Current Commercial Cases

2005

ISBN 978-1-920569-33-4

A SURVEY OF THE CURRENT CASE LAW

written by

Mark Stranex BA (Natal) Hons LLB (Cape Town)Advocate of the High Court of South Africa

The Law Publisher CCCK92/26137/23

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Contents

Index .......................................................................................................................................... 4

PRETORIA EAST BUILDERS CC v BASSON .. 8NOORMAHOMED v VISSER N.O. . 9DELTA MOTOR CORPORATION (PTY) LTD v VAN DER MERWE 10TRANSNET LTD v SECHABA PHOTOSCAN (PTY) LTD 11PRICE WATERHOUSE COOPERS INC v NATIONAL POTATO CO-OPERATIVE LTD 12BARLOWORLD CAPITAL (PTY) LTD v NAPIER N.O. 13VERULAM FUEL DISTRIBUTORS CC v TRUCK & GENERAL INSURANCE CO LTD 14UNITRANS FREIGHT (PTY) LTD v SANTAM LTD. 16MINISTER OF TRANSPORT v DU TOIT ..... 17WALLER v PIENAAR .. 18NEL N.O. v THE MASTER . 19ANGLO SOUTH AFRICA CAPITAL LTD v INDUSTRIAL DEVELOPMENT CORPORATION OF SOUTH AFRICA 21SHELL AUTO CARE (PTY) LTD v LAGGAR .. 22SECURITIES REGULATION PANEL v MGX HOLDINGS LTD 23INFO COLOUR PAGES v SOUTH AFRICAN TOURISM BOARD25MIXTEC CC v FLUID MIXING EQUIPMENT CC26PIETERSE v SHROSBREE N.O. 27SHROSBREE N.O. v LOVE 27HAUPT v BREWERS MARKETING INTELLIGENCE (PTY) LTD 28BERRANGÉ N.O. v SAMSUDIN 29DURANDT v FEDSURE GENERAL INSURANCE LTD ... 31TELIMATRIX (PTY) LTD v ADVERTISING STANDARDS AUTHORITY OF SOUTH AFRICA 32LAUGH IT OFF PROMOTIONS CC v SOUTH AFRICAN BREWERIES INTERNATIONAL (FINANCE) BV 33MUTUAL AND FEDERAL LTD v RUMDEL CONSTRUCTION (PTY) LTD 34LAND AND AGRICULTURAL BANK OF SOUTH AFRICA v PARKER 35IKEA TRADING UND DESIGN AG v BOE BANK LTD ... 36SOUTHERNPORT DEVELOPMENTS (PTY) LTD v TRANSNET LTD 37THE ORIGINAL FISHMONGER FRANCHISE HOLDING COMPANY (PTY) LTD v STONE 38STANDARD GENERAL INSURANCE CO LTD v COMMISSIONER FOR CUSTOMS AND EXCISE 39WILDE v WADOLF INVESTMENTS (PTY) LTD40CREUTZBURG v COMMERCIAL BANK OF NAMIBIA LTD 41BRINK v HUMPHRIES & JEWELL (PTY) LTD . 42BARNARD JACOBS MELLET SECURITIES (PTY) LTD v MATUSON, N.O. 43FERNTEX (PTY) LTD v PREMIER SPRINGS INDUSTRIAL MANUFACTURERS (PTY) LTD 45ASCO CARBON DIOXIDE LTD v LAHNER. 46BIRKENRUTH ESTATES (PTY) LTD v UNITRANS MOTORS (PTY) LTD 47LE RICHE v PSP PROPERTIES CC 48HOPKINS BOERDERY (EDMS) BPK v COLYN . 49WATERHOUSE PROPERTIES CC v HYPERCEPTION PROPERTIES 572 CC 51BAY CENTRE INVESTMENTS (PTY) LTD v TOWN COUNCIL OF THE BOROUGH OF RICHARDS BAY 52GOLD FIELDS LTD v HARMONY GOLD MINING CO LTD 53J&K TIMBERS (PTY) LTD v G L & S FURNITURE ENTERPRISES CC 54PAARWATER v SOUTH SAHARA INVESTMENTS (PTY) LTD 55HAY MANAGEMENT CONSULTANTS (PTY) LTD v P3 MANAGEMENT CONSULTANTS (PTY) LTD 56METLIKA TRADING LTD v COMMISSIONER, SOUTH AFRICAN REVENUE SERVICE 57KOTZÉ v SUID-WESTELIKE TRANSVAALSE LANDBOU KOÖPERASIE 59ABSA BANK LTD v LOMBARD .... 60VERULAM MEDICENTRE (PTY) LTD v ETHEKWENI MUNICIPALITY 61SA EAGLE INSURANCE CO LTD v KRS INVESTMENTS CC 62HOLLARD LIFE ASSURANCE CO LTD v VAN DER MERWE N.O. 63FERNTEX (PTY) LTD v PREMIER SPRINGS INDUSTRIAL MANUFACTURERS (PTY) LTD 64CLUTCHCO (PTY) LTD v DAVIS . 65DAVIDS v ABSA BANK BPK ... 66DE FARIA v SHERIFF, HIGH COURT, WITBANK .... 68MPAKATHI v KGHOTSO DEVELOPMENT CC 69VAN DER SPUY v MALPAGE . 70SOUTH AFRICAN FORESTRY CO LTD v YORK TIMBERS LTD71ROBERTS v MARTIN .. 73WELCH’S ESTATE v COMMISSIONER, SOUTH AFRICAN REVENUE SERVICE 74ESTATE AGENCY AFFAIRS BOARD v McLAGGAN .. 75CONSTANTIA INSURANCE CO LTD v COMPUSOURCE (PTY) LTD 76ESKOM v BOJANALA PLATINUM DISTRICT MUNICIPALITY 78SOCIETY OF LLOYDS v PRICE .... 79SAMANCOR LTD v MUTUAL AND FEDERAL INSURANCE CO LTD 80GOVENDER v MUTUAL AND FEDERAL INSURANCE CO 81STANDARD BANK OF SA LTD v SEWPERSADH... 82VALUNET SOLUTIONS INC v eTEL COMMUNICATIONS SOLUTIONS (PTY) LTD 83

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THE ANANGEL FIDELITY . 84ANANGEL FIDELITY v RENNIES GROUP LTD 84THE GLADIATOR 1 (NO 2) 85IBETO PETROCHEMICAL INDUSTRIES v SUN UNITED MARINE LTD 85SA BANK OF ATHENS LTD v VAN ZYL.... 86CORDIANT TRADING CC v DAIMLER CHRYSLER FINANCIAL SERVICES (PTY) LTD87PRIVEST EMPLOYEE SOLUTIONS (PTY) LTD v VITAL DISTRIBUTION SOLUTIONS (PTY) LTD 88SEVEN ELEVEN CORPORATION OF SA (PTY) LTD v CANCUN TRADING NO. 150 CC 89OOS-VRYSTAAT KAAP BEDRYF BPK v VAN ASWEGEN 90SOUTH AFRICAN MUNICIPAL WORKERS UNION v CITY OF CAPE TOWN 91ABSA BANK LTD v LOMBARD .... 93GEDULDT v THE MASTER 94COMMISSIONER, S.A.R.S. v HAWKER AVIATION SERVICES PARTNERSHIP 95COMPUTER BRILLIANCE CC v SWANEPOEL 97COMMISSIONER, SOUTH AFRICAN REVENUE SERVICE v TFN DIAMOND CUTTING WORKS (PTY) LTD 98BUFFALO CITY MUNICIPALITY v GAUSS 99LAND EN LANDBOUONTWIKKELINGSBANK VAN SUID-AFRIKA v CONRADIE100DAVIDS v VAN STRAATEN ....101VIDAVSKY v BODY CORPORATE OF SUNHILL VILLAS 102RAUBENHEIMER v TRUSTEES OF THE HENDRIK JOHANNES BREDENKAMP TRUST 103A M MOOLLA GROUP LIMITED v THE GAP INC . 104TELEMATRIX (PTY) LTD v ADVERTISING STANDARDS AUTHORITY SA 105TELKOM SA LTD v BLOM107CORDIANT TRADING CC v DAIMLER CHRYSLER FINANCIAL SERVICES (PTY) LTD108SECURICOR (SA) (PTY) LTD v LOTTER .. 109MEDSCHEME HOLDINGS (PTY) LTD v BHAMJEE 110FROMAN’S EDEN (PROPRIETARY) LIMITED v WESTMEAD COMMERCIAL FLEET SERVICES CC 111THE COMMISSIONER OF SOUTH AFRICAN REVENUE SERVICES v STAND TWO NINE NOUGHT WYNBERG (PTY) LTD 112NEW MEDIA PUBLISHING (PTY) LTD v EATING OUT WEB SERVICES CC 113AXIAM HOLDINGS LTD v DELOITTE & TOUCHE . 114STANDARD BANK OF SA LTD v SNYDERS .... 115UBUNYE CO-OPERATIVE HOUSING v MBELE 116SYMINGTON v PRETORIA-OOS PRIVAAT HOSPITAAL BEDRYFS (PTY) LTD 117RICHMAN v BEN-TOVIM . 119S A BREWERIES LIMITED v VAN ZYL 120PARSONS TRANSPORT (PTY) LTD v GLOBAL INSURANCE COMPANY LTD121

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Index

A

Accountantfinancial statements and audit opinion 114

Acknowledgement of debtinterpretation of 59

Administrative lawreview, basis of under AJA 19

Agentconflict of interests between principals 112representing close corporation 54sale of land 8undisclosed principal 8

Applicationnotice of motion, form of in eviction proceeding 116

Arbitrationfailure to notify party of hearing 102nullity of award, enforcability of 102

Auctionbidder entitled to nominate purchaser 9

Auditorfinancial statements and audit opinion 114

Authorityto contract 88to represent close corporation 54

B

Bankmoney in account, ownership of 43

C

Cessionof debts, future debts 120

Champertous agreementnot contrary to public policy 12

Close corporationauthority to represent, whether resolution necessary 54security for costs 97sole member, knowledge of 8

Companiesloan to director 22offer of shares to public 53resignation of director, failure to inform Registrar 117

Companyliquidation, just and equitable 40, 55private, shareholder’s right to information 65

Competitionmerger proceedings, right to participate 21regulation of by statutory body 32, 105

Competition Commissionmerger, participation in proceedings 21

Concursus creditorumduty to maintain 112

Confidential information

protection of 83Companies

resignation of director, failure to inform Registrar 79Conflict of laws

proper law of contract 41Constitution

execution against fixed property 115validity of parate executie clause 86

Contractagreement to negotiate 37breach of, malperformance 70breach, party alleging breach also in breach 91contained in two documents 88contrary to public policy 12, 38contravening statute, invalidity of 68duress, what is 110illegal as contrary to statute 70illegal, champertous 12implied terms 71impossiblity of performance 71interpretation of 88interpretation of, background circumstances 89interpretation of, preamble 89mistake 66mistake inducing 76mora, effect of 47offer and acceptance 73, 90option, how formed 90specific performance 73uspensive condition 121vague terms 37void for vagueness 37void through illegality 70warranty, refurbishment of vehicle 111

Copyrightvesting by assignment 45, 64vesting by employment contract 45, 64

Credit transactioninsurance of goods 13

Creditor and debtorexecution against fixed property 115

D

Damagesloss of profits 11

Debtor and creditoracknowledgement of debt 59interest rate variable in discretion of creditor 60, 93

Defamationmanufacturer’s product 10

Delictdamages not claimable against Advertising Stand-

ards 32, 105loss of profits 11

5

Directorjoint liability under s226 22

Donationmeaning of 74

Duressin concluding contract 110

E

Employervicarious liability for employee’s theft 98

Employment contractassignment of following sale of business 107, 109restraint condition 109

Estatedeceased, property sold contrary to s 30 68

Estate agentconvicted of crime involving dishonesty 75failure to pay tax 75

Estoppelby conduct 49

Evictionprocedure in terms of Prevention of Illegal Eviction 116

Evidenceadmissibility of identificatory evidence 36

Export and importagent of exporter 39duty, special removal bond 39meaning of ‘exporter’ 39

Expropriationcalculation of compensation 17

F

Franchiseinterpretation of franchise contract 89

Franchise agreementcontrary to public policy 38

I

Illegalitycontract concluded contrary to statute 68contrary to public policy 38

Insolvencyact of insolvency, departing the Republic 29concursus creditorum, preservation of 112factual compared with act of insolvency 82insolvent’s right to sue 28insurance claim, effect of s156 16joint trustees, maladministration by one 31life insurance policy and 27life policy, insured sequestrated 27liqudator as agent of estate debtor 112liquidated claim, delictual claim as 29liquidator, removal of 94liquidator’s remuneration 19locus standi of unrehabilitated insolvent 28proof of 82sequestration, ulterior purpose in bringing applicat 95spouse, life policy and 27

Insurancebusiness interruption section 81death, benefits not payable to creditors 27

design defect, whether covered by policy 34double insurance 80exception, construction contract policy 34exclusion clause, interpretation of 63extension clause 16indemnity, extent of in respect of clean-up 14indemnity given discharging other insurer 80interpretation of contract 81interpretation of policy provision 14life, exclusion clause 63life, nomination of beneficiary 27life policy, sequestration of insured 27life, self-inflicted injury 63non-payment of premium, effect of 121noting interest by third party 13premises at which insured event occurs 81repudiation by insurer, insured’s fraud 62third party indemnity 16third party interest in property insured 13warranty compared to suspensive condition 121

Interestin duplum rule 61public policy and in duplum rule 61rate variable, reasonability of 60, 93

J

Jurisdictionability to enforce compliance with order 57foreign court 119foreign judgment 119submission to 119submission to court by peregrinus defendant 56

L

Leasebreach of by landlord, mora 47in perpetuity, not recognised in law 101rental review, notice of 47terminated in terms of Rent Control Act 101

Liquidationjust and equitable 40just and equitable ground 55

Liquidatorduty to wind up in preference to agreement with

esta 112grounds for removal of 94

Loaninterest rate, variation in 60, 93

Local authorityduty to provide services 91sale in execution and 69

M

Mandament van spoliedelay in bringing application 48

Manufacturerproduct of, deprecating statements made about 10

Medical aidscheme as debtor 110

Mistakeinducing contract, unreasonable reliance 76

6

inducing suretyship agreement 42Money

ownership of, how identified 43Mortgage bond

executability, constitutionality of 115Movable property

identification of in notarial bond 36

N

Negligent misstatementby auditor 114financial statements and audit opinion 114

Neighbourinterest in property alterations 103

Notarial bondidentification of property in 36

O

Optionformation of 90

Ownerright to claim against innocent purchaser 87, 108

Ownershipfixed property, neighbour’s rights and 51of money, how identified 43

P

Parate executievalidity of 86

Peregrinussubmission to jurisdiction 56

Prescriptiondamages claim compared to claim for disgorgement 117debt arising in foreign jurisdiction 79taxation, refund claim 78

Private international lawproper law of contract 41

Propertyeviction of occupier, factors considered 100eviction of tenant, constitutional considerations an 101eviction, procedure in terms of Prevention of Illega 116expropriation of, right to be heard 99expropriation, value of lost right 17local authority, right to expropriate property 99neighbour, rights of 51neighour’s interest in alterations 103sectional title, arbitration of dispute 102water supply, deprivation of 48

R

Restraint conditionin employment contract 109

S

Saleby auction, bidder nominating purchaser 9eviction proceedings brought against final pur-

chaser 87, 108floorplan agreement, notice of 87, 108subsequent sales, right of owner against pur-

chaser 87, 108

voetstoots, meaning of 18Sale in execution

bidder entitled to nominate purchaser 9formalities for 49rights of local authority not transferred to

council 69Sale of business

employee, pension fund rights 107Sale of fixed property

defects in dwelling, failure to disclose 18Sale of land

agent’s authority to sell 8counter-offer constituted by amended terms 8owner not party to sale 8

Sectional titlearbitration, failure to notify body corporate 102

Security for costscorporation as plaintiff 97

Sequestrationliquidated claim, delictual claim as 29of partnership 95

Set offsuretyship obligation against liquid claim 46

Shareholderright to information of company affairs 65

Sharesprospectus for offer of, when required 53

Suretycession of claims to creditor 120determination of obligations by surety 41excussion, benefit of 46incorporated in credit application 42locus standi to liquidate company 40mistake inducing accepting suretyship obliga-

tion 42special removal bond, where obligation

arises 39Suretyship

bank failing to explain terms of 66mistake by surety 66principal debt non-existent 31validity of, failure to comply with Act 41

T

Takeovercompanies, distinguished from offer to sub-

scribe 53Tax claim

judgment obtained on 95penalties, as criminal punishment 95

Theftby State official, vicarious liability 98

Trade Markinfringement by tarnishment 33

Trade markforeign holder of trade mark 104non-use 104territoriality principle 104web site name as infringing trade mark

rights 113Trust

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capacity of trustees to act for trust 35settling of assets, whether donation or not 74

Trusteesjoint, liability not joint and several 31

U

Unlawful competitionwhat is 83

V

Voidcontract concluded contrary to statute 68

W

Waiverunreasonable delay 49

Warrantyevidence of failure 111

Words and phrasesnominee 9

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PRETORIA EAST BUILDERS CC v BASSON

A JUDGMENT BY JONES AJA(BRAND JA and SOUTHWOODAJA concurring)SUPREME COURT OF APPEAL29 MARCH 2004

2004 (6) SA 15 (A)

A party which is aware thatanother party has concluded acontract for the sale of itsproperty does not confer authorityon that party to conclude the salemerely by virtue of its knowledgethereof.

THE FACTSBasson submitted a written offer

to purchase certain fixed propertysituated in Pretoria for R890 000.He made the offer to Pretoria EastBuilders CC which was thenbuilding a house on the property.The property was then owned byInfogold Investments 56 CC,whose sole member, a Mr F VanSchalkwyk, was also the solemember of Pretoria East Builders.After the offer was made, PretoriaEast Builders’ representative, MsG Badenhorst, accepted the offerand inserted a term that the offerwas subject to the presentation ofa specification list and the signingof a building contract with itself.This insertion was not initialled byBasson. The sale was conditionalupon Basson selling his own homeby 30 April 2002 and on himobtaining a loan of R890 000.

During the completion of thebuilding of the house, Bassonrequested certain amendments tothe building work and these wereeffected at his expense, but at nostage did the parties sign abuilding contract. Basson sold hishome before 30 April 2002 and anapplication for a loan of R812 000was made and granted. Bassononly required a smaller loan thanthat envisaged in the saleagreement because he proposed topay for portion of the purchaseprice with his own money. Theloan application was made byInfogold but the bank to which theapplication was made consideredBasson to be the proposed debtor.

In April 2002, Pretoria EastBuilders cancelled the saleagreement. Basson brought anurgent application for an ordercompelling it to give effect to theagreement, allowing himoccupation of the property andregistering the property in hisname. The order was granted.Pretoria East Builders appealed.

THE DECISIONInfogold, the second appellant,

could not be considered bound tothe sale agreement: it was neithera party to the agreement nor theundisclosed principal of it.

The basis upon which it wasalleged that Infogold was theundisclosed principal was that itknew of the sale agreementconcluded ostensibly withPretoria East Builders and failedto object to it. Van Schalkwyk assole member of both corporationsmust have been aware of this.However, Van Schalkwyk deniedthat Badenhorst had beenauthorised to conclude a saleagreement for Infogold, and therewas no direct evidence that shewas so authorised. The conclusionthat she was so authorised wasbased on inference and innuendo.Even if Infogold had known thatits property had been sold, thiswould not have been sufficient toindicate that it had authorised thesale.

As far as the position of PretoriaEast Builders was concerned, nobinding sale agreement had beenconcluded with it either. Theinsertion of the new termindicated that it was making acounter-offer as this insertionaltered the entire content of thecontract. Its response was not anacceptance of Basson’s offer.

An order compelling PretoriaEast Builders to give effect to theagreement and register theproperty in Basson’s name wouldalso be a futile order becausePretoria East Builders was not theowner of the property. In thesecircumstances, such an order forspecific performance was notappropriate.

The appeal succeeded.

Contract

9

NOORMAHOMED v VISSER N.O.

A JUDGMENT BY SCOTT JA(MTHIYANE JA, BRAND JA,COMRIE AJA AND PATEL AJAconcurring)SUPREME COURT OF APPEAL19 NOVEMBER 2004

2004 CLR 437 (A)

An oral agreement between bidderand auctioneer prior to an auctionthat the bidder may nominateanother party as purchaser conferson the bidder the right to cede hisrights as purchaser and assign hisobligations to that party. Oncethe bidder nominates anotherparty as purchaser in terms ofsuch an agreement, all obligationsas purchaser and otherwiseimposed under the Conditions ofSale of the auction fall away.

THE FACTSOn 21 August 2001, the sheriff

for Pretoria Central conducted asale in execution of certainproperty situated at Bloed Street,Pretoria. The sale was conductedby public auction andNoormahomed’s bid of R1 250 000was the highest. Noormahomeddid not sign the Conditions of Salethat had been read out prior to theauction but one S Moosa signedthis document as purchaser ornominee. Before the auctionstarted, Noormahomed had askedthe sheriff if he could bid at theauction and thereafter nominateanother party as purchaser. Thesheriff agreed to this.

Clause 16 of the Conditions ofSale provided that in the event ofthe purchaser signing as nominee,then the person signing would bedeemed to have bound himself assurety and co-principal with thepurchaser. Clause 6 provided thatimmediately upon the auctionbeing concluded, the purchaserwas to sign the Conditions of Sale.

Moosa paid a deposit,commission and VAT. The chequetendered in payment wassubsequently dishonoured.

Visser, the sheriff, then broughtan action for an order declaringthat Noormahomed had acted inhis capacity as purchaser for aperson to be nominated aspurchaser and declaring thatMoosa had accepted the

nomination and directing him tofulfil his obligations as purchaser.Visser contended that in terms ofclause 6, Noormahomed wasobliged to sign the Conditions ofSale which, in terms of clause 16,would render him liable as suretyand co-principal debtor. Theaction succeeded. Noormahomedappealed.

THE DECISIONThe oral agreement concluded

between the sheriff andNoormahomed prior to theauction amounted to anagreement that shouldNoormahomed purchase theproperty, he would be entitled tocede his rights as purchaserthereafter. The significance of theterm ‘nominee’ in this context wasthat a person other thanNoormahomed could become theperson entitled and obliged aspurchaser, ie an assignee.

After the conclusion of theauction, Noormahomed did notsign the Conditions of Sale.Accordingly, he did not becomeliable as purchaser in terms ofthem, and in fact ceded his rightsto Moosa who did sign theConditions of Sale. The effect ofthis was to release Noormahomedfrom his obligations as purchaser.The contractual relationshipbetween him and the sheriff thenceased to exist.

The appeal succeeded.

Contract

10

DELTA MOTOR CORPORATION (PTY) LTDv VAN DER MERWE

A JUDGMENT BY JONES AJA(MPATI DP, BRAND JA,CONRADIE JA and CLOETE JAconcurring)SUPREME COURT OF APPEAL31 MAY 2004

2004 (6) SA 185 (A)

A statement framed as adescription of historical fact, evenif disputed, is not defamatory. Astatement deprecating amanufacturer’s product is primafacie defamatory but will not beso if the statement is a commentor an opinion amounting to faircomment.

THE FACTSIn April 2000, Van der Merwe

purchased an Isuzu KB 280 4X4double cab vehicle from a dealerof the Delta Corporation (Pty) Ltd.For a year, the vehicle functionedwell and showed no defects. Thenhe took the vehicle to Namibia viaBotswana and the Caprivi.According to Van der Merwe,while he was travelling along agravel road on the final 30-kilometre stretch to the KuneneRiver Lodge, the chassis of thevehicle bent. On inspection, it wasdiscovered that the bakkie portionof the vehicle had pulled awayfrom the cab leaving a gapingaperture.

Van der Merwe showed thevehicle to the Delta dealer. Deltatook the view that the chassis hadbent because of driver abuse. Vander Merwe obtained a report fromthe South African Bureau ofStandards which concluded thatthe damage had occurred becauseof a variation in the thickness ofthe steel structure of the chassis.Delta disputed this.

Van der Merwe sent emailmessages to people stating hisexperience with the vehicle andattaching images of it. He alsodisplayed his vehicle in publicplaces with the words ‘Swakste 4X 4 X Ver; Grondpad KnakOnderstel’ (Worst 4 X 4 X Far;Gravel Road breaks Chassis)emblazoned on it in large print.Van der Merwe intended todisplay the vehicle complete withthe slogans on the back and side

windows of the canopy outside anexhibition centre at Kyalami,Gauteng, an exhibition which wasexpected to attract thousands of 4X 4 enthusiasts.

Delta brought an urgent interdictto prevent Van der Merwe fromso displaying his vehicle and frommaking any statement allegingthat its products were defective orsubstandard. An interim orderwas granted in favour of Delta buta final order was later refused.Delta appealed.

THE DECISIONThe first question is whether the

description of the vehicle made byVan der Merwe was defamatory.The email messages sent by Vander Merwe stated his experiencewith the vehicle. A reader ofordinary intelligence would notreasonably understand the wordsto have a meaning which reducesDelta in his or her estimation. Thedescription of Van der Merwe’sexperience with the vehicle was astateto make the statementbecause this amounted to faircomment. Fair comment is acomment or opinion and not anallegation of fact. Van der Merwestated that his description of thevehicle was his opinion, therebeing an underlying dispute offact as to whether or not what hestated was true. Clearly thestatement was Van der Merwe’sopinion and accordingly, in theabsence of proof of maliciousness,the statement was not defamatory.

The appeal failed.

Contract

11

TRANSNET LTD v SECHABA PHOTOSCAN (PTY) LTD

A JUDGMENT BY HOWIE P(ZULMAN JA, FARLAM JA,LEWIS JA and VAN HEERDENJA concurring)SUPREME COURT OF APPEAL1 APRIL 2004

2005 (1) SA 299 (A)

A claim for loss of profits iscompetent in the case of adelictual claim.

THE FACTSTransnet called for tenders for

the sale of one of its divisions,Transnet Production House,which operated a printingbusiness. Sechaba Photoscan (Pty)Ltd submitted a tender, as didSkotaville Press (Pty) Ltd. Despitestrong indications that it wouldwin the tender, Sechaba failed inits bid and the division was soldto Skotaville.

Sechaba alleged that the sale toSkotaville was the culmination ofa fraudulent tender process. Itbased a claim in delict againstTransnet and sued it for damages.

For the purposes of trial,Transnet admitted that Sechabahad sustained damages. Transnethowever, disputed Sechaba’s rightto claim lost profits. Sechabaclaimed that it was entitled to lostprofits in the sum of R60 689 000.

THE DECISIONThe usual measure of damages

in contract is the amount requiredto place the innocent party in theposition he would have been in

had the contract been properlyperformed. In delict, the measureof damages is the amountrequired for the injured party torecover the loss he has sustained.

This distinction does nothowever, imply that there can beno claim for loss of profits when aclaim is made in delict. Theformulation of the measure ofdamages in the case of a delictualclaim is wide enough to include aclaim for lost profits.

The measure of damages in eachcase is, in any event, calculated ina similar way, ie by comparisonbetween the situation whichwould have arisen had noinjurious event occurred and thesituation which actually did arise.Because this is so, there is noadvantage in distinguishingbetween negative and positiveinteresse when calculating thequantum of damages.

There being no bar to the claimfor loss of profits, Sechaba wasentitled to the damages it hadproved. The appeal wasdismissed.

The award of delictual damages seeks to compensate for the difference between theactual position that obtains as a result of the delict and the hypothetical positionthat would have obtained had there been no delict.That surely says enough to define the measure. There appears to be no practicalvalue in observing the distinction between positive and negative interesse indetermining delictual damages.It is a distinction that tends to obscure rather than clarify. If to award thedifference means necessarily awarding loss of profits then it does not assist first toask what positive interesse and negative interesse comprise.

Contract

12

PRICE WATERHOUSE COOPERS INC vNATIONAL POTATO CO-OPERATIVE LTD

A JUDGMENT BYSOUTHWOOD AJA(HARMS JA, CAMERON JA,CONRADIE JA and LEWIS JAconcurring)SUPREME COURT OF APPEAL1 JUNE 2004

2004 (6) SA 66 (A)

A champertous agreement is notin itself contrary to public policyand does not constitute a defenceto a claim in respect of which suchan agreement has been concluded.

THE FACTSPrice Waterhouse Coopers Inc

was the auditor for the NationalPotato Co-operative Ltd. At thistime, the Co-operative’s manager,Mr Boonzaaier, committed certainirregularities with the Co-operative’s finances. When theextent of the irregularities came tolight, the Co-operative consideredbringing a claim for damagesagainst Price Waterhouse. Itdecided to sell its claim to theFarmers Indemnity Fund (Pty) Ltd(‘FIF’). In May 1998, it did so inreturn for 50% of the grossproceeds of a successful claim orsettlement of the claim.

In October 1999, the Co-operative and FIF cancelled thesale agreement and FIF agreed toprovide financial assistance to theCo-operative to enable it topursue its claim against PriceWaterhouse. As security, the Co-operative ceded to FIF 45% of theproceeds of the claim. Theagreement provided that the Co-operative could not sell or cede itsinterest in the claim to any thirdparty without FIF’s consent, andthe Co-operative was not entitledto accept any settlement or make acounter-offer without consultingwith FIF. Various provisions dealtwith the payment to FIF of a sharein the proceeds of the claim.

In November 1999, the Co-operative instituted an actionagainst Price Waterhouse fordamages for breach of contract. Itsclaim amounted to some R353m.Price Waterhouse defended theaction on the grounds that theclaim was based on an agreementwhich was contrary to publicpolicy. The defence was rejected.Price Waterhouse appealed.

THE DECISIONThe question was whether the

arrangements to finance thelitigation against PriceWaterhouse were contrary topublic policy, and if so, whetherthis would constitute a defence tothe Co-operative’s claim.

In the past, champertousagreements have been consideredto be unlawful and against publicpolicy. However, this view haschanged and legislative enactmenthas recognised that in somecircumstances, a contingency feeor speculative fee as a means offinancing litigation is acceptable.The civil justice system is strongenough to withstand perceivedabuses which could arise if civillitigation is made possible byfinancial support given by thosewho receive a share of theproceeds. Accordingly anagreement in terms of which astranger to a lawsuit advancesfunds to a litigant on conditionthat his remuneration, if thelitigant wins the action, is to bepart of the proceeds of the suit, isnot contrary to public policy.

In any event, the fact that suchan agreement has been enteredinto would be irrelevant to thelawsuit itself. Even if consideredcontrary to public policy, it wouldnot constitute a defence to theclaim, provided that the claimitself is bona fide. Frivolous orvexatious litigation is relevant indetermining the competency ofany claim, and may constitute areason to dismiss a claim, but themere fact that a party is financingthe claim in return for paymentout of the claim, is not an answerto the claim.

The appeal failed.

Contract

13

BARLOWORLD CAPITAL (PTY) LTD v NAPIER N.O.

A JUDGMENT BY GOLDBLATT JWITWATERSRAND LOCALDIVISION30 APRIL 2004

2005 (1) SA 57 (W)

An insurer is not obliged toindemnify a third party having aninterest in the property insured ifit has already agreed to pay theinsured before it learns of thethird party’s interest.

THE FACTSIn January 1997, CAR Transport

& Earthworks CC purchased anexcavator from BarloworldCapital (Pty) Ltd by instalmentsale transaction. In terms of theagreement, Barloworld remainedthe owner of the equipment and,as required by the agreement,CAR insured the equipment. CARinsured the equipment with aconsortium which was part ofLloyds but did not request Lloydsto note Barloworld’s interest in theequipment, nor did it informLloyds of Barloworld’s ownershipof the equipment.

In June 2000, while the insuranceagreement was in force, theequipment was irreparablydamaged. Barloworld informedthe insurer’s representative of itsinterest in the equipment. Theinsurer however, was faced with aclaim by CAR that it should settlethe claim made by it following theloss by making payment directlyto CAR and not to Barloworld.

Barloworld submitted expertevidence to the effect that there isa practice in the short terminsurance industry that in theevent of, inter alia, an owner ofinsured property requesting theinsurer to note its interest in suchproperty, and the propertysuffering irreparable damageduring the currency of theinsurance policy, the insurer will,subject to the maximum amountof the cover provided by theinsurance policy, effect paymentto the owner of any outstandingamount due to it by the insured inrespect of the property, prior tomaking payment of any approvedclaim to the insured.

Barloworld claimed payment ofthe settlement amount offered bythe insurer.

THE DECISIONThere was insufficient evidence

to show that the insurer knew ofBarloworld’s interest in theequipment before the lossoccurred. The question waswhether or not there was a tradepractice under which payment ofan insurance claim will be madeto a party with an interest in theproperty insured as stated by theexpert witnesses.

While there was sufficientevidence to demonstrate the tradepractice stated by these witnesses,that practice does not deal withthe situation where the insurer hasalready agreed to pay the insuredbefore it learns of the third party’sinterest as happened in this case.It also does not deal with thesituation where the insured insistsupon payment being made to himin terms of the policy where nointerest had been noted on thepolicy at the time of the claim andalso after the policy had beencancelled as happened in this case.

There is considerable doubtwhether the practice provedcreates a contractual relationshipbetween the insurance companyand the third party which givesthe third party a right of actionagainst the insurer—with whom ithas no contractual relationship.

The claim failed.

Insurance

14

VERULAM FUEL DISTRIBUTORS CC v TRUCK &GENERAL INSURANCE CO LTD

A JUDGMENT BYBORUCHOWITZ JWITWATERSRAND LOCALDIVISION7 JULY 2004

2005 (1) SA 70 (W)

An indemnity against liabilityincurred toward third partiesshould not be restricted merelybecause an obligation arisingfrom an insured event, such as theobligation to attend to the clean-up of pollution, is created bystatute. The wording of anindemnity may be wide enough toinclude any situation where theinsured incurs cost or expense forwhich it is legally liable.

THE FACTSTruck & General Insurance Co

Ltd insured Verulam DistributorsCC against liability incurred byVerulam toward third parties inrespect of damage to propertyother than property belonging toVerulam or in the custody orcontrol of Verulam, the damagehaving been caused by anyaccident caused by or through orin connection with any vehiclespecified in a schedule. Theindemnity covered ‘all sumsincluding claimant’s costs andexpenses which the insured shallbecome legally liable to pay’. Theindemnity was provided for in asubsection B.

In terms of an endorsement thepolicy was extended to includeadditional costs reasonablyincurred by Verulam of for whichit was held responsible resultingfrom an accident to an insuredvehicle and which results inleakage and/or spillage of theproduct being transported. Suchadditional costs includedemergency services call out costs,cleaning the accident site of debrisand product, and clearing uppolluting or contaminatingsubstances carried by the insuredvehicle. Such additional costswere limited to the amount of R25000 for any one incident.

In March 2000, in two separateincidents, diesel that was beingconveyed in one of Verulam’stankers leaked, causing pollutionand ecological damage. Followingeach incident, Verulam arrangedfor the clean-up of the spillage,and incurred costs of R1m indoing so. Verulam was obliged toattend to the clean-up in terms ofthe National Environmentalmanagement Act (no 107 of 1998)and the National Water Act (no 36of 1998). It claimedreimbursement from Truck &General under the indemnitygiven in the insurance policy.

Truck & General contended thatthe endorsement applied and thatin consequence, its indemnity waslimited to R25 000 for eachincident. Verulam contended thatsubsection B applied. It claimedpayment of the full costs incurredin cleaning up the spillage.

THE DECISIONSub-section B stated the defined

event upon which Truck &General was obliged to indemnifyVerulam in wide terms. Indemnitywas provided against ‘all sums’including the claimant’s costs andexpenses which the insuredwould be legally liable to pay.There was virtually no restrictionas to the type of cost, expense orliability covered under the policy.The only qualification was thatexpressed in the words ‘in respectof’. The effect of these words wasto limit the liability to ensure thatthere existed a direct relationshipor causal connection between thecosts and expenses for whichVerulam would be liable and thedamage to property.

There was however, no reason torestrict the operation of theindemnity merely because theobligation to attend to the clean-up was created by statute. Thewording of the indemnity waswide enough to include anysituation where the insured incurscost or expense for which it islegally liable. The onlyrequirement is that the cost orexpense has a direct relationshipwith or causal connection to thedamage to property of a thirdparty. It is not a requirement thatthe owner of such property seek tohold the insured liable in respectof the damage.

The fact that Verulam claimedthe amounts paid to contractors toeffect the clean-up did not meanthat the claim was not in respectof damage to property. Theamounts paid related to the

Insurance

15

damage to the property and weretherefore covered by theindemnity.

The endorsement was notapplicable to the facts of the

situation as this provision relatedto a situation where legal liabilitywas not a prerequisite.

The claim succeeded.

The phrases ‘all sums’ which the insured ‘shall be legally liable to pay’ are qualified by thewords ‘in respect of damage to property other than property belonging to the insured . . .’.The expression ‘in respect of’ is of importance. It may, dependingon its context, have eithera wide or narrow meaning. In its narrow sense it is indicative of a requirement that thereexist a direct relationship or causal connection between the costs and expenses for whichthe insured is legally liable, on the one hand, and the damage to the property on theother.The expression must not be given an unbusiness like meaning, and I accept thereforethat in the context of the policy it is used in its narrow sense, that is, there must exist adirect relationship or causal connection between the costs and expenses for which theinsured is legally liable and the damage to the property.As to the contention that the heading of ss B is an indication that only the owners of theaffected land may seek to hold the plaintiff liable I would say the following. There is noreason to restrict the expression ‘third party’ to the owner of the land that was damaged bythe spillage. To do so would be inconsistent with the wide and expansive languageemployed in the subsection. In Digby v General Accident Fire and Life AssuranceCorporation Ltd [1942] 2 All ER 319 (HL) it was held that the phrase ‘third partyliability’ did not have a rigid and definite meaning, so as to require in all instances, threeparties. The phrase is used to indicate an indemnity against some liability, incontradistinction to an indemnity against loss or damage to the insured’s own property. Itmeans only that the insurer will indemnify the insured against proper liability incurredelsewhere. See in this regard the speech of Lord Porter (at 331H) where the following isstated:‘I doubt if the phrase "third party liability’’ when used in the policy has any such definitemeaning as that ascribed to it by the respondents. In my view, in a policy such as this,indemnity against third-party liability is used in contradistinction to indemnity against"loss or damage’’ to the car and means only that the insurer will indemnify the insuredagainst any proper claim made upon him by a person who is injured by the negligentdriving of the car. . . . I do not think that there is any question of first, second and thirdparties. The phrase is merely a useful description of a particular type of insurance.’

