Current Commercial Cases

1999

ISBN 978-1-920569-27-3

A SURVEY OF THE CURRENT CASE LAW

written by

Advocate Mark Stranex BA (Natal) Hons LLB (Cape Town)Member of the Johannesburg Bar

The Law Publisher CCCK92/26137/23

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Contents

Index......................................................................................................................................................... 4THOMPSON v SCHOLTZ . 8ETKIND v HICOR TRADING LTD ... 9GRAND MINES (PTY) LTD v GIDDEY N.O. 10AFCOL MANUFACTURING LIMITED v AFRIFURN INDUSTRIES CC 11DURBAN’S WATER WONDERLAND (PTY) LTD v BOTHA 12VULINDLELA FURNITURE MANUFACTURERS v MEC, DEPT OF EDUCATION AND CULTURE13CROATIA MEAT CC v MILLENNIUM PROPERTIES (PTY) LTD 15SOFOKLEOUS v MILLENNIUM PROPERTIES (PTY) LTD 15PARADISE LOST PROPERTIES (PTY) LTD v STANDARD BANK OF SOUTH AFRICA (PTY) LTD 16KOEKEMOER v LANGEBERG STENE BK ... 17STELLENBOSCH FARMERS WINERY LTD v VLACHOS 18CHINATEX ORIENTAL TRADING CO v ERSKINE... 19AMALGAMATED RETAIL LTD v B.R. HODGSON GROUP INTERNATIONAL (PTY) LTD 20B.R. HODGSON GROUP INTERNATIONAL (PTY) LTD v AMALGAMATED RETAIL LTD 20STANDARD BANK OF SA LTD v FRIEDMAN .. 21INVESTEC BANK (PTY) LTD v GVN PROPERTIES CC 22GIANNAROS v MERCHANT COMMERCIAL FINANCE (PTY) LTD 23DUNLOP TYRES (PTY) LTD v BREWITT... 24STANDARD BANK OF SA LTD v MASTER OF THE HIGH COURT 25MOKOENA v THE MASTER ....26DOYLE v BOARD OF EXECUTORS 27OWNERS OF THE MV FORTUNE 22 v KEPPEL CORPORATION LTD 28INTERCONTINENTAL EXPORTS (PTY) LTD v FOWLES 29BOE BANK LTD v TRUSTEES, KNOX PROPERTY TRUST 30ADMINISTRATORS, ESTATE RICHARDS v NICHOL . 32MOHAMMED N.O. v ALLY33LOW WATER PROPERTIES (PTY) LTD v WAHLOO SAND CC35DE KOCK v HÄNEL36CALDEIRA v RUTHENBERG ....37ERF 167 ORCHARDS CC v GREATER JOHANNESBURG METROPOLITAN COUNCIL 38ODENDAAL v EASTERN METROPOLITAN LOCAL COUNCIL 39WILKEN N.O. v REICHENBERG 40GREUB v THE MASTER .... 41MULLER v DE WET..... 42TALACCHI v MASTER OF THE SUPREME COURT ... 43PREMIER WESTERN CAPE v PARKER & MOHAMMED 44COMMERCIAL UNION INSURANCE COMPANY OF SA LTD v LOTTER 45ADEL BUILDERS (PTY) LTD v THOMPSON ... 46NAMPESCA (SA) PRODUCTS (PTY) LTD v ZADERER47VAN DEN BERG & KIE REKENKUNDIGE BEAMPTES v BOOMPROPS 1028 BK 48CONSOLIDATED EMPLOYERS MEDICAL ...... 49AID SOCIETY v LEVETON 49Basil Read Sun Homes (Pty) Ltd v Nedperm Bank Ltd 51CROWTHER & PRETORIUS v WARDA BUTCHERY BK 52EX PARTE GRIFFIN SHIPPING HOLDINGS LTD..... 53ABSA BANK LTD v AMOD55BODY CORPORATE OF THE LAGUNA RIDGE SCHEME NO 152/1987 v DORSE 56HOFFMAN v HOFFMAN ... 57DENEL (PTY) LTD v CAPE EXPLOSIVE WORKS LTD 58GOVERNMENT OF THE REPUBLIC OF SOUTH AFRICA v VAN HULSTEYNS ATTORNEYS 60SHROSBREE N.O. v SIMON..... 61KIA INTERTRADE JOHANNESBURG (PTY) LTD v INFINITE MOTORS (PTY) LTD 62STAFFORD v LIONS RIVER SAW MILLS (PTY) LTD 63CUYLER v SHIERS 64CUYLER v C&S MARKETING CC . 64HILDEBRAND v KLEIN RHEBOKSKLOOF (PTY) LTD . 65NOVATECH ADHESIVES LTD v DOHERTY 66REGISTRAR OF BANKS v NEW REPUBLIC BANK LTD 68ABSA BANK BPK v CL VON ABO FARMS BK 69JOOSTE v DE WITT N.O. .. 71EX PARTE WESSELS N.O. 72DU PLESSIS N.O. v OOSTHUIZEN 73MASTERBOND PARTICIPATION TRUST v MILLMAN N.O. 74STRUWIG N.O. v MARAIS 75HINDRY v NEDCOR BANK LTD 76EXTEL INDUSTRIAL (PTY) LTD v CROWN MILLS (PTY) LTD 78QUATREX MARKETING (PTY) LTD v CROWN MILLS (PTY) LTD 78

