere 1975 1 SA 279 A at 305C E Swart s case supra at 200E 201A and 202C Shoprite Checkers Ltd v Blue Route Property Managers Pty Ltd and Others 1994 2 SA 172 C at 180I J 3 to apply extrinsic evidence regarding the surrounding circumstances when the language of the document is on the face of it ambiguous by considering previous negotiations and correspondence between the parties subsequent conduct of the parties showing the sense in which they acted on the document save direct evidence of their own intentions Delmas Milling case at 455A C Van Rensburg s case at 303A C Swart s case at 201B Total South Africa Pty Ltd v Bekker NO 1991 ZASCA 183 1992 1 SA 617 A at 624G Pritchard Properties Pty Ltd v Koulis 1986 2 SA 1 A at 10C D 14 The present contract serves a commercial purpose and should be construed pragmatically altruism in the repayment of loan finance is not a characteristic which may reasonably be expected from a financial institution 15 It is clear as I have indicated that the parties expected that if the contract ran its full term the repayment date and the cutting of the timber would sufficiently coincide to enable the first defendant to use either the proceeds or the imminent prospect to repay the loan Clause 6 1 covered that eventuality 16 Clause 6 3 catered for an entirely different scenario After less than eight years of a sixteen year contract the bank was entitled to reconsider without let or hindrance or the necessity to justify itself its participation in the farming operation Circumstances which might influence it to decide to send the notice for which the clause provides are obvious deteriorating market conditions then and as foreseen loss of confidence in the farmer a substantial opportunity to invest elsewhere for which capital was needed or simply a perceived desire for liquidity In any of these circumstances a long delay in the opportunity to recover the investment in the farming operation might well be very disadvantageous to the bank 17 The parties also contemplated other circumstances where the contract would come to a premature end and the first defendant would nevertheless be able or obliged to find the resources to repay its obligations immediately Clause 6 4 provides one example and clause 11 the breach clause another Both provide specifically for repayment of the entire indebtedness before the defined repayment date Clause 6 3 likewise deals with an interim termination of the first defendant s obligations in this case at the instance of the bank After eight years of growth the standing timber might well have been expected to provide a substantial basis upon which to repay the debt There is no need to speculate however There is simply no sufficient reason to treat the proceeds of the crop at the repayment date as the one and only source of income available to the farmer throughout the duration of the contract and to interpret the contract as if the proceeds of the mature felled timber were a critical determinant in relation to obligations arising from early termination as the Court a quo seems to have done 18 In the light of the considerations to which I have referred in paragraph 16 one may fairly conclude that the bank was hardly likely to have agreed to the suspension of repayment for eight years after it had in effect brought to an end its business relationship with the first defendant The latter on the other hand while it would no doubt have welcomed such a suspension could hardly have contemplated the possibility of consensus in that regard Perhaps that explains why this particular defence was only introduced by amendment shortly before the trial It seems to me that the purpose of clause 6 3 in the context of the overall context of the agreement is against the defendant s interpretation For the reasons which follow the plain wording of that clause decisively favours the bank s interpretation 19 Clause 6 3 is constructed in two distinct halves the first confers on the bank an election to claim repayment while the second sets out the consequence of the election The notice which the bank must give need only set out the election and say nothing about the consequence as the (2013-04-07)

  • BoE Trust Ltd NO and Another (in their capacities as co-trustees of the Jean Pierre De Villiers Trust 5208/2006) (846/11) [2012] ZASCA 147 (28 September 2012)