Insurance

16

UNITRANS FREIGHT (PTY) LTD v SANTAM LTD

A JUDGMENT BY NUGENT JA(HOWIE P, CLOETE JA, HEHERJA and PONNAN AJAconcurring)SUPREME COURT OF APPEAL29 MARCH 2004

2004 (6) SA 21 (A)

An insurer against which a claimbased on section 156 of theInsolvency Act (no 24 of 1936)may be brought is obliged toindemnify under an extensionclause providing for the insurer’sliability in respect of loss causedby a third party if it can be shownthat the intention of thecontracting parties was that theinsurer’s obligation to indemnifysubsists. This will be so whetheror not that obligation is towardthe third party.

THE FACTSSantam Ltd insured a firm

known as JG Olieverspreidersagainst loss arising from itsliability toward third partiesresulting from any accidentcaused by or through or inconnection with one of its motorvehicles. An extension clause inthe insurance agreement providedthat an indemnity was extendedto any person driving or using thevehicle on the insured’s order orwith its permission. Clause 11provided that any extensionproviding indemnity to anyperson other than the insuredwould not give any rights of claimto such person.

While the insurance cover was inplace, the vehicle was involved ina collision with a vehicle in whichUnitrans Freight (Pty) Ltd had aninterest. At the time of thecollision the insured vehicle wasbeing driven by an employee ofDe Kroon BrandstofverspreidersCC acting in the course and scopeof his employment. His negligencecaused the collision. De Kroonwas placed under a winding uporder.

Unitrans claimed payment of itsdamages from Santam. It relied onsection 156 of the Insolvency Act(no 24 of 1936) and the extensionclause. Section 156 provides thatwhenever any person is obliged toindemnify another person inrespect of liability incurred by theinsured towards a third party, thelatter shall, on the sequestration ofthe estate of the insured, beentitled to recover from theinsurer the amount of theinsured’s liability toward the thirdparty.

THE DECISIONA claimant depending on section

156 must show that it is entitled torecover against the insolventperson and that the insurer isobliged to indemnify the insolventperson against the claim. In viewof the accepted negligence on thepart of De Kroon’s employee,Unitrans had clearly shown that itwas entitled to recover against DeKroon. The only questiontherefore was whether Santamwas obliged to indemnify DeKroon.

The fact that there was nocontractual relationship betweenSantam and Unitrans wasirrelevant: the section envisagedcircumstances in which there wasno such contractual relationship.Santam’s liability toward Unitranswould arise by virtue of thesection, if it was obliged toindemnify De Kroon. This it wasobliged to do if the intention ofthe original contracting parties,Santam and JG Olieverspreiderswas that a benefit should beconferred on a third party such asDe Kroon which, uponacceptance, would give rightsenforceable at the instance of sucha third party.

It was clear from clause 11 thatthe parties did not intend that thisbenefit would be enforceable byDe Kroon. However, although DeKroon could not enforce anyrights of indemnity againstSantam, JG Olieverspreiderscould. Santam therefore remainedobliged to indemnify. The secondcondition for liability wastherefore established.

Santam was obliged towardUnitrans in terms of section 156.

Insurance

17

MINISTER OF TRANSPORT v DU TOIT

A JUDGMENT BY HEHER JA(HOWIE P, HARMS JA, FARLAMJA and CAMERON JAconcurring)SUPREME COURT OF APPEAL28 MAY 2004

2005 (1) SA 16 (A)

The expropriation of a temporaryuse of land and the extraction ofitems of value from it entitle theowner to compensation calculatedby reference to the right lost bythe expropriation and not byreference to the value gained bythe expropriator.

THE FACTSDu Toit was the owner of a farm

614 hectares in extent. The SouthAfrican Roads Board expropriated3.03 hectares of the farm for thepurposes of maintaining andupgrading two roads which ran toits north and its south. Theexpropriation was effected undersection 8(1)(c) of the NationalRoads Act (no 54 of 1971) readwith section 12(1)(b) of theExpropriation Act (no 63 of 1975).The purpose of the expropriationwas described as the temporaryright to use the land for 18 monthsas a borrowpit and access road.

In terms of section 12(1)(a), theamount of compensation to bepaid to an owner for expropriatedproperty other than a right, shallnot exceed the aggregate of themarket price of the property andthe amount required to makegood any financial loss caused bythe expropriation. In terms ofsection 12(1)(b), the amount ofcompensation to be paid to anowner for expropriated propertyin the case of a right to property,shall not exceed the amountneeded to make good any actualfinancial loss caused by theexpropriation.

While exercising its temporaryright to use the land, the Boardremoved gravel from the land andused it. Du Toit claimed that hewas entitled to compensationunder section 12(1)(a) and thatthis should be calculated byreference to the market value ofthe gravel removed from the land.Du Toit had earlier obtained alicence to mine and sell gravel.Sales of gravel prior to theconstruction of the roads wereminimal and had increased onlybecause of the maintenance andupgrading then taking place.

Du Toit’s calculation of thecompensation he was entitled totook into account the marketvalue of the gravel, and amounted

to R240 594. The Minister ofTransport contended that thiscalculation was incorrectly basedon section 12(1)(a) and not section12(1)(b) and that applying thelatter sub-section, the amountpayable was R6 060 being themarket value of the landexpropriated.

THE DECISIONThere is a clear distinction

between sub-section (a) and sub-section (b). The former refers toproperty and the latter to rights toproperty. In the case of thetemporary use of land, the lattersub-section is applicable becausethis concerns rights to property.Section 12(1)(b) was therefore theapplicable provision and notsection 12(1)(a).

Compensation is payable only ifthere has been actual financialloss. The measure of the loss is theloss suffered by the owner, not thegain of the taker. The owner’s losswill be measured by the inabilityto use his land during thetemporary period and to exploitthe gravel on it.

The evidence showed that themarket price for gravel hadincreased only because of theroadworks being conducted bythe Board, and that there wassufficient of the gravel availableelsewhere for the Board to havebeen able to source it off Du Toit’sproperty. Furthermore, it wasclear that the gravel left behindwas sufficient to provide a supplyof gravel on present demand for aperiod of sixty years. It was notclear that Du Toit would havebeen able to supply the Boardwith the gravel it needed becauseto do this, Du Toit would havehad to open a quarry.

The Minister’s offer ofcompensation was therefore thecorrect one in the circumstances.The appeal succeeded.

Property

18

WALLER v PIENAAR

JUDGMENT BY NC ERASMUS JCAPE OF GOOD HOPEPROVINCIAL DIVISION27 MAY 2004

2004 (5) SA 303 (C)

A seller of property who knows ofdefects in the property and thatthe buyer is ignorant of them, theexistence of which wouldmaterially affect the conclusion ofthe sale, is obliged to disclose theexistence of the defects. Ifdisclosure is not made, the salemay be cancelled.

THE FACTSIn August 2000, Waller

purchased from Pienaar certainfixed property situated in Parow.The property was sold‘voetstoots’. After takingoccupation of the house on theproperty, Waller discoveredcracks in it. He was advised thatthe cracks were a result of thehouse having been built onuncompacted sand filling. Itbecame apparent that it would notbe economically feasible to repairthe cracks and that remedialmeasures would probably causefurther damage to the house.Experts appointed by both Wallerand Pienaar agreed that the housewould not be able to withstand anearth tremor or earthquake andthe property should bedemolished.

Waller contended that Pienaarhad fraudulently concealed,alternatively fraudulentlymisrepresented the defects in thehouse. Waller claimed that thesale should be cancelled and theproperty retransferred to Pienaar.Pienaar admitted having effectedsome repair work to the houseprior to the sale but contendedthat this was visible on inspectionprior to the sale. He contendedthat he was unaware of theexistence of the alleged defectsand that, the sale being voetstoots,there were no grounds for itscancellation.

THE DECISIONThe mere fact that a seller fails to

disclose known defects in the itemsold does not found an action forfraud. Withholding thisinformation must be done withthe object of inducing the otherparty to conclude the sale.

In the present case, the defect inrespect of the uncompacted sandfilling was not visible uponinspection of the house. Thecracks in the walls had not beencommented upon in thenegotiations leading to the sale,and accordingly it could beinferred that they were not seenby Waller. The defects in questionwere therefore latent defects andhad to be treated as such.

Pienaar was aware of one of thecracks in the walls prior to thesale. He did not disclose itsexistence. It could be inferred thathe failed to disclose it for somereason and had been under a dutyto disclose it. The duty to discloseit arose from the fact that onlyPienaar was aware of the defectand that Waller would bepurchasing the property ignorantof it.

The sale was therefore cancelledand Waller ordered to re-taketransfer of the property.

Property

19

NEL N.O. v THE MASTER

A JUDGMENT BY VANHEERDEN AJA(HOWIE P, HARMS JA,ZULMAN JA and JONES AJAconcurring)SUPREME COURT OF APPEAL1 APRIL 2004

2005 (1) SA 276 (A)

The Master is entitled to take anyfactors into account indetermining the remunerationpayable to the liquidator of aninsolvent estate when acting interms of section 384(2) of theCompanies Act (no 61 of 1973),including the time spent on thewinding up of the company.

THE FACTSNel and the other appellants

were joint liquidators of Intramed(Pty) Ltd, a subsidiary in theMacmed group of companies.Intramed’s indebtedness hadarisen from the initial acquisitionof its business and its suretyshipobligations in respect of the debtsof its parent company.

Intramed was a well-runcompany and traded profitably asa going concern. The liquidatorsdecided to continue the running ofits business and then sell it as agoing concern. In due course, theysold the business for R154 300 000.

In the first liquidation anddistribution account, theliquidators claimed remunerationof R21,2m. The Master advised theliquidators that he was of theopinion that there was good causeto reduce the remuneration interms of section 384(2) of theCompanies Act (no 61 of 1973) .The Master stated as his reasonsthe fact that the business of thecompany had been a well-run andprofitable company, that its booksof account were written up as atdate of liquidation, and theliquidators did not have as manyonerous duties as is normal in aliquidation of that magnitude. Healso noted that approximatelyR15,4m of the remuneration wascalculated by reference to theamount received from the sale ofthe business.

The liquidators reduced theirremuneration by reducing thepercentage claimed on the sale ofcertain fixed property, andclaimed R18,5m. The Masterrequested details of the time spenton the liquidation, or an estimatethereof. The liquidatorsresponded that they had not kepttime records and were unable tofurnish an estimate.

The Master determined that theliquidators’ remuneration wouldbe R3 250 000. The liquidators

claimed that they were entitled toR21m. They applied for an orderreviewing and setting aside theMaster’s determination and anorder that they were entitled toremuneration in the amount ofR21m.

THE DECISIONSection 384 of the Companies

Act provides that in any winding-up a liquidator shall be entitled toa reasonable remuneration for hisservices to be taxed by the Masterin accordance with the prescribedtariff of remuneration. The Mastermay reduce or increase suchremuneration if in his opinionthere is good cause for doing so.

The discretion vested in theMaster by this section is a wideone. The concept of ‘good cause’ isalso wide and any factor may beapplied in determining whether ornot there is ‘good cause’ forreducing or increasing theremuneration.

Section 151 of the Insolvency Act(no 24 of 1936) provides that anyperson aggrieved by any decisionof the Master may bring it underreview by the court. The extent ofthe powers of a court on revieware however, dependent to someextent on the nature and extent ofthe functions entrusted to theparty making the decision underreview. In the case of the power todetermine the quantum ofremuneration, the Master’spowers should be seen asrelatively unrestricted, and a courtshould be slow to interfere withthe exercise of those powers.

The basis on which theliquidators brought theirapplication was that the Masterbased his determination of aninsistence on the need to assessthe time spent on the liquidationprocedure. It was not brought onthe basis of the Promotion ofAdministrative Justice Act (no 3 of2000). The liquidators were wrong

Insolvency

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in contending that the Master wasnot entitled to take the time spentas a factor in determining theremuneration. They had notfurnished any information, whenthis was requested, indicating

what time was spent on theliquidation. In consequence, theMaster had to base hisdetermination on his ownestimations, as well as the otherevidence he had regarding the

liquidation of the company. In sodoing, he had acted reasonablyand had correctly not taken intoaccount the work done byliquidators in winding-up smaller,unprofitable estates.

The application was dismissed.

It is also clear that the discretion vested in the Master by s 384(2) is a wide one.2 I agree withthe argument advanced both by the Master and by the intervening respondents that, intaxing a liquidator’s remuneration for services rendered, the Master has a duty to satisfyhimself or herself as to the reasonableness of the remuneration arrived at by the application ofthe tariff.This means that where, in the Master’s view, there is ‘good cause’ for departing from thetariff, the Master has the power to do so. The concept of ‘good cause’ is very wide3 and thereis nothing in s 384 of the Act which indicates that it should be interpreted so as to excludeany factor which may be relevant in determining what constitutes reasonable remunerationfor a liquidator’s services in the circumstances of each case. Obviously, what factors arerelevant will vary from case to case, but may certainly includeaspects such as the complexity of the estate in question, the degree of difficulty encounteredby the liquidator in the administration thereof, the amount of work done by the liquidator andthe time spent by him or her in the discharge of the duties involved. If, in the winding-up of acompany, particular difficulties are experienced by the liquidator because of the nature of theassets or some other similar feature connected with the winding-up, this would undoubtedlyconstitute ‘good cause’ entitling the Master to increase the tariff remuneration. On the otherhand, in a situation where, having regard to all the relevant factors, the Master forms theview that the remuneration calculated according to the tariff is excessive in relation to thework done or the responsibility involved, this would likewise entitle the Master – and theMaster will be obliged – to depart from the tariff figures by decreasing the tariffremuneration to an amount which would be reasonable in the circumstances.

Insolvency

21

ANGLO SOUTH AFRICA CAPITAL LTD v INDUSTRIALDEVELOPMENT CORPORATION OF SOUTH AFRICA

A JUDGMENT BY JALI JA(DAVIS JP and SELIKOWITZ JAconcurring)COMPETITION APPEAL COURT28 MARCH 2003

2004 (6) SA 196 (CAC)

A party is entitled to participatein merger proceedings beingconsidered and determined by theCompetition Tribunal withoutnecessarily having a direct andsubstantial financial interest inthe proceedings. Its right toparticipate may be based on anyof the grounds set out in section53(1) of the Competition Act (no89 of 1998).

THE FACTSAnglo South Africa Capital Ltd

gave notice to the CompetitionCommission of two large mergers.The Competition Commissioninvestigated the proposed mergerand concluded that the mergersshould be approvedunconditionally by theCompetition Tribunal.

The objects of the IDC providedfor in the Industrial DevelopmentCorporation Act (no 22 of 1940)included the promotion of newindustries, the improvement ofexisting industries, the promotionof economic empowerment ofhistorically disadvantagedcommunities, the development ofsmall and medium industries, thepromotion of employment-creating activities, leverage offoreign direct investment, and theencouragement of newknowledge-based industries.

The purpose of the CompetitionAct (no 89 of 1998) is to promoteand maintain competition in theRepublic.

Following the CompetitionCommission’s investigation andrecommendation, the IndustrialDevelopment Corporation ofSouth Africa (the ‘IDC’) appliedfor leave to participate in themerger proceedings. Theapplication was granted. Anglocontended that the IDC did nothave a substantial or materialinterest for it to be granted leaveto intervene in the mergerproceedings and it appealedagainst the grant of IDC’sapplication.

THE DECISIONSection 53(1)(c) of the

Competition Act provides forparticipation in a hearing bypersons other than an applicant. Itdoes not qualify the right toparticipation by requiring that theparticipant has an interest in thehearing . While Rule 46 of theTribunal Rules on Intervenorsdoes refer to a person who has amaterial interest, this provisioncannot be used to interpret orqualify the provisions of theCompetition Act. Furthermore,merger proceedings cannot beequated with ordinary litigationwhere the basis for joining in anaction is the substantial andmaterial interest of the party inquestion. The Tribunal is notconfined to submissions orevidence presented by the partiesinvolved or parties having aninterest in the matter.

The objects of the IDC Act wereconsistent with the objects of theCompetition Act. They gave theIDC a direct interest in the mergerand afforded it the necessarystanding to participate in theproceedings concerned with themerger. Section 12A(3) of theCompetition Act set out theparticular basis upon which theIDC was entitled to participate inthe merger proceedings. TheTribunal was correct in allowingits participation in them.

The scope of the IDC’s right toparticipate included the right tocross-examine witnesses, to callwitnesses and adduce evidence.However, its right did not includethe right to examine Anglo’sconfidential information.

The appeal was dismissed.

Competition

22

SHELL AUTO CARE (PTY) LTD v LAGGAR

A JUDGMENT BYTSHABALALA JPDURBAN AND COAST LOCALDIVISION21 JANUARY 2004

2005 (1) SA 162 (D)

A director liable on the basis ofsection 226 of the Companies Act(no 61 of 1973) is entitled to claima contribution from fellowdirectors also shown to be liableunder that section.

THE FACTSLaggar was a managing director

of Shell Auto Care (Pty) Ltd. Shellbrought an action against himbased on section 226 of theCompanies Act (no 61 of 1973).The section provides that nocompany shall make a loan to anydirector, and that any director of acompany who authorises, permitsor is a party to the making of anyloan contrary to the provisions ofthe section shall be liable toindemnify the company againstany loss directly resulting fromthe invalidity of the loan.

Laggar issued a third partynotice claiming a contribution orindemnification from five fellowdirectors of Shell, of one-sixth ofany amount which he was obligedto pay to Shell. Laggar allegedthat the five directors authorisedthe loan to him alleged by Shelland that their action constituted abreach of section 226 of theCompanies Act. He claimed anorder that upon payment by himof the amount claimed by Shell,the other directors would be liableto reimburse him with an amountequivalent to their proportionateshare.

The third parties raised anexception to the claim. Theycontended that a breach of section226 by any of them did not entitleLaggar to claim anindemnification from them.

THE DECISIONThere were no judgments which

specifically determined thequestion whether fellow directorswho were jointly liable undersection 226 should be treated asparties in a solidary co-debtorship, so that if one of thempaid the full amount of the debt,he had a right of recourse againstthe others. English law expresslyprovides that the liability ofdirectors is joint and several.

Given the lack of precedent inSouth Africa, and the approachfollowed by English law on thetopic, and considerations offairness and equity, wouldindicate that the liability ofdirectors should be joint andseveral in the presentcircumstances. Our courtsrecognise the right to contributionin the case of solidary co-debtorship. Accordingly, the rightshould be recognised in the caseof directors who are liable undersection 226 of the Companies Act.

Laggar would be entitled toclaim an indemnification from theother directors. The exception wasdismissed.

Companies

23

SECURITIES REGULATION PANEL v MGXHOLDINGS LTD

A JUDGMENT BY MALAN JWITWATERSRAND LOCALDIVISION23 JUNE 2004

2004 CLR 444 (W)

Once it is established that whathas taken place is in fact anaffected transaction, those whoare a party to an ‘agreement,arrangement or understanding’pursuant to which they or any ofthem co-operate for the purposesof entering into or proposing anaffected transaction and who actpursuant to such agreement,arrangement or understanding areacting in concert.

THE FACTSThe Securities Regulation Panel

brought an action against MGXHoldings Ltd to declare certainshare acquisitions affectedtransactions and direct thedefendants to make a mandatoryoffer in terms of Rules 23.1, 23.1 &8 made in terms of Chapter XVAof the Companies Act (no 61 of1973). The Panel was establishedin terms of the provisions of thatChapter and had made the rulesauthorised under them.

The Panel claimed that MGX andthe Mandy Rebecca Price Trust,acting in concert, acquired morethan 35 percent of the shares inEC-Hold Ltd. This being an‘affected transaction’, they becameliable to make a mandatory offerto the minority shareholders. Italleged that the second defendantwas a concert party to theacquisitions and so became liableto make a mandatory offer to theminorities. The Panel claimed, inthe alternative, that the holding ofthe acquirer increased by morethan five percent in EC-Hold.

The Panel proposed to bring itsaction under amended Particularsof Claim which set out the facts onwhich it brought the actionincluding the details ofacquisitions of shares by MGXand the other defendants. ThePanel alleged that acting on anagreement between themselves,the defendants co-operated toacquire shares in EC-Hold. Italleged further that they hadengaged in a series of transactionsin terms of which they wouldacquire sufficient shares to exceed35 percent of the voting rights atmeetings of EC-Hold and soobtain control of the company.

MGX objected to the claim on thegrounds that the Panel had failedto allege the terms of the allegedagreement, and had failed toallege facts to render the seconddefendant liable in his personalcapacity.

THE DECISIONThe idea of an ‘acquisition’ is

only relevant to an ‘affectedtransaction’. Once it is establishedthat what has taken place is in factan affected transaction, those whoare a party to an ‘agreement,arrangement or understanding’pursuant to which they or any ofthem co-operate for the purposesof entering into or proposing anaffected transaction and who actpursuant to such agreement,arrangement or understanding areacting in concert. In this respect,the purpose of the agreement,arrangement or understanding isirrelevant. The purpose of the co-operation is relevant.

The deeming provisions insection 440A(2) of the Act are notdependent on a person acquiringany securities in the targetcompany. Therefore, a concertparty need not necessarily himselfacquire shares in the targetcompany. This is true under theCity Code as well as under Rule8.2. In the present matter, thePanel expressly pleaded that thesecond defendant was a directorof and shareholder in MGX. Inconsequence, the Panel wasentitled to rely on thepresumption in section440A(2)(ii)(aa).

As far as the obligation of thesecond defendant in his personalcapacity was concerned, the onlyquestion was whether he,personally, was acting in concertwith MGX and the trustees. Theanswer to this depended on thedefinition of ‘acting in concert’,and on whether the conduct of thesecond defendant, personally, fellwithin that definition. In thisregard, sufficient allegationsrelating to the ‘agreement,arrangement or understanding’had been made in the proposedparticulars of claim.

As far as the first objection wasconcerned, it had to beremembered that the ‘agreement,

Companies

24

arrangement, or understanding’covers a whole range ofagreements and other acts fallingshort of being legally bindingcontracts. They need not be‘formal’ and may arise fromconduct. It also does not matterwhat the content or object of thearrangement was.

The contention made by MGXwas that the Panel did not allegethat it was a material term orobject of the agreement thatcontrol would be achieved bypersons acting in concert andthere was an agreement that suchcontrol would be achieved by co-operation. This contention wasincorrect because the definition of

‘acting in concert’ does not requirethat the purpose or content of theagreement must be the acquisitionof control.

The content of the agreementwas, in any event, implicitlypleaded.

The objection was dismissed andthe Panel granted leave to amendits Particulars of Claim.

However, the first defendant and the trustees were (as alleged) not the only persons‘acting in concert’; the group of persons ‘acting in concert’ also included the seconddefendant personally. Rule 8.2 extends the obligation to make a mandatory offer also to‘each of the members of a group of persons acting in concert with him’. As far as theobligation of the second defendant in his personal capacity is concerned, the only questionis therefore whether he, personally, was (as alleged) ‘acting in concert’ with the firstdefendant and the trustees.22. The answer to this question depends on the definition of ‘acting in concert’, and onwhether the (alleged) conduct of the second defendant, personally, fell within thatdefinition. It seems to me that sufficient allegations relating to the ‘agreement,arrangement or understanding’ have been made in the proposed particulars of claim.Paragraph 6.1 of the proposed particulars alleges that there was such an ‘agreement,arrangement or understanding’ between the first defendant, the trustees, and thesecond defendant personally. Paragraph 10 of the proposed particulars of claim supportsthat allegation and show that the second defendant, personally, was the controllingshareholder in and chairman of the board of directors of the first defendant, and was alsothe founder and a trustee of the trust; and that he initiated and managed the purchases ofthe shares by the trust; and to that end he obtained the co-operation of the first defendantto fund the purchases by the trust and ultimately procured a company de facto controlledby him to assume liability to pay for such purchases.

Companies

25

INFO COLOUR PAGES v SOUTHAFRICAN TOURISM BOARD

A JUDGMENT BY SWART JTRANSVAAL PROVINCIALDIVISION7 AUGUST 1998

JOC 818 (T)

Copyright may subsist in amundane item such as a calendarbut the scope for proving thatcopyright does so subsist islimited given the fact that acalendar will always exhibit thesame features.

THE FACTSInfo Colour Pages produced a

desk calendar which wasdesigned to compete with a deskcalendar produced by the SATourism Board. The Board tookthe view that the calendar wouldinfringe its copyright in its owncalendar and requested anundertaking that Info would notpublish the calendar or infringe itscopyright.

Info denied that it had infringedthe Board’s copyright. Itconfirmed that certain features ofits calendar were common tothose of the Board’s but statedthat this was because its calendarwas intended to compete withthat of the Board. Info’s calendarwas different from that of theBoard in a number of respects.

The Board brought a counter-application interdicting Info frominfringing its copyright in another,proposed calendar.

THE DECISIONThe first question was whether

or not the Board’s calendar waseligible for copyright protection.The Board submitted that thecalendar was a drawing andhence an artistic work as definedin the Copyright Act (no 98 of1978).

The calendar did exhibit certainunique features. However, as acalendar, it constituted a layout ofthe most common, everydayinformation. The fact that parts ofit were depicted in different waysin order to accommodate suchthings as a luncheon appointmentindicated the commonplacenature of the calendar. Its designand its content might have beenunique but these were adjuncts toit as a calendar. The calendar itselfcould not be said to be a uniquework in which copyright resided.

Though it could not be saidabsolutely that copyright couldnot subsist in a diary, or in acalendar, to confer copyrightprotection on the calendar in thiscase would be to confer amonopoly in something that isessentially mundane.

The counter-application failed.

Copyright

26

MIXTEC CC v FLUID MIXING EQUIPMENT CC

A JUDGMENT BY SNYDERS JWITWATERSRAND LOCALDIVISION15 OCTOBER 1998

JOC 811 (W)

The production of an artistic workbased on a design which is derivedfrom a previously publisheddesign will, despite similaritywith the artistic work of acompetitor, not be considered aninfringement of copyright.

THE FACTSMixtec CC designed, produced

and sold aerofoil impeller systemsand marketed them using abrochure. The brochureincorporated a photograph of theimpeller system. The impellerswere artistic works as defined inthe Copyright Act (no 98 of 1978).

The second respondent wasemployed by Mixtec for a period.During that period, he had accessto the impeller systems and thebrochures used to market them.After the termination of hisemployment, he became amember of Fluid MixingEquipment CC and thiscorporation began producing andmarketing impeller systems.

Mixtec alleged that the impellersystems produced and sold byFluid Mixing Equipment werecopies of its own systems. Itapplied for an interdict preventingFluid Mixing Equipment frominfringing its copyright in itsimpeller systems.

Fluid Mixing Equipmentcontended that Mixtec’s impellersystem was not original, the basicdesign of the system being foundin text books, variations of it beingdictated by the requirement of theapplication.

THE DECISIONMixtec’s allegation that its

impeller system was unique was amere bald allegation to that effectand there was no evidence thatthe system was unique. Thebrochures showing the impellersystems were similar to each otherand this indicated that there wasvery little distinctiveness aboutMixtec’s system compared to thatof Fluid Mixing Equipment.

Mixtec had not alleged that FluidMixing Equipment hadreproduced any of Mixtec’sdesigns. The fact that FluidMixing Equipment had competedwith Mixtec by producing andselling a similar product did notshow that it had, nor that it hadinfringed copyright. The evidenceshowed that the systems weredesigned to customerrequirements, thus indicating thatthey were not direct copies ofMixtec’s systems.

Mixtec contended that on thestrength of section 26(12) of theAct, it had established a primafacie case. However, theprovisions of this section couldnot be taken to mean or imply thatallegations produced in terms of itremain prima facie proof evenwhen there is an inherentlycredible challenge to it. Such achallenge did exist and it couldnot be ignored.

The application was dismissed.

Copyright

27

PIETERSE v SHROSBREE N.O.SHROSBREE N.O. v LOVE

A JUDGMENT BY PONNAN JA(MPATI DP, STREICHER JA,FARLAM JA and HEHER JAconcurring)SUPREME COURT OF APPEAL23 SEPTEMBER 2004

2005 (1) SA 309 (A)

Section 63 of the Long TermInsurance Act (no 52 of 1998) doesnot vest in the trustee of aninsolvent estate any interest inthe proceeds of the policiesreferred to.

THE FACTSPieterse case

Amelia Pieterse took out threelife insurance policies on her ownlife. Her husband was thenominated beneficiary.

In September 2000 Mrs Pietersecommitted suicide. Her husbandaccepted the benefits of thepolicies. Her estate, which wasinsolvent, was sequestrated andShrosbree and others wereappointed her trustees.

Mr Pieterse contended that hewas the owner of the policies,having become so when heaccepted their benefits. Shrosbreecontended that the policies vestedin the insolvent estate of MrsPieterse by virtue of theprovisions of section 21 of theInsolvency Act (no 24 of 1936).The section provides that theassets of a spouse of an insolventvest in the insolvent’s trustee.

Mr Pieterse’s estate was alsosequestrated and Van Rooyen wasappointed his trustee.Love case

In April 1996, Mr RJ Love tookout a life insurance policy withSantam Life Insurance Ltdinsuring his own life. His motherand his wife, to whom he wasmarried out of community ofproperty, were the beneficiaries.

In 1997, Mr Love ceded thepolicy to Sanlam Brokers assecurity for a debt. In 2000, a MrGehrke was nominated asbeneficiary in substitution for hiswife but on 6 February 2001 thisnomination was withdrawn andhis wife resumed her position asbeneficiary. On 17 February 2001,Mr Love committed suicide. InApril 2001, his estate was finallysequestrated.

The trustee in Mr Love’sinsolvent estate took the view thatthe proceeds of the life policyshould be paid into the deceased

estate as the nomination of hiswife and mother as beneficiariesamounted to a voidablepreference.

Love and her mother brought anapplication for an order that theywere entitled to payment of thefull proceeds of the policy.

THE DECISIONSection 63 of the Long Term

Insurance Act (no 52 of 1998)provides that the policy benefits tobe provided to a person undercertain long-term policies,including life policies, in whichthat person or his spouse is the lifeinsured and which has been inforce for longer than three yearsshall not be liable to be attachedor subjected to execution under ajudgment of court or form part ofhis or her insolvent estate, norafter that person’s death, beavailable for the purposes ofpayment of his debts, if thatperson was survived by a spouse,child or parent.

In the ordinary course of events,the proceeds of an insurancepolicy will go directly to thenominated beneficiary. Thetrustee of such a person’sinsolvent estate would not haveany claim to the policy proceeds.Section 63 does not provideanything to the contrary of thisposition. It does not purport todivert the proceeds of theinsurance policy from anominated beneficiary to theinsolvent estate of a deceasedpolicy holder. It does not conferany interest by the trustee in theproceeds of the policies.

The trustees were therefore notentitle to rely on section 63. In thePieterse case, the application wasaccordingly dismissed. In theLove case, the application wasgranted.

Insolvency

28

HAUPT v BREWERS MARKETINGINTELLIGENCE (PTY) LTD

A JUDGMENT BY HJ ERASMUS JCAPE OF GOOD HOPEPROVINCIAL DIVISION4 MAY 2004

2005 (1) SA 398 (C)

An unrehabilitated insolvent isentitled to sue in respect of rightswhich fell within the insolventestate in cases where the trusteedeclines to sue, unless section23(6) of the Insolvency Act (no 24of 1936) applies to the case.

THE FACTSHaupt brought an application for

an order compelling the seizure ofdocuments in the possession ofBrewers Marketing Intelligence(Pty) Ltd (an ‘Anton Piller’ order).His application was based on aclaim that he was the holder of thecopyright in certain computerprogrammes and the allegationthat Brewers was infringing hiscopyright in them. He alsoapplied for an order restrainingBrewers from in any mannerdealing with the computerprogramme.

At the time Haupt brought theapplication, he was anunrehabilitated insolvent. As partof its opposition to his application,Brewers contended that becausethis was his status, he lacked thelocus standi to bring theapplication. Haupt contended thathe had developed the computerprogramme during his insolvencyand that it was an asset not fallinginto his insolvent estate. Hecontended that in terms of section23(9) of the Insolvency Act (no 24of 1936) he was entitled to takelegal steps in respect thereof.

Section 23(9) provides that aninsolvent may recover for his ownbenefit, the remuneration orreward for work done or forprofessional services rendered byor on his behalf after thesequestration of his estate.

The trustee of Haupt’s insolventestate stated that she was of theopinion that his claim was not onerelating to his insolvent estate andthat it was therefore not necessaryfor her to institute proceedings inrespect of it.

THE DECISIONHaupt’s reliance on section 23(9)

was misconceived. He was notseeking to recover remunerationfor work done or professionalservices rendered by or on hisbehalf after the sequestration ofhis estate, nor was he seeking torecover remuneration for workdone or professional servicesrendered. He was seeking toprotect from infringement hisrights as holder of the copyright toa computer programme and hispotential reward to be derivedfrom commercial exploitation ofthe programme.

In terms of section 20(1) of theInsolvency Act, the effect of thesequestration of the estate of aninsolvent is to vest it in the Masteruntil a trustee is appointed.Section 20(2)(b) of the Actprovides that the proceedingsbrought by Haupt and explicitlydeclined to sue herself. Haupt wastherefore entitled to bring theapplication.

Brewers objection to theapplication was dismissed.

Insolvency

29

BERRANGÉ N.O. v SAMSUDIN

A JUDGMENT BY LEVINSOHN JDURBAN AND COAST LOCALDIVISION18 JANUARY 2005

2005 CLR 25 (D)

A delictual claim may beconsidered a liquidated claim forthe purposes of sequestrationproceedings, where it is clear thatthe claim may be easilyquantified.

THE FACTSSamsudin immigrated to South

Africa in 1994. After that date, heregarded South Africa as hispermanent base for the conduct ofvarious businesses. He returned tohis home in Malaysia to pursuehis business interests there. In1995, he established the NewRepublic Bank, transferring thebusiness of NRB Holdings Ltd, analready-established bank to it.Samsudin had obtained acontrolling interest in NRBH.Other assets held by NRBH wereshares in a company calledSamrand Development HoldingsLimited and shares in MitrajayaHoldings Berhad, a companylisted on the Malaysian stockexchange.

A run on the bank resulted in itbeing placed under curatorship,and thereafter, a scheme ofarrangement under section 311 ofthe Companies Act (no 61 of 1973)was concluded.

While Samsudin was in controlof NRBH, he disposed of some ofits shareholdings in variouscompanies including Mitrajayaand arranged the payment ofdividends from the company toanother company controlled byhim, Khidmas Capital Ltd. He didso without the authority of theboard of directors of NRBH.

The provisional liquidator ofNRBH brought an application forthe sequestration of Samsudin andhis wife, to whom he was marriedin community of property. Aprovisional order was granted.Samsudin opposed theconfirmation of the order.

THE DECISIONA prima facie case had been

made out that the first respondenthad been guilty of dishonestconduct in relation to theMitrajaya shares. The evidenceadduced showed that theapplicant had misappropriated

these shares for his own benefit.This had resulted in NRBHsuffering a very substantial lossrunning into millions of rand.Against this background, onhearing the application at theprovisional stage, it was quiteacceptable to dispense with therequirement of ‘furnishing’ thefirst respondent with a copy of thepapers.

In response to Samsudin’sobjection that the same matter wasalready being dealt with anddetermined in a Malaysian court,it had to be noted that the reliefclaimed in the respectiveproceedings was different. Thesequestration proceedings arebrought in terms of the SouthAfrican insolvency statute. Aconfirmation of the order grantedwill give rise to the variousconsequences set forth in thestatute. One of the jurisdictionalfacts to be established was theexistence of a liquidated debt. Theparties in the Malaysian courtwere different to those cited in thepresent proceedings. While someof the factual issues that will betraversed in Malaysia coincided,the case made out in South Africawas essentially that there are inexistence South African debtswhich arose in this jurisdiction.

As far as the substance of theapplication was concerned, thecumulative effect of the evidenceled to the most probable inferencethat Samsudin knew that he hadtaken the Mitrajaya sharesunlawfully out of the control ofNRBH and had dealt with themfor his own account. Theprovisional liquidator had provedon a balance of probability thatSamsudin perpetrated a theft ofthe Mitrajaya shares.

The claim against Samsudinbeing a delictual claim, thequestion arose whether or not itwas a liquidated claim as requiredby the Insolvency Act. The shares

Insolvency

30

in question were marketablesecurities which as at the relevantdate traded freely on the KualaLumpur stock exchange. Theirmarket value was readilyavailable on any given day. Acourt would therefore not requirethe assistance of expert evidenceto decide an issue which washardly capable of dispute. Themeasure of the applicant’s loss

was the market value of the sharesmisappropriated. That couldeasily be determined at any giventime.

The applicant had successfullyshown that Samsudin committedan act of insolvency as referred toin section 8(a) of the InsolvencyAct. When he left the Republic onthe 9 December 2003 his avowedintention was to continue in the

conduct which had beenevidenced by his conduct in thewinding-up proceedings. This wasto delay the day when he had topay what he hadmisappropriated. The applicanthad established the act ofinsolvency relied upon.

The provisional order ofsequestration was confirmed.

I say at once that the relief claimed in the respective proceedings is different. Thesequestration proceedings are brought in terms of the South African insolvency statute. Aconfirmation of the order granted will give rise to the various consequences set forth in thestatute. It is true to say that one of the jurisdictional facts that needs to be established isthe existence of a liquidated debt. The parties in the Malaysian court are different to thosecited in the present proceedings. While it may be true to say that some of the factual issuesthat will be traversed overseas coincide, the case made out in South Africa is essentiallythat there are in existence South African debts which can be said to have arisen in thisjurisdiction.Each of the factors alluded to in the foregoing quotation weigh heavily with me. In myopinion given the magnitude of the present litigation and the enormous costs incurred sofar, a stay of proceedings would be unfair both to the applicant and to the South Africancreditors of the first respondent.I conclude therefore that the plea of lis alibi pendens ought not to be upheld.

Insolvency

31

DURANDT v FEDSURE GENERAL INSURANCE LTD

A JUDGMENT BY HEHER JA(HARMS JA, NUGENT JA andCOMRIE AJA concurring,CONRADIE JA dissenting)SUPREME COURT OF APPEAL30 NOVEMBER 2004

2005 CLR 122 (A)

When a document incorporatingplural alternatives is signed byone party only, the pluralalternatives should be deleted forthe purposes of interpreting andapplying the document’s recordedterms. An Undertaking by a jointtrustee to pay for hismaladministration in the windingup of an insolvent estate does notoblige that trustee to pay for themaladministration of his fellow-trustee.