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MOSSGAS (PTY) LTD v SASOL TECHNOLOGY (PTY) LTD 79JAMES v MICOR HOLDINGS LTD 80TESORIERO v BHYJO INVESTMENTS SHARE BLOCK (PTY) LTD 82GEROLEMOU/THAMANE JOINT VENTURE v AJ CONSTRUCTION CC83BOTHA’S TRUCKING v GLOBAL INSURANCE CO LTD 84UNIMARK DISTRIBUTORS (PTY) LTD v ERF 94 SILVERTONDALE (PTY) LTD 85HAYES v MINISTER OF HOUSING, PLANNING AND ADMINISTRATION (WESTERN CAPE) 86FW WOOLWORTH & CO (ZIMBABWE) (PVT) LTD v SUNRAY STORES (PVT) LTD 88ABSA BANK BPK v RETIEF..... 89KAPLAN N.O. v THE PROFESSIONAL AND EXECUTIVE RETIREMENT FUND 90S A I INVESTMENTS v VAN DER SCHYFF N.O. .... 91BEDDY N.O. v VAN DER WESTHUIZEN 92DEACON v CONTROLLER OF CUSTOMS AND EXCISE 94BMW FINANCIAL SERVICES (PTY) LTD v MOGOTSI 96NUNSOFAST SHIPPING (PTY) LTD v GLENASHLEY SERVICE STATION 97ABP 4X4 MOTOR DEALERS (PTY) LTD v IGI INSURANCE CO LTD 98BELFRY MARINE LIMITED v PALM BASE MARITIME SDN BHD 99THE HEAVY METAL ... 99TRADAX OCEAN TRANSPORTATION SA v MV SILVERGATE 101WELTMANS CUSTOM OFFICE FURNITURE (PTY) LTD v WHISTLERS CC 103WYNLAND EIENDOMME BK v POTGIETER105JOSEPH FORMAN HOLDINGS (PTY) LTD v FORIM HOLDINGS (PTY) LTD 106KNIGHT FRANK SA (PTY) LTD v NACH INVESTEMENTS (PTY) LTD 107BODY CORPORATE OF GREENWOOD SCHEME v 75/2 SANDOWN (PTY) LTD 108BOOKWORKS (PTY) LTD v GREATER JOHANNES-BURG TRANSITIONAL METROPOLITAN COUNCIL 109BAFOKENG TRIBE v IMPALA PLATINUM LTD .... 110GOLDEN LIONS RUGBY UNION v FIRST NATIONAL BANK OF SA LTD 111Consolidated Employers Medical Aid Society v LEVETON 112KELVINATOR GROUP SERVICES OF SA (PTY) LTD v McCULLOCH 113MERVIS BROTHERS v INTERIOR ACOUSTICS115TESORIERO v BHYJO INVESTMENTS SHARE BLOCK (PTY) LTD 116BOE BANK BPK v VAN ZYL ....117OWNERS OF CARGO LATELY LADEN ON BOARD THE MT CAPE SPIRIT v CAPE SPIRIT 118COMMISSIONER OF CUSTOMS AND EXCISE v CONTAINER LOGISTICS (PTY) LTD 119COMMISSIONER OF CUSTOMS AND EXCISE v RENNIES GROUP LTD 119TOSEN ENTERPRISES CC v COMMISSIONER OF CUSTOMS AND EXCISE 120FAZENDA N.O. v COMMISSIONER OF CUSTOMS AND EXCISE 122OWNERS OF THE MV URGUP v WESTERN BULK CARRIERS (AUSTRALIA) (PTY) LTD 123MANLEY APPLEDORE SHIPPING LTD v OWNERS OF THE MV RIZCUN TRADER 124MANLEY APPLEDORE SHIPPING LTD v OWNERS OF THE MV RIZCUN TRADER (2) 125KIA MOTORS (SA) (EDMS) BPK v VAN ZYL . 126ABBOTT LABORATORIES v UAP CROP CARE (PTY) LTD 127MINISTER OF PUBLIC WORKS AND LAND AFFAIRS v GROUP FIVE BUILDING LTD 128HOLLARD INSURANCE CO LTD v LECLEZIO 130ANOOP v IGI INSURANCE CO LTD131BELING v SOUTHERN LIFE ASSOCIATION LTD ... 132SINGH v FUTURE BANK LTD .. 133BERNSTEIN v SMART TAG INTERNATIONAL (PTY) LTD 134TEK CORPORATION PROVIDENT FUND v LORENTZ 135TRIDENT INSURANCE BROKERS (PTY) LTD v ELLWOOD 136COURTIS RUTHERFORD AND SONS CC v SASFIN (PTY) LTD138McCARTHY v CONSTANTIA PROPERTY OWNERS’ ASSOCIATION 139DEUTSCHE BANK AG v MOSER ... 141PREMIER TRADING COMPANY (PTY) LTD v SPORTOPIA (PTY) LTD142WATT v SEA PLANT PRODUCTS LTD..... 144SIMPEX (PTY) LTD v VAN DER MERWE .. 145SHERIFF, DISTRICT OF THE CAPE v SOUTH SEAS DRILLER 146

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Index

Accountantas expert in determining matter 80interpreting meaning and application of GAAP 80

Agencycheque payment received by agent for principal 52delegation, by person to whom power delegated 90undisclosed principal 43, 63

Agentof seller in sale of land, authority of 91ratification of action by 62

Arbitrationaward of specific performance, when possible 115sub-contract containing provision for 83

Arbitratorexceeding powers 115

Arrestassociated ship 28

Arrest of shipcompetency where associated ship relationship is

unk 124, 125Associated ship

discovery of document necessary to prove 124, 125

Bankcuratorship of, as protective measure 68interest on overdraft 89overdraft, interest charged on 89winding up of, when under curatorship 68

Businessliabilities of assumed by party taking over 43takeover of 43

Chequeholder in due course, agent as 52provisional sentence on, payee cited under trading n 97

Chequespossessor of cheque, meaning of 60stolen, collecting bank’s liability 51stolen, possessor’s liability under s81 60

Close corporationcarrying on business of recklessly 73fiduciary duties of members 64in liquidation 73member’s right to sue another member for breach of f 64personal liability of party acting for 63

Collecting bankliability in collecting stolen cheques 51

Companiesallotment of shares, invalid when no consideration g 9curator ad litem, appointment of 106

director, authority to act for 62liquidation of, inquiry, Master’s power to conduct 25reckless trading 108scheme of arrangement, disclosure requirement 53scheme of arrangement, reasonableness of 53security for costs 109Turquand rule 139

Companyname, change of 65share ownership scheme, employee entitlement to

clai 144Compromise

meaning of, replacing previous agreement 103not affecting claim brought under previous agree-

ment 103Constitution

custom’s duty, imposition of, individual’s right to 94right to notification of appeal affecting rights 86security for costs and right of access to court 109

Constitutional rightstaxpayers, when bank account deposits claimed by

Com 76Construction

arbitration, whether should be postponed 83sub-contract, arbitration clause 83

Contractappointment of expert to detemine matter 80breach of, proof of damages 131cancellation of, bribery causing contract 78cancellation of, method of 61cancellation of, when notice not dispensed with 61common assumption 113contra bonos mores, method of entering into 48credit application form, whether incorporating agree 18default, mora interest 80disclaimer, whether exemption interpreted against pr 12duress as ground for avoiding 48evidence of surrounding circumstances leading to

con 113exceptio adimpleti contractus 8exceptio non adimpleti contractus 10insurance of thing sold 11interpretation of provision for operation in perpetu 111interpretation, terms disclaiming liability 12mistake, circumstances where no mistake applica-

ble 82, 116mistake inducing 133not concluded when third party obligation not

includ 134rectification of 29restraint of trade 79seller obliged to insure, extent of 11specific performance 134tacit term, not proved 113

5

terms of, notice disclaiming liability at amusement 12vague terms 22vitiated by duress 117void, failing to comply with statutory provision 91voidable when induced by bribe 78

Contractual capacitymarried woman, foreign matrimonial property regime

a 82, 116Credit agreement

credit receiver’s right to abandon possession 75Credit Transaction

ownership reserved to seller 126Credit Transactions

credit application form, whether incorporating agree 18demand by credit grantor, whether precondition to or 96interest on overdraft, determination of 89interest rate determined solely in creditor’s discre 22

Curator ad litemcompany, appointment of 106

Curatorshipmeaning of 98

Customs and exciseagent’s liability for customs duty 119custom’s duty, imposition of, individual’s right to 94

Damagesduty to mitigate 46escalation in costs, whether can be included in 46interest on unliquidated claim 46quantification of 46

Deed of suretyshipdebtor described similarly to surety, whether partie 29

Directorof company, authority to act 62

Directorsfiduciary duties of 66reckless trading by, personal liability 108

Distributorship agreementmanufacturer’s mark, whether conferring benefit on

d 142Domicile

residence no longer within area of domicile 19Duress

economic, whether applicable in South African law 48vitiating contract 117

Employeeshare ownership scheme, right to claim transfer of s 144

Employmentrestraint of trade 47

Estate agenteffective cause of sale 107effective cause of sale, meaning of 105

Estoppelfailure to inform creditor of sale of business 18partnership continuing business as close corporation 17

Evidenceadmissibility in examination under s11 Usury Act 23contract, interpretation of, surrounding circumstanc 113

judicial notice, facts established by other court 89obtaining of in order to establish maritime claim 123