    not be deleted from the will The rule nisi was granted and served on the Master of the High Court and the universities concerned It was not served on the charitable organisations No opposition to the rule nisi was received and a final order was sought 11 The trustees contended that the word White fell to be deleted as it was discriminatory against potential beneficiaries of the bursaries contemplated in the will on the basis of race Consequently they contended the will was contrary to public policy the right to equality as enshrined in the Constitution the provisions of section 7 of the Promotion of Equality and Prevention of Unfair Discrimination Act 1 the principles contemplated in sections 3 and 4 of the National Education Policy Act 2 and the principles set out in Minister of Education and Another v Syfrets Trust NO and Another 3 12 The attitude of the trustees was set out in the founding affidavit as follows In spite of this contingent directive being available to the trustees of the Trust Keddy Brownell and I are of the view that it would be prudent and preferable to rather fulfil the primary purpose behind the creation of the Trust by obtaining an order from this Court that the word White be deleted from clause 3 6 of the Will so that the bursary bequest is acceptable to the South African universities and can be used to assist students in the manner contemplated in the Will than resorting to a disposal of the income to the charitable organisations The attitude of the trustees and the purpose of the bursaries are noble and commendable but neither unfortunately can be decisive in giving effect to the terms of the will 13 The matter of Curators Emma Smith Educational Fund v University of Kwazulu Natal and Others 4 a judgment of this court had not been decided at the time the application was brought Nor had it been decided at the time the court a quo gave its judgment on the application 14 In dismissing the ex parte application Mitchell AJ emphasized the principle of freedom of testation the right to property as enshrined in the Constitution and the fact that it includes the right to give enforceable directions as to its disposal on the death of the owner He remarked that the provisions were not clearly contrary to public policy in that the Constitution only prescribes discrimination which is unfair and further that there may be sufficient reason in the instant case why the testatrix specifically nominated white students as the beneficiaries of her bequest namely The testatrix has thought fit to require beneficiaries of the bursary trust to return to South Africa for a period determined by the universities concerned after obtaining their doctorates It seems at least possible that in so doing she was seeking to ameliorate this skills loss and indeed to promote importation of skills obtained overseas Certainly it seems to me that the implementation of the bequest in accordance with its terms would have that effect However no finding was made on this point 15 The high court correctly found that the bursary bequest was rendered impossible as a result of the universities stance The high court went on to find that this eventuality was however expressly and in terms provided for by the testatrix in that the trust income would then go to the charitable organisations 16 Nearly two years after the court below handed down judgment the appellants applied for leave to appeal The appeal was based on the decision of this Court in Emma Smith The appellants contended that if they were to be given leave to appeal then in view of the decision in Emma Smith such appeal must succeed 17 Mitchell AJ denied leave to appeal for the reason that Emma Smith did not affect his judgment regarding Mrs De Villiers will holding that the testatrix had foreseen the possibility that the bursary bequest might prove impossible to carry out and had provided an alternative to which effect had to be given 18 The appellants are before this court with its leave Before the appeal was heard this court raised the issue of non joinder of the charitable organisations named in the will The appellant s attorneys wrote to the charitable organisations some of whose names had changed in the meantime 19 The common law rule regarding the obligatory joinder of parties is that anyone with a direct and substantial interest in a matter must be joined The appellants concluded that the charitable organisations did not have a legal interest in these proceedings How they reached that conclusion is beyond understanding The relief they sought in the court below was to alter the trust created by Mrs De Villiers If the court below granted the relief that was sought the charities would not receive the funds if it did not the charitable organisations would They thus had a substantial interest and they should have been joined 5 20 The next question is whether a letter addressed to this court an appellate court informing it that the charitable organisations have indicated that they abide the court s decision is enough to cure that failure by the appellants Put differently was the informal notice informing the charitable organisations of the proceedings and asking them if they wished to intervene at the appeal stage sufficient notice Is this type of extra judicial notice sufficient In my view it is Eventually each of the charitable organisations was properly informed of the nature and purpose of the proceedings and unequivocally indicated that it would abide the decision of this court The decision in Amalgamated Engineering Union v Minister of Labour 6 is accordingly distinguishable on the facts 21 I now turn to the main issue in the appeal Should this Court uphold the appeal and allow a deletion of a word in Mrs De Villiers last will and testament based on the principles enunciated in (2013-04-07)