THE FACTSDurandt and Van Rensburg were

appointed joint trustees in aninsolvent estate. At that time, theysigned separate documentsentitled ‘Undertaking and Bond ofSecurity’. Each documentrecorded that the signatory boundhimself to administer the estateand distribute the assets properlyaccording to law, and to pay ondemand up to R220 000 to theMaster of the Supreme Court,Cape Provincial Division, asmight be claimed by the Master inrespect of loss or damage sufferedby the estate or any person byreason of a failure to perform hisfunctions properly or because ofmaladministration.

The document was in standardform, and provided in thealternative for single or jointsignatories. It employed the terms‘I/we’, ‘me/us’ and ‘my/our’ forthis purpose and blank spaces hadbeen used to complete detailsspecific to the estate in question.

Fedsure General Insurance Ltdthen bound itself in writing infavour of the Master as surety andco-principal debtor jointly andseverally with each of the trusteesfor the due and properperformance by them of theirduties and functions as jointtrustees of the estate for amountsup to R250 000.

By arrangement between the twotrustees, Van Rensburg attendedto the day-to-day administrationof the estate. In doing so, heabsconded with money receivedfrom the sale of fixed property inthe estate.

The Master called upon Fedsureto honour its guarantee to makegood the loss suffered by theestate. Fedsure paid an amount ofR243 045,52. It then claimedpayment of this amount from thetwo trustees.

THE DECISIONThe documents signed by the

trustees was designed toaccommodate various statutoryappointments and cater for morethan one signatory. Durandt’sname only was inserted as theparty giving the Undertaking.Accordingly, all use of the pluralforms in the document shouldhave been struck out. Reading thedocument in this manner, thereference to ‘jointly and severally’was inappropriate and could haveno proper meaning. To infer thatjoint and several liability wasnevertheless intended would be toimply into the wording, meaningsthat were neither businesslike ornecessary to give it effect.

A co-trustee can undertakeliability for his own loss or defaultalone. There was no evidence thatat the time he signed thedocument, Durandt knew thatVan Rensburg had also beenappointed as a trustee. Thereference in the document to jointand several liability was thereforeto be deleted as it formed on ofthe inappropriate pluralalternatives.

Since the maladministration andthe theft of money was notattributable to Durandt but to VanRensburg, the Master held noclaim against Durandt.Accordingly, there was noprincipal debt attributable toDurandt which would give rise toany obligation by Fedsure to paythe Master in respect of hisadministration of the estate.

Fedsure’s claim was dismissed.

Insolvency

32

TELIMATRIX (PTY) LTD v ADVERTISINGSTANDARDS AUTHORITY OF SOUTH AFRICA

A JUDGMENT BY SNYDERS JWITWATERSRAND LOCALDIVISION26 MAY 2004

2005 (2) SA 264 (W)

A body created by statute whosepurpose is to regulate mattersbetween parties participating inthe competitive economy andwhich has appeal proceduresentitling a party so affected tooverturn an incorrect decisionwill not be delictually liable for adecision made in the course ofachieving that purpose, even if thedecision made might result indamages for that party.

THE FACTSTelimatrix (Pty) Ltd brought an

action against the AdvertisingStandards Authority in which itclaimed damages amounting toR6 457 000. Its claim was based onthe allegation that the ASA hadincorrectly required Telimatrix towithdraw an advertisement it hadissued. Telimatrix had appealedthat decision. The ASA’s decisionwas subsequently reversed by itstribunal.

Telimatrix alleged that the ASA’sdirectorate made its rulingnegligently, outside the ambit ofthe terms of the complaint madeagainst the advertisement and/orarbitrarily, in circumstances inwhich it owed Telimatrix a dutynot to act in that manner, andaware that an adverse rulingwould cause Telimatrix to sufferdamages.

The ASA excepted to the claimon the grounds that even ifTelimatrix succeeded inestablishing that its action hadbeen negligent, and outside theambit of the complaint orarbitrary, the action did not giverise to a delictual claim and theaction was not in breach of anylegal duty owed by the ASA toTelimatrix.

THE DECISIONA person is undoubtedly entitled

to freely exercise their trade, butmust do so within the constraintsof competition, which itself bringsabout interference. The right totrade freely is therefore not anabsolute right.

The judgment handed down inthe case of Knop v JohannesburgCity Council 1995 (2) SA 1 (A)concluded that the existence of anappeal procedure created inlegislation negatived the existenceof a common-law duty of care. Inthe present case, an appealprocedure was also provided forand had been followed. Thisprovided an indication that aclaim for damages would not liein respect of a decision made inerror by the directorate of theASA unless it was taken malafide.

It was clear that the ASA’s owncode was meant to protect theconsumer and ensure fair playamongst advertisers. This aimwould not be achievable if theASA were potentially liable as aresult of an erroneous negligentdecision.

Taking all relevantconsiderations into account, it wasnot just and reasonable that a civilclaim for damages should beafforded to Telimatrix. Theexception was upheld.

Competition

33

LAUGH IT OFF PROMOTIONS CC v SOUTH AFRICANBREWERIES INTERNATIONAL (FINANCE) BV

A JUDGMENT BY HARMS JA(STREICHER JA, NAVSA JA,MTHIYANE JA and COMRIE JAconcurring)SUPREME COURT OF APPEAL16 SEPTEMBER 2004

2005 (2) SA 46 (A)

A trademark holder’s rights maybe infringed by use of the markwhich creates a negativeimpression of the trademarkholder. This may take place whenthe mark is amended so as toconvey a message that will createthis impression.

THE FACTSSouth African Breweries

International (Finance) BV owneda trademark in a label attached toa beer bottle. The label bore thewords ‘Carling Black Label’ andincorporated a specific design aswell as other descriptive wordssuch as ‘America’s lusty, livelybeer’ and ‘Carling Black LabelBeer’.

Laugh It Off Promotions CCmarketed clothing which bore thetrademarks of various partiesincluding that of SA Breweriesand including the Carling BlackLabel mark. An exact replica ofthe mark was however, not used.Laugh it Off amended the mark toread ‘Carling Black Labour’ and‘America’s lusty, lively beer’ wassubstituted with ‘Africa’s lustylively exploitation since 1652'. Itretained the general layout andcolours of the registered mark.

SA Breweries brought anapplication for an interdict againstLaugh it Off, basing its claim onsection 34(1)(c) of the TradeMarks Act (no 194 of 1993). Thesection provides that a trademarkis infringed by the unauthoriseduse in the course of trade inrelation to any goods or serves ofa mark which is identical orsimilar to a registered trademark,if such trademark is well knownin the Republic and the use of themark would be likely to takeunfair advantage of or bedetrimental to the distinctivecharacter or repute of theregistered trademarknotwithstanding the absence ofconfusion or deception.

THE DECISIONThe alleged trademark

infringement was best describedas infringement by dilutionthrough tarnishment. Therequirement of section 34(1)(c)that the use of the mark would belikely to take unfair advantage of,or be detrimental to, thedistinctive character or repute ofthe mark must be interpreted inthe light of the Constitution. Itsapplication must not undulyrestrict a party’s freedom ofexpression. This involves abalancing of the trademarkholder’s rights and the right tofreely express oneself.

Section 34(1)(c) containsstrictures on the trademarkholder’s right: conditions must befulfilled before it may exercise itsright under this section. Theselimitations show that thetrademark holder’s right is notnecessarily inconsistent with theright of free speech. The questionin the present case was whether ornot Laugh it Off’s use of SABreweries’ mark would be likelyto take unfair advantage of, or bedetrimental to, the distinctivecharacter or repute of that mark.

The meaning conveyed by Laughit Off’s use of the mark was thatSA Breweries exploited blacklabour. The impression created bythis was a negative one and onewhich was materially detrimentalto the repute of the trademark.There was no justification for this,and the right to freedom ofexpression provided no basis forit.

An interdict was justifiablygranted against Laugh it Off.

Competition

34

MUTUAL AND FEDERAL LTD v RUMDELCONSTRUCTION (PTY) LTD

A JUDGMENT BY CONRADIE JAand PATEL AJA(HARMS JA, FARLAM JA andPONNAN AJA concurring)SUPREME COURT OF APPEAL21 SEPTEMBER 2004

2005 (2) SA 179 (A)

An insurance policy in respect ofdamage arising from constructionwork containing an exception toliability in the case of loss ordamage due to defective designdoes not entitle the insurer torepudiate liability merely becausethe design fails its own standardsof design.

THE FACTSMutual and Federal Ltd insured

Rumdel Construction (Pty) Ltdagainst fortuitous physicaldestruction of or damage to worksto be undertaken by Rumdel inrespect of two rural roads which itwas to construct for theMozambican Directorate ofNational Roads and Bridges. Theroads were situated in theNampula province and involvedthe opening of gravel roads andthe rehabilitation and constructionof bridges in that province.

Clause 10 of the policy providedthat all risk of loss or damage toproperty arising in consequence ofthe performance of the contractother than the excepted risk werethe responsibility of thecontractor. Clause 11 providedthat the employer was responsiblefor the excepted risks which werethe caused solely due to thedesign of the works, other thanthe contractor’s design. Anexception to the policy providedthat Mutual and Federal was notliable for loss destruction ordamage due to defective design.

In February 1997, Nampulaprovince experience a tropicalcyclone. It severely damagedsome 102 kilometres of roadsconstructed by Rumdel. Rumdelclaimed indemnity under theinsurance policy. The claim wasrepudiated on the grounds that interms of the construction contract,Rumdel was not obliged to repairthe road, and so did not have aninsurable interest. An alternativeground was that the roads weredefectively designed so that thedamage fell outside the policyindemnity.

Mutual and Federal’s defence toRumdel’s claim failed. Itappealed.

THE DECISIONIt could be assumed that Rumdel

insured only its interest in theworks and not damage resultingfrom their design.

In terms of clause 11, the insurerwould not be liable for damageresulting from its defective design,when caused by someone otherthan Rumdel. However, defectivedesign was not the cause of theloss. Storm damage was. Clause11 was therefore inapplicable tothe case.

As far as the exceptions toliability provided for in the policywere concerned, the allegationthat Rumdel had constructedroads of defective designremained unproven. TheMozambican Directorate ofNational Roads wished to havethe roads in the previously war-torn province rehabilitated and itwas accepted that Rumdel wouldachieve this object by providinglow-cost, high-risk, high-maintenance, low-volume and all-weather roads. The roads weremeant to be degraded by weatherand repaired by regularmaintenance.

The standard of road expectedby Mutual and Federal was higherthan that provided by Rumdel.However, there was no indicationthat it failed to meet the standardsexpected by Rumdel’s ownemployer. Mutual and Federal’sstandard was in any eventunmeasurable because although itcontended the roads should havewithstood the cyclone, it failed tostate what the return period ofthis phenomenon was.

The appeal was dismissed.

Insurance

35

LAND AND AGRICULTURAL BANK OF SOUTHAFRICA v PARKER

A JUDGMENT BY CAMERON JA(MPATI DP, BRAND JA,ERASMUS AJA and JAFTA AJAconcurring)SUPREME COURT OF APPEAL23 SEPTEMBER 2004

2005 (2) SA 77 (A)

When trustees purport to act onbehalf of a trust withoutcomplying with the formalrequirements for so acting, asprovided for in the trust deed, thetrust is not bound by theiractions.

THE FACTSMr DW Parker established the

Jacky Parker trust in 1992. Itsbeneficiaries were Parker, his wifeand their descendants. Thetrustees were the Parkers and thefamily attorney, Senekal. Senekalresigned as trustee in 1996.

The trust deed provided thatthere should always be aminimum of three trustees inoffice. Between April and October1998, the Parkers signedsuretyship agreements purportingto bind the trust for the repaymentof loans made by the Land andAgricultural Bank of South Africa.

In September 2000, the bankbrought sequestrationproceedings against the Parkersand the trust. The trust appealedthe confirmation of the applicationbrought against it. Its appeal wasbased on the contention thatbecause insufficient trustees werein office at the time the bank’sloan was granted, the trust did nothave the power to conclude thesuretyship agreements. Thisappeal was brought before theFull Court and it succeeded. Thebank then appealed further.

Trusts

THE DECISIONA trust does not have separate

legal personality. It is comprisedof an accumulation of assets andliabilities, control of which vests inthe trustees. Whether or not thetrust has taken upon itself furtherliabilities or entered into anytransactions is determined bywhether or not the trustees actedas provided for in the trust deed.

In the present case, the trusteesdid not so act because the trustdeed required that there be aminimum of three trustees. Thecapacity of the trust to legallybind itself did not exist as long asthe requirement that there be sucha minimum failed. While this didnot mean that the trust ceased toexist when the number of trusteesreduced to less than three, northat the obligation fell away, themanner in which the trust estatecould be bound was affected.

When the first order confirmingthe sequestration of the trust tookplace, the trusteeshipautomatically terminated. Thismeant that the trustees were inany event, without capacity toopposed the order and withoutcapacity to appeal the granting ofthe order. Their appeal to the FullCourt should therefore have beenstruck from the roll.

The appeal succeeded.

36

IKEA TRADING UND DESIGN AG vBOE BANK LTD

A JUDGMENT BY LEWIS JA(ZULMAN JA, FARLAM JA,NUGENT JA and PONNANN AJconcurring)SUPREME COURT OF APPEAL1 APRIL 2004

2005 (2) SA 7 (A)

Property bonded under a specialnotarial bond in terms of theSecurity by Means of MovableProperty Act (no 57 of 1993) mustbe identifiable from the bonditself and no extrinsic evidencesupplementing the description ofsuch property is admissible.

THE FACTSIn 1991, Woodlam Industries Ltd

passed a general covering notarialbond over its assets in favour ofBOE Bank Ltd. In 1998, it passed aspecial bond in favour of IkeaTrading Und Design AG, listing inthe bond certain assets to whichthe bond pertained. These assetswere listed in a 12-page schedulein three columns which citedDescription, Date of Acquisitionand Supplier. Included were suchitems as ‘Grecon Optimiser’,‘Weing Moulder and Infeed’, ‘RipSaw’, ‘Mercedes Truck’ and‘Truck with crane’.

Ikea contended that the specialbond was registered in terms ofsection 1(1) of the Security byMeans of Movable Property Act(no 57 of 1993). This sectionprovides that if a notarial bondhypothecating corporeal movableproperty specified and describedin a bond in a manner whichrenders it readily recognisable, isregistered, then such propertyshall, subject to any priorencumbrances and whether or notdelivered to the mortgagee, bedeemed to have been pledged tothe mortgagee as effectually as ifit had expressly been pledged anddelivered to the mortgagee.

BOE contended that the assetsbonded in the special bond werenot identifiable from the bonditself and that extrinsic evidence,which would be required toidentify them, was inadmissible.

Real Security

THE DECISIONIt was clear that the assets listed

in the bond were not identifiablesimply from the descriptions theregiven. The test for whether anitem is readily recognisable iswhether it can be identifiedwithout reference to extrinsicevidence. Section 1(1) of the Actprovides so much when it saysthat the property must bespecified and described so that itis readily recognisable.

The implication of this was thatany evidence as to the origin andprogeny of the assets would besupplementary to the descriptiongiven in the bond and would notmerely relate the itemisedproperty to the property itself.Such evidence would beinadmissible.

This conclusion was consistentwith the interpretations given ofthe older Notarial Bonds (Natal)Act (no 18 of 1932) whoseprovisions the Security by Meansof Movable Property Act wereintended to extend.

Identification of the property inquestion is related to the need forpublicity in relation to it and theassociated prevention of fraud.The consequence of this is thatproperty referred to in a notarialbond must be so described that itand no other property can beidentified with it. The bondregistered in favour of Ikea didnot meet these requirements.

BOE’s contention was upheld.

37

SOUTHERNPORT DEVELOPMENTS (PTY) LTD vTRANSNET LTD

A JUDGMENT BY PONNAN JA(HARMS JA, FARLAM JA andCAMERON JA concurring)SUPREME COURT OF APPEAL29 SEPTEMBER 2004

2005 (2) SA 202 (A)

An agreement to conclude anagreement in the future isenforceable. If such an agreementprovides for the future conclusionof an agreement in the event ofdispute between the parties, the‘dispute’ referred to should bewidely interpreted and within thecontext of the conclusion of thefirst agreement.

THE FACTSSouthernport Developments

(Pty) Ltd and Transnet Ltdentered into an agreement whichincluded a provision that if acasino licence application madeby Southernport failed, then forthree years from that date or fromthe date of the award of the casinolicence to a competitor,Southernport would have theoption to lease certain propertieson terms and conditions of anagreement negotiated between theparties in good faith. Should theparties be unable to agree on anyof the terms and conditions of thealternative agreement within 30days of the date of any noticegiven be either party requiringsuch agreement, the disputewould be referred to arbitration,and the arbitrator’s decisionwould be final and binding on theparties.

Southernport brought an actionclaiming that Transnet be requiredto enter into good faithnegotiations with it regarding theterms and conditions of anagreement or lease in respect ofthe properties referred to in theprovision. It relied on theprovisions of the agreemententered into between the parties.

Transnet excepted to the claimon the grounds that theseprovisions were unenforceablebecause there was no agreementregarding the essential terms ofany lease, because the terms of the

agreement relating to the leasewere void for vagueness, becausethe provision amounted to anunenforceable preliminaryagreement, and because the reliefclaimed was not certain anddefinite in its terms andaccordingly incompetent.

The exception was upheld.Southernport appealed.

THE DECISIONThe ‘dispute’ referred to in the

agreement was to be widelyinterpreted and within itscontextual setting. Understood assuch, it would meant that areferral to arbitration should takeplace when the parties wereunable to agree upon terms andconditions of a lease agreement. Inthe circumstances, it appearedthat the parties had come intodispute and accordingly, anarbitrator should have beenappointed as provided for in theexisting agreement.

The agreement that the partieswere to enter into negotiations ingood faith was an enforceableagreement. A duty to negotiate ingood faith was provided for in theparties’ agreement and could beenforced against either of them,with a view to reaching agreementon a lease. The function of thearbitrator would be to completethe essential agreement to beconcluded between the parties,not to formulate that agreement.

The appeal was upheld.

Contract

38

THE ORIGINAL FISHMONGER FRANCHISEHOLDING COMPANY (PTY) LTD v STONE

A JUDGMENT BY MALAN JWITWATERSRAND LOCALDIVISION1 MARCH 2004

2005 CLR 91 (W)

A franchise agreement containingonerous provisions will only beconsidered to be void on thegrounds that it is contrary topublic policy if the provisions areclearly inimical to constitutionalvalues or the interests of thecommunity.

THE FACTS The Original FishmongerFranchise Holding Company (Pty)Ltd concluded a franchiseagreement with Stone and theother defendants. In terms of it,Fishmonger licensed its trademarkto the defendants and providedthem with expertise in the conductof a restaurant business and otherbenefits, in return for payment ofa royalty.

The terms of the agreement wereconsistently framed in favour ofFishmonger. Fishmonger hadcontrol over the external andinternal appearance of therestaurant, was entitled to enforcestandards and had the right ofaccess to the business premisesand financial records and the rightto nominate suppliers of goodsand to control many aspects of thefranchisee’s business.

Stone and the other defendantsdefended an action by Fishmongeragainst them on the grounds thatthe agreement was invalidbecause it offended against publicpolicy.

THE DECISIONOur courts have held that

agreements contrary to publicpolicy are void. An agreementwill be regarded as contrary topublic policy when it is clearlyinimical to constitutional values,or the interests of the community.If however, a contractualprovision is capable ofimplementation in a manner thatis against public policy but thetenor of the provision is neutralthen objectionable illegal conductis absent and the provision willnot be considered contrary topublic policy.

Where the agreement in questioncontains a severability clause, thismay provide a means by whichunobjectionable provisions areupheld as against those which arecontrary to public policy.

While containing many onerousprovisions, an analysis of each ofthe provisions of the franchiseagreement showed that it was notcontrary to public policy. Theagreement was therefore not voidand was valid and bindingbetween the parties.

Contract

39

STANDARD GENERAL INSURANCE CO LTD vCOMMISSIONER FOR CUSTOMS AND EXCISE

A JUDGMENT BY NUGENT JAand LEWIS JA(HOWIE P, CLOETE JA andJONES AJA concurring)SUPREME COURT OF APPEAL31 MARCH 2004

2005 (2) SA 166 (A)

An ‘exporter’ as referred to in theCustoms and Excise Act (no 91 of1964) includes a person who actsas agent for the exporter. A specialremoval bond given in favour ofthe Commissioner for Customsand Excise relates to theobligation to pay duty, suchobligation arising independentlyof the Act and accordingly notbeing subject to the thirty-daylimitation period provided for insection 18A.

THE FACTSIn January 1990, Standard

General Insurance Co Ltd andGem Shipping (Pty) Ltd signed asurety bond, termed a ‘specialremoval bond’, in respect of theobligations of Gem Shipping (Pty)Ltd arising from the export ofgoods held in the Durban harbourarea to places outside of SouthAfrica. In January 1993, Gementered for export and removal inbond from a customs warehousein Durban and transportation toZambia, two bills of entry. It actedas agent on behalf of an entityknown as ‘AMKA’. TheCommissioner for Customs andExcise gave permission for thegoods to be transported to Zambiawithout the payment of duty.

The goods were removed from acustoms warehouse by Gem. Gemfailed to prove that the goods hadbeen taken out of the commoncustoms area and weretransported in accordance withthe declarations made in the billsof entry. In May 1993, Gem wasplaced in liquidation. In December1993, written demand was madeon Gem for payment of duty onthe goods. In September 1994, theCommissioner proved a claimagainst the insolvent estate. InJune 1995, the Commissionerinstituted action against StandardGeneral basing its claim on itssurety bond obligations.

The parties asked the court todetermine whether StandardGeneral was liable for payment ofthe duty, taking into accountsections 18A and 99(5) of theCustoms and Excise Act (no 91 of1964).

THE DECISIONSection 18A provides that a

person who exports goods to anyplace outside the commoncustoms area shall be liable forduty on goods so exported butliability for duty shall cease whenit is proved to the satisfaction ofthe Commissioner that the exportshave been taken out of thecommon customs area. If theexporter fails to submit such proofwithin a period of thirty daysfrom the date on which the goodsconcerned were entered forexport, it shall upon demandforthwith pay the duty.

Gem acted as agent of AMKA.The question accordingly arosewhether or not Gem could beconsidered an exporter as referredto in this section, as opposed toAMKA which was its principal.On a consideration of theprovisions of the Act, it appearedthat the intention of the Act was toimpose liability on all personswho might have an interest in theexport in question. Gem thereforeincurred liability in terms ofsection 18A when in January 1993,it entered for export and removalin bond from the customswarehouse in Durban.

The special removal bondrecorded obligations imposed onGem independently of theprovisions of the Act. This meantthat Standard General alsoundertook such obligations. Beingindependent of the Act, the thirty-day limitation did not apply. Theysubsisted at the time summonswas issued.

Standard General was liable forpayment of the duty.

Suretyship

40

WILDE v WADOLF INVESTMENTS (PTY) LTD

A JUDGMENT BY LABE JWITWATERSRAND LOCALDIVISION30 APRIL 2004

2005 (1) SA 354 (W)

A surety has locus standi to applyfor the liquidation of the companyfor which it stands surety. Aprovisional order only liquidatinga company may be given where itis shown that the company shouldbe wound up on the grounds thatthis is just and equitable butnegotiation between the interestedparties may result in resolution oftheir differences.

THE FACTSWilde and the second applicant

sold to Wadolf Investments (Pty)Ltd a business being the bottlingof natural spring and super-oxygenated water and certainfixed property. Wilde and thesecond respondent boundthemselves as sureties for therepayment of portion of a loanobtained by Wadolf for thepurposes of paying the purchaseprice of R3 610 065.

The parties fell intodisagreement about certainaspects of the sale and inconsequence, Wilde and thesecond applicant brought anapplication to liquidate Wadolf.Prior to their doing so, CloverDanone Beverages Ltd offered tobuy the fixed property and otherassets for R5m. The offer wasrejected by Wadolf. Wilde and thesecond applicant alleged that therejection was grossly negligent.Then, while the application forliquidation was being argued incourt, Wadolf and Cloverconcluded a sale agreement whichincluded warranties and somesuspensive conditions whichremained unfulfilled.

Wilde proceeded to apply for theliquidation of Wadolf on thegrounds that the company wasunable to pay its debts,alternatively that it was just andequitable that the companyshould be wound up.

THE DECISIONWilde’s right to bring the

application (her locus standi)arose from the fact that she wasthe surety for the repayment ofthe loan. The fact that her liabilitywas contingent only did not affectthis right.

It was clear that Wadolf couldnot pay its debts. It owed its banksome R3m, had only R4 333 in itsbank account, and could look onlyto the sale of the business toClover to satisfy its creditors andmeet its obligations.

It was not certain that the sale ofthe business to Clover would becompleted, given the warrantiesand the unfulfilled suspensiveconditions. It therefore appearedthat it was just and equitable thatthe company be wound up,although time should be given forthe parties to resolve theirdifferences. A provisional orderonly liquidating the company wastherefore appropriate.

A provisional order liquidatingthe company was given.

Suretyship

41

CREUTZBURG v COMMERCIAL BANK OFNAMIBIA LTD

A JUDGMENT BY MPATI AP(STREICHER JA, NUGENT JA,HEHER JA AND PONNAN AJAconcurring)SUPREME COURT OF APPEAL1 DECEMBER 2004

2005 CLR 68 (A)

In the absence of a clearstipulation in a contract, theformal validity of a contract willbe determined according to thelaw of the place of contracting. Asurety who determines hissuretyship obligation and whoseprincipal debtor pays the debtthen owing to the creditor is notliable for any subsequentindebtedness of the principaldebtor.

THE FACTSCreutzburg and Eich signed a

deed of suretyship in favour ofCommercial Bank of Namibia Ltd,in respect of the debts of PacificBest Namibia (Pty) Ltd. The deedof suretyship was headed‘Commercial Bank of Namibia’and a sub-heading stated ‘Surety’.Beneath this, the word ‘To:’ wasprinted, and to the right of that,there appeared a stamp imprintreading ‘The Commercial Bank ofNamibia Ltd Risk ManagementHead Office of the CBN Group’.This stamp imprint was not on thesuretyship document at the timethat it was signed.

The deed of suretyship containeda clause which provided that thesuretyship was in all respectsgoverned by and construed inaccordance with the law of theRepublic of South Africa and/orthe Republic of Namibia.

A little over a year after signingthe deed of suretyship, Eichresigned as a director of thecompany and he determined hissuretyship obligations from thatpoint, as he was entitled to do interms of the deed of suretyship.At this time, Pacific Best owed thebank N$597 808,34. Subsequently,there were deposits in excess ofN$3m into its bank account.

Pacific was liquidated in June1998. The bank brought an actionagainst Creutzburg and Eich assureties for payment of R663152,27, alleging that this was theamount then owing by Pacific tothe bank.

Creutzburg and Eich defendedthe action on the grounds that the

deed of suretyship was invalid asit did not comply with section 6 ofthe General Law Amendment Act(no 50 of 1956) in that it failed toidentify the creditor. Eich alsodefended the action on thegrounds that the company’sliability, as at the date on whichhe determined his suretyshipobligations, had beenextinguished by the deposits to itsbank account at least to the extentof the N$597 808,34 he owed atthat date.

THE DECISIONThe deed of suretyship itself was

unclear as to whether the law ofSouth Africa or the law ofNamibia applied. In the lattercase, section 6 of the General LawAmendment Act did not apply.Applying the rule that the lex locicontractus determines theformalities of a contract,Namibian law would apply to thedeed of suretyship, with the resultthat the deed of suretyship wasproperly seen to be valid despitenon-compliance with the SouthAfrican Act.

As far as the position of Eich wasconcerned, the bank was notassisted by a clause in thesuretyship agreement entitling itto continue an existing facilitysubsequent to determination. Thecommon law rule of appropriationof payments applied: the earliestdebts were extinguished first.Eich’s indebtedness would havebeen extinguished by the laterpayments in excess of N$3m.

Creutzburg’s appeal thereforefailed. Eich’s appeal succeeded.

Suretyship

42

BRINK v HUMPHRIES & JEWELL (PTY) LTD

A JUDGMENT BY CLOETE JA(MPATI AP, FARLAM JA, JAFTAAJD concurring, NAVSA JAdissenting)SUPREME COURT OF APPEAL30 NOVEMBER 2004

2005 CLR 75 (A)

A suretyship obligationincorporated in a creditapplication form which isinsufficiently identified mayinduce a mistake on the part ofthe person signing the form thatrenders the suretyship obligationnull and void. This will be thecase where a reasonable person inthe position of the signatorywould have been misled intothinking that no such suretyshipobligation was incorporated inthe document.

THE FACTSGuzto Log Homes (Pty) Ltd

normally purchased goods fromHumphries & Jewell (Pty) Ltd ona cash basis although Humphries& Jewell would allow Guzto totake delivery of goods up to avalue of R10 000 before paying forthem. At a certain point,Humphries & Jewell requiredGuzto to complete its standardcredit application form and thiswas forwarded to Guzto forsignature.

Brink, a director of Guzto, signedthe credit application form. Hewas not then informed that theform incorporated a suretyshipobligation on the person signingit. When signing the form, he wasnot aware of the suretyshipobligation incorporated in it andhe signed it thinking that it didnot incorporate such anobligation, his experience havingbeen that a separate suretyshipagreement would have beenrequired should a creditor wish tohave such security.

Humphries & Jewell brought anaction against Guzto as well asBrink, basing their claim againstBrink on the allegation that he hadbound himself as surety whensigning the credit applicationform. Brink contended that he hadundertaken the suretyshipobligation in error and that thesuretyship agreement should beconsidered void.

THE DECISIONWhile the evidence clearly

showed that Brink had beenmisled, it was also necessary todetermine whether a reasonableman in Brink’s position wouldhave been misled.

The form itself gave noindication that it incorporated asuretyship obligation. Its headingstated that it was a CreditApplication and it required asingle signature only.Furthermore, the place forsignature indicated that thesignatory signed on behalf of thecompany, Guzto. Although theclause incorporating thesuretyship obligation was incapitals, so were precedingclauses and there was insufficientindication to distinguish thisclause from the rest of clauses inthe document.

The application form was a trapfor the unwary and it induced amistake which any reasonableman in Brink’s position wouldhave made. Humphries & Jewellwas therefore not entitled to relyon it in its action against Brink.

Suretyship

43

BARNARD JACOBS MELLET SECURITIES (PTY) LTD vMATUSON, N.O.

A JUDGMENT BY MALAN JWITWATERSRAND LOCALDIVISION16 NOVEMBER 2004

2005 CLR 1 (W)

Money paid into a bank accountseparately created to identifymoney owned by a stated partymay be considered to be claimableby that party, even if the accountname is not cited as that of thatparty. Money originally in suchan account but subsequentlyrefunded to the company or itsliquidators is not identifiableseparately and may not beclaimed under vindicatory orquasi-vindicatory rights.

THE FACTSITI Technology Holdings Ltd

entered into an agreement toacquire a business owned byUniteq Inc, a United Statescorporation, for US$7m. In orderto pay for the business, ITIproposed to issue shares in itselfto five South African institutions.The issue of additional sharesrequired the consent of theJohannesburg Stock Exchange (the‘JSE’).

The institutions committedthemselves to purchasing the newshares subject to suspensiveconditions, including that the JSEwould grant its consent to thelisting. ITI opened a bank accountin its own name and described asthe Vendor Placement CallAccount. The institutions thendeposited a total of some R26 310000 into this account.

The agreement for the purchaseof the business was subject to thesuspensive condition that ITIwould, by 30 June 2000, obtain theapproval to it of the JSE, theSecurities Regulation Panel andthe Reserve Bank of South Africa.The JSE and the Reserve Bankrequired the fulfilment of certainrequirements before theirapproval would be given.

R14 886 732,14 of the fundsdeposited to the VendorPlacement Call Account were paidto Nedbank Ltd in reduction ofITI’s indebtedness to it. A balanceof R5 609 871,88 remained in theaccount. Then, before any of theapprovals were obtained, ITI wentinto liquidation. The acquisition ofthe business and the listing of theadditional shares did notmaterialise.

Following an inquiry in terms ofsection 417 of the Companies Act(no 61 of 1973), in terms of asettlement agreement, Nedbankagreed to repay to the liquidatorsthe amount it had received fromthe Vendor Placement CallAccount.

Barnard Jacobs Mellet Securities(Pty) Ltd, the sponsoring broker inthe issue of the new shares, tookcession of the claims of theinstitutions and claimed paymentof the R14m repaid by Nedbank tothe liquidators and the R5mremaining in the VendorPlacement Call Account.

THE DECISIONThe opening of a separate

account for the deposit of thefunds from the institutionsindicated that the funds would beheld separately from the otherfunds of ITI and pendingfulfilment of the suspensiveconditions. Only upon fulfilmentof those conditions would thefunds become the property of ITI.The reason for the separate fundwas to free the investors from anyrisk pending fulfilment of theconditions.

After money has beentransferred to another party, itcannot be traced and claimed bythe true owner. But when aseparate account is opened withthe intention that it is to be arepository of money to be held onbehalf of a specific party, thefunds in that account may be seento belong to that party rather thanthe account holder. In such a case,money paid into that account canbe traced and claimed by the trueowner. These were the facts of thecase in the present matter. TheVendor Placement Call Accounthad been specifically created forthe deposit of amounts paid bythe institutions and the moneydeposited in it could therefore beseen as rightfully that of theinstitutions.

As far as the R14m refunded byNedbank was concerned, theeffect of the refund was toincrease the free residue accountof the company in liquidation.This, and other amounts receivedby way of liquidation income,meant that there were funds for

Banking

44

distribution to creditors. It wasnot however, a separate asset towhich the institutions could makeany claim as owner, eithervindicatory or quasi-vindicatory.

Barnard Jacobs Mellet wastherefore entitled to payment ofthe balance remaining in theVendor Placement Call Account,ie R5 609 871,99, but not theamount refunded by Nedbank.

25.While it is correct to say that money cannot be followed because there is noearmark, this maxim requires refinement where money, not in specie, but in anaccount is involved: the account itself can be held, not for the account holder, but onbehalf of another. This is illustrated by McEvan NO v Hansa 1968 (1) SA 465 (A),where there was no doubt of the agency, but is also recognised in DantexInvestment Holdings (Pty) Ltd v National Explosives (Pty) Ltd 1990 (1) SASA 736 (A) at 749I-50B. The funds in an account may also ‘belong’ to someone otherthan the account holder or, for that matter, the bank or institution holding themoneys....Nor does the fact that the moneys became the property of Nedcor on deposit detractfrom this conclusion (McEwen’s case 469H-470A and 472A and see Ormerod vDeputy Sheriff, Durban 1965 (4) SA 670 (D); De Hart, NO v Kleynhans 1970(4) SA 383 (O); Rousseau, N.O. v Standard Bank of SA Ltd 1976 (4) SA 104(C); Louw N.O. v Coetzee 2003 (3) SA 329 (A) 334-5). On the reasoning inMcEwen 469A-C, the intention of Nedcor holding the funds is irrelevant to thequestion whether the Applicant is entitled to the funds. Nor does the agreementdeposed to by Van der Merwe that Nedcor would only act on the instructions of ITIaffect the question who is entitled to the funds (McEwen’s case 469D-470H,471DF).

Banking

45

FERNTEX (PTY) LTD v PREMIER SPRINGSINDUSTRIAL MANUFACTURERS (PTY) LTD

JUDGMENT BY BERTELSMANN J9 MAY 2003TRANSVAAL PROVINCIALDIVISION

JOC 838 (T)

To show that copyright vests inan employer by virtue of section21(1)(d) of the Copyright Act (no78 of 1978) it is necessary to showthat the party producing thecopyright work did so under acontract of employment and notunder a contract to render aservice. The employer maynevertheless show that it holdsthe copyright by virtue of anassignment of copyrightsubsequently entered into.

THE FACTSFerntex (Pty) Ltd represented by

a certain Ms Abrahams,contracted with two persons, a MsRetief and Ms Beack, to produceartistic works for the purposes ofusing them in a textile designknown as the TropicanaCollection. Retief and Beack, bothSouth African citizens, thenproduced the artistic works andwere remunerated, it beingconsidered that copyright wouldonly pass to Ferntex whenpayment for the works was made.No written agreement wasconcluded between the parties.

The artistic works were used inthe production of the fabrics.Ferntex then discovered thatPremier Springs IndustrialManufacturers (Pty) Ltd wasusing the same range of textiles asthe Tropicana Collectionincluding the artistic works, andselling these at prices lower thanFerntex was able to offer itscustomers.

Ferntex then concluded writtenagreements of assignment ofcopyright with Retief and Beack.It brought an action for damagesarising from infringement ofcopyright, alleging initially that itsrights arose from the assignment,and thereafter alleging that Retiefand Beack made the artistic worksin the course of their employmentwith Ferntex as contemplated insection 21(1)(d) of the CopyrightAct (no 78 of 1978).

THE DECISIONSince Ferntex ultimately based

its case on the allegation thatRetief and Beack had beenemployed by it, rather than thatthe copyright in the works hadbeen assigned to it, the questionwas whether these twoindividuals were in fact employedby Ferntex.

Abrahams on behalf of Ferntexdid not involve herself in theprocess of the production of theartistic works. Their productiontook almost one year and it wasclear that Abrahams could nothave exercised the participationand control in this process whichwould show that the two artistswere employed by Ferntex. Thefact that the artists were only paidafter the art work was completealso indicated that the completionof the contract was connected tothe completion of the end product.There was no obligation onFerntex to make interimpayments. The relationshipbetween the artists and Ferntexwas not a contract of employment.The claim based on section21(1)(d) had to fail.

Ferntex however, did become theholder of the copyright uponconclusion of the assignmentagreements, as was clear from theterms of those agreements.

Copyright

46

ASCO CARBON DIOXIDE LTD v LAHNER

A JUDGMENT BY HURT J(VAN DER REYDEN J andCOMBRINCK J concurring)NATAL PROVINCIAL DIVISION7 SEPTEMBER 2004

2005 (3) SA 213 (N)

A suretyship obligation whichidentifies the principal debtor as aparty other than the party allegedto be the principal debtor may beconstrued as referring to thatother party if it is clear that theparties intended that other partyto be the principal debtor. Set offmay not operate against asurety’s contingent obligationwhen the surety is entitled to thebenefit of excussion and theprincipal debtor has not beenexcussed.