Exceptio non adimpleti contractusmutuality and reciprocity requirement 10

Expertjurisdiction of where appointed under agreement 80

Export and importagent’s liability for customs duty 119

Fixed propertyaccession thereto of movable property 85cancellation, method of 61

Foreign courtres judicata 101

Foreign judgmentenforceability of 19

Import and exportin transit included in meaning of import 120owner of vehicle not aware of contraband

goods 122Income tax

bank account attached by C.I.R. 76Insolvency

act of, under s8(b) 40action by insolvent where irregularities alleged 42advantge to creditors 24collusive transaction with spouse 92fiduciary rights held by insolvent 72inquiry, Master’s power to conduct after

distributio 25interrogation, presence of credit manager of peti-

tio 26rehabilitation, allegations required for application 41sale of business, transfer void 103sequestration, foreigner as debtor 141spouse, collusive donation to 92trustee not obtaining prior consent of Master to

sal 91voidable preference 73voidable preference, action by third party to set

as 74Insurance

contract not constituting stipulatio alteri 132exemption from liability distinguished from war-

ranty 84insurer’s claim against insured, proof of 131non-disclosure by insured 45release by insured, effect of 131renewal of cover, amounts to new contract 130repudiation of by insurer 130subrogation, compromise of by failure to disclose

th 45subrogation, rights of prejudiced by insured 131thing sold under contract of sale 11warranty, not constituted by exemption from

liabilit 84Interest

mora, running from date earlier than capital

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specifi 80variation of by decision of creditor 21variation of rate within creditor’s discretion 22

Interest rateexceeding maximum permissible under Usury Act 23

InterrogationMaster entitled to conduct after distribution of div 25presiding officer’s discretion in procedural matters 26

Jurisdictioncauses arising within court’s jurisdiction, person o 13

Landlord and tenantunlawful occupation of, wehter Act applies 55

Leasebreach of by lessor 15landlord’s hypothec 16lessor’s obligation to confer exclusive right on les 15shopping complex, lessee entitled to exclusive right 15

Leasing transactionreturn of goods, prior to action being instituted 96

Letter of undertakingnot to re-arrest, applicable outside of jurisdiction 101

Liquid documentcheque, payee cited under trading name 97

Loaninterest rate variation of by creditor acting alone 21

Local authorityright to approve building plans 39

Locus standidirect and substantial interest sufficient 139of beneficiary in action brought for trust 110of sheriff in admiralty proceedings 146to require performance of duty toward another 13

Mistakecontractual terms allegedly not understood 82, 116excusable, leading to voidability of contract 133

Negotiable instrumentspossessor of cheque, meaning of 60

Ownershipbuyer taking delivery not in good faith 37estoppel applied against owner 126evidenced by invoicing of purchaser 120

Partnershiptransferring business to close corporation 17

Passing offreputation in product 142

Pension fundbenefits payable to dependants notwithstanding nomin 90surplus in, employer’s obligations in connection wit 135

Personal rights

registrable, but not thereby real 35Prescription

whether suspended in favour of person undercurators 98

Propertyaccession thereto of movable property 85condition in deed of transfer, whether registrable

o 58development of, property owners’ rights 139estate agent, entitlement to commission 105fideicommissum, conditions attached thereto 72landlord’s hypothec 16neighbour, building affecting value of prop-

erty 38neighbour, right to object to building 39rezoning application, right to object to 39rezoning of, size of erven, whether regulations

appl 86sale of, estate agent as cause of 107sale of fixed property, required to be in writ-

ing 57sectional title, decision by trustees of body

corpor 56servitude, right to water 35servitude, subdivided land 36unlawful occupation of, wehter Act applies 55

Provisional sentencecheque, plaintiff cited under trading name 97

Real rightsdistinguished from personal rights 35

Rehabilitationbasis of applicaation for 41Master’s reasons for not recommending 41

Res judicatajudgment given by foreign court 101

Restraint of tradecommunication with clients, prohibition

against 136not enforceable beyond extent necessary for

protecti 47unenforceable provision 79

Retailingpassing off, manufacturer’s mark 142

Salebuyer not taking in good faith 37

Sale of businessfailure to inform creditor of 18void under Insolvency Act 103

Sale of fixed propertycancellation, method of 61oral agreement, whether later performance can be

anu 57Sale of land

condition in, whether registrable or not 58failure to comply with Alienation of Land

Act 91seller’s agent, authority of 91

7

Sale of propertyestate agent as effective cause of 107

Sectional titlebody corporate, decision by, reviewability of 56

Securityarrested ship applying for setting aside of ar-

rest 125Security for arrest

given after commencement of action 118Security for costs

company in liquidation, application for 74company in liquidation, indemnity as alternative

to 74constitutional rights and 109

Sequestrationadvantge to creditors 24foreigner debtor 141liquidated claim in application for 44liquidated claim, whether claim for restitution

give 44liquidated claim, whether theft gives rise to 44

Servitudeinterpretation of, when surrounding circumstances

ap 36utilitas of, when exists 36

Sharevalue of, distinguished from net asset value 53

Sharesallottment of invalid when no consideration given 9increase in share capital, with retrospective ef-

fect 144Shipping

associated ship, whether can be arrested as wellas 28

security for action furnished after action begun 118sheriff’s right to proceed against third party

causi 146Specific performance

damages not claimed as alternative 15when not ordered 134

Spousecollusive transaction with insolvent spouse 92

Stipulatio alterinot constituted by contract of insurance 132

Subrogationcompromise of right by failure to disclose theft 45

Suretyshipcreditor’s identity, whether sufficiently defined 30rectification of 29validity of, compliance with General Law Amendment

A 29

Theftwhether liquidated claim or not 44

Trade markcomparative advertising 127infringement where mark used in relation to goods

of 127manufacturer’s in relation to importer’s 142

Trust

beneficiary’s right to recover loss sustained bytru 110

duty to account to beneficiary, contingent rights 27interpretation of, appointment of trustees 33representation of classes of members 33separate legal persona 30trustee acting as such before issue of letters of au 30

Trusteeinvestments by trustees, policy to be followed 32irregularities alleged to have been committed by 42personal liability, property under control of truste 145

Trustsinvestments by trustees, policy to be followed 32

Unjust enrichmentaccession of movables to fixed property 85

Unlawful competitionby ex-directors of company 66passing off as form of 88

Words and phrasescommunicate 136‘deemed’ 84Furthermore 111in perpetuity 111in transit 120legitimate expectation 39‘represent’ 33‘roadworthy’ 84

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THOMPSON v SCHOLTZ

A JUDGMENT BY NIENABER JA(VAN HEERDEN DCJ,SMALBERGER JA, ZULMAN JAand MELUNSKY AJA concurring)SUPREME COURT OF APPEAL28 SEPTEMBER 1998

1999 (1) SA 232 (A)

A party claiming that the otherparty to a contract perform hisobligations in terms of thecontract, may be met with thedefence that the party claiminghas failed to perform properlyhimself in terms of the contract.However, while such a defencemay give rise to an adjustment ofclaims between the parties, suchan adjustment may not be easy toachieve where the obligations ofboth parties are continuingobligations and for that reasondifficult of assessment. In suchcircumstances, a court may applyan alternative solution to claimand counterclaim and allow theplaintiff’s claim, subject to areduction in accordance withwhat is fair between the parties.

THE FACTSScholtz bought a farm from

Thompson. In terms of the agree-ment of sale, possession of thefarm was to be given to Scholtz on1 May 1992. Occupational interestof 12½% was payable from thisdate to date of payment of thepurchase price.