THE FACTSAsco Carbon Dioxide Ltd

concluded agreements with acompany to be formed and namedas Cryogenic Tanks Ltd. Thepurpose of the agreements was toprovide capital for the company inorder to revive the business of acompany which had failed in thepressurised and liquefied gasindustry. Asco undertook toadvance a loan of 600 000 Swissfrancs. The loan was to be repaidout of the profits of the companywithin five years, after whichtime, 75% of the shares in thecompany would be transferred toLahner.

Clause 6 of the loan agreementprovided that Lahner personallyguaranteed 75% of the loan and itsfull repayment to Asco within aperiod of five years, otherwise allshares were to remain theproperty of Asco.

Some three years later, Ascoapplied for the liquidation of AscoCryotank (Pty) Ltd, a companywhich it alleged was the companyto be formed as intended by theparties who concluded theoriginal agreements. Lahnerintervened in the application andthe application was laterwithdrawn. Asco undertook topay the costs of the applicationand these were taxed at R104863,43.

Lahner threatened to enforcepayment of the taxed costs. Ascocontended that the claim for costscould be set off against the muchlarger claim it had against Lahnerarising from clause 6. It broughtan application for an ordersuspending such enforcement andrestraining the issue or executionof any warrant in respect of thesecosts. It appealed against thedismissal of its application.

THE DECISIONClause 6 could be interpreted as

creating a suretyship obligation.The validity of this suretyshipagreement was however, a matterof doubt because the companyagainst which Asco had broughtthe liquidation proceedings wasnot the same company asdescribed in the agreement. In theabsence of objection by Lahnerhowever, it could be held thatdespite this, the suretyshipobligation was valid in law. Thenature and extent of theundertaking were clear enough tobe enforceable in law.

The extent of the suretyshipobligation was however in somedoubt. It was possible to construeclause 6 as rendering Lahnerliable for 75% of the loancontemplated in that agreement.This would mean that his liabilitywas confined to 450 000 Swissfrancs and that Asco had no claimfor interest on the loan as againstthe surety. Clause 6 however,went on to provide that Lahnerguaranteed full repayment of theloan to Asco within a maximum offive years. Assuming that thisrendered Lahner liable for thepayment of interest, the nextquestion was whether Asco wasentitled to set off thisindebtedness against his claim forpayment of the taxed costs.

Set off in the manner contendedfor by Asco was not possiblebecause the debt due by Lahnerwas not yet due and payable.Lahner had not renounced thebenefit of excussion. Accordingly,any debt due by him wouldremain contingent until theprincipal debtor had beenexcussed. This meant that set offcould not operate against hisclaim for payment of the taxedcosts.

The appeal failed.

Suretyship

47

BIRKENRUTH ESTATES (PTY) LTD v UNITRANSMOTORS (PTY) LTD

JUDGMENT BY GILDENHUYS J(RABIE J and GAUTSCHI AJconcurring)WITWATERSRAND LOCALDIVISION15 SEPTEMBER 2004

2005 (3) SA 54 (W)

The breach of an obligationresting on a landlord to givenotice of the amount of rentaldoes not by itself entitle thetenant to treat the lease ascancelled.

THE FACTSBirkenruth Estates (Pty) Ltd

concluded a lease agreement withUnitrans Motors (Pty) Ltd interms of which Birkenruth letcertain premises to Unitrans from1 July 1994 to 30 June 2004. Thelease provided for stipulatedmonthly rentals for the first fiveyears. For the second period offive years, the lease provided thatthis was to be determined in termsof a rent review procedure.

The rent review procedureprovided that between six andnine months prior to the expiry ofthe first five-year period,Birkenruth would notify Unitransof the rent for the first year of thesecond five-year period, as well asthe rate of escalation applicable inthe following years. It furtherprovided that should the rentaldetermination thus made beunacceptable to Unitrans,Unitrans would be entitled to givenotice thereof, and the rentalwould be determined by a thirdparty.

Birkenruth contended that it hadgiven notice of a rent review asprovided for in the rent reviewprocedure. Unitrans denied that itreceived such a notice and itvacated the premises at the end ofthe first five-year period.

Birkenruth sued for unpaidrental. The parties agreed that theissue for determination waswhether a failure by Birkenruth togive notice in terms of the rentreview procedure meant that thefurther provisions of thatprocedure would not becomeoperative and the lease wouldconsequently terminate as at 30June 1999.

THE DECISIONThe first question was whether

or not a failure by Birkenruth togive the requisite notice under therent review procedure wouldentitle Unitrans to treat the leaseas cancelled.

The procedure provided thatBirkenruth ‘shall’ give notice toUnitrans. This peremptoryrequirement meant that a failureto do so would place Birkenruthin mora, ie in breach, but thiswould not deprive Unitrans of itsright of occupation. There wasnothing in the terms of the lease toindicate that a right of cancellationarose as soon as such breachoccurred.

The word ‘shall’ meant thatBirkenruth was obliged to givenotice. If it failed to do so,Unitrans could compel it to do so.The provision did not merely giveBirkenruth an election toterminate the lease after five yearsby not giving notice. Theprovision was there for the benefitof both parties and the failure ofBirkenruth to give the noticetimeously did not entitle Unitransto cancel the lease or treat it asterminated.

The remaining question waswhether or not failure to give therequisite notice allow the lease tocontinue for the full ten yearperiod?

The parties intended the lease topersist for a period of ten years. Aproper construction of the leaseagreement showed that provisionwas made for a rental pending thedetermination of the rental by thethird party. The lease wouldtherefore continue whether or notnotice was given in terms of therental review procedure.

The issue for determination wasdecided in favour of Birkenruth.

Property

48

LE RICHE v PSP PROPERTIES CC

A JUDGMENT BY YEKISO JCAPE OF GOOD HOPEPROVINCIAL DIVISION30 NOVEMBER 2004

2005 (3) SA 189 (C)

Delay in applying for therestoration of possession afterunlawful deprivation thereof mayconstitute a reason whyrestoration should not be allowed.If sufficient reason is shown forthe delay, such as that the partiesentered into negotiationsfollowing the deprivation ofpossession, then restorationshould be ordered, provided thatall other requirements for themandament van spolie are met.

THE FACTSLe Riche was the owner of

portion 1 of fixed property knownas Kleyn Hagel Kraal. It wasalmost completely surrounded bythe remainder of portion 1. Awatercourse having its origin inthe remainder of portion 1 flowedacross portion 1. In the catchmentarea of the water flowing in thewatercourse, there were two damsboth situated on the remainder ofportion 1. From them, ran asbestospipes which joined together andthen ran across portion 1 to acamping site. To this pipe wasjoined another pipe which ledonto portion 1 and fed a smalldam used for farming andpastoral purposes.

The feeder pipe was connectedin 1984 pursuant to an agreementconcluded between the owners ofthe respective properties at thistime. Le Riche became the ownerof portion 1 in November 1986.

In March 2001, PSP PropertiesCC disconnected the feeder pipewithout notice. In January 2003,Le Riche brought an applicationfor a mandament van spolie, ie anorder directing PSP to restore thewater supply.

THE DECISIONThe disconnection of the pipe

was an act of spoliation. The rightof which Le Riche had beendeprived arose from the

agreement concluded by thepredecessors in title of theirrespective properties. Althoughthis right was not registeredagainst the title deeds of theproperty this did not affect theright to the mandament vanspolie, a remedy designed to effectan instantaneous and possiblyinterim restoration of possession.

The question was whether thetime period which had elapsedbetween the deprivation ofpossession and the bringing of theapplication for restoration ofpossession was a bar to grantingthe application. It was clear thatthe reason for the delay was thefact that the parties had engagedin extensive discussion andnegotiation regarding therestoration of the water supplyand had addressed theDepartment of Water Affairsconcerning the matter.

It is conceivable that delay inbringing an application forrestoration of possession couldresult in loss of the right.However, in the present case, thefacts indicated that Le Riche actedimmediately upon becomingaware of the deprivation of thewater supply. The ensuing eventsdid not prevent him fromobtaining the order he nowsought.

The application was granted.

Property

49

HOPKINS BOERDERY (EDMS) BPK v COLYN

JUDGMENT BY VAN ZYL J(YEKISO J AND KNOLL JconcurringCAPE OF GOOD HOPE PROVIN-CIAL DIVISION20 APRIL 2005

2005 CLR 145 (C)

A title deed description ofproperty to be sold in execution interms of Rule 46 of the Rules ofCourt is sufficient description ofthe property for the purposes ofthe Rule.

THE FACTSColyn and his wife were the co-

owners of certain fixed propertysituated in the district ofSwellendam. They were marriedto each other in community ofproperty.

In 1993, the Land andAgricultural Bank lent R500 000 toColyn and a mortgage bond overthe property was passed assecurity for repayment of the loan.Colyn fell into arrears on therepayments of the loan and in duecourse, the bank brought an actionfor repayment of the loan. InAugust 2003, the bank obtaineddefault judgment against Colynfor payment of R705 014,43. Theproperty was declared executable.

A warrant of execution was thenissued and served on Colyn, in thepresence of his wife. In February2002, a notice of sale in executionwas served on Colyn and inMarch 2002, it was published in anewspaper and the GovernmentGazette. The notice described theproperty as given in the title deed.

The sale in execution took placein April 2002 and it was thenpurchased by Hopkins Boerdery(Edms) Bpk for R720 000. Colynand his wife vacated the propertyin June 2002 and the followingmonth, Hopkins took occupation.

In October 2002, Colyn broughtan urgent application to set asidethe sale in execution. Hecontended that the notice of salein execution failed to comply withthe Rules of Court in that it didnot describe the propertysufficiently and should haveincluded a full description of theproperty including its location.

The application succeeded.Hopkins appealed.

THE DECISIONRule 46(1) of the Rules of Court

provides that a warrant ofexecution must contain a fulldescription of the nature and

location of the fixed property,including the address, so that thesheriff can locate and identify it.Rule 46(3) provides that the modeof attachment of immovableproperty shall be by notice inwriting by the sheriff served onthe owner and other parties. Suchnotice shall be served by means ofregistered letter. Rule 46(7)(b)provides that the executioncreditor shall prepare a notice ofsale containing a short descriptionof the property, its situation andstreet number, if any. Rule 46(7)(e)provides that not less than tendays prior to the sale, the sheriffshall affix one copy of the noticeon the notice board of themagistrate’s court of the district inwhich the property is situated,and one copy thereof at or nearthe place where the sale is to takeplace.

The first question was whetherthe title deed description of theproperty was a short descriptionof the property as provided for inRule 46(7)(b). The shortdescription there provided forcould be contrasted with thelonger description provided for inRule 46(1). It was a descriptionwhich would enable potentialpurchasers to find and identify theproperty. Should they requirefurther information, they couldeasily enough obtain suchinformation. The short descriptionof the property was to beunderstood within the context ofthe Rule as a whole. Therequirements of this sub-rule hadbeen complied with.

As far as Rule 46(3) wasconcerned, Colyn contended thatnotice had not been given to thesecond co-owner of the property,his wife, but only to himself.There was no doubt however, thatColyn’s wife was aware of thenotice. She was accordingly notprejudiced by any failure of noticeto her as formally required by thesub-rule and tacitly accepted the

Property

50

form of notice she did receive.The unreasonably long delay in

bringing the application meant, inany event, that the delay could notbe condoned and the applicationshould have been dismissed.

The tacit acceptance of theposition by Colyn and his wifealso provided a basis fordismissing the application on thegrounds of estoppel.

The appeal was allowed.

aar bestaan geen twyfel nie dat die tweede respondent deurgaans bewus was van dieregstappe wat teen die eerste respondent geneem is, vanaf aanmaning en dagvaardingtot en met die geregtelike verkoping van die eiendom. Sy was trouens meestal persoonlikteenwoordig toe die relevante dokumentasie op hom beteken is en sy was inderdaadpersoonlik teenwoordig ten tye van die geregtelike verkoping. In geen stadium het syenige beswaar geopper teen die feit dat sy as mede-eienaar van die eiendom nie as partytot die lening of daaropvolgende regsprosedures gevoeg is nie. Sy het ook nooit gepoogom haar onverdeelde helfte van die eiendom uit te sluit of andersins te beskerm nie.[51] Op sterkte van hierdie feite is ek heeltemal tevrede dat die tweede respondentsodanig op die hoogte van elke stap in die proses was, insluitende die kennisgewing vanverkoping in terme van reël 46(3), dat sy beskou moet word persoonlike kennis daarvante ontvang het. Sy is klaarblyklik nie benadeel deur die feit dat sodanige kennisgewingnie op haar persoonlik beteken is nie en daar is geen basis waarop hierdie hof sou weierom sonder meer kondonasie vir enige nie-nakoming van die gemelde reël te verleen nie.

Property

51

WATERHOUSE PROPERTIES CC vHYPERCEPTION PROPERTIES 572 CC

A JUDGMENT BY RAMPAI JORANGE FREE STATEPROVINCIAL DIVISION28 OCTOBER 2004

2005 CLR 175 (O)

A property owner is entitled toexercise rights of ownership inrespect of its property but isobliged not to cause intolerableannoyance or discomfort to itsneighbour in so doing. The test forwhether or not that obligationhas been met is determined by theobjective unreasonableness orotherwise of the interference.

THE FACTSWaterhouse Properties CC

owned property neighbouring onthat of Hyperception Properties572 CC. Both properties frontedonto the Vaal River. Bothproperties were expensive andlarge, being 6.5 hectares and 8.0hectares in extent respectively,and they had been purchased forrecreational use. Waterhouse hadpurchased its property because ofthe unique design andconstruction of the houseconstructed on it and the extent ofthe scenic view of the river.

From Hyperception’s property, ajetty had been constructed.Hyperception then built a thatchroof over the jetty. Because of theheight of the roof, the effect of thisconstruction was to obscure theview till then enjoyed byoccupants of the Waterhouseproperty.

Hyperception then brought anapplication for an interdictcompelling Hyperception toremove the roof.

THE DECISIONThe primary basis upon which

Waterhouse claimed the interdictwas common law nuisance, ie thatHyperception was using itsproperty in a manner whichunreasonably interfered with theordinary use, comfort,convenience and enjoyment of its

own property.The effect of the common law of

nuisance is to recognise thereasonable exercise of ownershiprights while limiting that exercisewithin the normal and acceptablelimits of reasonableness. Thisrestricts a neighbour’s right to thefull exercise of his powers andrights of ownership and requiresthat the owner should not causeintolerable annoyance ordiscomfort to his neighbour. Thetest for whether or not anactionable interference by oneproperty owner on the normaluse, enjoyment and convenienceof a neighbour’s property hastaken place is the objectiveunreasonableness or otherwise ofthe interference.

In the present case, theconstruction of the thatch roof hada material and negative influenceon the intended use, enjoymentand purpose for whichWaterhouse had purchased itsproperty. It was not merely aneyesore and the objection was notmerely that it offended theaesthetic sense of the neighbour.The roof constituted a nuisanceand it interfered with the use andenjoyment of the Waterhouseproperty.

Waterhouse had also establishedthe other requirements for aninterdict and was accordinglyentitled to the interdict it sought.

Property

52

BAY CENTRE INVESTMENTS (PTY) LTD v TOWNCOUNCIL OF THE BOROUGH OF RICHARDS BAY

JUDGMENT BY MTHIYANE JA(HOWIE P, NAVSA JA, BRAND JAAND MAYA AJA concurring)SUPREME COURT OF APPEAL23 MARCH 2005

2005 CLR 197 (A)

A provision that a party carriesan obligation in relation toproperty not identified butdescribed in kind requires thatthat party maintain theobligation in relation to thatproperty or its equivalent anddoes not prevent that party fromeffecting adjustments to theproperty, including thedestruction thereof, with a viewto replacement with otherproperty of like kind.

THE FACTSIn August 1982, the Town

Council of the Borough ofRichards Bay sold four plots ofland to Bay Centre Investments(Pty) Ltd for R542 000. In terms ofthe applicable town planningscheme, the property was zonedfor commercial development andcould only be used for generalcommercial purposes.

In terms of clause 10.1.1 of thesale agreement, Bay Centre mightbe required to provide parking formotor vehicles on the property.However, and in lieu of this, BayCentre was also permitted toprovide at its own expense, theequivalent number of parkingbays on adjoining land belongingto the Town Council. This landwas reserved and zoned for publicparking under the town planningscheme.

Clause 10.5 of the agreementprovided that the Town Councilwould accept full responsibilityfor the maintenance of parkingwhich was so provided.

Bay Centre then constructed 437parking bays on adjoining TownCouncil land, at a cost of R381500. Other purchasers of land,who were also propertydevelopers, also constructedparking bays on adjoining TownCouncil land.

In 1994, the Town Council beganconstruction of a shopping centre,restaurant and piaza. Thisinvolved the destruction of 175parking bays, some of which werethose constructed by Bay Centre.

Bay Centre applied for andobtained an interdict to preventthe destruction of the parkingbays. The interdict was grantedbut lifted on appeal. Bay Centreappealed.

THE DECISIONIn clause 10.5, the Town Council

had accepted the obligation tomaintain the parking bays. Thequestion was whether or not thisobligation was to subsist inperpetuity.

The parking facilities which thedevelopers were requested toprovide on Town Council landwere not identified with specificareas of land relating to eachdeveloper. The developer’sobligation related to a number ofparking bays only and this wascalculated proportionately to thefloor size of the building to beerected.

The Town Council’s obligation,as provided for in clause 10.5,therefore required it to maintain anumber of parking bays, ratherthan specific parking bays and inparticular, those constructed byBay Centre. It was not possible toidentify the parking bays as thosesituated as close as possible to theshopping complex constructed bythe Town Council because itsobligation related to neighbouringland reserved for public vehicularparking, and this could includenew parking facilities connectedto the new shopping centre.

It was also significant that theparking bays had to be locatedwhere the public had access. Theimplication of this was that onceBay Centre had constructed them,it ceased to have control overthem and this meant that it couldnot prevent their later destructionby the Town Council.

Bay Centre had not shown thatthere had been any breach ofclause 10.5: the Town Councilintended to construct new parkingbays after demolishing theexisting ones.

The appeal was dismissed.

Property

53

GOLD FIELDS LTD v HARMONY GOLDMINING CO LTD

A JUDGMENT BY NUGENT JA(MPATI AP, STREICHER JA,FARLAM JA and COMRIE AJAconcurring)SUPREME COURT OF APPEAL26 NOVEMBER 2004

2005 (2) SA 506 (A)

An offer to shareholders for theacquisition of their shares is notan offer to the public as providedfor in section 145 of theCompanies Act (no 61 of 1973).

THE FACTSHarmony Gold Mining Co Ltd

wished to acquire the issuedshares in Gold Fields Ltd. It madean offer to acquire a maximum of34,9% of them by 26 November2004 and the balance at a laterstage pending the fulfilment ofcertain conditions.

Harmony’s offer was for 1,275 ofits own shares for one Gold Fieldsshare. The offer was made toexisting shareholders of GoldFields who were able to deliverGold Fields shares to Harmony.

Gold Fields contended that theHarmony offer constituted anoffer to the public for thesubscription of shares as providedfor in section 145 of theCompanies Act (no 61 of 1973). Itcontended that because the offerwas not accompanied by aprospectus, it was prohibited bythat section.

Gold Fields applied for an orderdeclaring that the offer was soprohibited. The application wasrefused and Gold Fields appealed.

THE DECISIONOrdinarily an offer to take up

shares would be for a cashconsideration. However, there isno reason why the considerationcannot be, as in the present case,shares in the offeror company.

The determinative question waswhether or not the offer was madeto the ‘public’ as referred to in thesection.

To qualify as an offer to thepublic, the terms of the offer needto be capable of being offered andaccepted by the public at large,even if it is made to a section ofthe public residing for example ina particular location of thecountry. However, it will not bean offer to the public where theoffer aims to acquire specificprivate property, because in suchacase, the offer must be made to theparticular parties who own thatproperty. The offer cannot beextended to the public at large,nor can it be extended to aparticular section of the public. Itmust be made to those owning theshares. Accordingly, it is not anoffer made to the public withinthe meaning of the term in section145.

The fact that any member of thepublic would be able to acquireshares in Gold Fields, and therebybecome eligible to accept the offer,did not make the offer an offer tothe public. Until such person didacquire shares in Gold Fields, theoffer was not made to that party.

Section 145 therefore did notapply. The appeal was dismissed.

Companies

54

J&K TIMBERS (PTY) LTD v G L & SFURNITURE ENTERPRISES CC

A JUDGMENT BY KOEN AJNATAL PROVINCIAL DIVISION16 SEPTEMBER 2004

2005 (3) SA 223 (N)

Authority to represent a closecorporation may be given by amember of the close corporationwithout the need for a resolutionconferring such authority on theperson so authorised.

THE FACTSJ & K Timbers (Pty) Ltd brought

an action against G L & SFurniture Enterprises CC. Prior totrial, the action was settled and asettlement agreement wasconcluded between the twoparties. The settlement agreementprovided that GL&S would payR250 000 in two monthlyinstalments.

The settlement agreement wassigned on behalf of GL&S by itsattorney and by a certain JKSewpersad. At the time, GL&Shad forwarded a letter on itsletterhead stating that Sewpersadwas authorised to settle thematter.

J&K alleged that GL&S breachedthe terms of the settlementagreement and brought anapplication in terms of Rule 41(4)of the Rules of Court for an orderthat judgment be granted againstGL&S for the amount claimed.

GL&S opposed the applicationon the grounds that the settlementagreement was concluded withoutits authority and without anyresolution having been obtainedfrom it to authorise Sewpersad toconclude the settlement. GL&Salleged that it had not beenconsulted regarding the terms ofthe settlement agreement at thetime it was concluded.

J&K contended that it wasentitled to rely on section 54 of theClose Corporations Act (no 69 of1984) in asserting the authority ofSewpersad to conclude thesettlement agreement. Section 54provides that any member of acorporation shall, in relation to aperson who is not a member andin dealing with the corporation, bean agent of the corporation, and

any act of a member shall bind acorporation unless the member soacting has in fact no power to actfor the corporation and the personwith whom he deals has, or oughtreasonably to have, knowledge ofthe fact that the member has nosuch power.

THE DECISIONThe opposition to J&K’s

application was based essentiallyon the failure to secure aresolution authorising thesignatories to the settlementagreement to conclude thatagreement. The existence of aresolution was not however,essential to the authorisation ofthe settlement agreement. Section54 is specifically aimed atavoiding the application of theultra vires doctrine and thedoctrine of constructive noticewhich applies in respect ofcorporations.

Even in the absence of aresolution from the remainingmember of GL&S therefore, thecorporation was bound to thesettlement agreement.

The ambit of the authoritygranted to Sewpersad was definedin the words of authority given tohim, ‘to settle the matter withTEGS Timber’. This was an open-ended authority and it was notqualified by requiring that thesettlement agreement bereasonable. An inquiry into thereasonableness or otherwise of thesettlement agreement wastherefore inappropriate. It wasclear that Sewpersad was givenauthority to concluded thesettlement agreement and he wasduly authorised to do so.

The application was granted.

Companies

55

PAARWATER v SOUTH SAHARA INVESTMENTS (PTY) LTD

A JUDGMENT BY ZULMAN JA(FARLAM JA and MAYA AJAconcurring)SUPREME COURT OF APPEAL3 MARCH 2005

2005 CLR 112 (A)

An application for the liquidationof a company on the grounds thatit is just and equitable to do somust be based on evidenceshowing on a balance ofprobabilities that the companyshould be finally liquidated.

THE FACTSPaarwater and Bothma were the

two shareholders of South SaharaInvestments (Pty) Ltd whose onlyasset was a 90% shareholding inSouth African Beef (Pty) Ltd. In2002, the two parties had agreedto commence the business ofbuying, slaughtering, processingand marketing cattle and otherbeef products and established thetwo companies for this purpose.The parties also entered into ashareholders’ agreement.

Initially, Paarwater held 51% ofthe shareholding in South Saharabut later, as a result of financialdifficulties, sold part of hisshareholding to Bothma and thenheld 25% of the shares in thecompany.

Paarwater brought anapplication for the liquidation ofSouth Sahara, based on thegrounds that it was just andequitable that the company bewound up. He alleged that thecompany had been based on apartnership understandingbetween himself and Bothma andthat this had failed. He alleged,inter alia, that Bothma had invitedhim to a meeting to discuss thefuture of the company, that whilethey were doing so, his parkedvehicle was repossessed by SABeef’s bankers because it wasunable to pay the repaymentinstalments on the vehicle, andthat this information was given tohim by Bothma shortly after theirmeeting.

South Sahara opposed theapplication. In opposition, Bothmadisclosed that Paarwater hadfailed to return the vehicle whenrequested to do so. He alsodisputed that he had taken overownership and control of the

company and that the company’sbank had made it impossible forPaarwater to operate the companyaccount.

A provisional order liquidatingthe company was given.Paarwater applied for a finalorder liquidating the company.

THE DECISIONAn application for the

liquidation of a company must, atthe provisional stage, show primafacie evidence for the liquidationof the company. At the final stage,the court must be satisfied on abalance of probabilities that a casefor the final liquidation of thecompany has been made out.

The evidence presented to thecourt showed serious disputes inregard to essential mattersrelevant to the question whetherthe company should beliquidated. Paarwater’s evidencefailed to disclose facts that wererelevant. Even assuming that apartnership relationship existedbetween Paarwater and Bothmaand that the conduct of thebusiness of the companydepended on this, the allegationsmade by Paarwater amounted tovague and generalised allegationsof financial misconduct and failedto respond adequately to theanswers given to them by Bothma.

It was not possible to find thatthe relationship betweenPaarwater and Bothma precludedthe proper functioning of thecompany. It had not beenestablished that South Saharacould not be properly managedand the company could not deal atarms length with its co-investorsin SA Beef.

The application was refused andthe provisional order discharged.

Companies

56

HAY MANAGEMENT CONSULTANTS (PTY) LTD v P3MANAGEMENT CONSULTANTS (PTY) LTD

A JUDGMENT BY HEHER JA(SCOTT JA, CAMERON JA,CONRADIE JA and PATEL AJAconcurring)SUPREME COURT OF APPEAL30 NOVEMBER 2004

2005 (2) SA 522 (A)

A submission to the jurisdictionof the court by a peregrinus issufficient to confer jurisdiction ona South African court. Indetermining whether suchsubmission has taken place, acourt will take into account thecumulative effect of the evidencerelevant to that question.

THE FACTSHay Management Consultants

(Pty) Ltd and P3 ManagementConsultants (Pty) Ltd concludedan agreement in London inNovember 1989. In terms of theagreement, Hay granted P3 alicence to operate a managementconsultancy in South Africa inreturn for a royalty payable inLondon. Clause 15 of theagreement provided that theproper law of the contract was thelaw of South Africa and adomicilium address in SouthAfrica was given.

P3 brought an action against Hayin which it claimed repayment ofan amount it alleged had beenoverpaid. Hay defended theaction inter alia on the groundsthat, being a peregrinus, and nothaving submitted to thejurisdiction of the court, the courtdid not have jurisdiction over it.Hay contended that because P3’saction against it was not based onthe agreement but on a cause ofaction aside from the agreement, itcould not depend on the terms ofthe agreement to show asubmission to the jurisdiction ofthe South African court.

THE DECISIONA submission to the jurisdiction

of the court would have beensufficient to confer jurisdiction onthe court in matters relating to theagreement. To give effect to theparties’ intentions, the effect ofsuch submission should properlybe extended to matters goingbeyond the scope of theagreement. A submission to thejurisdiction of the court by Haywas therefore sufficient of itself tofound jurisdiction in the actionbrought against it by P3.

To determine whether Hay hadin fact submitted to thejurisdiction of the court, one hadto look at the cumulative effect ofthe evidence. In the present case,the evidence showed that Haywas an English company with noconnection to South Africa, whichhad chosen a domicilium addressin South Africa. The businessrelating to the agreement was tobe conducted in South Africa andthe applicable law was the law ofSouth Africa.

Hay’s defence was dismissed.

Jurisdiction

57

METLIKA TRADING LTD v COMMISSIONER,SOUTH AFRICAN REVENUE SERVICE

JUDGMENT BY STREICHER JA(CAMERON JA, CONRADIE JA,PATEL AJA and PONNAN AJAconcurring)SUPREME COURT OF APPEAL1 OCTOBER 2004

2005 (3) SA 1 (A)

A court may assume jurisdictionto grant an interdict in personameven if the act in question is to beperformed or restrained outsidethe court’s area of jurisdiction.The court granting the interdictmust be able to enforcecompliance with its order,otherwise it does not havejurisdiction to grant the order.

THE FACTSIn September 2000, Ben Nevis

Holdings Ltd sold an aircraft to apartnership composed of threepartners, Rand Merchant Bank,Hawker Management (Pty) Ltdand Hawker Air Services (Pty)Ltd. At this time, the Hawkerpartners were wholly-ownedsubsidiaries of Firstrand and BenNevis. Ben Nevis was a companyincorporated in the British VirginIslands.

Rand Merchant Bank advancedR171 110 000 to the partnershipfor the purpose of purchasing theaircraft. Ben Nevis depositedapproximately R171m with thebank as security for the loan.Hawker Air Services held anoption to require the other twopartners to withdraw from thepartnership upon all amountsowing under the loan agreementhaving been paid by thepartnership to the bank.

In January 2002, theCommissioner of the SouthAfrican Revenue Service began aninquiry in terms of section 74C ofthe Income Tax Act (no 58 of 1962)into the non-payment of tax byBen Nevis on income receivedfrom the sale of its shares inOutsourcing Ltd, a companywhich was listed on theJohannesburg Stock Exchange.During the inquiry, it wasrevealed that all the South Africanassets of Ben Nevis had beentransferred to Metlika Trading Ltda year earlier.

During February 2002, incometax assessments were raisedagainst Ben Nevis for the tax years1998 to 2000, the total amountthereof being R1 467 844 330. TheCommissioner instituted an actionagainst Metlika, Ben Nevis and itsowner, David King, for an orderdeclaring that various assetspreviously held in the name ofBen Nevis were in fact owned byBen Nevis or its owner, David

King. The Commissioner alsoobtained interim interdicts againstthese parties preventing themfrom disposing of their assets andprefenting hawker Air Servicesfrom selling or ceding the aircraftto any person.

Rand Merchant Bank theninformed the Commissioner that itwould be exercising its rights interms of various breach clauses ofthe loan agreement. At the sametime, it commenced negotiationsfor the sale of its partnershipinterest. These culminated in thesale of its interest for R24 550 450.The aircraft was flown out ofSouth Africa and situated inSwitzerland.

The Commissioner then appliedfor and obtained an order HawkerAir Services take all necessarysteps to procure the return of theaircraft to South Africa. Orders forthe attachment of assets andconfirming and foundingjurisdiction were also confirmed.Metlika and the other appellantsappealed against these orders.

THE DECISIONAn interdict at the instance of a

creditor preventing its debtorfrom disposing of its assets todefeat its creditors, pending theinstitution of an action, has formany years been recognised inour law. The Commissioner hadshown that all the requirements ofsuch an interdict had beenfulfilled and should have bengranted, if the aircraft had been inSouth Africa. The question waswhether or not, given the fact thatthe aircraft was not in SouthAfrica, the interdict should havebeen granted.

If the court granting the interdicthad not been able to enforcecompliance with its order, itwould have had no jurisdiction togrant the order. A court mayhowever, assume jurisdiction togrant an interdict in personam no

Jurisdiction

58

matter if the act in question is tobe performed or restrainedoutside the court’s area ofjurisdiction.

In the present case, the aircraftwas registered in South Africa inthe name of Hawker Air Services.The terms under which HawkerAir Services operated the aircraftindicated that at all times theintention was that the aircraftwould be based in South Africa. It

was therefore clearly within thepower of the partnership andHawker Air Services to procurethe return of the aircraft to SouthAfrica. An order that it do socould be enforced by contempt ofcourt proceedings against thedirectors of Hawker Air Services.The availability of that remedyrendered the order sufficientlyeffective to confer jurisdiction onthe court to grant the order.

The appeal was dismissed.

An interdict at the instance of a creditor preventing his debtor pending an actioninstituted or to be instituted by the creditor from getting rid of his assets to defeat hiscreditors has, for many years, been recognised in our law (Knox D'Arcy at 372C-F). Itis similar to the Mareva injunction in English law. The appellants did not content thatthe respondent had not established the requisite for such an interdict, ie they did notcontent that, had the aircraft been within the are of jurisdiction of the court a quo, therespondent would not have been entitled to an interim restraining order preserving ehaircraft as an asset. They argued that the aircraft was in a foreign country and that thecourt a quo had no jurisdiction to order its return to South Africa because such anorder infringed the sovereignty of the foreign country concerned and because the courta quo had no jurisdiction to order its return to South Africa because such an orderinfringe the sovereignty of the foreign country concerned and because the court a quowould be unable to give effect to its order ...

If the court a quo were not able to enforce compliance with the order which it granted, ithad no jurisdiction to grant it. It is therefore, necessary to determine whether the courta quo could enforce compliance with the order.

Jurisdiction

59

KOTZÉ v SUID-WESTELIKETRANSVAALSE LANDBOU KOÖPERASIE

A JUDGMENT BY FARLAM JA(HARMS JA and VAN HEERDENAJA concurring)SUPREME COURT OF APPEAL26 MARCH 2004

2005 (2) SA 295 (A)

An undertaking to pay linked tothe proposed manner of repaymentis the basis upon which a creditormust bring its case and proof thatthe parties agreed on both aspectsis required for the creditor toestablish its claim.

THE FACTSOn 4 March 1994, Kotzé signed a

document headed ‘Agreement toPay Debt’. In it, Kotzéacknowledged that he was trulyand lawfully indebted to Suid-Westelike Transvaalse LandbouKoöperasie Bpk in the sum ofR191 028,32. It further providedthat Kotze undertook to pay thedebt together with interest, at theoffices of the co-operative in fourinstalments.

The document was signed as anoffer to reach a settlement on theco-operative’s claim against Kotzeand it was returned to the co-operative. The co-operativerejected the offer.

The co-operative brought anaction against Kotze for paymentof its claim. Kotze defended theaction inter alia on the groundsthat the parties had concluded noagreement upon which the co-operative was basing its claim.

THE DECISIONThe co-operative’s cause of

action did not rest on theacknowledgement of

indebtedness only. It alsodepended on the undertaking topay in the manner proposed. Theco-operative therefore needed toshow that it and Kotze had agreedupon these matters.

Because the co-operative hadrejected the offer made by Kotze itcould not rely on the terms of thedocument he had signed. The co-operative however, contendedthat the acknowledgement ofindebtedness was severable fromthe undertaking to pay in themanner proposed by Kotze, andthat although it had rejected theundertaking, it had accepted theproposal for repayment putforward by Kotze.

Properly interpreted however,the document showed that Kotze’sundertaking to pay was linked tothe manner of the repayment.With the rejection of theundertaking to pay, the co-operative therefore also rejectedthe manner of its repayment. Itwas left with no basis for theclaim it brought against Kotze.

The action was dismissed.

Contract

60

ABSA BANK LTD v LOMBARD

A JUDGMENT BY FARLAM JA(SCOTT JA, STREICHER JA,CLOETE JA and VAN HEERDENJA concurring)30 MARCH 2005

UNREPORTED

A creditor holding the right tovary the interest rate payable on aloan, such variation to beexercised by the creditor in itsexclusive discretion from time totime, is obliged to exercise itsdiscretion reasonably. It will beheld not to have done so if it failsto rebut the prima facie evidencepresented by the debtor indicatingan unreasonable exercise of itsdiscretion.

THE FACTSAbsa Bank Ltd lent Lombard

R260 000. Lombard undertook torepay the loan with interest at therate of 15.55% per annum subjectto such increase or decrease in theinterest rate as the bank might inits exclusive discretion determinefrom time to time.

Over the next nine and a halfyears, Lombard paid the bankR701 055,71. During this period,from time to time the bankadjusted the interest rate upwardsfrom the initial rate of 15.55% asthe prime interest rate increased.When from 1990, the primeinterest rate decreased, the bankretained the interest rate chargedto Lombard so that the marginbetween the prime interest rateand that charged to Lombardincreased. This increase wasmaintained thereafter as the primeinterest rate declined even thoughthe bank decreased the interestrate charged to Lombard by onepoint in November 1992. If thebank had decreased the interestrate with the decrease in theprime interest rate then the loanwould have been fully repaid atan earlier stage.

Lombard brought an actionagainst the bank for repayment ofamounts he alleged had beenoverpaid to it, but thereafterwithdrew this action. The bankhowever, counterclaimed forpayment of R51 796,60,contending that this amount was

still owed in terms of the loanagreement. Lombard defendedthe counterclaim on the groundsthat the bank had failed toexercise its discretion reasonablyin adjusting the interest rate inthat it had increased the interestrate when the prime interest rateincreased but had decreased theinterest rate only once when theprime interest rate fell.

THE DECISIONThe evidence presented by

Lombard represented a primafacie case against the bank. Thebank’s evidence had therefore tobe weighed against this case. Inreply to this, the bank had givenno reason for its failure todecrease the interest rate chargedto Lombard.

The fact that the bank’s claim didnot relate to the interest accruingat the earlier time, which it statedhad all been paid, did not affectthe conclusion that could bedrawn from this comparison ofthe evidence presented by bothsides. This was because interestpaid at the earlier time had theeffect of prolonging the life of theloan.

Since the bank did not show thatit had exercised its discretionreasonably in varying the interestrate charged to Lombard, theprima facie case made by himremained unanswered. The bank’sclaim was accordingly dismissed.

Credit Transactions

61

VERULAM MEDICENTRE (PTY) LTD vETHEKWENI MUNICIPALITY

A JUDGMENT BY GALGUT AJPDURBAN AND COAST LOCALDIVISION26 AUGUST 2004

2005 (2) SA 451 (D)

The in duplum rule does not applyin circumstances where theinterest in question does not fulfilthe usual function of interest andshould only apply whenconsiderations of public policyrequire its application.

THE FACTSEthekweni Municipality sold

certain fixed property to VerulamMedicentre (Pty) Ltd for R1 592000. The purchase price waspayable by means of a deposit ofR159 000 and instalments overtwo years, with interest payableon the balance outstanding.