Scholtz was not given possessionof the farmhouse until 10 October1992. Furthermore, some ofThompson’s labourers retainedoccupation of dwellings on thefarm from some time after 1 May1992, and certain goods andlivestock belonging to Thompsonalso remained on the farm afterthat date.

On 18 September 1992, Scholtztook transfer of the farm and paidthe purchase price. He refused topay the occupational interest asprovided for in the agreement ofsale because of Thompson’sfailure to give him vacant posses-sion of the farm on 1 May 1992.Thompson brought an actionagainst Scholtz for payment of theoccupational interest. Scholtzdefended the action on thegrounds that he was excused frompayment because Thompson hadfailed to perform his own obliga-tions under the agreement (theexceptio non adimpleti contrac-tus).

Scholtz also raised a counter-claim for expenses incurred inextra travelling to and from thefarm, caused by the failure to givevacant possession of the farm on 1May 1992.

THE DECISIONThompson argued that because

the commercial benefits of thecontract accruing to Scholtzoverwhelmingly outweighed theshortcomings of his own perform-ance, those shortcomings shouldbe disregarded for the purposes ofassessing his own claim. This washowever, not a situation where

the rule de minimis non curat lexrule (the law does not haveregard to trifles) applied. Thedamages to which Scholtz wasentitled would exceed R1 000 andthis could not be consideredtrivial.

Thompson argued in the alter-native that Scholtz should not bepermitted to raise the exceptionon adimpleti contractus as anabsolute defence, but that becauseScholtz had accepted Thompson’sdefective performance,Thompson’s claim should beallowed though taking intoaccount the cost of remedying thatdefective performance. While thiswas something that could bedone, on the authority of BKTooling (Edms) Bpk v Scope Preci-sion Engineering (Edms) Bpk 1979(1) SA 391 (A), there was a diffi-culty in doing so when the per-formance being sued for was theperformance of a continuingobligation, ie the payment ofoccupational interest, in responseto the other party’s continuingimperfect performance of itscontinuing obligation. The diffi-culty was that the imperfectperformance (Thompson’s failureto provide complete vacantoccupation of the farm) could notbe cured later and it was impossi-ble to assess the cost of curing thisdefect later.

In order to meet this difficulty,an alternative solution could befound. This was to apply theprinciples of remission of rentwhere a landlord has failed toprovide the lease premises in atenantable condition. The amountof remission of rent is calculatedby reference to what is fair in thecircumstances. In the present case,in view of the reduced occupationgiven to Scholtz, it was fair toreduce the occupational interestpayable by him by 25%.

Thompson’s claim for the occu-pational interest was granted,reduced by 25%.

Contract

9

ETKIND v HICOR TRADING LTD

A JUDGMENT BY WUNSH JWITWATERSRAND LOCALDIVISION5 SEPTEMBER 1997

1998 (1) SA 104 (W)

An agreement in terms of whichone party undertakes to allot andissue shares in a companywithout there being any intentionthat the party taking the shareswill give any valuableconsideration therefor is contraryto the provisions of section 92(1)of the Companies Act (no 61 of1973) and is accordingly invalid.

THE FACTSEtkind and Tayob entered into

an agreement with Hicor TradingLtd in terms of which Hicoracquired the share capital ofMiltons (1987) (Pty) Ltd and theirclaims against it, and Hicoragreed to indemnify Etkind andTayob against one half of theirsuretyship obligations to theCredit Guarantee InsuranceCorporation of Africa Ltd,Nedbank, Etron (Pty) Ltd andGDM International (Pty) Ltd.Hicor also agreed to issue toEtkind and Tayob 1 700 000ordinary shares in the sharecapital of itself.

The agreement was entered intoin an attempt to continue thebusiness of Miltons which wasthen under winding up proceed-ings and was entered into with aview to concluding a compromisebetween Milton and its creditors.

Etkind and Tayob brought anaction against Hicor for reim-bursement of amounts paid bythem to the creditors in terms oftheir suretyship obligations, andpayment of the market value ofthe 1 700 000 shares which werenot delivered to them.

Hicor defended the action on thegrounds that Etkind and Tayobhad not performed their obliga-tions as required of them in termsof the agreement, ie had notdelivered the shares in Miltonsand their claims against it free ofclaims by third party creditors.

THE DECISIONWhether or not Etkind and

Tayob had tendered delivery oftheir shares free of claims byothers was linked to the questionwhether or not they had tendereddelivery of their shares at all.Section 92(1) of the CompaniesAct (no 61 of 1973 ) provides thatno company shall allot or issueany shares unless the full issueprice of or any other considerationfor such shares has been paid toand received by the company.This section required that theallotment or issue of Hicor’sshares be made in considerationfor payment of money or othervaluable consideration. Hicorcontended that the shares inMiltons were valueless and weretherefore insufficient considera-tion as required by this section.The agreement was therefore voidin that it contravened the provi-sions of the section.

The agreement clearly providedfor the transfer of the Miltonsshares and claims against thatcompany to Hicor. However,there was no evidence that thecession of the shares or claims wasto take place before the allotmentof the shares by Hicor or that anycession ever took place. Theevidence was that Etkind andTayob did not intend to passownership of the shares inMiltons, on the contrary, were notin a position to do so, and Hicoraccepted the risk of their inabilityto transfer ownership of theshares.

This meant that the provisions ofsection 92(1) were contravened.The agreement was thereforeinvalid and could not be enforced.The action was dismissed.

Contract

10

GRAND MINES (PTY) LTD v GIDDEY N.O.

A JUDGMENT BY SMALBERGERJA (NIENABER JA, HOWIE JAAND NGOEPE AJA concurring,SCHUTZ JA dissenting)SUPREME COURT OF APPEAL23 NOVEMBER 1998

UNREPORTED

The defence that a claimant hasitself not performed in terms of acontract upon which the claimantsues (exceptio non adimpleticontractus) may only succeed ifthe obligations of each party aremutual and are to be performedreciprocally and simultaneously.

THE FACTSGrand Mines (Pty) Ltd accepted

a tender made by Bercon Mining(Pty) Ltd to mine and deliver coal.Clause 1(3) of their agreementprovided that rehabilitation of thesurface at any opencast minewould form an integral part of themining operations and would beconducted concurrently with suchoperations. The quoted rate ofR14.00 per R.O.M. ton includedthe removal of hard and softoverburden, the removal of coalseams and delivery of the ex-tracted coal, and rehabilitation ofany pit mined by Bercon. Paymentwas to be made on the 25th of eachmonth.

Bercon proceeded to mine anddeliver the coal, but a year later,Grand Mines cancelled the con-tract. At this time, Grand Mineshad fallen so far behind withrehabilitation that it was clearlynot complying with its obligationsin that regard. Bercon had also notremoved ‘pillars of coal’, a cross-section of coal defining the edgeof a cut. These were not referredto in the agreement, but it wascontended by Grand Mines that itwas a tacit term of the agreementthat their removal was to takeplace.

Bercon was placed under liqui-dation and its liquidator, Giddey,instituted action against GrandMines for payment due to Berconfor coal mined and delivered.Grand Mines defended the actionon the grounds that Bercon hadfailed to perform its own obliga-tions under the agreement (theexceptio non adimpleti contrac-tus).