Over the following three years,Verulam paid a total of R1 141153,48. It was then discovered thatwhen the agreement wasconcluded, the municipality hadfailed to comply with certain ofthe provisions of the LocalAuthorities Ordinance (no 25 of1974) and that the agreement wasconsequently invalid. Verulambecame obliged to repayment ofthe amount it had paid over theyears.

The parties however, enteredinto negotiations whichculminated in an agreement thatthe purchase price was R3,5m,that the amount already paid byVerulam would be treated as inpart payment of the price and thattransfer would be given afterVerulam had successfully appliedfor the rezoning of the property.

The rezoning application failed.The agreement provided that inthis event, Verulam could cancelthe agreement and obtainrepayment of the amounts it hadpaid together with interest at therate of 15,5% per annum. Verulamdid cancel the agreement and sobecame entitled to repayment ofthe R1 141 153,48 already paid. Bythis time, the interest thereonexceeded the amount of the

capital repayable to Verulam.The municipality contended that

the in duplum rule applied at thatinterest in excess of the capitalsum was not payable to Verulam.Verulam applied for an orderentitling it to payment of interestin excess of the capital sum due toit.

THE DECISIONThe in duplum rule does not

apply when the interest at issueserves a different purpose fromthe ordinary function of interest. Italso may only apply whenconsiderations of public policywould require that borrowers beprotected by it.

In the present case, the interestwas specifically provided for inthe second agreement, at a timewhen interest had alreadyaccrued, and from the date onwhich payment had originallybeen made, not from the date ofthe second agreement. At thatdate, the interest had alreadyexceeded the amount of thecapital and these factors indicatedthat the parties did not considerthe interest in question to beinterest serving its usual purpose.In such circumstances, the induplum rule did not apply. Theparties’s purpose was to ensurethat Verulam received fullrestitution which included theinterest then exceeding the capitaldue.

The municipality was also notthe sort of party that stood in needof protection of this rule.

The application was granted.

Credit Transactions

62

SA EAGLE INSURANCE CO LTD v KRSINVESTMENTS CC

A JUDGMENT BY NUGENT JA(VAN HEERDEN JA andERASMUS AJA concurring)SUPREME COURT OF APPEAL24 NOVEMBER 2004

2005 (2) SA 502 (A)

An insurer’s termination of aninsurance contract operates fromthe moment of termination andnot retrospectively. Accordingly,it cannot operate so as to deny theinsured the right to claim wherethe right to claim accrued prior tothe date of termination.

THE FACTSSA Eagle Insurance Co Ltd

insured a Land Rover belongingto KRS Investments CC againstloss or damage. Cover did notsubsist in the case of loss ordamage caused while the vehiclewas being driven by a person notlicensed to drive the vehicle. SAEagle also insured KRS fordamage by fire to its restaurantand its contents.

The vehicle was damaged in acollision at a time when it wasbeing driven by a person who wasnot licensed to drive the vehicle.KRS however, misrepresented toSA Eagle that the driver wasproperly licensed to drive thevehicle. KRS submitted a claim toSA Eagle in respect of this loss.

Before the claim was paid, a firedestroyed the restaurant and itscontents. KRS submitted a claimin respect of this loss. SA Eaglediscovered that at the time whenthe damage to the vehicle tookplace, the driver was unlicensed.It refused to pay the claim inrespect of this loss, and alsorefused to pay the claim in respectof the damage caused to therestaurant and its contents.

KRS brought an action forpayment of both claims. It failedin respect of the vehicle claim butsucceeded in respect of therestaurant claim. SA Eagleappealed against the order givenin respect of the restaurant claim.

Insurance

THE DECISIONAssuming that the insured has a

duty to act in good faith towardan insurer for the duration of theinsurance contract, and that thedeliberate submission of a falseclaim is in breach of that duty, theinsurer would be entitled toterminate the contract upon thehappening of these events.

However, the contract remainsvalid and enforceable until suchtime as the insurer does terminateit and the insurer remains entitledand obliged under the contract inrespect of rights that have accruedup until termination. SA Eaglewished to assert was the right toterminate the policy withretrospective effect from the dateof the attempted fraud. Thiswould mean that KRS wouldforfeit rights accruing to it beforetermination.

There was no reason to import arule of law which would allow aninsurer’s termination to have thiseffect. Such a rule would operatepunitively against the insured.

The appeal was dismissed.

63

HOLLARD LIFE ASSURANCE CO LTD v VANDER MERWE N.O.

A JUDGMENT BY VANHEERDEN JA(SCOTT JA, MTHIYANE JA,CONRADIE JA and PONNANAJA concurring)SUPREME COURT OF APPEAL30 NOVEMBER 2004

2005 CLR 135 (A)

An exclusion clause in a lifeinsurance policy must beinterpreted according to the plainlanguage in which it is stated. Aqualifying phrase following twoinstances stated together in whichthe exclusion applies qualifiesboth instances.

THE FACTSHollard Life Assurance Co Ltd

insured the life of Mr JP van derMerwe. Hollard undertook to paythe outstanding liability due byvan der Merwe to Wesbank underan instalment sale agreement inthe event of his death.

An exclusion clause in the policyprovided that no amount wouldbe payable if in Hollard’s opinion,the claim was in any was due ortraceable to or arose from suicide,self-inflicted injury or self-inflicted illness, whether intendedor not, or voluntary exposure todanger or obvious risk of injury.

A few weeks after conclusion ofthe insurance policy, van derMerwe accidentally shot himselfwith his own firearm, and died.

Hollard defended a claim forpayment under the policy on thegrounds that the cause of van derMerwe’s death was self-inflictedinjury and that the exclusionclause applied.

THE DECISIONIn interpreting the insurance

contract, the intention of theparties must be ascertained, firstlyby examining the language usedand attributing to it the plain,ordinary and popular meaning ofit.

In the present case, the ordinaryrules of grammar dictated that thephrase ‘whether intended or not’applied to both self-inflictedinjury and self-inflicted illness andnot only the latter. Were theexclusion clause to be interpretedas applying only to self-inflictedinjury unintentionally done, thiswould negate completely thephrase ‘whether intended or not’.

The fact that in some cases,injury may be inflicted partly bythe insured and partly by anotherparty meant only that in thosecases, one would have to attributethe cause to one of the parties inorder to determine if the exclusionclause applied.

The defence raised by Hollardwas a good one. van der Merwe’sclaim was dismissed.

Contrary to the view of Prinsloo AJ in this regard* , the ordinary rules of grammardictate that the comma before and after the phrase ‘selfinflicted injury or self-inflicteddisease’ in the exclusion clause makes the qualification ‘whether intended or not’(appearing immediately after such phrase) applicable to both instances and not only to‘self-inflicted disease’. Counsel for the respondent conceded as much. Moreover, ascounsel for Hollard correctly contended, Prinsloo AJ’s conclusion that the kind ofunintentional self-inflicted injury which had caused the death of the deceased in thiscase was not covered by the wording of the exclusion clause effectively negates thewords ‘whether intended or not’ in that clause, contrary to the general rules governingthe interpretation of contracts

Insurance

64

FERNTEX (PTY) LTD v PREMIER SPRINGSINDUSTRIAL MANUFACTURERS (PTY) LTD

A JUDGMENT BYBERTELSMANN JTRANSVAAL PROVINCIALDIVISION9 MAY 2003

JOC 838 (T)

To show that copyright vests inan employer by virtue of section21(1)(d) of the Copyright Act (no78 of 1978) it is necessary to showthat the party producing thecopyright work did so under acontract of employment and notunder a contract to render aservice. The employer maynevertheless show that it holdsthe copyright by virtue of anassignment of copyrightsubsequently entered into.

THE FACTSFerntex (Pty) Ltd represented by

a certain Ms Abrahams,contracted with two persons, a MsRetief and Ms Beack, to produceartistic works for the purposes ofusing them in a textile designknown as the TropicanaCollection. Retief and Beack, bothSouth African citizens, thenproduced the artistic works andwere remunerated, it beingconsidered that copyright wouldonly pass to Ferntex whenpayment for the works was made.No written agreement wasconcluded between the parties.

The artistic works were used inthe production of the fabrics.Ferntex then discovered thatPremier Springs IndustrialManufacturers (Pty) Ltd wasusing the same range of textiles asthe Tropicana Collectionincluding the artistic works, andselling these at prices lower thanFerntex was able to offer itscustomers.

Ferntex then concluded writtenagreements of assignment ofcopyright with Retief and Beack. Itbrought an action for damagesarising from infringement ofcopyright, alleging initially that itsrights arose from the assignment,and thereafter alleging that Retiefand Beack made the artistic worksin the course of their employmentwith Ferntex as contemplated insection 21(1)(d) of the CopyrightAct (no 78 of 1978).

Copyright

THE DECISIONSince Ferntex ultimately based

its case on the allegation thatRetief and Beack had beenemployed by it, rather than thatthe copyright in the works hadbeen assigned to it, the questionwas whether these twoindividuals were in fact employedby Ferntex.

Abrahams on behalf of Ferntexdid not involve herself in theprocess of the production of theartistic works. Their productiontook almost one year and it wasclear that Abrahams could nothave exercised the participationand control in this process whichwould show that the two artistswere employed by Ferntex. Thefact that the artists were only paidafter the art work was completealso indicated that the completionof the contract was connected tothe completion of the end product.There was no obligation onFerntex to make interimpayments. The relationshipbetween the artists and Ferntexwas not a contract of employment.The claim based on section21(1)(d) had to fail.

Ferntex however, did become theholder of the copyright uponconclusion of the assignmentagreements, as was clear from theterms of those agreements.

65

CLUTCHCO (PTY) LTD v DAVIS

A JUDGMENT BY COMRIE AJA(MPATI DP, STREICHER JA,NUGENT JA and VANHEERDEN JA concurring)SUPREME COURT OF APPEAL24 MARCH 2005

2005 (3) SA 486 (A)

A shareholder in a companywishing to obtain informationregarding the company, anddepending on Promotion of Accessto Information Act (no 2 of 2002)for this purpose, must show thatthe information is reasonablyrequired for the protection of hisrights as shareholder.

THE FACTSIn 1999, Davis bought 30% of the

shares in Clutchco (Pty) Ltd, asmall company run as a familybusiness. The sole director ofClutchco at that time was Davis’father. Davis’ brother was themanager of the business. Conflictdeveloped between Davis and hisbrother and in 2002, Davis wasremoved as director anddismissed from his employmentwith the company. In that year,Davis had discovered thatClutchco’s credit facilities hadbeen closed by a number ofcompanies due to non-payment ofaccounts by his brother.

Davis attempted to sell hisshares in Clutchco in accordancewith the Articles of Association.Davis was not satisfied with thevaluation of R100 000 placed onhis shares and requested access tothe company’s books of account .Davis stated that he required thisinformation in order to determinethe true financial position of thecompany; with this information hewould be able to reconstruct thefinancial records of the companyand determine the value of hisshares.

Clutchco refused to give Davisthe requested information on thegrounds that the othershareholder was no longerinterested in purchasing his sharesin the company. Davis thenapplied for an order in terms ofsection 78(2)(d)(i) of thePromotion of Access toInformation Act (no 2 of 2002) thatthe books of account be madeavailable to him.

THE DECISIONOn the assumption that the right

of a shareholder to value his

shareholding and fix anappropriate price is a rightprotected by the Act, what had tobe determined was whether therecord of a private body, such as aprivate company, is required forthe exercise or protection of thatright. What must be shown is thatthe person desiring access to therelevant information requires theinformation in the sense that it isreasonably required for theirpurposes.

The Companies Act (no 61 of1973) entitles a shareholder toreceive certain information abouthis company, for example theannual financial statements andminutes of the company’s generalmeetings. This Act does notexpressly entitle a shareholder tothe kind of information requestedby Davis in the present case,although it does make expressprovision for the furnishing ofinformation in othercircumstances.

Viewed in the light of theseprovisions, the Promotion ofAccess to Information Act shouldnot be seen as going beyond themto the extent of allowing theopening up of the books of acompany on the grounds of meresuspicion of impropriety or thatrelatively minor errors orirregularities have occurred.

In the present case, Davis hadfailed to show grounds for thedisclosure of companyinformation which would berequired for the exercise orprotection of his rights.Furthermore, his claims lackedspecificity and failed to show howthe information he sought wouldenable him to place a value on hisshares.

The application was dismissed.

Companies

66

DAVIDS v ABSA BANK BPK

A JUDGMENT BY FOURIE J(KNOLL J and BOZALEK Jconcurring)CAPE OF GOOD HOPEPROVINCIAL DIVISION19 APRIL 2004

2005 (3) SA 361 (C)

A suretyship agreement concludedby a surety who labours under areasonable mistake regarding itsterms will be considered null andvoid on the grounds that therewas a failure of consensus by theparties thereto. A suretyshipagreement containing complexterms which will be difficult tounderstand by the signatoryshould be explained to thesignatory prior to completion.

THE FACTSDavids and two others invested

in a business which traded underthe name Just Foam BK. One ofthe members, a Mr JE Bailey,negotiated with Absa Bank for aloan of R50 000 for Just Foam.Bailey and one other member hadalready signed unlimitedsuretyship agreements. Therequired loan was in addition toan overdraft facility of R150 000already given to Just Foam by thebank and was required because ofa cash-flow problem then beingexperienced by the business. Themembers of the corporationagreed between themselves thatthey would be liable forrepayment of the loan to theextent of R10 000 for each of them.

Bailey informed the othermembers of the corporation of hisnegotiations, and told them thatthe bank required a suretyshipagreement to be signed by them.Davids and the other twomembers then attended a meetingat the bank and signed separatesuretyship agreements. Theseagreements provided that theliability of the surety wasunlimited. The bank official whoattended to the signing of theagreements had not been a partyto the negotiations whichpreceded, and he made nocomments directly related to theterms of the agreements.

The bank brought an actionagainst the three members whohad signed the suretyshipagreements. They defended theaction on the grounds that theyhad signed the agreements bymistake as they had only intendedto sign suretyship agreements thatlimited their liability to R50 000.

THE DECISIONThe question to be answered was

whether the three defendants’mistake had the effect that therewas no consensus between theparties.

It was clear that if the defendantshad been aware that thesuretyship agreements wereunlimited, they would not havesigned them. The bank officialwho attended to the signing of theagreements on behalf of the bankcould not remember the events oftheir signing and was not a partyto the negotiations that preceded.The question was thereforewhether or not the reasonableperson in his position would haveconsidered the defendants wereaccepting potential unlimitedliability when they signed thedeeds of suretyship.

In determining that a reasonableperson would not have consideredthat they were, the relevant factswere that (i) the defendants hadnot, prior to signing the deeds ofsuretyship, undertaken suretyshipobligations of any kind at all, (ii)the negotiations conducted byBailey related only to the loan forR50 000, (iii) the bank only hadthe assurance of Bailey’s report tothe defendants regarding theirunderstanding of the terms of thenew suretyship agreements, (iii)immediately after signing thesuretyship agreements, theoverdraft facility increased by R50000, and (iv) the defendants didnot read the suretyshipagreements before signing them.

In the light of this, a reasonableperson in the position of the bankofficial would have consideredthat the defendants intended tobind themselves of a contingentliability only to the extent of R50000. A reasonable person in theposition of the bank official wouldhave explained the terms of thesuretyship agreement to ensurethat the signatories understoodthat the contingent liability wasunlimited. The bank’s ownevidence was that its officialswere trained to explain themeaning of such documents whenattending to the signature thereof.

Suretyship

67

Furthermore, it was apparentfrom the suretyship agreementsthemselves, that these werecomplex documents with longsentences and a large number ofwords. Being difficult tounderstand, the document

required explanation to thedefendants prior to signature.

The defendants had concludedthe suretyship agreements bymistake. The agreements weretherefore null and void. Theaction failed.

Ek is aan die hand van die volgende getuienis van oordeel dat 'n redelike persoon in dieposisie en met die kennis van Geldenhuys in die gegewe omstandighede bewus sougewees het dat dit waarskynlik nie die ware bedoeling van die appellante was om hulleonbeperk teenoor respondent te verbind vir die skuld van Just Foam nie:(a)Die appellante, anders as Bailey en Klaasen, het hulle nie voor 26 Maart 1998

teenoor respondent verbind vir die skuld van Just Foam nie. Hulle was gevolglik nieteenoor respondent aanspreeklik vir enige skuld van Just Foam wat opgeloop het voor26 Maart 1998 nie.(b)Die onderhandeling tussen Bailey, namens Just Foam, en die respondent, was vir

die verhoging van Just Foam se oortrokke limiet met 'n bedrag van R50 000. Dit wasten aansien van hierdie verhoging wat addisionele borge bekom moes word aangesienrespondent van oordeel was dat die bestaande borgskappe van Bailey en Klaasenonvoldoende was om die verhoging te regverdig.(c)Die oortrokke fasiliteit van Just Foam is onmiddellik na ondertekening van die

borgaktes deur appellante op 26 Maart 1998, met 'n bedrag van R50 000 verhoog.(d)Geldenhuys getuig as volg oor die rede waarom addisionele borge bekom was:'As ek nou reg onthou het hulle ekstra kontrakte of iets bekom wat hulle besigheid sou

uitbrei daarom het hulle mense gekry om vir hulle sekuriteit te staan vir die ekstrageld.'(My beklemtoning.) Die 'ekstra geld' waarna Geldenhuys verwys, is klaarblyklik 'n

verwysing na die bedrag van R50 000 waarmee Just Foam se oortrokke limiet verhoogsou word.(e)Bailey en Klaasen het met respondent oor die verkryging van verdere borge

onderhandel en het appellante dus vir die eerste keer by ondertekening van die betrokkeborgaktes insae daarin gehad. Geldenhuys het dus geen sekerheid gehad dat Bailey enKlaasen die bank se vereistes ten aansien van verdere borgskappe korrek aan appellanteoorgedra het nie.(f)Appellante het nie by ondertekening die betrokke borgaktes, en in besonder die

eerste bladsy daarvan, gelees nie. Hulle sou dus nie uit hoofde van die inhoud van dieborgaktes wat hulle wel gelees het, daarop bedag gewees het dat dit onbeperkteborgaktes was nie.In die lig van voormelde is ek van oordeel dat 'n redelike persoon in die posisie van

Geldenhuys, welwetende dat appellante nie betrokke was by die onderhandelinge metrespondent wat die ondertekening van die borgaktes voorafgegaan het nie, nie misleisou gewees het om te glo dat appellante deur die ondertekening van die borgaktesbedoel het om hulle onbeperk te verbind vir die verpligtinge van Just Foam nie.

Suretyship

68

DE FARIA v SHERIFF, HIGH COURT, WITBANK

A JUDGMENT BY DE VOS JTRANSVAAL PROVINCIALDIVISION19 NOVEMBER 2004

2005 (3) SA 372 (T)

A sale of property in a deceasedestate by a party other than theexecutor in contravention ofsection 30 of the Administrationof Estates Act (no 66 of 1965) isvoid.

THE FACTSDe Faria instituted action against

the executor of the deceased estateof J de Faria. The action wassettled. In terms of the agreementof settlement, the executor agreedthat R165 000 was owing to DeFaria and authorised him toexecute against the estate’simmovable property. De Fariathen issued a warrant of executionout of the magistrates’ court andthe property was sold in executionby the sheriff.

The sheriff was later advised thatthe sale took place incontravention of section 30 of theAdministration of Estates Act (no66 of 1965) and he refused toproceed with transfer of theproperty.

Section 30 provides that noperson charged with the executionof any writ shall sell any propertyin a deceased estate before theexpiry of a thirty-day noticeperiod following the publicationof notice for the lodgement ofclaims in the Government Gazette.

De Faria applied for an ordercompelling the sheriff to obtainpayment of the balance of thepurchase price and implement theterms and conditions of sale.

THE DECISIONThe sale as concluded

constituted a direct contraventionof the provisions of section 30. The

question was what effect that hadon the validity of the sale itself.

The tests to be applied indetermining whether invalidityresults from a contract concludedin contravention of a statutoryprovision are: (i) the word ‘shall’is to be considered peremptoryrather than directory, (ii) aprovision stated in negative formshould be considered peremptoryrather than directory, (iii) aprovision stated positivelywithout sanction when itsrequisites are not carried outshould be considered directoryonly, (iv) having regard to thescope and object of a provision, ifwhen its terms are carried outinjustice or fraud results, theprovision should be considereddirectory only.

Applying these considerations inthe present case, section 30 was tobe considered as peremptory andcontravention thereof shouldresult in a contract beingconsidered void. The scope andobject of the whole Act is toensure that no preference is givento any one creditor, that the rightsof heirs are protected and that theliquidation and distribution ofassets takes place according to itsrules and procedures. To this end,only the executor is empowered tosell fixed property and a sale byany other party will result ininvalidity of the contract.

The application was dismissed.

Contract

69

MPAKATHI v KGHOTSO DEVELOPMENT CC

JUDGMENT BY ERASMUS AJA(HARMS JA, STREICHER JA,JAFTA AJA and PONNAN AJAconcurring)SUPREME COURT OF APPEAL20 SEPTEMBER 2004

2005 (3) SA 343 (A)

The contract concluded at a salein execution is a contract betweenthe purchaser and the sheriffacting as the executive of the law.

THE FACTSMpakathi’s house was sold in

execution of a judgment obtainedagainst her by a local authority.Transfer was effected to thepurchaser, Kghotso DevelopmentCC. The member’s interest in thecorporation was held by acouncillor of the local authority.

In terms of the conditions of sale,the purchaser was obliged to payall costs relating to the transfer ofthe property and the sale inexecution. The purchaser assumedliability for all outstanding debtsowed to the local authority inrespect of taxes, levies and servicefees relating to the property. Thepurchaser was obliged to furnish aguarantee for payment of thebalance of the purchase price. Thelocal authority was entitled toappoint the conveyancer totransfer the property and it wasexempt from liability for anylatent defects to the property.

Mpakathi contended that thesale in execution was incontravention of section 40 of theGauteng Local GovernmentOrdinance (no 17 of 1939) whichprovides that a municipalcouncillor shall not enter into acontract with the council in whichhe or she has any direct or indirectpecuniary interest.

Mpakathi brought an action foran order declaring that the salewas null and void in that it waseffected in contravention of thisstatute.

THE DECISIONThe contract concluded at a sale

in execution is a contract betweenthe purchaser and the sheriffacting as the executive of the law.Mpakathi contended however,that the terms of the conditions ofsale indicated that a contractbetween the local authority andthe purchaser had been formed atthe sale in execution.

The terms of the conditions ofsale stated no more than the localauthority’s rights as alreadyexisting in terms of statutoryprovisions or the Rules of Court.The provisions related to rightswhich were conferred on the localauthority. Being in favour of thelocal authority, they were notprovisions which a councillorcould enjoy or take advantage of.There being no pecuniary interestwhich the councillor could haveenjoyed, there was nocontravention of the Ordinance.

The action was dismissed.

Contract

70

VAN DER SPUY v MALPAGE

A JUDGMENT BY ALKEMA AJNATAL PROVINCIAL DIVISION22 APRIL 2005

2005 CLR 207 (N)

A contract concluded contrary toa statutory provision whichindicates an intention by thelegislature to prohibit some actwill be considered void andunenforceable. Breach of contractby malperformance will entitlethe innocent party to cancel thecontract if the breaches viewedcumulatively constitute asufficiently serious breach.

THE FACTSMalpage agreed to construct a

trailer and deliver it to Van derSpuy. Malpage was amanufacturer as defined in theNational Road Traffic Act (no 93of 1996). He had not registered asa manufacturer in terms of theAct.

Malpage built the trailer, anddelivered it to Van der Spuy.Malpage did not register thetrailer in terms of the Act. Van derSpuy paid Malpage R12 000 forthe trailer. Following delivery,Van der Spuy took the view thatthe trailer had not beenconstructed properly and in aworkmanlike manner and thatsecondhand parts had been usedin its construction, contrary to theparties’ agreement that newmaterial would be used.

Van der Spuy brought an actionfor repayment of the R12 000 paidfor the trailer and tendered returnof the trailer to Malpage. Van derSpuy contended that he wasentitled to cancel the contractbecause its performance wascontrary to the terms of theNational Road Traffic and becauseMalpage was in breach of thecontract through positivemalperformance.

Van der Spuy’s action failed inthe magistrate’s court. Van derSpuy appealed.

THE DECISIONSection 5 of the National Road

Traffic Act provides thatmanufacturers of motor vehiclesshall register as manufacturersand shall register motor vehiclesmanufactured by them. Motorvehicles include trailers in termsof the Act. Regulationspromulgated under the Act repeatthis prohibition.

The question was whether thefailure to comply with theseprovisions rendered the contractvoid and unenforceable. Todetermine this, it was necessary todetermine the intention of thelegislature. The provisions ofsection 5 expressly prohibited thedistribution and sale of trailerswithout the registrationformalities having been compliedwith. The purpose of theprovisions is to prevent the use ofunsafe vehicles on the roads. Thispurpose will be defeated ifunregistered vehicles are sold andused on the roads. The intentionof the legislature was therefore toprohibit the sale of trailerswithout registration having takenplace. The result of this is that anysuch sale would be contrary tostatute and therefore void andunenforceable. The contractconcluded by the parties was voidand unenforceable.

Van der Spuy was in any event,entitled to cancel the contract onthe grounds of breach having beencommitted by Malpage. Viewedcumulatively, the various defectsin the construction of the trailerentitled Van der Spuy to cancelthe contract and claim restitution.

The appeal succeeded.

Contract

71

SOUTH AFRICAN FORESTRY CO LTD v YORKTIMBERS LTD

A JUDGMENT BY BRAND JA(STREICHER JA, CAMERON JA,JAFTA JA and PATEL AJAconcurring)SUPREME COURT OF APPEAL9 SEPTEMBER 2004

2005 (3) SA 323 (A)

A contractual term cannot beimplied merely because it isreasonable or that it promotesfairness and justice between theparties in a particular dispute.Such a term can be implied only ifit can be considered a termintended by the parties to apply totheir contract.

THE FACTSOver thirty years ago, York

Timbers Ltd’s predecessor and theGovernment of South Africaentered into an agreement, thepurpose of which was to supplyYork Timbers with softwood sawlogs from two governmentplantations in the Mpumlangaprovince. The Government ofSouth Africa was later substitutedby the South African Forestry CoLtd (Safcol).

Clause 3.2 of the agreement, asamended, provided that log pricescould be revised once per year.Should the parties be unable toagree on revised prices, the matterwould be referred to the Ministerof Environmental Affairs, and ifthe Minister was of the opinionthat no agreement could bereached, the matter would bereferred to arbitration.

Clause 4.2 provided that theagreement would subsist for anunspecified period, provided thatthe parties had agreed mutually inadvance as to the termsapplicable, which terms wouldapply for a five-year period. In theevent of no agreement beingreached regarding the applicableterms, the matter was to bereferred to the Minister ofForestry for decision. Should theMinister’s decision not beacceptable to both parties, theagreement would terminate at theend of that five-year period.

Clause 4.3 provided thatnotwithstanding the provisions ofclause 4.2, York could cancel theagreement on giving to Safcol oneyear’s written notice of itsintention to do so.

Clause 4.4 provided that Safcolcould cancel the agreement ongiving York written notice of atleast five years, if in the opinion ofthe Minister of Forestry it was inthe interests of the wood industryor the country as a whole toterminate the agreement.

In the nineties, Safcol attemptedto increase the prices at which thesoftwood saw logs were sold.York refused to accept theproposed price increases until1994 when it did so in terms of asettlement agreement. Safcol alsoproposed an amendment to thecontractual terms. York opposedthis. Safcol proposed new priceincreases. York opposed this.Safcol obtained an order to theeffect that it was entitled toproceed to arbitration in terms ofclause 3.2. York opposed theapplication of any further priceincrease on the grounds thatSafcol approached the wrongMinister. Safcol also approachedthe Minister to take a decision interms of clause 4.4. York opposedthis on the grounds that theMinister was biased. The Ministerin fact expressed no opinion asrequired by clause 4.4.

In 1999, Safcol instituted actionfor an order declaring that itsagreement with York hadterminated. It based its claim onthe contention that the agreementhad become impossible offulfilment, alternatively that Yorkhad breached the terms of theagreement.

THE DECISIONThe supervening impossibility

contended for by Safcol had notbeen established. The Ministerhad not refused to express anopinion as provided for in clause4.4. It was true that the Minister’sparticipation was required interms of clause 3.2, and theparties’ intention was frustratedby his failure to participate. Butthere were mechanisms by whichthe Minister could be compelledto participate. He was subject to astatutory duty, in terms of section30(2) of the Forestry Act (no 72 of1968) to exercise his discretion,and was subject to the compulsionof these provisions.

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The impossibility relied on bySafcol was therefore a self-createdimpossibility. It was broughtabout by the South Africangovernment while it was a partyto the agreement.

As far as the alleged breach ofcontract by York was concerned,Safcol relied on an implied termthat it was obliged to act inaccordance with the dictates ofreasonableness, fairness and goodfaith when Safcol exercised itsrights in terms of clauses 3.2 and4.4.

A term cannot be implied merely

because it is reasonable or that itpromotes fairness and justicebetween the parties in a particulardispute. It can be implied only if itis considered to be good law ingeneral. The implied termcontended for by Safcol couldtherefore not be accepted as aterm to be implied in all contracts.A court will only enforcecontractual terms which wereintended by the parties shouldoperate between them. Thequestion therefore was whether ornot York failed to comply with itsobligations not to frustrate or

delay Safcol in the exercise of itsrights under clause 3.2.

The background facts showedthat York had indeed failed tocomply with its obligations. It haddone its utmost over a period ofseveral years to prevent or delaySafcol from obtaining theMinister’s opinion, with theobvious intention of avoidingarbitration.

The agreement had beencancelled by Safcol followingYork’s breach. Accordingly, Safcolwas entitled to the order it sought.The action succeeded.

Our courts’ approach in deciding whether a particular term should be implied provides anillustration of the creative and informative function performed by abstract values such asgood faith and fairness in our law of contract. Indeed, our courts have recognised explicitlythat their powers of complementing or restricting the obligations of parties to a contract byimplying terms should be exercised in accordance with the requirements of justice,reasonableness, fairness and good faith (see eg Tuckers Land and DevelopmentCorporation (Pty) Ltd v Hovis 1980 (1) SA 645 (A) 651C-652G; A Becker & Co (Pty)Ltd v Becker and Others 1981 (3) SA 406 (A) 417F-420A; Ex Parte Sapan Trading (Pty)Ltd 1995 (1) SA 218 (W) 226I-227G). Once an implied term has been recognised, however, itis incorporated into all contracts, if it is of general application, or into contracts of a specificclass, unless it is specifically excluded by the parties (see eg Alfred McAlpine & Son (Pty)Ltd v Transvaal Provincial Administration 1974 (3) SA 506 (A) 531D-H). It follows, inmy view, that a term cannot be implied merely because it is reasonable or to promote fairnessand justice between the parties in a particular case. It can be implied only if it is considered tobe good law in general. The particular parties and set of facts can serve only as catalysts inthe process of legal development.[29] Conceptually, Safcol’s argument is therefore well founded in the principle that a termcan be implied if it is dictated by fairness and good faith. The further progression of theargument is, however,flawed by misconception.

Contract

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ROBERTS v MARTIN

A JUDGMENT BY NDITA AJCAPE OF GOOD HOPEPROVINCIAL DIVISION31 JANUARY 2005

2005 (4) SA 163 (C)

A contract intended to be inwriting may be concluded merelyupon the signature of one party tothe agreement when the signatureamounts to the acceptance of anoffer, the terms of which arerecorded in the documentaryrecord of the agreement.

THE FACTSMartin offered to sponsor

Roberts’ daughter as a tennisplayer. He instructed his attorneysto draw a sponsorship agreement.They did so, and the agreementwas presented to Roberts and hisdaughter for signature.

Roberts and his daughter signedthe agreement but Martin did not.For a period of six months, Martinsponsored Roberts’ tennis playingactivities. He paid for aprofessional player to assist herwith her training and paid for herparticipation in the Super Seventournament in Gauteng. He spenta total of approximately R250 000in sponsoring Roberts.

Martin then stated, through hisattorneys, that he had decided notto pursue the sponsorshipagreement and considered himselfnot bound thereby.

Roberts then brought anapplication for an order for theenforcement of the sponsorshipagreement. Martin opposed theapplication on the grounds that noagreement between the partieshad been concluded andconsequently, there was no basisupon which enforcement could berequired.

THE DECISIONWhen Martin delivered the

written agreement to Roberts hemade an offer with the expressintention that, if he and hisdaughter were satisfied with thecontents thereof, they would sign

the agreement. The signing of theagreement would constitute anunequivocal act of acceptance.

These events would constitutethe offer and acceptance by whicha contract is formed and wouldbring about a concluded contractbetween the parties. It couldtherefore be inferred that acontract between the parties hadbeen concluded.

This conclusion also followedfrom the fact that Martin did notattempt to amend the terms of theagreement as recorded in thedocument prepared by hisattorneys, and in fact acted inaccordance with those terms byfunding Roberts’ tennis activities.

The facts of the case indicatedthat the terms of the contractbetween the parties wasembodied in the writtendocument signed by Roberts.

As far as the application forenforcement was concerned, theobligations resting on Martin werenot so onerous as to indicate therewould be difficulty in performingthem. It would be undesirable fora court to refuse an order forenforcement of a contract simplybecause this would beinconvenient to the party againstwhom such an order was made.An alternative order for thepayment of damages would notbe appropriate where the onlyparty who might be prejudiced bythis would be Roberts.

The application succeeded.

Contract

74

WELCH’S ESTATE v COMMISSIONER,SOUTH AFRICAN REVENUE SERVICE

A JUDGMENT BY MARAIS JA(ZULMAN JA and CLOETE JAconcurring, CONRADIE JA andNUGENT JA dissenting)SUPREME COURT OF APPEAL21 MAY 2004

2005 (4) SA 173 (A)

A donation is a disposition ofassets which is essentiallygratuitous. A transfer of assets inthe satisfaction of obligations isaccordingly not a donation anddonations tax is not applicable tosuch a disposition.

THE FACTSIn terms of a divorce settlement

agreement, Welch was obliged topay maintenance to his wife andminor child. It was provided thatin discharge thereof, Welch wouldsettle certain assets upon a trust tobe created with the specificintention of providing income forthe purposes set out in theagreement. In the event of thetrust being unable to provide thenecessary income, Welch himselfwould become obliged to do so.His obligations were to be bindingon his estate.

The trust deed which wassubsequently signed provided forthe settlement of certain assets onthe trust and provided for thetrust to accept additional amountsin the future on the same termsand conditions and for thepurposes set forth in the trustdeed.

The terms of the trust deed alsoprovided for income and capitalbeneficiaries, some of whom werenot persons to whom maintenanceobligations were owed. MrsWelch and the minor child weregiven a priority in regard to thedistribution of any income.Surplus income might beaccumulated and added to thecapital by the trustees.

Before transfer of the assets tothe trust, Welch died. The assetswere transferred to the trust bythe executors, in order to meet theobligations of Welch as set out inthe settlement agreement. TheCommissioner, South AfricanRevenue Service, contended thatthis constituted a donation andthat donations tax on the whole ofthe assets so transferred waspayable.

Welch’s executors disputed thiscontention and denied that therewas any obligation to paydonations tax.

THE DECISIONWelch agreed to transfer the

assets to the trust not because hewished to make a gift to the trustbut because he wished to enablethe trustees to fulfil hismaintenance obligations. He had asecondary purpose in providingfor the administration of surplusassets and income because thishad become necessary because theassets and the income from themwould be more than sufficient forthe purposes of fulfilling hismaintenance obligations.

A donation is defined in section55(1) of the Income Tax Act (no 58of 1962) as any gratuitous disposalof property including anygratuitous waiver or renunciationof a right. The common law testfor a donation is whether or notthe disposition has beenmotivated by pure liberality. Theoverriding idea for any donationis that it is gratuitous. Whether ornot a disposition constitutes adonation is therefore to bedetermined by whether or not it isgratuitous.

Whatever view one took of themeaning of ‘donation’ however,there was no basis on which itcould be said that Welch’s transferof assets to the trust constituted adonation. The settling of theseassets on the trust was effected asa quid pro quo to Welch’smaintenance obligations. Ittherefore did not constitute adonation and donations tax wasnot payable on the disposition.

Contract

75

ESTATE AGENCY AFFAIRS BOARD v McLAGGAN

A JUDGMENT BY LEWIS JA(HOWIE P, CAMERON JA, NAVSAJA AND BRAND JA concurring)SUPREME COURT OF APPEAL31 MARCH 2005

2005 CLR 230 (A)

The offences provided for in theIncome Tax Act (no 58 of 1962)and the Value Added Tax Act (no89 of 1991) in respect of a failureto pay the SA Revenue Servicetaxes collected as an employerand as a vendor involve anelement of dishonesty, whether ornot the party convicted hasproperly filed returns required interms of these Acts.

THE FACTSMcLaggan was convicted under

the Income Tax Act (no 58 of 1962)and the Value Added Tax Act (no89 of 1991) of failing to payemployees’ tax deducted fromemployees’ salaries and of failingto pay value-added tax and usingthe amounts in question for thebenefit of his company or himself.Charges of theft which had beenbrought against McLaggan werewithdrawn.

McLaggan was an estate agentand registered as such under theEstate Agency Affairs Act (no 112of 1976). He always properlyrendered tax and VAT returns tothe South African RevenueServices.

Seven days after McLaggan hadbeen sentenced, the Estate AgencyBoard wrote to McLaggan statingthat he had been rendereddisqualified as an estate agentpursuant to section 27(a)(ii) of theEstate Agency Affairs Act in thathe had been convicted of anoffence involving an element ofdishonesty. It requested him toimmediately cease carrying onbusiness as an estate agent andreturn his fidelity fund certificate.

Section 27(a)(ii) of the Actprovides that no fidelity fundcertificate shall be issued to anestate agent who has at any timebeen convicted of an offenceinvolving an element ofdishonesty, provided that if theboard is satisfied that the issue ofsuch a certificate to such a personwill be in the interests of justice,

the board may issue a fidelityfund certificate.

The Board applied for an orderdeclaring that McLaggan’s fidelityfund certificate had lapsedbecause of his convictions.McLaggan opposed theapplication on the grounds that hehad not been convicted of anoffence involving an element ofdishonesty and that the Board hadno grounds for withdrawing hiscertificate.

THE DECISIONThe effect of the provisions of

sections 26 and 27 were to preventan estate agent from operatingwithout a fidelity fund certificate.The question was whether theoffences in respect of whichMcLaggan was convicted didinvolve an element of dishonesty.

McLaggan informed the SARevenue Service of the amountsowed to it, but neverthelessretained those amounts when theyshould have been paid to it. Thiswas dishonest, not only to theRevenue Service, but also to theemployees whose salaries werededucted. An employer whodeducts tax from employees anduses it for any purpose other thanpaying the fiscus, or who collectsVAT and fails to remit this to theSA Revenue Service is dishonest.It follows that dishonesty is anelement of the offences of whichMcLaggan was convicted.Accordingly, McLaggan’s fidelityfund certificate automaticallylapsed when he was convicted.

The appeal was allowed.

Contract

76

CONSTANTIA INSURANCE CO LTD vCOMPUSOURCE (PTY) LTD

A JUDGMENT BY BRAND JA(HOWIE P, FARLAM JA, LEWISJA and VAN HEERDEN JAconcurring)SUPREME COURT OF APPEAL30 MARCH 2005

2005 CLR 244 (A)

If a party unreasonably relies onan impression created by anothercontracting party that that othercontracting party agrees tocertain provisions of theiragreement, then the contract isentered into upon the basis of amistake and those provisions willnot form part of the contract.

THE FACTSCompusource (Pty) Ltd brought

an action for damages for R590magainst three companies in theCape High Court. It was orderedto furnish security for costs in thesum of R800 000. Compusourcecould not pay this sum of money,and so it approached LegalProtection Services (Pty) Ltd forassistance. LPS stated that it couldissue a post dispute or postlitigation insurance policy (PDL)and this could be used ascollateral for the purposes offurnishing the R800 000 required.

LPS represented by a certain MrFegen, handed a batch ofdocuments to Compusource,which was represented by acertain Mr Rust. The documentscontained information about thePDL as well as a specimen copy ofthe insurance policy. Rust skimread some of the informationdocuments and glanced at thespecimen copy of the insurancepolicy. He then completed anapplication form for cover to theextent of R800 000. Fegentransmitted the application formto Constantia Insurance Co Ltd,whose representative, a MrBinnington, perused it andresponded with a quotation forPDL insurance to the limit of R800000. The quotation gave twooptions for payment of thepremium. The second option,which Compusource accepted,proposed a ‘no win no premium’option, under which no premiumwould be payable in the event ofCompusource failing in itslitigation against the threecompanies with a costs orderbeing awarded against it, and apremium of R594 815,37 would bepayable in the event of itsucceeding against them andobtaining a costs order againstthem.

After Compusource hadaccepted the quotation, Constantia

issued the policy. It was stated inthe same terms as the specimenpolicy originally shown to Rust.

Shortly thereafter, Compusourcetook out a second PDL insurancepolicy, this time insuring for itsown costs in the litigation. Thepremium payable on the ‘no winno premium’ option was R769547,74 and the terms of this policywere essentially the same as thefirst, except that Constantiarequired an inception fee of R57000.

The defendants in the litigationbrought by Compusource raisedfurther defences to the claim. Thelegal advisers for Compusourceadvised that this considerablyworsened its chances of success.The same advice was given by asecond opinion obtained fromsenior counsel. Compusourceconveyed this information toConstantia which then invoked itsright to cancel the policies interms of clause 3.3 contained ineach of them.

Clause 3.3 provided that ifanything was discovered thatmaterially affected the insured’sprospects of success in thelitigation, the insurer would beentitled to cancel the policy.Clause 3.5 provided that if theinsurer exercised this option, thepremium will have been fullyearned. Rust had not been awareof the existence of these clausesand had not intended to bindCompusource to them.

Constantia claimed payment ofthe premiums provided for in thePDL policies, an amount of R1,3m.

THE DECISIONIf there had been a mistake

between the parties whichinduced the contracts of insurancewhich they entered into, therewould be grounds for finding thatthe contracts were null and voidab initio. Whether or not such amistake did induce the contracts

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was dependant on whether or notConstantia’s reliance on theimpression created by Rust asrepresentative of Compusourcethat he was agreeing to clauses 3.3and 3.5 was reasonable. If areasonable party in the position ofConstantia would have realisedthat despite his apparentexpression of agreement, Rust didnot actually consent to be boundby these provisions, they couldnot be said to be part of theiragreement.

There was no doubt that therepresentatives of Constantialaboured under themisapprehension that Rust onbehalf of Compusource hadagreed to be bound by theprovisions of clauses 3.3 and 3.5and this misapprehension was

caused by Rust. The question waswhether a reasonable person inthe position of Constantia’srepresentatives had labouredunder this misapprehension?

While there were a number offactors which would induce areasonable person to labour underthis misapprehension, ofimportance was the fact that thiswas a novel form of insurance,that the policies were sold toCompusource on the basis that nopremium would be payable unlessit succeeded in the litigationwhich would provide the sourceof the funds necessary to pay thepremium and that Compusourcecould not pay the R1,3m premiumunless it was successful. In theknowledge of these facts, the

reasonable person would haverealised that if the clauses wereinvoked, Compusource wouldhave no hope of meeting itsobligations under them. In such acase, Compusource would nothave been able to continue withthe litigation, would have had topay its own costs and those of itsopponents, and be obliged to paythe premium of R1,3m. In thesecircumstances, a reasonableperson would have serious doubtsabout whether Rust would haveagreed to this obligation.

A reasonable person would haveasked Rust if he understood thenature and import of these clausesand would have explained themto him, if he did not.

Constantia’s claim wasdismissed.

In all the circumstances, I am therefore satisfied that the reasonable personin the position of Fegen and Binnington would not have inferred simplyfrom the fact of Rust’s acceptance of the quotations that his true intentionwas to bind Compusource to the provisions of clause 3.5. I believe that thereasonable person would thus have enquired from Rust at the time whetherhe appreciated the meaning of the clause. If his answer was in the negative,as we now know it would have been, the reasonable person would haveexplained the clause to him. The legal consequence of the failure by Fegenand Binnington to follow this approach, is that Compusource cannot be heldbound by the provisions of a clause to which its representative did not andcould not reasonably have been thought to agree.

Contract

78

ESKOM v BOJANALA PLATINUM DISTRICT MUNICIPALITY

A JUDGMENT BY COMRIE AJA(SCOTT JA, CAMERON JA,HEHER JA and JAFTA AJAconcurring)SUPREME COURT OF APPEAL30 NOVEMBER 2004

2005 (4) SA 31 (A)

Claims by a taxpayer in respect oftaxes erroneously paid are subjectto the three-year prescriptionperiod and not the thirty yearprescription period provided for insection 11(a)(iii) of thePrescription Act (no 68 of 1969).

THE FACTSEskom paid regional services

taxes to the Bojanala PlatinumDistrict Municipality. After suchtaxes were imposed by anotherlocal authority, Eskom objected tothe additional assessment and thisobjection was upheld both in theSpecial Income Tax Court and onappeal in the Supreme Court ofAppeal.

After its success in the SpecialIncome Tax Court, Eskomcontinued to pay these taxes.However, it later brought anaction for recovery of the taxesfound not to have been payable. Itclaimed R316 416,02 fromBojanala for taxes paid betweenJanuary and December 1998, andR2 636 595,94 from the secondrespondent, the RustenburgDistrict Council, for taxes paidbetween January 1991 andDecember 1998. Summons wasserved on 3 December 2001.

Bojanala and the secondrespondent contended thatEskom’s claim had becomeprescribed in terms of thePrescription Act (no 68 of 1969).Eskom contended that it had notprescribed, because section11(a)(iii) of the Act applied. Thesection provides that the period ofprescription applicable to anydebt in respect of any taxationimposed or levied by law is thirtyyears. Bojanala contended that theapplicable debt was not a debt inrespect of taxation imposed orlevied by law but was an ordinarydebt to which the period of threeyears applied.

THE DECISIONAssuming the Regional Services

Council levies constituted‘taxation’ the question still to beanswered was whether whatEskom paid was such taxation orsomething else. The councilswhich had imposed the levies onEskom had no power to do sounder the legislation that enabledthe levying of such taxes.Consequently, what they hadreceived was not taxation in thatsense.

The phrase ‘in respect of’ insection 11(a)(iii) was not to beconstrued as meaning that allclaims resulting from taxationwere referred to but that all claimsancillary to the taxation imposedby the State were referred to. Thismeant such claims as claims forpenalties and interest. The phrase‘imposed or levied’ was not to beconstrued as including thecollection of taxes but meant onlythat all forms of taxation werereferred to.

It followed that section 11(a)(iii)operates in favour of the State butnot in favour of the taxpayer.Eskom’s claims for refund weretherefore not subject to this sectionand the period of prescription inrespect of them was three years.

Eskom’s claims were dismissed.

Prescription

79

SOCIETY OF LLOYDS v PRICE

A JUDGMENT BY MYNHARDT JTRANSVAAL PROVINCIALDIVISION14 JANUARY 2005

2005 (3) SA 549 (T)

An action brought to enforce aclaim arising from a contract towhich foreign law applies will beconsidered to have prescribedunder South African legislationwhere the foreign law does notapply to matters of procedure andprescription of the debt isconsidered by that law to be amatter of procedure.

THE FACTSIn October 1997, an English court

gave judgment by default infavour of the Society of Lloydsagainst Price for payment of £71511,11. Price was a member of theSociety and had agreed that thelaws of England would apply tothe rights and obligations arisingfrom his membership and thecourts of England would haveexclusive jurisdiction to settle anydispute relating to hismembership and/or underwritingof insurance business at Lloyds.

Lloyds’ claim arose from aspecial settlement plan introducedby it to deal with unexpectedlylarge claims arising out ofasbestos litigation in the UnitedStates. Lloyds depended on itsstatutory powers to make by-lawsto impose an obligation onmembers to become parties to acontract concluded with EquitasGroup. The contract obligedmembers to pay premiums toEquitas which reinsured the non-life liabilities of members.

In June 2003, Lloyds brought anaction for provisional sentenceagainst Price in a South Africancourt. Price opposed the action,contending that the debtconstituted by the foreignjudgment against him hadprescribed. Price depended on theprovisions of the Prescription Act(no 68 of 1969) under which anordinary debt expires after the

lapse of three years. Lloydscontended that the EnglishLimitation Act, 1980, applied.Under this Act, an action foundedon simple contract shall not bebrought after the expiration of sixyears from the date on which thecause of action accrued.

THE DECISIONThe contract on which Lloyds

depended expressly provided thatthe law applicable to it was thelaw of England. However, thiswas the law applicable in mattersof substance, not in matters ofprocedure. In English law,limitation of actions is regarded asa matter of procedure, whereas inSouth African law, it is regardedas a matter of substance. Thequestion therefore was which lawwas to be applied in the limitationof the action.

There was clearly a conflictbetween the two alternativeapplicable laws. The claimbrought by Lloyds was a claimbased on the contract whichobliged Price to pay the premiumsbut it was not based on ajudgment debt. This was a debt towhich the South AfricanPrescription Act was applicable.The prescription period relating tothat debt was three years.Accordingly, the claim brought byLloyds had prescribed.

The action was dismissed.

Prescription

80

SAMANCOR LTD v MUTUAL AND FEDERALINSURANCE CO LTD

A JUDGMENT BY CONRADIE JA(MPATI JA, STREICHER JA,CLOETE JA and COMRIE JAconcurring)SUPREME COURT OF APPEAL30 NOVEMBER 2004

2005 (4) SA 40 (A)

Discharge by an insurer of itsobligation to indemnify itsinsured effectively discharges theobligation of any other insurer toindemnify in respect of the sameevent.

THE FACTSMutual and Federal Insurance

Co Ltd insured Samancor Ltdagainst loss and damage under a‘Works Policy’. WestchesterInsurance Co Ltd also insuredSamancor against loss anddamage, under an ‘AssetsInsurance Policy’. Propertyinsured under both policiesincluded an alternator whichfailed and was damaged duringthe currency of the policies.

The Works Policy issued byMutual and Federal included aprovision that the policy wouldtake precedence over any otherpolicy taken out by Samancor. Inthe event of loss or damage,Mutual and Federal wouldindemnify Samancor as if anyother policy did not exist.

Westchester indemnifiedSamancor in terms of the policy. Itthen exercised its rights ofsubrogation and brought an actionagainst Mutual and Federal.Mutual and Federal defended theaction on the grounds thatSamancor had been fullyindemnified under the AssetsInsurance Policy and Westchestercould not exercise powers ofsubrogation to recover that whichit had paid to Samancor underthat policy. It contended thatWestchester had no locus standi tobring the action against it.

THE DECISIONSubrogation entitles an insurer

which has indemnified its insuredto recover what it has paid fromthe third party which caused theloss. If an insured is indemnifiedby one insurer, that insurer mayexercise its rights of subrogationin this manner, but it may do so asagainst the third party, not againstanother insurer. This is becausewhen a party has obtained doubleinsurance, payment by one insurerdischarges all the rights of theinsured against the other insurers.

The fact that the Works Policyincluded the provision that thatpolicy would take precedenceover any other policy taken out bySamancor did not have the effectof varying this position. Paymentunder the indemnity provisions ofone policy discharged theobligations of both insurers, andnothing further could be obtainedonce payment had been made.The provision related to therelative contribution rights of theinsurers, not to any hierarchicalpositioning of such rights.

The action was dismissed.

Insurance

81

GOVENDER v MUTUAL AND FEDERAL INSURANCE CO

A JUDGMENT BY LEVINSOHN JDURBAN AND COAST LOCALDIVISION6 MAY 2005

2005 CLR 257 (D)

An insurance policy is to beinterpreted so as to give businessefficacy to its contents and withdue regard to the plain languagein which it is framed. Ambiguitycreated by the insertion ofprovisions should be construedagainst the framer of the contractin accordance with the contraproferentem rule.

THE FACTSGovender concluded a written

agreement of insurance withMutual and Federal InsuranceCompany, described as aMultimark III policy. The policyinsured against damage caused byfire and also contained a BusinessInterruption section. This sectionprovided that cover would begiven in respect of loss followinginterruption of or interferencewith the business in consequenceof damage occurring at thepremises in respect of whichpayment has been made orliability admitted under foursections of the policy, includingthe fire section. The fire sectionprovided for cover for damage byfire.

In the schedule to the wholepolicy, the property was describedas 2 Rana Road and 4 Rana Road,Isipingo Rail. In the schedule tothe Business Interruption section,the premises were described as 2Rana Road, Isipingo Rail.

Three months after theconclusion of the agreement, a firetook place at 4 Rana Road. Mutualand Federal paid R400 000 toGovender following a claimarising out of this incident.However, it refused to pay R637000 in respect of a claim madeunder the Business Interruptionsection of the policy.

Govender claimed payment ofthis amount from Mutual andFederal.

THE DECISIONReading the Business

Interruption section of the policyso as to give business efficacy to it,and elicit the plain meaning of itswords, one determines thepremises to which it refers bylooking at the premises in respectof which payment had been madeor liability admitted under the firesection of the policy. The BusinessInterruption section referred tothis as the method of determiningthe premises in respect of which itgave cover and, in contrast toother sections of the policy, itmade no reference to a schedule.

The language of the BusinessInterruption section clearlyindicated that it intended to givecover for a specific type of loss, iethat arising from the interruptionof the insured’s business. Thepremises at which the loss wasexpected to have taken place wasthe premises damaged by fire. Inthis specific case, this was 4 RanaRoad, the premises in respect ofwhich the fire had taken place.

The only ambiguity created wasthat created by the insertion of 2Rana Road in the schedule. Thisambiguity created an uncertaintythat was to be interpreted againstthe insurer as framer of thecontract.

The claim was granted.

Insurance

82

STANDARD BANK OF SA LTD v SEWPERSADH

A JUDGMENT BY DLODLO JCAPE OF GOOD HOPEPROVINCIAL DIVISION18 NOVEMBER 2004

2005 (4) SA 148 (C)

An application for thesequestration of an individualmust be brought upon evidencethat that individual is eitherfactually insolvent or hascommitted an act of insolvency.Such evidence must be sufficientlyset out in the applicant’s foundingaffidavit to enable a court toreach that conclusion.

THE FACTSSewpersadh concluded two

instalment sale agreements withthe Standard Bank of South AfricaLtd. He fell into arrears with therepayments and in due course, thebank cancelled the agreements.The bank brought an actionagainst Sewpersadh for an orderconfirming the cancellation anddirecting the repossession of themotor vehicles which were thesubject of the agreements. Itobtained a judgment to this effect.

By agreement between theparties, the execution of thejudgment was stayed on conditionthat Sewpersadh paid off thearrears and made payments thenfalling due in terms of theagreements. Sewpersadh againdefaulted and the bank proceededto execute on the judgment.

The bank brought an applicationfor the sequestration ofSewpersadh. Sewpersadhdisputed a number of theallegations made by the bank andopposed the application.

THE DECISIONAn application for the

sequestration of an individualmust lead sufficient evidence for acourt to reach the conclusion thatthe respondent is factuallyinsolvent or has committed an actof insolvency. The evidencepresented by the bank in thepresent case was to be foundprincipally in the foundingaffidavit upon which it broughtthe application. This evidence washowever, insufficient to show thatSewpersadh was factuallyinsolvent or had committed an actof insolvency.

The allegations made in thebank’s affidavits pointed to thefact that Sewpersadh haddifficulty paying his debts andthat creditors had taken actionagainst him to enforce payment.However, some of theseallegations were made by thebank in reply to the oppositionraised by Sewpersadh and couldnot be taken into account whendetermining whether or notSewpersadh was factuallyinsolvent. Ambiguities in theproper interpretation of the factsalleged by both parties left thecourt unable to reach thisconclusion.

The application was dismissed.

Insolvency

83

VALUNET SOLUTIONS INC v eTELCOMMUNICATIONS SOLUTIONS (PTY) LTD

JUDGMENT BY VAN OOSTEN JWITWATERSRAND LOCALDIVISION26 JANUARY 2005

2005 (3) SA 494 (W)

A novel concept which becomeswell-known in the market placewill not be protected in interdictproceedings although a partywhich gains knowledge of theconcept in confidentialdiscussions with its creator maybe liable in damages in actionproceedings.

THE FACTSValunet Solutions Inc operated

an established telephone networkin the United States. It proposedto use this network for theimplementation of a ‘call ondemand’ service for South Africanusers. The service was to allowtelephony customers to makeinternational telephone calls atsubstantially reduced rateswithout using Telkom’s telephonelines. It operated by allowingtelephony users to send a signal toan offshore operator which thencalled the user back with a dialtone.

Valunet entered into negotiationswith eTel CommunicationsSolutions (Pty) Ltd with a view toeTel being appointed as Valunet’sservice provider for the call-on-demand service in South Africa.At an early stage of negotiations,the parties signed aConfidentiality, Non-Solicitationand Non-Competition Agreement,the purpose of which was toprotect the confidentialinformation disclosed to eTel aswell as its trade secrets and know-how in relation to the call-on-demand service. The agreementdefined ‘confidential information’extensively and broadly andincluded information relating tothe call-on-demand service. Atthis time, Valunet issuedbrochures to the public explainingthe concept of its callback service.

The negotiations between theparties broke off and no finalagreement was reached. eTel thenbegan operating its owninternational callback service.Valunet alleged that eTel was inbreach of the confidentialityagreement. It sought an interdict

against eTel to prevent it fromusing any of the confidentialinformation obtained during itsnegotiations with Valunet, or frombeing engaged in the samebusiness as that of Valunet, orfrom soliciting business from anyperson doing business withValunet.

THE DECISIONThe concept of the callback

service was a novelty in thetelephony industry. However,lacking copyright or patentprotection, its novelty value waslost as soon as it became wellknown in the industry. Althoughthis did not mean that theadvantage gained by eTel inobtaining the confidentialinformation relating to it could beused to the detriment of Valunet,the fact that it had become wellknown in the industry meant thateTel could no longer use it to itsadvantage. This was even morethe case in view of the fact thattime had passed since the interdictproceedings had begun and othercompetitors had entered themarket and were employing thecallback system extensively.

Valunet had therefore not shownthat it held a right which could beprotected in interdict proceedings,although it might be able to show,in action proceedings, that it hadsuffered damages as a result ofeTel’s activities.

Valunet also contended thateTel’s activities amounted tounlawful competition. Itsactivities could however, not beclassified as unlawful but as theusual practice of competitors inthe same market.

The application was dismissed.

Competition

84

THE ANANGEL FIDELITYANANGEL FIDELITY v RENNIES GROUP LTD

A JUDGMENT BY VAN DERREYDEN J(MAGID J and JAPPIE Jconcurring)NATAL PROVINCIAL DIVISION13 FEBRUARY 2004

SCOSA D221 (N)

In the exercise of lifting anddischarging heavy items of cargo,sufficient allowance must betaken in regard to safety factors.Failure to do so may constitutenegligence founding a claim fordamages should damages follow.

THE FACTSThe Anangel Fidelity transported

a forklift vehicle owned byRennies Group Ltd and attendedto its discharge from its hold. Thedischarge was effected by two ofthe ship’s cranes operating intandem with a spreader beamslung horizontally between theirlifting gear.

While the forklift was beinglifted out of the hold, it madecontact with the ship’s railing. Therailing was damaged and theship’s duty officer ordered theforklift to be swung back andlowered into the hold. When thiswas being done, the first crane’smotor cut out and its brakesfailed. The forklift came to rest onthe hatch coaming. Crewmembers of the ship then replacedthe Rennies crane operators. Theforklift was then pulled from thehatch coaming, with the resultthat it dropped into the hold. Itexerted a snatch or drop load onthe rigging and this broke a link inthe chain causing the forklift tofall into the hold.

Rennies claimed damages andAnangel Fidelity counter-claimed.

THE DECISIONEvidence of negligence could be

seen in the manner in which therigging of the forklift to thespreader beam was effected.Expert evidence was to the effectthat the use of a chain as a joiningor connecting device was totallyunacceptable in rigging andstevedoring practice. In theprocess of lifting heavy objectsfrom or into a hold, someallowance for a safety factor canbe expected. No or insufficientallowance was taken in thepresent case and in consequence,the stevedores acted negligentlyand wrongfully.

To determine the cause of thedamage, one should not only lookat the conduct of the craneoperators in pulling the forkliftfrom the hatch coaming. Whilethis did induce a drop load, thewrongful conduct of thestevedores in effecting theimproper rigging was alsosufficiently linked to the damageto the forklift to be a cause of thedamage.

The action of the ship’s crew inreplacing the crane operators wasitself negligent however, and theresult of this was that there shouldbe an apportionment of damagesbetween the parties.

Shipping

85

THE GLADIATOR 1 (NO 2)IBETO PETROCHEMICAL INDUSTRIES v SUNUNITED MARINE LTD

A JUDGMENT BY VAN DERREYDEN JDURBAN AND COAST LOCALDIVISION13 MAY 2004

SCOSA B303 (D)

A party which has effected anarrest under section 5(2)(c) of theAdmiralty JurisdictionRegulation Act (no 105 of 1983) isentitled to effect a later arrestunder section 5(3)(a) providedthat the basis for both arrests asprovided for in these sub-sectionsexists.

THE FACTSSun United time chartered the

Gladiator 1 and as disponentowner, sub-chartered the vessel toIbeto Petrochemical Industries Ltdunder a voyage charter.

On 31 October 2003, Sun UnitedMarine Ltd obtained an order exparte arresting the cargo formerlyladen on board the Gladiator 1. Ittook this action upon beingnotified that a claim earlierbrought against Ibeto byAudacious Shipping SA, andwhich had caused the arrest of thecargo by Audacious, was about tobe settled. The purpose of thearrest was to obtain security inrespect of arbitration proceedingsbrought by Sun United againstIbeto in London o 27 October2003.

At the time that Sun Unitedarrested the cargo, it had appliedfor leave to intervene in theapplication for the arrest of thecargo brought by Audacious andfor an order that there be norelease of the cargo until anundertaking had been furnishedthat all loss or damage caused to itby the arrest of the cargo had beengiven. Pending the outcome ofthis application, Ibeto wasordered to give one day’s notice toSun United, should security beprovided to Audacious for releaseof the cargo.

Ibeto applied for an order settingaside the arrest of the cargo bySun United.

THE DECISIONThere was a difference between

the relief sought in the applicationfor leave to intervene and thearrest of the cargo. The formerwas sought under section 5(2)(c)of the Admiralty JurisdictionRegulation Act (no 105 of 1983)and the latter under section5(3)(a). The relief sought by SunUnited in its first application wasconcerned with obtaining anundertaking and not with thearrest of the cargo to obtainsecurity in respect of thearbitration proceedings.

Although Sun United hadobtained the interim orderproviding for one day’s notice,this did not preclude it frombringing the application for thearrest of the cargo in the absenceof such notice having been given.Reasonable ground that securitymight be given to Audaciousresulting in the lifting of its arrestof the cargo justified Sun United’sapplication for the arrest of thecargo. Its action did not constitutean abuse of the process of thecourt.

No basis for the contention thatthe uberrima fides rule had beenviolated had been set out.

The application was dismissed.

Shipping

86

SA BANK OF ATHENS LTD v VAN ZYL

JUDGMENT BY ERASMUS AJA(MPATI AP, FARLAM JA,MTHIYANE JA and VANHEERDEN JA concurring)SUPREME COURT OF APPEAL21 FEBRUARY 2005

2005 (5) SA 93 (A)

A provision entitling an creditorto apply extra-judicial executionis not invalid in itself.

THE FACTSVan Zyl ceded four investment

policies to the SA Bank of AthensLtd as security for herindebtedness to the bank. Thecessions provided that sheappointed the bank as herattorney and agent to apply forthe surrender, to realise orotherwise deal with the policies inits absolute discretion in the eventof failure to pay any amountwhich she might owe or in whichshe might be or become indebtedto it, and to apply the proceeds ofsuch surrender to her debt.

The bank alleged that Van Zylwas indebted to it. Acting withoutcourt sanction, and while anaction by it was pending in themagistrates’ court, it called up andretained the proceeds of the fourpolicies, the total value of whichwas R206 907,40.

Van Zyl challenged the bank’saction. She contended that thebank was not entitled toappropriate the proceeds of thepolicies without proceedingthrough legal action, and that theprovision purporting to allow it todo so constituted parate executie,extra-judicial execution, and wasconsequently invalid.

THE DECISIONA parate executie clause has long

been acceptable under thecommon law. However, theConstitutional Court’sinterpretation of section 34 of theConstitution has led to aqualification of this apparentincursion on the rights of a debtor,and the qualification has resultedin judgments that have refused touphold the validity of notarialbonds entitling the creditor toexecute against moveableswithout the intervention of thecourt.

This qualification however, hasnot meant that a provisionallowing parate executie ofmoveables which are lawfully inthe possession and carried outwithout prejudice to the debtor’srights is invalid. Such provisionsretain their validity and a creditoris entitled to rely on them inexercising its rights.

Accordingly, Van Zyl was notentitled to succeed in her actionagainst the bank merely becauseof the contested provisions.Summary judgment should nothave been granted in her favour.

The appeal succeeded.

Notwithstanding what was said in the Bock and Juglal judgments, counsel forthe plaintiff bravely contended that Findevco was correctly decided and shouldbe upheld. He submitted that the dictum of Harms JA to the contrary wasclearly wrong, and was in any event delivered obiter. I am, however,unpersuaded that parate execution is per se unconstitutional or offensive topublic policy. I find that the court a quo erred in holding that the deeds ofcession allowed the bank to be the arbiter of the fact whether the debt was owing(compare: Senwes Ltd v Muller 2002 (4) SA 134 (T)). The cessionagreements do not expressly authorise such action on the part of the bank, nor isthis objectionable feature of parate execution implicit in the stipulations. Nor dothe particular clauses purport to allow the bank to by-pass the courts in adispute regarding the existence or validity of the cession agreements.

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CORDIANT TRADING CC v DAIMLERCHRYSLER FINANCIAL SERVICES (PTY) LTD

A JUDGMENT BY NICHOLSON JDURBAN AND COAST LOCALDIVISION25 APRIL 2003

2005 (4) SA 389 (D)

A seller of goods in respect ofwhich a claim for eviction is madeby the owner has no locus standito interdict the owner frommaking such a claim when theclaim is not made against thepurchaser of the goods but againsta subsequent purchaser.

THE FACTSCordiant Trading CC purchased

sixteen motor vehicles from twocompanies which jointly operatedas motor dealerships under thecontrol of a managing director.Cordiant paid for the vehicles andtook delivery of them.

The vehicles held by the twocompanies and delivered toCordiant had been held by themunder a floorplan financeagreement concluded withDaimler Chrysler FinancialServices (Pty) Ltd. In terms of thisagreement, ownership in thevehicles would remain vested inDaimler until their purchase pricehad been paid for in full.

Cordiant’s representative wasunaware of the floorplanagreements which applied to thevehicles it had purchased. Itthought that the two companies itpurchased from were the ownersof the vehicles, and considereditself to become the owner of themwhen it took delivery of them.Cordiant sold the vehicles tomotor dealers who sold them tocustomers.

After the death of the managingdirector of the two motordealerships, Daimler repossessedone of the vehicles and claimed anorder to attach and remove others.The whereabouts of all but one ofthese was unknown. Cordiantthen applied for an interdictrestraining Daimler from doingso, pending the finalisation of anaction for a declaration thatDaimler had no right to seekrecovery of the vehicles.

THE DECISIONThe parties under threat by

Daimler’s action were those whopossessed the vehicles, notCordiant. Cordiant therefore facedno threat of eviction in respect ofthe vehicles it had purchased.When a buyer is faced with aclaim for eviction by one claimingto be the owner of the thingpossessed by the buyer, thenormal procedure is for the buyerto call upon the seller to assist inits defence against the claimant.This had not taken place in thepresent case.

The most that Cordiant could dowould be to protect those whohad purchased from it. However,they had on-sold the vehicles totheir customers. Cordiant couldnot protect these parties. Cordianttherefore had no locus standi asagainst Daimler.

It was also clear that Daimlerresiding in Centurion, Gauteng,was not a resident of the area ofthe court’s jurisdiction. The courtdid not therefore have jurisdictionto deal with the matter.

The application was dismissed.

Contract

88

PRIVEST EMPLOYEE SOLUTIONS (PTY) LTD vVITAL DISTRIBUTION SOLUTIONS (PTY) LTD

A JUDGMENT BY MLAMBO JA(MPATI DP, ZULMAN JA, LEWISJA and JAFTA JA concurring)SUPREME COURT OF APPEAL30 MAY 2005

2005 (5) SA 276 (A)

A contract contained in twodocuments must be interpretedwith equal regard to the termsprovided for in each document. Anaddendum may provide guidanceas to the proper interpretation ofthe terms recorded in the maindocument recording the contract.

THE FACTSPrivest Employee Solutions (Pty)

Ltd agreed to provide temporarylabour to Vital DistributionSolutions (Pty) Ltd. Theagreement was recorded in twodocuments. Clause 7 of the mainagreement provided that a weeklytime sheet system that records andassigns names and hours workedby employees was to be used. Thetime sheet system was to beauthorised weekly by the personat Vital charged with theresponsibility of so doing andfaxed to Privest’s office by theMonday following the week inwhich the labour was provided.Clause 3 provided that all hoursworked were to be signed by anauthorised person stating allhours that had been signed for,that this would be taken to be trueand correct and invoicedaccordingly.

Between September 1999 andApril 2000, Privest providedtemporary labour to Vital, andissued invoices totalling R1 384111 for the services rendered.Vital paid R994 452,44 but refusedto pay the balance. It contendedthat the time sheets relating tohours in respect of the balancewere not authorised in terms ofthe agreement.

At first, time sheets wereprepared by an employee ofPrivest, but subsequently, theywere prepared by an employee ofVital who had earlier beenemployed by Privest.

Vital defended an action forpayment of the balance of R389

658,56 contending that it was theintention of the parties that Privestwould prepare the time sheetsand that they would then beauthorised by its ownrepresentative.

THE DECISIONThe issue was what was

intended by the parties when theyrequired the authorisation of timesheets in the agreement.

The proper interpretation of anagreement recorded in twodocuments involves aconsideration of all the terms usedby the parties in all of documents.Terms used in a subsidiarydocument can be used todetermine the meaning of theterms in the main document.

The documents in the presentcase provided for an initialauthorisation which would formthe basis of the issuing of aninvoice upon which paymentwould be made. Should thisprocedure be followed, Vitalwould be obliged to pay theinvoices.

The authorisations which weregiven in respect of the disputedinvoices were given by employeesof Privest, not by employees ofVital. The procedure envisaged inthe agreement was therefore notfollowed and no properauthorisation was secured.Accordingly, Privest was notentitled to payment on theinvoices which followed from theinvalid authorisations so given.

The appeal was dismissed.

Contract

89

SEVEN ELEVEN CORPORATION OF SA (PTY) LTD vCANCUN TRADING NO. 150 CC

A JUDGMENT BY LEWIS JA(MPATI DP, FARLAM JA,HEHER JA and PONNAN JAconcurring)SUPREME COURT OF APPEAL24 MARCH 2005

2005 (5) SA 186 (A)

A contract may be interpreted inthe light of the backgroundcircumstances giving rise to thecontract, but obligations createdby the contract will not normallybe found in its preamble.

THE FACTSCancun Trading No. 150 CC

concluded a franchise agreementwith Seven Eleven Corporation ofSA (Pty) Ltd in terms of whichCancun was to operate a store asfranchisee. In terms of theagreement, Cancun as franchisorwould supply Cancun with a fullystocked store, and thereafterarrange the supply of furtherstock. The franchise agreementmade no provision in regard todiscounts obtained by SevenEleven in respect of the purchaseof stock.

Prior to concluding theagreement, Cancun’srepresentative entered intodetailed discussions with SevenEleven regarding the terms of theagreement. Seven Eleven gavehim a disclosure document whichindicated that ‘maximumdiscounts’ would be given to afranchisee. At that stage, theCancun representative was awareof the dissatisfaction of certainother franchisees in regard todiscounts that they alleged werenot being passed on to them bySeven Eleven.

In due course, Cancun operatedthe store but eventually sold itback to Seven Eleven because itdid not achieve success. Cancunthen claimed that it was entitled torebates and early settlementdiscounts not passed on to it bySeven Eleven. These amounted toR353 396,08 and it claimedpayment of this amount fromSeven Eleven.

Seven Eleven contended that thefranchise agreement did notprovide for the right to discountsobtained by it as franchisor.Cancun contended that on aproper interpretation of thefranchise agreement, the right tosuch discounts could be asserted.In the alternative, it contendedthat on the basis of quasi-mutual

assent, a tacit term or a fraudulentmisrepresentation, it was entitledto such discounts.

THE DECISIONIt was permissible to have regard

to the disclosure document as thisconstituted a backgroundcircumstance in the conclusion ofthe franchise agreement.However, insofar as it related tothe preamble of the agreement, itwas of no assistance because thepreamble did not impose anyobligations on the parties.

While taking into account thedisclosure document, the properinterpretation of the franchiseagreement remained that SevenEleven as franchisor was notobliged to pass on rebates or earlysettlement discounts to Cancun.Such benefits were secured onlyafter stock was ordered and werenot negotiated in the course ofsecuring stock for future supplies.Accordingly, they could not beincluded in the benefits to which afranchisee would be entitled. Theparties therefore could not haveintended that a franchisee wouldhave been entitled to them and thefranchise agreement could not beinterpreted to the effect that afranchisee would have been soentitled.

As far as the contention based onquasi-mutual assent wasconcerned, for this to succeed, itwould have to be shown that amisrepresentation that resulted ina contract differing from thatintended by the parties. There wasno credible evidence of this and inany event, the contract itselfprovided that neither party couldrely on an allegedmisrepresentation other than afraudulent one.

There was also no evidence tosupport the contention that a tacitterm or a fraudulentmisrepresentation had been made.

The action was dismissed.

Contract

90

OOS-VRYSTAAT KAAP BEDRYF BPK vVAN ASWEGEN

A JUDGMENT BY VAN DERMERWE JORANGE FREE STATEPROVINCIAL DIVISION9 SEPTEMBER 2004

2005 (4) SA 417 (O)

Unless an offeror agrees to keepan offer open for a specified periodof time, no option comes intoexistence and the offeror mayrevoke the offer at any time untilacceptance takes place.

THE FACTSOn 26 October 2000, Van

Aswegen’s husband signed adocument entitled Grain PurchaseAgreement. The documentrecorded that 500 tons of grade 1white mealies were sold to Oos-Vrystaat Kaap Bedryf Bpk at aselling price of R580 per ton fordelivery the following year in Julyand August.

Van Aswegen’s husband signedthe agreement on behalf of hiswife, with whom he was marriedout of community of property.Van Aswegen owned the farmwhich produced the mealies.

Clause 21 of the agreementprovided that it would become offorce and effect upon signature bythe authorised signatory of theseller and an authorisedrepresentative of the purchaser. Inany event, the purchaser would beobliged to sign the agreementwithin fourteen days of it havingbeen signed by the seller, failingwhich neither party would bebound by the agreement.

When Van Aswegen learnt thather husband had signed theagreement, she informed arepresentative of Oos-Vrystaatthat she had not authorised herhusband to do so and that she didnot consider herself bound to theagreement. Her husbandinformed a representative of Oos-Vrystaat that the agreement hadbeen cancelled. Oos-Vrystaatsigned its acceptance of theagreement and informed VanAswegen that it had done so. VanAswegen consulted her attorneywho informed Oos-Vrystaat thatshe had not authorised anyone tosign the agreement.

Oos-Vrystaat contended that abinding agreement had beenconcluded and it claimeddamages in the sum of R180 500.

THE DECISIONEither Van Aswegen’s husband

signed the agreement against hiswife’s express instruction not todo so and told lies about what hehad done, or he signed it with herauthority, either express or tacit.The second alternative was morelikely and the evidence pointed tohim having the authority to signon her behalf.

What Van Aswegen signed wasessentially an offer to sell. Thequestion was whether this offerhad been validly withdrawnbefore it was accepted. Anobligation to keep an offer openfor acceptance only arises by anagreement to the effect that theoffer will not be revoked for acertain period. Such an agreementis often termed an ‘option’. Aparty wishing to show that anoption did arise must show thaton a balance of probabilities that itwas undertaken to hold open theoffer made for a specific period. Itmust then be shown that the offerwas accepted.

It could not be said that upon aproper interpretation of clause 21,an option had arisen. Theprovisions of this clause wereambiguous in this respect.

There was no evidence that VanAswegen had made a unilateralstatement that the offer wouldremain open for any period oftime. The evidence showed thatbefore Oos-Vrystaat signified itsacceptance of the agreement, VanAswegen had stated she cancelledthe agreement. This amounted toa revocation of the offer made.The acceptance came after thatevent and could not bring theagreement into being.