THE DECISIONThe exceptio can be raised as a

defence when the obligations ofthe parties are mutual and areintended to be performed recipro-cally and simultaneously. The firstquestion was whether GrandMines’s obligation to pay for coaldelivered by Bercon was recipro-cal to Bercon’s obligation torehabilitate. The second questionwas whether it was a tacit term ofthe agreement that in the miningprocess no ‘pillars of coal’ were tobe left behind by Bercon, and if sowhether this obligation wasreciprocal to Grand Mines’sobligation to pay for coal deliv-ered.

The obligations of the partieswere clearly reciprocal in regardto the delivery of coal and pay-ment for it. As far as rehabilitationwas concerned however, this wasnot an obligation Bercon couldperform at precisely the same timeas payment corresponding theretowas to be made. Practical difficul-ties could have attended therehabilitation process and therewas therefore no reciprocitybetween the obligation to performthis task and the obligation tomake payment. The main purposeof the agreement was, in anyevent, to achieve the mining anddelivery of coal.

Since these obligations were notreciprocal, Grand Mines could notraise Bercon’s failure to performthem as a defence to Bercon’sclaim for payment.

As far as the ‘pillars of coal’ wereconcerned, while it might havebeen reasonable for Grand Minesto expect these to be removed,there was no reason to expect thatboth parties would have agreedthat their removal was a part ofthe obligations intended to beperformed by Bercon.

Grand Mines’s claim was dis-missed.

Contract

11

AFCOL MANUFACTURING LIMITED v AFRIFURNINDUSTRIES CC

THE FACTSAfcol Manufacturing Ltd sold

certain plant to Afrifurn Indus-tries CC for R72 000. Payment ofthe purchase price was to be effectin eight instalments of R9 000each, the balance outstanding toattract interest at the rate of 14¼%per annum.

The agreement of sale providedthat Afcol was to insure the plantagainst loss through theft, riot, fireand similar hazards. Afcol did so,securing cover to the extent of R72000. The plant was destroyed byfire and Afcol received paymentfrom the insurer of R67 260representing the amount insuredagainst, less salvage and excessplus VAT. After subtracting theamount owed to it by Afrifurn,Afcol paid this sum to Afrifurn.

Afrifurn contended that upon aproper construction of the agree-ment of sale, Afcol had beenlegally obliged to insure the plantfor its replacement value, alterna-tively its market value. It broughtan action against Afcol for dam-ages for breach of contract.

HOEXTER JA (HOWIE JA, SCOTTJA, ZULMAN JA and NGOEPE AJAconcurring)SUPREME COURT OF APPEAL28 SEPTEMBER 1998

1998 CLD 654 (A)

A contract in which the sellerundertakes to insure the thingsold while the purchase priceremained unpaid entitles the sellerto insure to the extent of itsinterest and in the absence of animplied term, does not oblige theseller to insure to the extent of thepurchaser’s interest.

THE DECISIONThe terms of the sale agreement

were framed so as to protect theinterests of the seller, ie Afcol.While the terms of the sale agree-ment were that Afcol was toinsure the plant, in the sense thatit was under a legal obligation todo so, the sum at which it was todo so was within Afcol’s own andcompletely unfettered discretion.In exercising its discretion, Afcolhad insured the plant to the extentof its own interest in it and it hadbeen under no obligation to insureto the extent of Afrifurn’s interestin it. In insuring the plant, Afcolhad not acted as Afrifurn’s agentand it was therefore not obligedon this basis, to insure any furtherthan to the extent of its owninterest.

The only other basis upon whichit could be said that Afcol wasobliged to insure the plant anyfurther was on the basis of animplied or tacit term that it was soobliged. However, there was noevidence to suggest that theparties would have agreed to sucha term.

Afcol was therefore not in breachof contract and Afrifurn was notentitled to damages.

Contract

12

DURBAN’S WATER WONDERLAND (PTY)LTD v BOTHA

A JUDGMENT BY SCOTT JA(VAN HEERDEN DCJ, HOWIEJA, HARMS JA and MELUNSKYAJA concurring)SUPREME COURT OF APPEAL27 NOVEMBER 1998

UNREPORTED

An ambiguous term of a contractmust be interpreted against theperson in whose favour the term isincluded in the contract, but itmust be clear that there is a realambiguity before such aninterpretation is placed on theterm. A party to a contract whichdoes what is reasonably sufficientto bring a term of the contract tothe attention of the other party isentitled to assume that the term isa part of the contract entered intobetween them.

THE FACTSBotha and her husband attended

an amusement park owned byDurban’s Water Wonderland (Pty)Ltd. When there, they purchasedtickets entitling Botha and herdaughter to go on the ‘jet ride’, aride in a car resembling a jet-propelled aircraft which wasattached to a central cylindrical-shaped structure which revolvedat a rate of about five to sixrevolutions per minute. At thecashier where they paid for theirtickets, a notice was painted inwhite on a glass window inlettering some 2½cm high:‘The amenities which we provideat our amusement park have beendesigned and constructed to thebest of our ability for your enjoy-ment and safety. Nevertheless weregret that the management, itsservants and agents, must stipu-late that they are absolutelyunable to accept liability orresponsibility for injury or dam-age of any nature whatsoeverwhether arising from negligenceor any other cause howsoeverwhich is suffered by any personwho enters the premises and/oruses the amenities provided.’

When buying the tickets, MrsBotha did not notice this sign, butshe was aware of such signs beingposted at amusements parks andthat patrons rode on the amenitiesat their own risk.

While they were taking the ride,the hydraulic system controllingthe vertical movement of the carfailed. The car moved in a seriesof violent jerks, fell to its lowestlimit, then bounced back up again.Its upward movement was suffi-ciently forceful to result in MrsBotha and her daughter beingpropelled into the air togetherwith the seat on which they hadbeen sitting, parting from the carand landing in a nearbyflowerbed.

Botha and her husband in hiscapacity as father and natural

guardian of their daughterbrought an action claiming dam-ages against Durban’s WaterWonderland (DWW). DWWdenied that it had been negligentand also defended the action onthe grounds that the disclaimerstated on the cashier’s windowexempted it from liability inrespect of any injury or damagearising from use of the amenities.

DWW appealed Botha’s success-ful action.

THE DECISIONThe approach in determining the

proper construction to be placedupon the disclaimer was to firstlydetermine whether or not therewas any ambiguity in it. If not, thefull effect of the exemption was tobe applied. If there was anyambiguity, the exemption was notto be applied.

There was no ambiguity in thedisclaimer. Botha had contendedthat the phrase ‘unable to acceptliability’ indicated no more thanthat the management of DWWcould not accept liability fordamages without proof of theclaim in a court of law. However,there would have been no pur-pose in DWW making such adisclaimer as it could alwaysrequire proof of any claim broughtagainst it. The purpose of thedisclaimer was to inform users ofthe amusement park that liabilitywould not be incurred at all.Accordingly, DWW was entitledto raise the disclaimer as a defenceto any claim brought against itand deny liability on the groundsthat it had been agreed that DWWwould not be liable for injury ordamage arising in the circum-stances provided for within theterms of the disclaimer.

The second question was there-fore whether the terms of thedisclaimer were incorporated intothe contract entered into betweenDWW and Botha. If Botha hadbeen aware of a notice indicating

Contract

13

terms of this contract but had notbothered to read them, she wouldhave been bound by them. How-ever, her evidence was that shewas merely aware of noticesgenerally at amusement parks.The question then was whether ornot DWW was reasonably entitled

to assume that she had assented tothe terms of the disclaimer dis-played at the ticket office window.It was reasonably entitled to makethis assumption because it haddone what was reasonably suffi-cient to bring these terms to hernotice. The notice was sufficientlyprominent for any reasonable

person to observe it, especially incircumstances where that personwas aware of notices of that sortbeing posted at amusement parks.