The claim was dismissed.

Contract

91

SOUTH AFRICAN MUNICIPAL WORKERSUNION v CITY OF CAPE TOWN

A JUDGMENT BY VAN ZYL J(MOTALA J concurring)CAPE OF GOOD HOPEPROVINCIAL DIVISION31 MAY 2005

2005 CLR 263 (C)

A local authority is obliged toconsult the local communityabout the level, quality, range andimpact of municipal servicesprovided by itself but is notobliged to meet the objections tomeasures taken which affect theprovision of such services whensuch objections are brought by aparty unable to show that itrepresents the local community.Breach of an agreement by oneparty does not provide a basis fornullifying the agreement when theother party to the agreement is inbreach itself.

THE FACTSIn 1999, the City of Cape Town

established a Commission toinvestigate and makerecommendations regarding theactivities and functions of the Cityand represent the various councilsof which the City was thencomposed in regard toemployment-related mattersaffecting employees in thetransition to a unified cityadministration. In 2000, theCommission recommended thatactivities and functions which theCity had no constitutional orlegislative obligation to ensure orwhich did not support its strategicpriorities or core functions shouldbe phased out. This included theservices until then afforded by theEpping National Fresh Producemarket and the Maitland Abattoir.

In 2002, the City concluded anagreement, known as a ‘processagreement’, with trade unionsrepresenting its employees, thepurpose of which was to regulate‘micro-design organisationalstructures’ below the level of adirectorate. The City proposedthat the market and abattoirshould be disposed of. ByFebruary 2003, no final decisionhad been taken on this issue.However, the South AfricanMunicipal Workers Union wasinformed that the City’s view wasthat the market and abattoirshould be sold and that affectedemployees should be redeployedin accordance with an agreementconcluded in terms of section197(2) of the Labour Relations Act(no 66 of 1995).

The City adopted the view thatthe process agreement did notinvolve the decision whether ornot to dispose of the market andabattoir and requested the Unionto consider a draft agreement interms of section 197(6) of theLabour Relations Act. InDecember 2003, the City’s

executive resolved that CapeInternational Fresh ProduceTrading (Pty) Ltd (the secondrespondent) be accepted as thepreferred bidder for the marketand that negotiations shouldbegin to finalise a contract of saleand lease.

In January 2004, the Unionreferred a dispute to thebargaining council in regard to theinterpretation and application ofthe process agreement. The Citychallenged the bargainingcouncil’s jurisdiction to arbitratethe dispute.

In February 2004, the City’smayoral committee resolved tosanction the sale of the market toCape International and anagreement of sale was concludedbetween the parties later in thatmonth.

The Union then brought anapplication to review and setaside the City’s decision tosanction the sale of the marketand to declare the sale thereof tobe null and void. It also sought aninterdict preventing the City fromtaking any further steps to disposeof the abattoir pendingcompliance with certainprocedural obligations.

THE DECISIONSection 4(2)(e) of the Local

Government: Municipal SystemsAct (no 32 of 2000) provides thatthe council of a municipality hasthe duty to consult the localcommunity about the level,quality, range and impact ofmunicipal services provided bythe municipality and the availableoptions for service delivery. Thissection was applicable to the saleof the market and abattoir as thiswas a sale of capital assetsunderlying the provision of amunicipal service and wouldaffect the ‘level, range and impact’of such service.

The Union had however, failed

Contract

92

to show any basis upon which itsapplication could be brought interms of this section. The historyof its opposition to the saleshowed that its policy was toavoid consultation with the Cityon this issue. At no stage had itshown that it had communitysupport for its position and couldtherefore not show that the Cityhad failed in its duty toward the‘local community’ as referred to insection 4(2)(e). The evidenceshowed that the City had in factconsulted fully with the localcommunity and had substantiallycomplied with its obligations inthat regard.

The Union contended that theCity had breached the process

agreement. However, the Unionitself had not shown anywillingness itself to abide by theagreement. Its attitude hadpersistently been to oppose theCity’s privatisation plans and thishad meant that it avoided allthose measures designed to bringabout the execution of theagreement. Being in breach of theprocess agreement itself, theUnion could not depend on theallegation that the City was inbreach, nor that any such breachwould imply that the City’sactions should be nullified.

The Union also contended thatthe mayoral committee whichresolved to sanction the sale of the

market did so without authorityas this was contrary to section6(2)(a) of the Promotion ofAdministrative Justice Act (no 3 of2000) and the decision to sellcould not be appropriatelydelegated in terms of section59(1)(a) of the Systems Act.However, the purpose of thesystem of delegation devised bythe Systems Act was to increaseand maximise the council’sefficiency. Only powersspecifically referred to wereexcluded from delegation. The Actdid not exclude the delegation ofpower in relation to the sale of anasset.

The application was dismissed.

Among the extremely relevant averments which the applicant has failed to make isthat there is not the slightest indication that it was ever mandated by its membersor resolved by its directors to take up the cudgel on behalf of the general public.There is likewise no suggestion that any member of the local community everapproached it for assistance in resisting the sale of the market, not to speak of thedeafening silence regarding the existence of any mandate emanating from anysingle member of such community.

Contract

93

ABSA BANK LTD v LOMBARD

A JUDGMENT BY FARLAM JA(SCOTT JA, STREICHER JA,CLOETE JA and VAN HEERDENJA concurring)SUPREME COURT OF APPEAL30 MARCH 2005

2005 CLR 319 (A)

A creditor holding the right tovary the interest rate payable on aloan, such variation to beexercised by the creditor in itsexclusive discretion from time totime, is obliged to exercise itsdiscretion reasonably. It will beheld not to have done so if it failsto rebut the prima facie evidencepresented by the debtor indicatingan unreasonable exercise of itsdiscretion.

THE FACTSAbsa Bank Ltd lent Lombard

R260 000. Lombard undertook torepay the loan with interest at therate of 15.55% per annum subjectto such increase or decrease in theinterest rate as the bank might inits exclusive discretion determinefrom time to time.

Over the next nine and a halfyears, Lombard paid the bankR701 055,71. During this period,from time to time the bankadjusted the interest rate upwardsfrom the initial rate of 15.55% asthe prime interest rate increased.When from 1990, the primeinterest rate decreased, the bankretained the interest rate chargedto Lombard so that the marginbetween the prime interest rateand that charged to Lombardincreased. This increase wasmaintained thereafter as the primeinterest rate declined even thoughthe bank decreased the interestrate charged to Lombard by onepoint in November 1992. If thebank had decreased the interestrate with the decrease in theprime interest rate then the loanwould have been fully repaid atan earlier stage.

Lombard brought an actionagainst the bank for repayment ofamounts he alleged had beenoverpaid to it, but thereafterwithdrew this action. The bankhowever, counterclaimed forpayment of R51 796,60,contending that this amount was

still owed in terms of the loanagreement. Lombard defendedthe counterclaim on the groundsthat the bank had failed toexercise its discretion reasonablyin adjusting the interest rate inthat it had increased the interestrate when the prime interest rateincreased but had decreased theinterest rate only once when theprime interest rate fell.

THE DECISIONThe evidence presented by

Lombard represented a primafacie case against the bank. Thebank’s evidence had therefore tobe weighed against this case. Inreply to this, the bank had givenno reason for its failure todecrease the interest rate chargedto Lombard.

The fact that the bank’s claim didnot relate to the interest accruingat the earlier time, which it statedhad all been paid, did not affectthe conclusion that could bedrawn from this comparison ofthe evidence presented by bothsides. This was because interestpaid at the earlier time had theeffect of prolonging the life of theloan.

Since the bank did not show thatit had exercised its discretionreasonably in varying the interestrate charged to Lombard, theprima facie case made by himremained unanswered. The bank’sclaim was accordingly dismissed.

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94

GEDULDT v THE MASTER

A JUDGMENT BY DAVIS JCAPE OF GOOD HOPEPROVINCIAL DIVISION11 NOVEMBER 2004

2005 (4) SA 460 (C)

A liquidator should not beprevented from acting jointlywith other liquidators merely onthe suspicion that he or she willact prejudicially. The fact that theliquidator enjoys substantialsupport from creditors is anindication that preventing theliquidator from so acting may beprejudicial to their interests.

THE FACTSOn 14 October 2004, Southern

Sun Hotel Interests (Pty) Ltdobtained a provisional order forthe liquidation of GrahamGeduldt CC.

The corporation had been thesubject of an investigation begunby the Secretary to Parliament intoalleged over-invoicing of travelvouchers of parliamentarians.With the support of 99% of thecreditors, the third respondentwas appointed as one of theliquidators in the estate of thecorporation. She had beenemployed by the auditorsappointed by the Secretary toconduct an audit in respect ofsuch over-invoicing.

Geduldt objected to theappointment of the thirdrespondent as a liquidator. Hecontended that the thirdrespondent intended to use theliquidation proceedings in orderto investigate allegedirregularities in the use of thetravel voucher system. Hebrought an application for aninterim interdict preventing herfrom acting as liquidator pendingthe finalisation of a reviewapplication to set aside thedecision to appoint her.

Insolvency

THE DECISIONAssuming that the correct

procedure had been followed toprevent the participation of thethird respondent as liquidator, theessential question was whether ornot the balance of conveniencefavoured the granting of theapplication.

The third respondent could notact as a liquidator for her ownaccount. Her actions would haveto be taken in conjunction with theother liquidators. The questionwas whether by not participatingas a liquidator, the interests ofcreditors would be properlyaddressed. It was noteworthy thatshe enjoyed the support of 99% ofthe creditors. There was thereforepotential prejudice in the thirdrespondent not being able to actjointly with the other liquidators.Against this, the suggestedprejudice put forward by Geduldtwas unsubstantiated andspeculative.

Geduldt had failed to show thatthe balance of conveniencefavoured the granting of theinterdict. Accordingly, theapplication failed.

95

COMMISSIONER, S.A.R.S. v HAWKERAVIATION SERVICES PARTNERSHIP

A JUDGMENT BY PATEL JTRANSVAAL PROVINCIALDIVISION26 NOVEMBER 2004

2005 (5) SA 283 (T)

An application for sequestrationwhich is brought for an ulteriorpurpose or to obtain relief alreadysought in a previous litigationshould not be allowed. Ajudgment obtained by theCommissioner of the SouthAfrican Revenue Service in termsof section 40(2)(a) of the ValueAdded Tax Act (no 89 of 1991) isinvalid if the amount of suchjudgment varies with the amountrecorded in the certifiedstatements of account. Penaltiesclaimed amount to a form ofcriminal punishment and areunconstitutional.

THE FACTSHawker Aviation Services

Partnership was formed for thepurpose of conducting an aircharter business. To conduct thisbusiness, in September 2000, thepartnership purchased a Hawkeraircraft. When it did so, it claimedinput VAT on the purchase fromthe Commissioner of the SouthAfrican Revenue Service. This wasaccepted and allowed in the sumof R10,2m. The partnership alsopurchased a Falcon aircraft fromBen Nevis Holdings Ltd, acompany registered in the BritishVirgin Islands, for R171m. Thepartners of the partnership wereHawker Air Services (Pty) Ltd,Hawker Management (Pty) Ltdand Rand Merchant Bank, thelatter having a 99,8% interest inthe partnership.

Two years later, the partnershipwas dissolved and sold itspartnership interests to CarmelTrading Ltd. It and Hawker AirServices formed a newpartnership which used theaircraft of the dissolvedpartnership for the purposes ofconveying passengers and goodsfor reward.

In March 2003, theCommissioner issued four VATassessments and determined thatthe partnership was liable forVAT in the sum of approximatelyR73m. It did so on the basis thatthe aircraft were not being usedfor the purpose earlier stated butfor the benefit of the sole directorof Hawker Air Services.

In December 2003, theCommissioner obtained judgmentagainst both Hawker Air Servicescompanies and the partnership. Itdid so by filing a certifiedstatement of the amount due andpayable in terms of section40(2)(a) of the Value Added TaxAct (no 89 of 1991). This sumremained unpaid and theCommissioner then brought an

urgent application for thesequestration of the partnershipand the liquidation of the HawkerAir Services companies. Therespondents opposed theapplication.

THE DECISIONThe partnership contended that

the sequestration and liquidationapplications had been broughtwith the ulterior purpose ofsecuring the return of the Falconaircraft, which was then situatedoutside of the country. Thisappeared to be so from allegationsmade by the Commissioner itselfand from the fact that Hawker AirServices no longer owned theaircraft. As such, it constituted anattempt to levy execution againstan asset belonging to anotherparty and was an abuse of fiscalpower. Because the applicationswere brought with an ulteriorpurpose, they should bedismissed.

It was also clear that in previouslitigation, the Commissioner hadattempted to obtain the aircraft,and that the same attempt wasbeing made in the presentapplications. This meant that theattack presently being made was acollateral attack and as such,constituted an abuse of theprocess of the court.

The partnership also contendedthat a discrepancy between theamounts recorded in thecertificate issued by theCommissioner and the judgmentssubsequently obtained on thestrength of them rendered thejudgments invalid. Thisdiscrepancy indicated that thejudgments were invalid becausethey were not preceded by serviceon the taxpayer of an assessmentgiving rise to them. Insofar as thepenalties imposed wereconcerned, this amounted to aform of criminal punishment. As

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such, it was unconstitutional andthe judgments obtained for themwere unconstitutional.

The application was in any eventfatally defective since it had not

been brought simultaneouslyagainst the estates of all membersof the partnership.

The applications were dismissed.

I find that the liquidation and sequestration applications are brought for a collateralpurpose to obtain possession of the aircraft which the applicant failed to attain inthe Rule 49 (11) application. It is apparent that the applicant initiated the presentproceedings with an ulterior purpose in that the real motive is not to simplyliquidate Hawker Air Services and sequestrate the partnership but to obtainpayment of the alleged VAT debt of R73 million by obtaining possession of theaircraft for purposes of executing the larger tax claims against both King and BenNevis. Unfortunately, for the applicant, both applications must be dismissed.However, even if I am wrong in holding that the two applications constitute animpermissible collateral attack, there are other reasons for dismissing theapplications before this court.

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COMPUTER BRILLIANCE CC v SWANEPOEL

A JUDGMENT BY VANLOGGERENBERG AJ(WEBSTER J concurring)TRANSVAAL PROVINCIALDIVISION13 NOVEMBER 2003

2005 (4) SA 433 (T)

The right to require security of aplaintiff corporation is not anabsolute right but depends onproper demonstration that there isreason to believe that thecorporation will be unable to paythe costs of the defendant if he issuccessful in his defence.

THE FACTSComputer Brilliance CC brought

an action in the magistrates’ courtagainst Swanepoel for payment ofR202 350 in respect of servicesrendered to Swanepoel’s practiceas a plastic surgeon. Swanepoelentered an appearance to defend,and then gave notice to ComputerBrilliance to provide security forcosts in terms of Rule 62(1)(c) ofthe Magistrates’ Court Rules.

Computer Brilliance refused toprovide the security for costs.Swanepoel then brought anapplication for an order that theaction be stayed until security forcosts had been provided. Healleged that security for costs wasneeded because there was reasonto believe Computer Brilliancewould not be able to pay costsshould it fail in its action.

Computer Brilliance opposed theapplication on the grounds that noproper factual basis for theapplication had been set outindicating that it would be unableto pay costs should its action failand on the grounds that adefendant is not entitled as ofright to security for costs. Italleged that in any event, it wouldbe able to pay such costs.

The application succeeded on thegrounds that a defendant isentitled as of right to security forcosts in terms of Rule 62(1)(c).Computer Brilliance appealed.

THE DECISIONRule 62(1)(c) provides that a

defendant may require a plaintiffwhich is a company or closecorporation to give security forcosts of an action. Section 8 of theClose Corporations Act (no 69 of1985) provides that a court mayrequire security to be given by aplaintiff corporation if it appearsthat there is reason to believe thatthe corporation will be unable topay the costs of the defendant ifhe is successful in his defence.

Section 8 superseded thecommon law as from the date ofits enactment. Being subordinatelegislation, Rule 62(1)(c) could notoverride the provisions of thissection. The right to security asprovided for in that Rule wastherefore not an absolute right butwas delineated within theprovisions of section 8. Swanepoelwas not entitled to securitywithout showing the applicabilityof this section.

The decision to order thatsecurity be given was based onthe view that the defendant’s rightto security was an absolute right.This meant that no discretion hadbeen exercised as to theapplicability of section 8. Theorder therefore could not stand.

The appeal was upheld.

Corporations

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COMMISSIONER, SOUTH AFRICAN REVENUE SERVICE vTFN DIAMOND CUTTING WORKS (PTY) LTD

A JUDGMENT BY PONNAN JA(ZULMAN JA, STREICHER JA,LEWIS JA and HEHER JAconcurring)SUPREME COURT OF APPEAL31 MARCH 2005

2005 (5) SA 113 (A)

Section 17(3) of the Customs andExcise Act (no 91 of 1964) does notprotect the State when an officerof the State commits a theftgiving rise to loss.

THE FACTSA director of TFN Diamond

Cutting Works (Pty) Ltd returnedto South Africa with diamondswhich he had earlier taken out ofthe country. When he took themout of the country, the requireddocumentation for their exporthad been lodged with theCommissioner, South AfricanRevenue Service (‘SARS’), andwhen he brought those backwhich he had not sold, hedeclared them to employees ofSARS.

The original invoice for thediamonds could not then belocated. Accordingly, thediamonds were placed in a plasticpouch, sealed and placed in a safein a strongroom at the customshall. SARS issued a receipt andentered the detention of thediamonds in the bond book.

Two days later, TFN’s clearingagency attended at the customshall to obtain the diamonds. It wasthen discovered that thediamonds were missing, havingbeen stolen by a SARS employee.

TFN brought an action fordamages against SARS allegingthat it was liable in delict to paysuch damages. SARS defended theaction on the grounds that itsemployee did not act within thecourse and scope of hisemployment when he stole thediamonds and on the grounds thatsection 17(3) of the Customs and

Delict

Excise Act (no 91 of 1964) applied.This section provides that theState or any officer shall not beliable in respect of any loss ordiminution of or damage to anygoods in a State warehouse or inrespect of any loss or damagesustained by reason of wrongdelivery of such goods.

THE DECISIONAn employer is vicariously

responsible for the actions of itsemployee when the actions takenby the employee were in factperformed in the course of theemployee’s employment. Theemployee in the present case actedin the course of his employment.Had he acted negligently, SARSwould have been responsible forhis actions. His intentional actionrendered SARS no lessresponsible.

As far as section 17(3) wasconcerned, assuming that thestrongroom in the customs hallcould be classified a Statewarehouse as referred to in thesection, the words ‘any loss’ hadto be strictly construed. As such,they could not be interpreted toencompass theft. The sectioncould not have intended to protectan officer of the State whocommits theft. Such an absurdresult could not have beenintended by the legislature.

TFN was therefore entitled todamages arising from the theft.

99

BUFFALO CITY MUNICIPALITY v GAUSS

A JUDGMENT BY NUGENT JA(MPATI AP, NAVSA JA, CLOETEJA and COMRIE AJA concurring)SUPREME COURT OF APPEAL2 DECEMBER 2004

2005 (4) SA 498 (A)

A local authority’s decision toexpropriate property does notattract a duty to afford theproperty owner an opportunity tobe heard concerning theexpropriation as the effect of sucha decision is merely to preservethe status quo in regard to theproperty. The property owner isentitled to make representationsat the stage when the approval ofthe relevant Premier is sought forthe expropriation of the property.

THE FACTSOn 3 May 1999, the Buffalo City

Municipality decided by specialresolution to expropriate a portionof property owned by Gauss. Apreliminary notice was served onGauss and the Registrar of Deedsand Gauss was informed that hewould be offered R60 000 incompensation. Gauss objected tothe expropriation.

The municipality then issued anotice of expropriation andtendered a cheque for R60 000, butwithdrew this when it was noticedthat the approval of the Premier ofthe province had not beenobtained. The municipality thensought the required approval, butbefore it could be obtained, Gausscalled upon the municipality towithdraw its preliminary notice.The municipality refused to do so.

Gauss then applied for an orderreviewing and setting aside thedecision to expropriate and thepreliminary notice. Theapplication was granted. Themunicipality appealed.

THE DECISIONThe Expropriation Act (no 63 of

1975) authorises the expropriationof property by the State. Itspecifically provides that a localauthority with the power to

expropriate property must do soonly in accordance with itsprovisions. Its provisions requirethat the approval of the Premier ofthe province be obtained.

The effect of a decision toexpropriate, such as that made bythe municipality, was, in terms ofthe applicable ordinance, torestrict Gauss from alienating ordisposing of his property andprohibit the Registrar of Deedsfrom registering transfer thereof.This was the only effect of themunicipality’s decision toexpropriate. The decision did noteffect the expropriation nor did itpreempt the procedures still tofollow in the process ofexpropriation. Such proceduresincluded the right of Gauss to beheard and to be afforded anopportunity of makingrepresentations regarding theexpropriation.

The effect of the ordinance wasto preserve the status quo inregard to the property. This didnot affect Gauss unfairly. Thefailure to allow an opportunity tomake representations to themunicipality regarding thisdecision therefore did not entitlehim to overturn that decision.

The appeal was upheld.

Property

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LAND EN LANDBOUONTWIKKELINGSBANK VANSUID-AFRIKA v CONRADIE

A JUDGMENT BY MPATI DP(ZULMAN JA, STREICHER JA,LEWIS JA and VAN HEERDENJA concurring)SUPREME COURT OF APPEAL24 MARCH 2005

2005 (4) SA 506 (A)

Section 8(1) of the Extension ofSecurity of Tenure Act (no 62 of1997) requires that all of thefactors referred to therein must beconsidered when an occupier ofproperty is to be evicted.

THE FACTSThe appellant bank brought

eviction proceedings againstConradie, its reason for doing sobeing that it wished to sell theproperty occupied by Conradieand that prospective buyers werenot interested in buying theproperty while burdened with alease. In its action, the bankreferred to the factors listed insection 8(1) of the Extension ofSecurity of Tenure Act (no 62 of1997).

An eviction order was granted,but later the Land Claims court setaside the order. The bankappealed. Conradie vacated theproperty but the bank continuedwith its appeal in view of theimportance of the applicablequestions of law.

THE DECISIONSection 8(1) provides that an

occupier’s right of residence maybe terminated on any lawfulground, provided that such

termination is just and equitablehaving regard to all relevantfactors including the fairness ofthe relevant agreement, theconduct of the parites giving riseto the termination, the interests ofthe parties, the existence of areasonable expectation of renewalof the agreement, and the fairnessof the procedure followed by theowner.

The acceptable reasons fortermination of an occupier’s rightof residence should not be toobroadly stated. The fact that theowner wishes to sell the propertymay not be a sufficient reason, butthis will not necessarily be theonly factor taken into account, northe decisive factor. Each of thefactors referred to in section 8(1)must be considered. If an ownerwishes to sell the property inquestion this should not be seen asa factor militating against evictionof the occupier.

The appeal was upheld.

Property

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DAVIDS v VAN STRAATEN

A JUDGMENT BY HJ ERASMUS JCAPE OF GOOD HOPEPROVINCIAL DIVISION17 MARCH 2005

2005 (4) SA 468 (C)

A lease for an indefinite period isnot recognised in our law. A leasewhich subsists on a month-to-month basis may be terminated bya landlord employing theprocedures provided for in section28(1)(d)(i) of the Rent Control Act(no 80 of 1976).

THE FACTSVan Straaten and the other

respondents purchased flatssituated in a building known asLeeuwen Mansions situated inLeeuwen Street, Cape Town. Atthe time they became ownersthereof, the flats were occupied byDavids and the other applicantsunder verbal periodic leaseagreements. The leases subsistedon a month-to-month basis.

Notices were then issued to theapplicants in terms of section28(1)(d)(i) of the Rent Control Act(no 80 of 1976) in which they wereinformed that the new owners andlessors required the premises forpersonal occupation or use andthey were afforded a three-monthperiod in which to vacate. Theapplicants did not vacate thepremises and in consequence, therespondents issued notices tothem informing them of theirintention to evict them. They thencommenced eviction proceedingsin the magistrates’ court.

The applicants defended theaction but judgment by defaultwas given against them. Theirapplication for rescission ofjudgment was dismissed. Theapplicants then brought an urgentapplication for an order that theeviction order given against thembe reviewed and set aside andthat they be restored to peacefuland undisturbed possession of theleased premises with immediateeffect, pending the outcome of anappeal against the dismissal of theapplication for rescission.

THE DECISIONThe applicants based their claim

to a clear right on the existence ofa right of occupation. Theirdefence to the claim for evictionwas that the lease concluded withthe previous owner continued toapply, that the lease provided foroccupation for an indefiniteperiod so long as the rental was

paid, that should the landlorddecide to sell the property, theparties would negotiate to reachan appropriate selling price, andthat for so long as the tenant paidthe rental, the lease could not beunilaterally terminated.

The allegations made by theapplicants could be acceptedinsofar as they did not conflictwith those of the respondents. Theallegation made regarding thenature of the existing lease couldtherefore not be accepted, in viewof the fact that the previous ownerof the property had confirmedonly that the existing lease wasconcluded on a month-to-monthbasis. As far as the allegation of anindefinite period was concerned,the law does not recognise a leasewhich subsists in perpetuity.Accordingly, this allegation had tobe rejected. As far as theobligation to negotiate a sale wasconcerned, any such obligationwould be meaningless becauseeither party was entitled in itsentire discretion to agree ordisagree any term relating to sucha sale. The lease could always beterminated unilaterally, asprovided for in the Rent ControlAct.

The applicant also depended onsection 25(1) of the Constitution.This section provides that no-onemay be deprived of propertyexcept in terms of a law of generalapplication, and no law maypermit arbitrary deprivation ofproperty. On a conspectus of allthe facts of the case, including thatthe respondents were in direfinancial straits as a result of theapplicants’ refusal to vacate thepremises, and that the applicants,except for the first applicant, werenot poor or destitute people, theoccupation of the premises by theapplicants except the firstapplicant should be terminated.

The application failed.

Property

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VIDAVSKY v BODY CORPORATE OFSUNHILL VILLAS

A JUDGMENT BY HEHER JA(STREICHER JA, FARLAM JA,CONRADIE JA and VANHEERDEN JA concurring)SUPREME COURT OF APPEAL31 MAY 2005

2005 (5) SA 200 (A)

An arbitration proceeding whichis attended by an irregularity suchas the failure to notify a party ofthe proceeding is a nullity and notmerely voidable. Any award madein such a proceeding isaccordingly unenforceable andcannot be made an order of court.

THE FACTSVidavsky, the owner of a

sectional title unit, declared adispute with the body corporateof Sunhill Villas. The dispute wasreferred to arbitration, aprocedure which was providedfor in terms of the Sectional TitlesAct (no 95 of 1986) and to whichthe Arbitration Act (no 42 of 1965)applied.

Vidavsky’s statement of claimwas served on the chairman of thebody corporate but no statementof defence was filed or served onbehalf of the body corporate. Thearbitrator sent a registered letterto the body corporate stating theintention to proceed with thearbitration on a specified date andcalling for an indication as towhether or not the date wasconvenient to it.

The body corporate received theletter on the date of thearbitration. It did not attend thearbitration. The arbitratorconsidered submissions onwhether or not the arbitrationcould nevertheless continue in theabsence of the body corporate,and decided that it could. He thenconsidered Vidavsky’s evidenceand made an award in his favour.

The body corporate refused tocomply with the award. Vidavskythen applied for an order that theaward be made an order of court.

THE DECISIONIn terms of section 15(2) of the

Arbitration Act, if any party to anarbitration fails, after havingreceived reasonable notice of thetime and place of the arbitrationproceedings, to attend suchproceedings without havingshown good and sufficient causefor such failure, the arbitrationtribunal may proceed in theabsence of such party.

In the present case, there was noreasonable notice. Consequently,the arbitrator’s jurisdiction waslacking. The question was whatthe consequences of that were:nullity of the arbitrationproceedings or voidability? Thefact that the arbitrator lacked thejurisdiction to make the awardindicated that the proceedings,and the award resulting fromthem, were a nullity. It followedthat nothing needed to be done toset aside the award since noaward had ever been made. Forthe same reason, there was noaward that Vidavsky, or a court,could enforce.

The application was dismissed.

Property

103

RAUBENHEIMER v TRUSTEES OF THE HENDRIKJOHANNES BREDENKAMP TRUST

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPEPROVINCIAL DIVISION20 JULY 2005

2005 CLR 328 (C)

In an application to interfere withproposed alterations to aproperty, a neighbour and aresidents’ association mustdemonstrate that they have abona fide interest in the alterationof property affected by theNational Heritage Resources Act(no 25 of 1999).

THE FACTSRaubenheimer was a resident of

the neighbourhood in which thefirst respondent’s property wassituated. He was also thechairperson of the BloubergstrandResidents’ Association.

The first respondent’s propertycomprised three erven on whichwas constructed a house. Theoriginal construction on theproperty was a cottage built morethan a hundred years previously.This construction had been alteredover the years, and wasfundamentally changed duringthe period 1982 to 1996.

The first respondent concludedan agreement with the owner of aneighbouring property to theeffect that the house then standingon its property would bedemolished and the propertyredeveloped by the constructionof a new dwelling. A permitapproving the demolition of theexisting structure was issued byHeritage Western Cape, a bodyhaving the power to do so interms of National HeritageResources Act (no 25 of 1999).

When Raubenheimer receivednotice of the intended demolition,he and the Residents’ Associationbrought an urgent interdict toprevent demolition pending anappeal against the issue of thepermit.

THE DECISIONThe present structure

constructed at the property boreno resemblance to the structureoriginally on it. The fact that itcould be restored to its conditionprior to the latest alterations wasirrelevant, because that would notresult in the cottage which hadoriginally been built on theproperty.

In any event, Raubenheimer andthe Residents’ Association did nothave locus standi to bring theapplication. They did not have abona fide interest, and were notaffected by, the proposeddemolition, and their concernswere based on sentimental andemotional considerations inrespect of a house that had longsince been changed.

Sections 38 and 235 of theConstitution provided no basis onwhich the applicants could bringthis application .

The applicants had failed todemonstrate that they held anyprima facie right entitling them tothe interdict they sought. Theapplication accordingly failed.

Property

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A M MOOLLA GROUP LIMITED v THE GAP INC

A JUDGMENT BY BY HARMS JA(STREICHER JA, BRAND JA,LEWIS JA AND PONNAN JAconcurring)SUPREME COURT OF APPEAL9 SEPTEMBER 2005

2005 CLR 381 (A)

A foreign trade mark holder mustshow that its trade marks arewell-known in South Africa inorder to obtain the protectionoffered in sections 35 and 36(2) ofthe Trade Marks Act (no 194 of1993).

THE FACTSIn 1969, a speciality retail outlet

for clothing was opened in SanFrancisco. The business expanded,and in 1972, the first applicationfor registration in the UnitedStates of ‘THE GAP’ as a servicemark was made in respect of itsretail clothing stores. Furtherapplications were made in otherclasses and in other countrieswhere GAP stores were opened.The GAP trade mark went on tobecome one of the largest sellingapparel brands in the world. TheGap Inc was the proprietor of thevarious trade marks. It did nothowever, acquire any trade marksfor its brand in South Africa. Priorto the 1990s, it showed littleinterest in the South Africanmarket.

In 1971, an application forregistration in South Africa of thetrade mark GAP in respect ofclothing was made by a certainHirsch. He later assigned themark to a proprietor whichmanufactured and sold jeansusing the mark. In 1983, a groupof companies composed of AMMoolla Group Ltd and the otherappellants obtained control of theproprietor of the trade mark. Theproprietor changed its trade markfrom GAP to THE GAP and in1988, applied for registration of aTHE GAP device mark, a copy ofThe Gap Inc’s logo. Furtherassociated trade marks wereapplied for and obtained.

The Gap Inc claimedproprietorship of the trade marksheld by the proprietor andapplied for an interdict against thegroup of companies to preventthem from using its marks inrelation to clothing or retailclothing outlets. It also applied forthe expungement of the trademarks on the grounds of non-use,basing its application on section27(1)(b) of the Trade Marks Act(no 194 of 1993).

The interdict was granted. Thegroup of companies appealed.

THE DECISIONUnder the territoriality principle

of trade mark law, trade markprotection extends only within thecountry in which a trade mark isregistered. The legality andpropriety of the registration of theGAP trade marks in South Africawas therefore beyond dispute. Afactor vitiating the registrationcould however, have been the factthat the Gap Inc’s trade markswere well known in South Africa.

Protection in South Africa for aforeign trade mark holder is givenby sections 35 and 36(2) of theTrade Marks Act (no 194 of 1993)which apply the provisions ofarticle 6bis of the ParisConvention for the Protection ofIndustrial Property. The questionraised by these provisionsresolves into the question whetherthe foreign trade mark holder’smark was well-known in SouthAfrica. The respondent’s case wasbased on the allegation that itstrade marks were well known inSouth Africa. Assuming that theywere, the evidence showed that asat 31 August 1991, the GAP trademarks were not being used on acontinuous and bona fide manneras contemplated in section 36(2).Nevertheless, at this time, TheGap Inc’s trade marks werethemselves not well-known inSouth Africa at this time. Theprotection provided for in section35 of the Act therefore did notextend to the Gap Inc’s trademarks and Gap Inc was notentitled to an interdict against thegroup of companies on thisground.

As far as the application forexpungement was concerned, theevidence tendered by theappellants was insufficient toshow that its trade marks hadbeen used either by themselves or

Competition

105

others to whom permission mighthave been given for their use. Thisapplication should therefore havebeen granted.

The Gap Inc had also based itsapplication for expungement on

section 10(3) of the Act. The reliefsought on this basis should havebeen granted. Accordingly GapInc’s cross-appeal should beupheld.

TELEMATRIX (PTY) LTD v ADVERTISING STANDARDSAUTHORITY SA

A JUDGMENT BY HARMS JA(CAMERCON JA, VANHEERDEN JA, MLAMBO JAAND CACHALIA AJAconcurring)SUPREME COURT OF APPEAL9 SEPTEMBER 2005

2005 CLR 345 (A)

A body created by statute whosepurpose is to regulate mattersbetween parties participating inthe competitive economy andwhich acts in the public interestwill not be delictually liable for adecision made in the course ofachieving that purpose, even if thedecision made might result indamages for that party.

THE FACTSTelematrix (Pty) Ltd brought an

action against the AdvertisingStandards Authority in which itclaimed damages amounting toR6 457 000. Its claim was based onthe allegation that the ASA hadincorrectly required Telematrix towithdraw an advertisement it hadissued. Telematrix had appealedthat decision. The ASA’s decisionwas subsequently reversed by itstribunal.

Telematrix alleged that theASA’s directorate made its rulingnegligently, outside the ambit ofthe terms of the complaint madeagainst the advertisement and/orarbitrarily, in circumstances inwhich it owed Telematrix a dutynot to act in that manner, andaware that an adverse rulingwould cause Telematrix to sufferdamages.

The ASA excepted to the claimon the grounds that even ifTelematrix succeeded inestablishing that its action hadbeen negligent, and outside the

ambit of the complaint orarbitrary, the action did not giverise to a delictual claim and theaction was not in breach of anylegal duty owed by the ASA toTelematrix.

THE DECISIONWhen a body like the

Advertising Standards Authorityacts so as to adjudicate uponconflicting interests, it acts like aquasi-judicial body. As such, itacquires the same degree ofimmunity in respect of thedecisions it makes in soadjudicating as a judicial bodywould have.

In the present case, thewithdrawal of the advertisementordered by ASA had followed acomplaint made by Telematrix’scompetitor, Netstar (Pty) Ltd andit had to deal with the allegationmade by Netstar regarding theadvertisement. It therefore actedin a quasi-judicial capacity. Insuch circumstances, public policyconsiderations require that it be

Competition

106

immune to a damages claimarising from any incorrect ornegligent decision it might havemade. The fact that Telematrixmight not have been subject to therules of the ASA, as opposed to itsadvertising agent, did not makeany difference because eitherTelematrix could have ignored theASA decision or was bound to itthrough the obligations created by

its position as principal in relationto the agency. In any event, theASA purported to act so as toserve the public interest anddecisions made by it, whethermade negligently or on the basisof mistaken findings, had to beaccepted by either party affectedby its decisions.

The exception was dismissed.

Competition

107

TELKOM SA LTD v BLOM

A JUDGMENT BY JONES AJA(HARMS JA, CAMERON JA,MTHIYANE JA and MLAMBO AJAconcurring)SUPREME COURT OF APPEAL30 MAY 2003

2005 (5) SA 532 (A)

A statutory assignment of anemployment contract in terms ofsection 197 of the Labour RelationsAct (no 66 of 1995) does not involvethe assignment of the rights andobligations of the pension fundwhere the consent of the employee tosuch an assignment is required.

THE FACTSUntil 31 March 2000, Blom and the

other respondents were employed byTelkom Ltd. They were members ofthe Telkom Pension Fund. In thatmonth, Telkom sold the division inwhich they were employed to MolapoTechnology Ltd. The division wassold as a business as a goingconcern. The employment contractswere transferred to Molapo withoutthe consent of the employees.

Section 197 of the Labour RelationsAct (no 66 of 1995) was applicable tothe transfer. It provides that a transferof employment contract without theconsent of the employee is notpermissible unless the employer’sbusiness is also transferred as a goingconcern. If such a transfer takes place,the rights and obligations of theformer employer vest in the newemployer.

Blom and the other respondentscontended that as a result of thetermination of their employment withTelkom, their membership of thepension fund also terminated. Inconsequence, they were entitled topayment of the benefits payable tomembers upon termination in terms ofthe pension fund rules.

They brought an application tocompel payment.

Contract

THE DECISIONThe effect of section 197 was to

bring about a statutory assignment ofthe employment contract. Thecontinuity thus achieved did nothowever, mean that the employee wasno longer entitled to terminationbenefits in terms of the rules of thepension fund. The employmentcontract with Telkom neverthelessterminated.

The rules of the pension fund clearlystated that if the services of a memberwere terminated by the employer as aresult of abolition of the employee’spost or reorganisation of theemployer’s activities, certain specifiedpension and gratuity benefits were tobe paid to the member. Theseprovisions covered what happenedwhen Telkom transferred its divisionto Molapo.

Pension rights and obligations couldnot necessarily be transferred fromone employer to another because thenew employer might not be acontributing employer, and was not inthe present case. The pension funditself was not a party to the agreementbetween Telkom and Molapo. Theeffect of section 197 therefore did notextend to the continuation of pensionfund rights and obligations. Theemployment contracts were properlyseen to be terminated as far as thepension fund was concerned. Blomand the other employees weretherefore entitled to payment ofbenefits accruing on termination oftheir membership.

The application succeeded.

108

CORDIANT TRADING CC v DAIMLER CHRYSLERFINANCIAL SERVICES (PTY) LTD

A JUDGMENT BY JAFTA JA(HOWIE P, ZULMAN JA,MTHIYANE JA and MLAMBO JAconcurring)SUPREME COURT OF APPEAL30 MAY 2005

2005 (6) SA 205 (A)

A seller of goods in respect ofwhich a claim for eviction is madeby the owner has locus standi tointerdict the owner from makingsuch a claim.

THE FACTSCordiant Trading CC purchased

sixteen motor vehicles from twocompanies which jointly operatedas motor dealerships under thecontrol of a managing director.Cordiant paid for the vehicles andtook delivery of them.

The vehicles held by the twocompanies and delivered toCordiant had been held by themunder a floorplan financeagreement concluded withDaimler Chrysler FinancialServices (Pty) Ltd. In terms of thisagreement, ownership in thevehicles would remain vested inDaimler until their purchase pricehad been paid for in full.

Cordiant’s representative wasunaware of the floorplanagreements which applied to thevehicles it had purchased. Itthought that the two companies itpurchased from were the ownersof the vehicles, and considereditself to become the owner of themwhen it took delivery of them.Cordiant sold the vehicles tomotor dealers who sold them tocustomers.

After the death of the managingdirector of the two motordealerships, Daimler repossessedone of the vehicles and claimed anorder to attach and remove others.The whereabouts of all but one ofthese was unknown. Cordiantthen applied for an interdict in theDurban High Court restrainingDaimler from doing so, pendingthe finalisation of an action for adeclaration that Daimler had noright to seek recovery of thevehicles.

THE DECISIONThe area of jurisdiction of the

Durban High Court was the placewhere the vehicles were sold. Thiswas also the place where Cordiantwould have to honour warrantiesunder the sales. Some of theevictions experience bypurchasers was in this area. TheDurban High Court was thereforethe court with jurisdiction todetermine the matter, even inrespect of those vehicles not soldwithin its area of jurisdiction. Theprimary object of this approachwas to avoid unnecessaryproliferation of proceedings andthe possibility of conflictingdecisions on the same cause ofaction. Considerations ofconvenience dictated that thejurisdiction of the Durban HighCourt was the appropriate one todetermine the matter.

As far as the locus standi ofCordiant was concerned, thematter was governed by section19(1)(a)(iii) of the Supreme CourtAct (no 59 of 1959). The firstquestion was whether Cordianthad an interest in an ‘existing,future or contingent right orobligation’. Cordiant was clearlyinterested in the determination ofDaimler’s alleged right ofownership of the vehicles becauseits right to seek compensation andliability under the warrantyagainst eviction depended onDaimler’s right of ownershipbeing unassailable. The issues thatCordiant wished to raise were thatDaimler was not the owner of thevehicles in question, and thatDaimler was in any eventestopped from asserting any rightof ownership. There was noreason why Cordiant should waituntil sued by its buyers before itcould bring proceedings againstDaimler.

Contract

109

SECURICOR (SA) (PTY) LTD v LOTTER

A JUDGMENT BY FRONEMAN J(DAMBUZA AJ and HOLE AJconcurring)EASTERN CAPE PROVINCIALDIVISION13 JANUARY 2005

2005 (5) SA 540 (E)

A restraint agreement forming partof an employment contract istransferred to a new employerwhen a business is transferred asenvisaged in section 197 of theLabour Relations Act (no 66 of1995).

THE FACTSLotter and the other respondents

were employed by the predecessor ofSecuricor (SA) (Pty) Ltd and thenagreed to certain restraint conditionsthat applied to their activities for aperiod of two years followingtermination of their employment.During the period March 2001 to May2002, the predecessor transferred itsbusinesses to Securicor. Theemployment contracts with Lotter andthe other respondents were assignedto Securicor in terms of section 197 ofthe Labour Relations Act (no 66 of1995).

In 2004, Lotter and the othersresigned their employment withSecuricor and began working forOmega, a company which operated indirect competition with Securicor.

Securicor then brought anapplication for an interdict to enforcethe restraint conditions incorporatedin their employment contracts. Lotterand the others opposed the

application on the grounds thatthe restraint conditions wereseparate from their formeremployment contracts and couldonly be transferred to the newemployer by cession.

THE DECISIONThe assignment provided for in

section 197 of the Act ensures thatthe rights and obligations of oldemployer and employee remain thesame as between the new employerand employee. The content of therights and obligations remains thesame.

When the business was transferredto Securicor, the goodwill of thebusiness was transferred as well.There was nothing to suggest that therestraints, which formed part of thegoodwill, were not transferred at thesame time. The restraints couldtherefore be enforced against Lotterand the other employees andSecuricor was entitled to do so.

At the time of the transfers under section 197 the precise extent of therights and obligations under the restraints were not yet known simplybecause the employees' employment was not discontinued until thebeginning of 2004. As explained above, Telkom is no authority for theproposition that the cession and delegation of rights and obligations(including the restraints) between employees and employers under section197 did not take place at the time of the respective transfers of thebusinesses. There is no third party involved here to which the oldemployer-employee relationship was vital, as was the case with the TelkomPension Fund in Telkom. In short, on the founding papers there is nothingto suggest that the restraints did not attack to the business that was beingtransferred, but that it rather attached to the owner of the business, the oldemployer, at the time.

Contract

110

MEDSCHEME HOLDINGS (PTY) LTD v BHAMJEE

A JUDGMENT BY NUGENT JA(ZULMAN JA, CAMERON JA,CLOETE JA and JAFTA JAconcurring)SUPREME COURT OF APPEAL27 MAY 2005

2005 (5) SA 339 (A)

It is insufficient to show that duressin the conclusion of a contract hastaken place by showing that one ofthe parties was subject to somepressure brought to bear by the otheras when the other party drives a hardbargain.

THE FACTSMedscheme Holdings (Pty) Ltd

administered two medical aid schemesestablished for employees of SasolLtd. In the course of so doing, itreceived claims from Dr Bhamjee inrespect of medical services renderedto patients and pharmaceutical drugssupplied to them. Members of theschemes preferred to have theiraccounts submitted directly to themedical aid schemes rather than payBhamjee directly and Bhamjeeaccepted this method of securingpayment.

On two occasions, Bhamjee wassubjected to an investigation byMedscheme, because the claimssubmitted had resulted in his practicecosting the scheme more thancomparative practices in the area. Anoutcome of the investigations wasBhamjee’s acceptance of twoacknowledgments of debt which hesigned. The first was for R350 000 andthe second was for R588 000. Bothprovided that they were conditionalupon acceptance by the medicalschemes.

Shortly after signing theacknowledgements of debt, themedical schemes decided that theywould no longer accept claims madeagainst them directly by Bhamjee buthe would have to recover his chargesdirectly from its members who wouldbe reimbursed by them. They did notindicate their acceptance of theacknowledgements of debt.

Bhamjee then disputed the validityof the two acknowledgements of debt,claiming that they were void becausehe had signed them under duress. Heclaimed payment of money he hadpaid, and payment of money retainedby Medscheme as set off against the

second acknowledgement of debt.Medscheme counterclaimed forpayment of the balance of moneyowed under the secondacknowledgement of debt.

THE DECISIONBhamjee must have signed the

acknowledgements of debt in thebelief that his failure to do so placedthe future of his lucrative practice atrisk. This threat however, did notconstitute duress. It did not entail thecomplete cessation of payment of anyclaims but a bargain in which Bhamjeewould have to comply with certainrequirements before payment by themedical schemes would be made. Themeeting at which the secondacknowledgement of debt was agreedamounted to no more than asettlement of the parties’ respectivecontentions, prompted by legitimatecommercial considerations which fellfar short of duress.

In any event, because of theconditional nature of theacknowledgements of debt, and thefailure of the medical schemes toaccept them, no enforceableobligation came into existence in thefirst place. The counterclaim byMedscheme, which depended on theenforceability of theacknowledgements of debt, couldtherefore not succeed.

As far as Bhamjee’s claim wasconcerned, this too could notsucceed, because his claims wereproperly directed at his patients, towhom he had rendered services.Medscheme had incurred no debtstoward Bhamjee and it was notobliged to pay any of his claims.

The claim and counterclaim weredismissed.

Contract

111

FROMAN’S EDEN (PROPRIETARY) LIMITED vWESTMEAD COMMERCIAL FLEET SERVICES CC

A JUDGMENT BY LEVINSOHN JDURBAN AND COAST LOCALDIVISION27 OCTOBER 2005

2005 CLR 456 (D)

Evidence of defects of an itemfollowing refurbishing of the itemindicates that the refurbishing hasnot taken place properly andconstitute grounds for a claim fordamages.

THE FACTSOn 18 December 2002, Froman’s

Eden (Pty) Ltd agreed to give twoof its vehicles to WestmeadCommercial Fleet Services CC inexchange for a 25 ton MANtractor owned by Westmead. Itwas agreed that the tractor wouldbe in perfect working order andwould carry a warranty for sixmonths in respect of itsreconditioned engine, the gear boxand the differential excluding theclutch. The vehicle would berefurbished for this purpose.

In January 2003, Westmeaddelivered the tractor to Froman’sand took delivery of Froman’svehicles.

Froman’s alleged that in breachof the warranty, the tractorexhibited defects including sprayjets having broken off, a misfiringengine and the existence of threewrong injectors. It also allegedthat the engine had fuel leaks andoil leaks. The reasonable cost ofremedying the defects wasR252 502,63.

Westmead denied that thetractor had any of the allegeddefects. It claimed that the gearbox of one of the Froman’svehicles was defective and that itwas entitled to R21 000 in respectof these defects.

Froman’s brought an action forpayment of R252 502,63.Westmead counterclaimed forpayment of R21 000.

THE DECISIONThe first question was what was

meant by a ‘refurbished’ vehicle.In essence there is no differencebetween a refurbished and areconditioned vehicle. Thevehicle, accepted by both partiesto be a second-hand vehicle,would have to be capable ofcontinuing in running order for atleast another 300 000km after itsrefurbishment. The question thenwas whether the defectscomplained of indicated that thevehicle had not been refurbishedas agreed.

The evidence indicated thatWestmead had failed to refurbishthe vehicle properly. It wastherefore in breach of itsobligations toward Froman’swhich was entitled to be placed inthe position it would have been inhad the contract been properlyperformed.

Froman’s proved its damages inthe sum of R246 502,63 and wasentitled to payment of this sum.Westmead had been unable toshow that it was entitled topayment of its counterclaim.

The action succeeded.

Contract

112

THE COMMISSIONER OF SOUTH AFRICAN REVENUESERVICES v STAND TWO NINE NOUGHT WYNBERG (PTY) LTD

A JUDGMENT BY CONRADIE JA(HOWIE P, BRAND JA, NUGENT JA,AND VAN HEERDEN JA concurring)SUPREME COURT OF APPEAL31 MAY 2005

2005 CLR 376 (A)

An arrangement entered intobetween a liquidator and an estatedebtor under which the estate debtorundertakes to pay a particular estatecreditor cannot supersede the duty ofthe liquidator to wind up the estatein accordance with the liquidator’sstatutory obligations as set out in theInsolvency Act (no 24 of 1936).

THE FACTSAt the time of its liquidation, Super

Diamond Computers (Pty) Ltd owedStand Two Nine Nought Wynberg(Pty) Ltd R600 273,40 in unpaid rent.MMW Technologies (Pty) Ltd agreedto pay Stand Two Nine Nought’sclaim as well as that of any othercreditor.

MMW paid Super Diamond’sliquidator sufficient to pay Stand TwoNine Nought’s claim. It did not havesufficient funds to pay the other twocreditors, one of whom was the SouthAfrican Revenue Service and it wasalso placed in liquidation.

Super Diamond’s liquidator drew theliquidation and distribution account.It showed the claim of the SARevenue Service to be preferent, andthe claims of the two remainingcreditors, one of whom was StandTwo Nine Nought, as concurrent.

Stand Two Nine Nought objected tothe liquidation and distributionaccount, contending that the moneypaid by MMW had been earmarkedfor the payment of its debt andshould not be allocated to the SARevenue Service as preferent creditor.

Insolvency

THE DECISIONAlthough an arrangement between a

liquidator and a debtor that the debtorwill pay a particular estate creditor isunusual, so long as the debtor paysall of the debts, the validity of such anarrangement is dependent on thedebtor being able to honour itsobligations. In the present case,MMW had been unable to honour itsobligations. The consequence of thiswas that the arrangement offendedagainst the Insolvency Act (no 24 of1936) and was therefore unlawful.

MMW’s default resulted in theliquidator becoming obliged, inaccordance with his statutoryobligations, to wind up the affairs ofSuper Diamond. Even if the liquidatorwas properly seen as MMW’s agentin settling Stand Two Nine Nought’sclaim, once his obligation as liquidatorconflicted with such obligations asagent that he had accepted, he wasbound to honour the former inpreference to the latter.

Stand Two Nine Nought’sobjections were dismissed.

11] An assumption vital to the validity of the settlement agreement was that MMWwould see to it that all Super Diamond’s liabilities were settled. It would do this byimmediately paying the first respondent’s claim and thereafter paying the claims ofwhichever other creditors might prove claims. As long as MMW honoured itsobligations the agreement could be validly performed. As soon as it did not,however, performance of the agreement would offend against the Insolvency Actand for that reason be unlawful.[12] When MMW failed to honour its obligations Super Diamond remained insolventand the liquidator became obliged to wind up its insolvent estate according to thedictates of the Insolvency Act. Whatever mandate he may have received from therespondent and whatever agreement he may have concluded on behalf of SuperDiamond had to yield to his statutory duty to recover and reduce into possession allSuper Diamond’s assets and distribute the proceeds according to law.

113

NEW MEDIA PUBLISHING (PTY) LTD v EATINGOUT WEB SERVICES CC

A JUDGMENT BY THRING JCAPE OF GOOD HOPE PROVINCIALDIVISION4 APRIL 2005

2005 (5) SA 388 (C)

A web site which provides similarinformation to that provided by atrade mark holder, using a web sitename that is similar to that of theregistered trade mark, infringed thetrade mark rights of the trade markholder.

THE FACTSNew Media Publishing (Pty) Ltd

published a magazine entitled EatOut. The magazine containedinformation about restaurants,including their contact details andshort reviews. Revenue from thepublication of the magazine wasgenerated from sales and fromadvertising.

In 1998, New Media registered atrade mark in the words ‘Eat OutGuide’ in Class 16, ie in relation topublications and printed matter andthe like.

In 2000, Eating Out Web ServicesCC, the respondent, was formed. Itregistered two Internet web sites,www.eating-out.co.za andwww.eatingout.co.za. At these sites, itprovided the service of providinginformation about restaurantsthroughout South Africa. Theinformation was similar to thatcontained in the Eat Out magazine.Revenue from publication of thesesites was obtained from restaurantsand from advertising.

In 2003, New Media applied for anorder restraining the respondent frominfringing its trade mark and frompassing off its business, products orservices as those of New Media andfrom using the name or mark ‘EatingOut’ or any similar name or mark, soas to connect it with New Media’sbusiness, products or services.

Competition

THE DECISIONTwo questions arose: 1. Were the

two marks identical or sufficientlysimilar to one another? and 2. WasNew Media’s mark being usedunauthorisedly in the course of tradein relation to services similar to thoseof New Media that there existed thelikelihood of deception or confusion?

The only difference between themark as registered by New Media andthe mark used by the respondent wasthat the former included the word‘Guide’ and changed the word form of‘eat’ to ‘eating’. The fact that theparties’ respective logos were clearlydifferent did not affect the similarity ofthese marks. The two marks weresufficiently similar to constitute aninfringement of trade mark rights,provided that other requirements werepresent.

The goods and services provided byboth parties were also similar. Bothprovided information aboutrestaurants and there was evidencethat members of the public had beenconfused by the similarity, to theextent that they thought therespondent’s product was that ofNew Media. There therefore existedthe likelihood of deception orconfusion and New Media’s trademark rights had been infringed.

The application succeeded.

114

AXIAM HOLDINGS LTD v DELOITTE & TOUCHE

A JUDGMENT BY BY NAVSA JA(HOWIE P AND JAFTA JACONCURRING, CLOETE JA ANDHEHER JA dissenting)SUPREME COURT OF APPEAL1 JUNE 2005

2005 CLR 360 (A)

A claim alleging negligentmisstatement giving rise to loss maybe based on the allegation that thedefendant failed to correct anincorrect impression incircumstances where a reasonableperson in the position of thedefendant would have known of theinaccuracies giving rise to theincorrect impression.

THE FACTSAxiam Holdings Ltd brought an

action against Deloitte & Touche fordamages amounting to R241 069 22,43alleged to have been suffered as aresult of a negligent audit carried outby Deloitte. The audit was of thefinancial statements of the BusinessBank Ltd for the financial year ending31 March 1999.

Axiam’s particulars of claim allegedthat the financial statements failed topresent fairly the financial position ofthe bank in that they misrepresentedthe bank’s net worth, reflecting a netprofit before tax of R29 266 176whereas the bank in fact suffered anet loss of R77 899 201. They allegedthat in conducting the audit andcompleting the financial statements,Deloitte did not do so with therequisite professional and reasonableskill and care and failed to complywith Generally Accepted AccountingPractice, and had it done so, thefinancial statements would haveaccurately represented the bank’sfinancial position, alternatively wouldhave contained a qualified auditopinion.

The particulars of claim alleged thatin February 2000, two companies inthe PSG group concluded linkedagreements with the bank in terms ofwhich shares in the bank werepurchased and its business financed,and that Deloitte was aware of thenegotiations and that the financialstatements and audit opinion wouldbe relied on by the two companies inthat process.

In paragraph 12.1 and 12.2 of itsparticulars of claim, Axiam allegedthat prior to the date on which theagreements were concluded, Deloitteknew, alternatively could reasonablyhave been expected to know, that thetwo companies, in deciding toconclude the agreements, would relyon the financial statements andDeloitte’s audit opinion, and knew,alternatively could reasonably havebeen expected to know, that thefinancial statements contained themisrepresentation and

misstatements referred to above.Axiam alleged that Deloitte was

under a duty to warn thecontracting parties that thefinancial statements and auditopinion were incorrect,alternatively to warn them thatthe audit had not been conductedproperly and should not be reliedon.

Deloitte excepted to the claim on thegrounds that the alleged duty did notfollow from the allegations maderegarding Deloitte’s knowledge of thereliance on the financial statementsand of the misrepresentations andmisstatements contained in them.

The exception was upheld. Axiamappealed.

THE DECISIONBased on the allegation that Deloitte

knew what was alleged in paragraph12.1 and 12.2, the claim was, asaccepted by the court a quo, notexcipiable. As far as Axiam’salternative claim was concerned, thisrelied on a negligent misstatement byomission, the allegation being thatDeloitte had failed to correct its priorcertification. This claim was inaccordance with fundamentalprinciples and in accordance with theprovisions of section 20(9)(b)(ii) ofthe Public Accountants and AuditorsAct (no 80 of 1991).

The important factual implication ofparagraph 12.2 was that a reasonableperson in the position of Deloittewould have known of the defects inthe financial statements andconsequent inaccuracy of the auditopinion. Based on this, a trial courtmight conclude that a reasonableperson would not have kept silent butwould have expressed at least areservation as to the reliability of thereport.

Axiam would have to prove thatupon Deloitte there rested a dutyto speak. In establishing that sucha duty rested on it, Deloitte’signorance of its negligent reportwould present no bar.

The exception was dismissedand the appeal upheld.

Competition

115

STANDARD BANK OF SA LTD v SNYDERS

A JUDGMENT BY BLIGNAULT JCAPE OF GOOD HOPEPROVINCIAL DIVISION21 JULY 2005

2005 (5) SA 510 (C)

An action claiming the right toexecute against the immovableproperty of a defendant must allegethat the claim complies with section26(3) of the Constitution. Theplaintiff may then proceed to applyfor default judgment to court shouldthe defendant fail to defend theaction.

THE FACTSStandard Bank of SA Ltd

brought actions against Snydersand others foreclosing onmortgage bonds passed by thedefendants in its favour. The bankalleged a failure to pay sums dueon money lent and advanced andclaimed the right to executeagainst the debtors’ fixedproperty. In each case, it soughtorders that the bonded propertybe declared executable.

The bank’s claim did not refer tosection 26(3) of the Constitution. Thesection provides that no-one may beevicted from their home without anorder of court made after consideringall the relevant circumstances.

The Registrar refused to grant anorder declaring the defendants’properties executable in the light ofthe decision given in the case ofJaftha v Schoeman 2005 (2) SA 140(CC). This judgment held that section66(1)(a) of the Magistrates’ CourtsAct (no 32 of 1944) must be readsubject to the addition that a courtmay give an order executing againstthe immovable property of adefendant after considering allrelevant circumstances. The effect ofthe judgment is to require such anorder before execution againstproperty may be given.

The actions were referred to the

Property

court for decision.THE DECISION

The defendants argued that sinceRule 31 of the Rules of Court, underwhich the applications for defaultjudgment were made, made noprovision for a court to give an orderexecuting against immovableproperty, the Rule wasunconstitutional.

Rule 31 did make provision forproceeding to court with such anapplication but only upon referral ofthe matter to the court. However, itwas not necessary to proceed byobtaining such a referral as the Ruledid not preclude a court fromconsidering such an applicationwithout prior reference to theRegistrar. Interpreting the Rule in apractical and sensible manner, andwith due regard for the provisions ofsection 26(3), a court could give anorder that the properties of thedefendants be declared executable,following application to it directly forsuch an order.

As far as the failure to notify thedefendants of their rights in terms ofsection 26(3) was concerned, it wastrue that the particulars of claimalleged sufficient facts to show thatthe orders sought by the bank shouldbe granted. However, without anexpress reference to the section, thedefendant would probably not knowof his rights under it. The summonsesshould have contained a reference tothis section, alleging that the factswere sufficient to permit executionagainst their properties.

The bank was therefore entitled tojudgment on all its claims except thatthe properties be declared executable.

116

UBUNYE CO-OPERATIVE HOUSING v MBELE

A JUDGMENT BY LEVINSOHN J(JAPPIE J concurring, Hurt Jdissenting)NATAL PROVINCIAL DIVISION22 SEPTEMBER 2005

2005 CLR 423 (N)

For an eviction application tocomply with section 4 of thePrevention of Illegal Evictionfrom and Unlawful Occupation ofLand Act (no 19 of 1998) thenotice of motion must incorporatea notice to the respondent that ifno notice of opposition isdelivered within the stipulatedtime, the application will be setdown for hearing to obtaindirections in terms of that section.

THE FACTSUbunye Co-operative Housing

brought an application for theeviction of Mbele and thirty oneothers from its property, theUbunye Centre.

It proceeded firstly by obtainingan order authorising the Registrarto issue eviction notices to beserved on the respondents and onthe municipal manager havingjurisdiction over the property.Thereafter, it sought an order thata rule nisi be issued calling uponthe respondents to show cause ona date to be determined, why anorder should not be made evictingthem from the properties situatedat the Ubunye Centre, orderingthem to vacate the propertieswithin a specified period, andauthorising the sheriff to carry outthe eviction.

The application was referred tothe Full Bench for directions onthe procedure adopted byUbunye, having regard to theprovisions of section 4 of thePrevention of Illegal Eviction fromand Unlawful Occupation of LandAct (no 19 of 1998).

THE DECISIONIt is clear from section 4(2) of the

Act that a notice of evictionproceedings must be served on anunlawful occupier and on the

municipality having jurisdiction,before the hearing of the evictionapplication. Such a notice must beauthorised by an order of court.This constitutes a separate anddistinct element in the procedurefor eviction.

In Cape Killarney PropertyInvestments (Pty) Ltd v Mahamba2001 (4) SA 1222 (A), it was heldthat an application for evictioncommences with the issue of anotice of motion as provided forin Rule 6(5)(a) of the Rules ofCourt. The notice of motionshould be modified to draw to therespondent’s attention the factthat if no notice of opposition isdelivered within the stipulatedtime, the application will be setdown for hearing to obtaindirections in terms of section 4(2).

Though the procedure envisagedby this judgment does not preventthe bringing of urgentapplications, the usual procedurewill be to commence with a noticeof motion, with the usual formsuitably modified so as to complywith the notice requirements ofsection 4(2).

In the present case, Ubunye hadnot followed this procedure.Accordingly, the proceedingscommenced by it were irregular.For it to proceed, Ubunye wouldhave to amend its papers.

Property

117

SYMINGTON v PRETORIA-OOS PRIVAATHOSPITAAL BEDRYFS (PTY) LTD

A JUDGMENT BY BRAND JA(SCOTT JA, STREICHER JA,CAMERON JA and PONNAN JAconcurring)SUPREME COURT OF APPEAL27 MAY 2005

2005 (5) SA 550 (A)

Failure to inform the Registrar ofCompanies of the resignation of adirector does not invalidate theresignation when effected by mutualassent. Prescription in respect of aclaim for damages begins to runfrom the time the act takes placewhich gave rise to the claim fordamages.

THE FACTSPretoria-Oos Privaat Hospitaal

Bedryfs (Pty) Ltd was incorporated tooperate a newly established privatehospital in the eastern suburbs ofPretoria. Symington was one of thefounding shareholders. In terms of ashareholders’ agreement, he wasentitled to conduct a radiologist’spractice in the hospital and occupy aportion of the building for thispurpose rent free, for a period of tenyears. A lease agreement wasconcluded between the parties.

Symington then nominatedIndependent Advisors SA Inc aslessee, and that company sub-let thepremises to a partnership ofradiologists at a rental of R45 000 permonth. The sub-lease was concludedon 8 November 1996. At this time,Symington and the other twoappellants were directors andshareholders of Pretoria-Oos.

In June 1998, the NetworkHealthcare group of companies,Netcare, purchased all the shares inPretoria-Oos. In terms of theagreement, all the directors ofPretoria-Oos were obliged to resign.At this time, they handed letters ofresignation to Netcare and receivedpayment for their shares. Notice oftheir resignations was given to theRegistrar of Companies on 12September 2000. Article 66(c) of thecompany’s Articles of Associationprovided that the office of directorwas vacated if the director resignedhis office by notice to the companyand the Registrar.

In November 2000, Pretoria-Oosbrought an action against Symingtonand the directors. The action claimedpayment of the present value of therental stream accruing to IndependentAdvisors, alleging that the leaseconcluded by it was a result of thediversion of a corporate opportunitywhich was rightfully that of Pretoria-Oos.

Symington and the other appellantsdefended the action inter alia on thegrounds that the claim arose on 8

November 1996, and that the claimprescribed after a period of threeyears from that date, before theservice of summons in November2000.

THE DECISION Pretoria-Oos argued that section

13(1)(e) of the Prescription Act (no 68of 1969) applied. The section providesthat the running of prescription isdelayed if the creditor is a juristicperson and the debtor is a member ofthe governing body of such juristicperson.

The relationship between a directorand his company is essentiallycontractual. Accordingly, there is noreason why the relationship cannot beterminated by mutual consent, unlessthis is specifically excluded by theArticles of Association. Terminationby mutual consent may take placewhether or not the Articles providefor it. Article 66(c) of the company’sArticles of Association however,provided for termination unilaterallyand were therefore inapplicable to thepresent case.

Failure to comply with theprovisions of section 216(2) of theCompanies Act by not informing theRegistrar of the termination of adirectorship also had the effect onlyof attracting criminal sanction and didnot affect the validity of thetermination itself.

The central question was when thedebt claimed by Pretoria-Oos becamedue. Since its claim was for damagesarising from the breach of a fiduciaryduty, the date of the breach was thedate on which the debt became due.Pretoria-Oos alleged this to be theentering into of the sub-lease on 8November 1996. This would be thedate on which the claim arose,assuming that the claim was one fordamages and not one fordisgorgement of profits by a directorwho took advantage of a corporateopportunity.

On a proper interpretation of theparticulars of claim, it was clear that

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118

Pretoria-Oos characterised its claim asone for the payment of damages andnot for the disgorgement of profits bya director. In any event, there was noclear link between the profits that

were made by Independent Advisorsand the defendants.

The claim therefore arose on 8November 1996 and the debt hadprescribed.

I do not agree with the conclusion that the plaintiff’s particulars of claim couldreasonably be understood to reflect a claim for disgorgement of profits. Isay this for various reasons. First and foremost is the consideration thatthere is not a single allegation in the plaintiff’s particulars of claim to theeffect that the defendants received any profit from the sublease which,according to the plaintiff, constituted the breach of their fiduciary duties.Because the receipt of profits constitutes the central element of such aclaim, the absence of an allegation could be regarded as fatal in itself.[32] However, the plaintiff’s difficulties are exacerbated by the fact thaton the face of the sublease it conferred no benefits on the defendants atall. The only recipient of any benefit was a company, IndependentAdvisors. The plaintiff’s answer to this difficulty was that the companycould conceivably have been used as a conduit for benefits leading tothe defendants. That is obviously so. The crux of the matter is, however,that in the circumstances one would have expected an allegation to thateffect or at least a description of the relationship between the companyand the defendants from which such a link could be inferred. The onlyreference to any relationship between Independent Advisors and thedefendants is contained in par 3.2 of the particulars of claim which readsas follows:‘3.2.1 The second and third defendants were directors of Independent Advisors.Alternatively3.2.2 The first, second and third defendants were directly or indirectly beneficiallyassociated with Independent Advisors.’[33] The plaintiff’s contention was that the alternative allegation in para3.2.2 was sufficient to justify the inference of a conduit between thedefendant and the company through which the benefit derived from thesublease could have flowed. In my view this contention is clearlyunfounded. Even more significant, however, is that if the main allegationin para 3.2.1 is accepted, there would be no link whatsoever betweenthe first defendant and the company at all, which in my view, is a clearindication that the plaintiff’s claim was not for the disgorgement of profitsreceived.

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119

RICHMAN v BEN-TOVIM

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPEPROVINCIAL DIVISION25 SEPTEMBER 2005

2005 CLR 441 (C)

For the purposes of enforcing aforeign judgment, a plaintiff mustshow that the foreign court whichgranted the judgment hadjurisdiction over the defendant asdetermined and recognised bySouth African law. Mere physicalpresence of the defendant in theforeign jurisdiction will notestablish that the foreign courthad jurisdiction. Mere admissionof liability in respect of theplaintiff’s claim will not indicatea submission to the jurisdiction ofthe foreign court.

THE FACTSRichman acted for Ben-Tovim in

the furnishing of advice anddrafting agreements between Ben-Tovim and companies in the DeBeers group. Richman did so at atime when he was situated inLondon and was in practice thereas a commercial and foreign lawconsultant.

During the period April toNovember 2000, Richman actedfor Ben-Tovim in negotiationswith those companies and in thepreparation of proposed litigationagainst them, In consequence,Ben-Tovim became indebted toRichman in the sum of £51,165.25in respect of fees for his work. On31 March 2001, Richman sent aninvoice to Ben-Tovim. By October2001, this remained unpaid foranother two years.

In November 2003, Ben-Tovimtravelled to London. Richmansued for payment of his fee andprocess was served on Ben-Tovimwhen he was in London. InDecember 2003 and in London,Ben-Tovim agreed to pay theclaim of £56,806.02. Richmanrequested confirmation of theterms of payment. When this wasnot forthcoming, he proceeded toobtain default judgment againstBen-Tovim.

Richman then broughtprovisional sentence proceedingsagainst Ben-Tovim in the CapeHigh Court. The claim was basedon the judgment obtained inEngland.

Ben-Tovim defended the actionon a number of grounds, one ofwhich was that the English courtwhich granted judgment againsthim did not have the jurisdictionto do so.

THE DECISIONProvisional sentence proceedings

are recognised as the ordinary andcustomary procedure for thepurpose of enforcing a foreignjudgment. It is however, necessaryto ensure that the foreign courtwhich gave the judgment hadjurisdiction over the defendant todo so, such jurisdiction beingdetermined in accordance withSouth African law on thejurisdiction of foreign courts.

While there is authority to theeffect that a ground of jurisdictionexists if at the time ofcommencement of an action, thedefendant is physically presentwithin the state to which the courtbelongs, the effect of the judgmenthanded down in Purser v Sales2001 (3) SA 445 (A) is that merephysical presence in a foreigncountry does not conferjurisdiction of the courts of thatcountry. Ben-Tovim’s merephysical presence in Englandtherefore did not conferjurisdiction on the English courtwhich gave judgment against him.

The question remained whetheror not Ben-Tovim submitted to thejurisdiction of the English court,either expressly or tacitly. It wasclear that Ben-Tovim admittedliability for the debt, but this initself did not demonstrate asubmission to the jurisdiction ofthe English court. There was noindication that he did submit to itsjurisdiction. Accordingly, on thisbasis too it had not been shownthat the English court hadjurisdiction over Ben-Tovim.

The action was dismissed.

Jurisdiction

120

S A BREWERIES LIMITED v VAN ZYL

JUDGMENT BY MPATI DP(BRAND JA, JAFTA JA, MLAMBOJA AND CACHALIA AJA concur-ring)SUPREME COURT OF APPEAL29 SEPTEMBER 2005

2005 CLR 473 (A)

A party which takes cession ofdebts from a creditor obtains theright to sue for payment of thedebts existing as at the date ofcession but not for payment ofdebts which arise at a later stage.

THE FACTSOn 7 July 1997, Van Zyl signed a

deed of suretyship bindinghimself to South AfricanBreweries Ltd as surety and co-principal debtor for money whichmay at any time become owing byGensam (Pty) Ltd to SouthAfrican Breweries. Gensam thenincurred debts toward SouthAfrican Breweries arising from itspurchase of liquor on account.

On 4 March 1999, South AfricanBreweries ceded all its right titleand interest in its debtors to aprivate company and then becamedormant. The private companyultimately converted into a publiccompany, and assumed the nameSouth African Breweries Ltd. Thenew South African Breweriescontinued to sell liquor to Gensamon account. As at 28 February2001, Gensam owed South AfricanBreweries R515 177,14.

South African Breweries sued forpayment of this sum. Van Zyl,who was sued as surety, defendedthe action on the grounds that thedeed of suretyship did not secureindebtedness arising toward anycompany other than the originalSouth African Breweries. Theamount claimed being in respectof sales subsequent to 4 March1999, there was no indebtednesscontemplated in the deed ofsuretyship for which Van Zyl wascontingently liable.

Cession

THE DECISIONIt is correct to say that a

cessionary acquires the cedent’srights against both principaldebtor and surety. However, thecessionary does not becomesubstituted for the cedent andtherefore does not acquire rightsin respect of debts arisingsubsequent to the conclusion ofthe cession agreement.

This situation may bedistinguished from one where byoperation of law, a new partybecomes substituted for theoriginal creditor, as when apurchaser becomes owner ofleased property and thus acquiresa claim against the debtor.

In the present case, SouthAfrican Breweries had notdemonstrated what was owed toit as at the date of cession, andtherefore whether the debt itclaimed was that which had beenceded to it, in distinction fromdebts which arose later. It wastherefore not entitled to claimpayment, either from the principaldebtor or the surety.

The actions was dismissed.

What then, was the extent of the respondent’s liability under the suretyship agreement?The only right of action that SAB 69 had against its debtors and which it could cede toSAB 98 at the time of the cession was the right to claim what was owed to it as at the dateof the cession. It had no right of action for the future debts of its debtors and it could notcede rights that had not accrued to it. The liability of a surety being ancillary to that of theprincipal debtor, the respondent was accordingly only liable to be sued for payment ofmoneys owed to SAB 69 by Gensam on the date of the cession, viz March 1999, and formoneys in respect of ‘outstanding orders for goods in transit’.

121

PARSONS TRANSPORT (PTY) LTD v GLOBALINSURANCE COMPANY LTD

A JUDGMENT BY MPATI DP(MTHIYANE JA, NKABINDE JA,MAYA AJ AND CACHALIA AJconcurring)SUPREME COURT OF APPEAL29 SEPTEMBER 2005

2005 CLR 479 (A)

A provision in an insurance policythat cover is conditional on thepayment of the premium is not asuspensive condition, non-fulfilment of which renders thepolicy void.

THE FACTSGlobal Insurance Company Ltd

agreed to insure ParsonsTransport (Pty) Ltd againstdamage or loss caused to its fleetof vehicles from 1 December 2002to 30 November 2003. An annualpremium of R4 513 998,83 waspayable in full by 15 January 2003.

The insurance policy provided:‘Subject to the terms, exceptionsand conditions (precedent orotherwise) and in considerationof, and conditional upon, the priorpayment of the premium by or onbehalf of the insured and receiptthereof by the company, thecompany agrees to indemnify orcompensate the insured bypayment ...’ The policy alsoprovided that it was subject tocertain warranties, one of whichwas that the premium waspayable by 15 January 2003.

Parsons failed to pay thepremium. Global brought anaction for payment. The partiesapproached the court for adetermination of whether or notpayment of the annual premiumby 15 January 2003 constituted acondition precedent or asuspensive condition so that non-compliance thereof would renderthe contract inoperative andunenforceable by Global.

Insurance

THE DECISIONParsons argued that payment of

the premium was a conditionprecedent to the operation of theinsurance policy and, not being anobligation resting on it, could notbe enforced. However, theprovision that the premium wasto be paid by 15 January 2003 wasstated in the form of a warranty.The effect of this was merely torender the policy voidable by theinsurer were it not honoured. Thevalidity of the whole contract ofinsurance was not renderedsubject to the fulfilment of thecondition.

Even if the provision wasconsidered to be a ‘promissorywarranty’, the contract ofinsurance was in existence, andcover did subsist, as from 1December 2002. Parsons enjoyedcover from that date and anyfailure on its part to pay thepremium in January did notexpunge that benefit.

Payment of the annual premiumwas therefore not a suspensivecondition and Global was notprevented from suing for paymentbased on the obligations created inthe contract of insurance.

And failure to pay the premium on due date does not suddenly wipe out theinsurance cover that was enjoyed from 1 December 2002 and continued to be enjoyedfor the period between then and the due date of payment (cf SA EagleVersekeringsmaatskappy Bpk v Steyn, supra, at 848I-849B). In my view,counsel’s reliance on the ‘warranties’ in support of the contention that the obligationflowing from the contract was suspended pending payment of the premium ismisplaced.