The terms of the disclaimer didform part of the contract enteredinto between DWW and Botha.The appeal was upheld.

VULINDLELA FURNITURE MANUFACTURERS vMEC, DEPT OF EDUCATION AND CULTURE

A JUDGMENT BY VAN ZYL JTRANSKEI DIVISION23 OCTOBER 1997

1998 (4) SA 908 (Tk)

A court may have jurisdiction tohear a matter which concerns aparty located outside its area ofjurisdiction where the causearising between the parties ariseswithin its area of jurisdiction, asfor example where theenforcement of a contract involvesenforcement procedures to beapplied within the court’s area ofjurisdiction.

THE FACTSVulindlela Furniture Manufac-

turers and the third to fifth re-spondents tendered for the supplyof school furniture to the TranskeiTender Board. Contracts for thesupply of the furniture wereawarded to Vulindlela and theserespondents by the MEC to whomthe tenders had been made. Theserespondents were all Transkeiancompanies who were obliged toperform their obligations underthe contracts within Transkei. TheMEC was an organ of the EasternCape Provincial Governmentwhich at the time the ensuingapplication was brought, situatedin Bisho, ie outside of the area ofjurisdiction of the Transkei Divi-sion of the High Court.

The MEC required Vulindlela topay for the costs of inspection ofthe furniture it supplied, theinspection being required in orderto ascertain that the furniture metthe standards provided for in thesupply contract. Vulindleladisputed its liability to pay forthese costs, but deferred legalrelief for the resolution of this

dispute pending the determina-tion of an application it broughtagainst the MEC. This applicationwas for orders, inter alia, that theMEC verify that all furnituredelivered to schools under thetender by all suppliers had beeninspected and approved prior todelivery. A further applicationwas later brought for an order thata later invitation for tenders forthe supply of furniture should notbe proceeded with until determi-nation of the earlier application.

The MEC opposed the applica-tions on two preliminary grounds,ie (i) that he and the second andsixth respondents, being locatedoutside of the court’s area ofjurisdiction (perigrini) were notsubject to the court’s jurisdiction,and (ii) that Vulindlela lacked anyright (locus standi) to bring theaction against the MEC.

THE DECISIONThe Transkei High Court en-

joyed a jurisdiction equal to thatof a provincial division of theHigh Court of South Africa,within the area for which the

Contract

14

that the MEC perform a dutyimposed on him in terms of astatute. Assuming that such aduty did exist, ie the duty toensure compliance with thecontracts entered into with suc-cessful tenderers, it did not confera right upon anyone to complainof a failure to comply with thatduty. Furthermore, Vulindlelaalleged financial prejudice arisingfrom its own contract with theMEC and not as a result of theother respondents having failed tocomply with their obligations, yetit was their failure to whichVulindlela pointed in proof of itsown financial prejudice. Thatfailure was irrelevant toVulindlela’s complaint.

Vulindlela had therefore notshown that it had any right, ielocus standi, to bring its applica-tion against the MEC. The applica-tion was dismissed.

Transkei Supreme Court hadoriginally been established. Thisarea did not include Bisho.

However, its jurisdiction wasover all persons residing within itsarea, as well as all causes arisingand all offences triable within itsarea of jurisdiction. The causearising in the present case arosefrom the MEC’s duty to enforcethe terms of the contracts ofsupply of the school furniture.Enforcement of those terms wouldrequire steps to be taken withinthe area of the court’s jurisdiction.This would require the MEC to actwithin this area and therebyrender him subject to the court’sjurisdiction.

All of the respondents weretherefore subject to the court’sjurisdiction.

As far as the question of locusstandi was concerned, Vulindlelawas asking the court to require

Contract

15

CROATIA MEAT CC v MILLENNIUMPROPERTIES (PTY) LTDSOFOKLEOUS v MILLENNIUMPROPERTIES (PTY) LTD

A JUDGMENT BYSCHWARTZMAN JWITWATERSRAND LOCALDIVISION24 MARCH 1998

1998 (4) SA 980 (W)

In deciding between twocompeting lessees against a lessorwhich has entered into leasesconferring incompatible rights, acourt may take into account therespective damages which may besuffered by the two lessees. Wherethis is insufficient to give a clearindication of which party’s rightshould be upheld, the party firstsecuring the right to occupationshould be given that right asagainst the other party.

THE FACTSIn November 1995, Sofokleous

leased premises at the FernridgeShopping Centre in Randburgunder a lease which permittedsole use of the premises as a café,supermarket, butchery, fruit andvegetable store and relatedbusiness activities. Sofokleousconducted the business of asupermarket at the premises,including within it a butcherytaking up more than 21% of thetotal area leased to him. Thebutchery formed a large part ofhis business, achieving a turnoverin January and February 1998 ofsome R100 000 each month,approximately 10% of totalturnover in these months.

In terms of clause 6.4 of the lease,Millenium warranted that itwould not let premises in theshopping centre for the purpose ofa person conducting a businesssimilar to that of Sofokleous.

In January 1998, Milleniumleased a shop in the same shop-ping centre to Croatia Meat CC.Croatia was permitted to use thepremises for a butchery, whichhad been the usual businessconducted by Croatia.

When Sofokleous received noticeof the lease, he objected to thelease. Millenium then advisedCroatia that it was not proceedingwith the lease. Croatia regardedthis as a repudiation of the leaseand brought an application for anorder that the lease was valid andbinding. Sofokleous brought anapplication against bothMillenium and Croatia for aninterdict preventing Milleniumfrom permitting any person otherthan himself from conducting thebusiness of a butchery from anypremises at the shopping centre.Sofokleous also sought leave tointervene in the applicationbrought by Croatia.

The two applications were heardtogether.

THE DECISIONThe two main issues were whether

Millenium had breached its leasewith Sofokleous, and if so whetherSofokleous was entitled to theinterdict or Croatia was entitled toan order for specific performance.

The facts clearly showed thatSofokleous was running a butchery,and was not merely selling meat aspart of the range of food usuallysold in his supermarket. The busi-ness to be run by Croatia in terms ofthe lease it had entered into withMillenium was essentially a butch-ery as well, notwithstanding the factthat it included the right to engagein other activities. Millenium hadtherefore committed a clear breachof the lease with Sofokleous when itentered into the lease with Croatia.

Because the claims brought bySofokleous and by Croatia wereboth claims for specific performanceand not claims for damages, andwere mutually incompatible, it wasnecessary to choose between themin deciding which claim should begranted. In deciding this, the respec-tive damages which might besustained by each party could betaken into account. On the onehand, Sofokleous would sufferdamages by losing sales to custom-ers who would purchase fromCroatia. On the other hand, withoutany premises to operate from,Croatia would probably suffergreater damages through lost sales.

Between the two competingclaims, the difference in damageswhich might be suffered wasinsufficient to favour one party orthe other. The only basis uponwhich one party should be allowedits claim was that stated in the ruleapplicable to double sales, ie he whois first in time has the greater right.The lease with Sofokleous wasentered into earlier than the oneentered into with Croatia. He wastherefore entitled to the interdict hesought.

Sofokleous’ application wasgranted and Croatia’s was dis-missed.

Property

16

PARADISE LOST PROPERTIES (PTY) LTD vSTANDARD BANK OF SOUTH AFRICA (PTY) LTD

A JUDGMENT BY BROOME DJP(GALGUT J and HURT J concur-ring)NATAL PROVINCIAL DIVISION22 JUNE 1998

1998 (4) SA 1030 (N)

A landlord is not entitled toassert a hypothec over propertyon the premises over which it hasa lease where it has knowledgethat a third party owns theproperty. Because a third partytacitly consents to the operationof the hypothec, the onus ofshowing that the landlord knewof its ownership of the propertyrests on the third party.

THE FACTSSupergro Properties CC leased

premises in Margate SandsBusiness Centre to DynamicShares CC. Dynamic ceded itsright, title and interest in the leaseto Mrs Hodgson with effect from 1November 1993. Mr and MrsHodgson conducted a business atthe premises, and then sold thebusiness to Mr Woolley.

The sale recorded that theHodgsons were indebted to theStandard Bank in the sum ofapproximately R100 000, and thatthe purchaser would assumeresponsibility for repayment ofthe loan. It provided further thatownership in the business and allits assets was reserved in favourof the sellers until such time as thefull purchase price had been paid.The sale was subject to thesuspensive condition that thepurchaser conclude a lease withSupergro on terms not less favour-able than the existing lease, andthat satisfactory arrangements bemade with the seller’s creditorsfor the repayment of amounts dueto them

The date on which Woolley wasto take over the business was 5August 1994, but the agreementwas not signed until November1994. An unsigned copy of theagreement was however, sent toboth the Standard Bank andSupergro in August 1994.

In September 1994, Supergroceded its rights and obligationsunder the lease to Paradise LostProperties (Pty) Ltd.

The Standard Bank broughtproceedings against the Hodgsonsfor amounts owing to it. It tookjudgment against them, andattached the assets then at thepremises. The assets were sold inexecution. Paradise Lost Proper-ties asserted that it held ahypothec which operated over theproperty, and that the proceeds ofthe sale in execution were to bedistributed taking into considera-tion its prior right in terms of thehypothec. The Standard Bankcontended that because Paradise

had known that ownership in theassets vested in the Hodgsons, itdid not have a hypothec over them.

THE DECISIONTo show that a hypothec operates

over the property of a third party, alessor must establish that (i) theproperty is on the premises withthe knowledge and consent of thethird party, (ii) the lessor wasunaware of the fact that the prop-erty is owned by the third party,(iii) the property was brought ontothe premises for the use of thelessee, and (iii) the property wasintended to remain on the premisesindefinitely.

All but issue (ii) had been estab-lished. The question was thereforewhether or not Paradise knew thatthe Hodgsons were the owners ofthe property. If Supergro knew,then that knowledge would beimputed to Paradise. There being apresumption that the owner ofgoods brought onto leasedpremises tacitly consents to theoperation of the hypothec, the onusof showing that no such consenthas been given rests on the owner.It had to be shown therefore, thatSupergro, or its successor, Paradise,knew that the Hodgsons were theowners of the property.

The evidence showed thatSupergro had received an unsignedcopy of the business sale agreementas early as August 1994. Thisinformed the lessor that the goodson the premises were owned by athird party, ie by the Hodgsons.Alternatively, it led the lessor tobelieve that Woolley became theowner of the goods. On eitheralternative, the Hodgsons failed torebut the presumption that theyhad tacitly agreed that the goodswere subject to the lessor’shypothec.

Supergro having had knowledgethat the Hodgsons or Woolleyowned the goods, it was unable toassert its hypothec. The bank’scontention was upheld and theproceeds of the sale distributedwithout regard to the hypothec.

Property

17

KOEKEMOER v LANGEBERG STENE BK

A JUDGMENT BY STEENKAMP J(BUYS J concurring)NORTHERN CAPE DIVISION11 SEPTEMBER 1998

1999 (1) SA 361 (NC)

A partnership which dissolves inorder to continue business as aclose corporation should notifythe public of the transformationin order to ensure that the publicwhich was doing business withthe partnership is doing businesswith the close corporationthereafter.

THE FACTSFrom 1978, Langeberg Stene BK

supplied stone and building sandto Koekemoer on credit.Koekemoer paid Langeberg’saccounts timeously. Koekemoerthen began trading as a partner-ship with his son and Langebergcontinued to supply goods oncredit to the partnership, render-ing its accounts to G Koekemoeren Seun. After being advised of achange of name of the partner-ship, Langeberg rendered itsaccounts to Wilco Kontrakteurs.

Unbeknown to Langeberg, thepartnership dissolved and trans-ferred its business to a closecorporation known as WilcoKontrakteurs BK. Langebergcontinued to render accounts asbefore, and received in paymentof them, cheques drawn by theclose corporation.

When some of the statementssent by Langeberg remainedunpaid, Langeberg brought anaction against Koekemoer and hisson as partners in the partnership.Koekemoer defended the actionon the grounds that the partner-ship had not incurred the debt,having been dissolved earlier, andthat the close corporation was theparty responsible for payment ofthe debt.

Langeberg contended thatKoekemoer was estopped fromrelying on this defence as thepartnership had not informed himof the dissolution of the partner-ship and the takeoever of thebusiness by the close corporation.

Credit Transactions

THE DECISIONThe dissolution of a partnership

is effective as against third partiesonly if they are notified of thedissolution. If notification is notgiven, the partnership will remainliable to third parties on the basisof the doctrine of estoppel. Toavoid this, a partner will berequired to notify the public of thedissolution of the partnership ifnecessary by notice in the Govern-ment Gazette.

While it was arguable that proofof negligence was not a require-ment for the establishment ofestoppel in all cases, it was clearthat in the present case,Koekemoer had been negligent innot informing Langeberg of thedissolution of the partnership.Langeberg itself could not be saidto have been negligent in notnoticing that the cheques paid to itby Koekemoer was drawn by theclose corporation. Often, debts aresettled by the payment of chequesdrawn by others, and Langeberghad stated that it had not takennote of the name of the drawer onthe cheque.

Langeberg could not haveknown that the partnership hadbeen dissolved and it was notunreasonable for it to havethought that it continued tosupply goods on credit to thepartnership.

Its action succeeded.

18

STELLENBOSCH FARMERS WINERY LTD v VLACHOS

A JUDGMENT BY SOLOMON AJWITWATERSRAND LOCALDIVISION21 SEPTEMBER 1998

1998 CLR 585 (W)

A seller of a business who hassecured credit terms in the nameof the business is under a duty onthe seller to inform its creditor ofthe sale where the creditor willcontinue to give credit on thestrength of those terms, but inorder to establish liability on thepart of the seller, it will benecessary to show that thecreditor was induced by themisrepresentation to continue togive credit on those terms.

THE FACTSVlachos signed a form headed

‘Customer Information/CreditApplication’ in which he fur-nished information regardinghimself and gave his trading nameas ‘Liquor Den’. The form in-cluded an application for creditfacilities, and a warranty (clause4(b)) that the information givenwas true and correct and that hewould notify Stellenbosch Farm-ers Winery Ltd (SFW) of anychange of ownership of thebusiness, failing which he wouldbe responsible for all amountsowing to SFW by the new owner.SFW, to which the form wasaddressed, then granted creditfacilities to Vlachos, and LiquorDen made orders for the purchaseof liquor from time to time.

Some five years later, Vlachossold Liquor Den to Baron Prod-ucts CC, subject to a reservation ofownership clause pending fullpayment of the purchase price.Orders continued to be placed byLiquor Den with SFW which soldand delivered the liquor in ac-cordance with them. BaronProducts failed to payR205 485,88. SFW then brought anaction against Vlachos for pay-ment of this sum. It alleged that ithad sold and delivered goods tothis value to him, alternativelythat by a tacit or implied term oftheir agreement, he had indemni-fied SFW for payment of sumsowing by a purchaser of hisbusiness if he failed to notify SFWof the disposal of such business,alternatively that the agreementshould be rectified to includenotification of a change of posses-sion of the business.

Vlachos defended the action onthe grounds that ownership of thebusiness had not passed to BaronProducts because it had not paidthe full purchase price and thataccordingly clause 4(b) was notapplicable. He also contended thathe signed the form in error on the

assumption that it was merelyrequired to give information toSFW to consider an application forcredit and that it therefore did notrecord any agreement betweenthem. In a replication to thisdefence, SFW pleaded anestoppel.

THE DECISIONThe first question was whether

or not the credit application formconstituted an agreement.

When Vlachos signed the creditapplication form, he knew that itcontained terms to which hewould be bound. Having done so,it was to be presumed that heknew what it contained.

The second question waswhether or not Vlachos wasbound to pay the debts incurredby Baron Products by virtue of theterms of clause 4(b). Those termsreferred to a transfer of owner-ship, something which had nottaken place in the present casebecause the full purchase pricewas not paid. Vlachos couldtherefore not be held liable to paythe debts of Baron Products byvirtue of this clause.

The third basis on which SFWsought to hold Vlachos liable wasthat he had been under a legalduty to inform it of the sale of thebusiness, and having failed to doso caused SFW to act to its detri-ment in affording credit to BaronProducts. Vlachos was under alegal duty to inform SFW that hehad sold the business. However,the breach of this duty wasinsufficient to establish liability onthe grounds of estoppel. This wasbecause it had not been shownthat SFW had been induced by themisrepresentation—that Vlachoscontinued its ownership of thebusiness—to give credit to BaronProducts. The failure to informSFW of this had not been thecause of it having continued to doso.

The action was dismissed.

Credit Transactions

19

CHINATEX ORIENTAL TRADING CO v ERSKINE

A JUDGMENT BY CHETTY JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION28 MAY 1998

1998 (4) SA 1087 (C)

The Protection of Businesses Act(no 99 of 1978) prevents theenforcement of foreign judgmentsin respect of claims arising fromtransactions involving rawmaterials and not those involvingmanufactured materials.

THE FACTSChinatex Oriental Trading Co

held a judgment against Erskinewhich was given by an Englishcourt in 1997 for payment of $2332 167,02. At the time this judg-ment was given, Erskine was nolonger resident in England, wherehe had been resident for two yearsand had owned fixed property. Inan application to the Registrar ofCompanies in 1995, Erskine hadstated that he was a British Na-tional and had furnished theaddress of this fixed property ashis usual address. After 1997, hewas resident in South Africa andowned fixed property there. Hewas born in South Africa andregarded it as his permanenthome.

Chinatex brought an action forprovisional sentence againstErskine based on the judgment ithad obtained against him inEngland. Erskine opposed theaction on the grounds inter aliathat the English court had lackedjurisdiction in granting the judg-ment against him in that he wasneither domiciled nor resident inEngland at that time. He alsoopposed the action on the groundsthat as the judgment was grantedupon an action for payment dueunder contracts of sale for manu-

factured garments, and such were‘any matter or material of what-ever nature’ as referred to in theProtection of Businesses Act (no99 of 1978). Under that Act, nojudgment emanating from outsideSouth Africa and arising from atransaction involving such matteror material shall be enforced inSouth Africa.

THE DECISIONThe facts showed that Erskine

had not visited England merelyfor temporary periods of time buthad established a domicile ofchoice there. His continuedpresence in England was notrequired for the purposes ofretaining that domicile and he wastherefore domiciled there at thetime the judgment was grantedagainst him.

As far as the defence based onthe Protection of Businesses Actwas concerned, the ‘matter ormaterial’ referred to in it was rawmaterials or substances fromwhich physical things were made,and not manufactured things. Theitems in respect of which Chinatexsought to enforce its judgmentwere the latter kinds of things andtherefore not items which fellwithin the ambit of the Act.

Provisional sentence was grantedagainst Erskine.

Credit Transactions

20

AMALGAMATED RETAIL LTD v B.R. HODGSONGROUP INTERNATIONAL (PTY) LTDB.R. HODGSON GROUP INTERNATIONAL (PTY) LTD vAMALGAMATED RETAIL LTD

A JUDGMENT BY McCALL JDURBAN AND COAST LOCALDIVISION30 JULY 1998

1998 CLR 603 (D)

A judgment may be rescindedwhere the judgment was grantedafter an intention to defend wasfiled and served prior to thejudgment having been granted.

THE FACTSAmalgamated Retail Ltd brought

an action against BR HodgsonGroup International (Pty) Ltd forpayment of R106 261,77, anamount owing in respect of goodssold and delivered to BR. On theday following the day on which itapplied for default judgmentagainst BR, BR filed and served aNotice of Intention to Defend theaction. Default judgment was thengranted against BR.

BR applied for rescission of thejudgment.

In a separate application, Amal-gamated applied for the windingup of BR.

THE DECISIONWhether or not when deciding to

grant rescission of judgment, acourt should have regard to factsof which the person who grantedthe judgment was unaware, the

determining factor was whetheror not a notice of intention todefend had been given. If notice ofintention to defend had beengiven, it would be incompetent forthe judgment to have been givensince the judgment would nothave been given had the persongranting judgment been aware ofthis at the time.

The fact that a notice of intentionhad been given prior to judgmenthaving been granted meant thatthe judgment had been errone-ously granted. The judgmentcould therefore be rescinded.

As far as the winding up applica-tion was concerned, there weretoo many disputes between theparties as to the grounds forwinding up to found an order forthe winding up of the company.This application was thereforepostponed sine die for the hearingof further evidence.

Credit Transactions

21

STANDARD BANK OF SA LTD v FRIEDMAN

A JUDGMENT BY GIHWALA AJCAPE OF GOOD HOPE PROVIN-CIAL DIVISION25 NOVEMBER 1998

1999 CLR 1 (C)

A creditor is entitled to vary theinterest rate applicable to a loanupon notice given to the debtorprovided that the circumstances inwhich the creditor may do so aresufficiently clear from the termsof the loan.

THE FACTSIn 1994, the Standard Bank of SA

Ltd lent money to Friedman andpassed a mortgage bond over herproperty as security for the loan.In terms of the bond, interest onall amounts secured by it as wellas capital, were payable byFriedman in monthly instalments.

Interest on the loan was deter-mined at the rate of 14,75% perannum. The bank was entitled tovary the annual finance chargerate at any time upon writtennotice to Friedman, provided thatthe rate could not at any timeexceed the applicable maximumrate permitted by law. The bank infact varied the interest rate appli-cable to the bond from time totime.

The bank alleged that Friedmanhad failed to honour her obliga-tions in terms of the bond andbrought an action against her forrepayment of the full amount duein terms thereof. Friedman de-fended the action on variousgrounds, inter alia that the bankhad not been entitled to vary theinterest rate as the provisionentitling it to do so was vague andtherefore void and enforceable.

The bank applied for summaryjudgment against Friedman.

THE DECISIONWhen the provisions of the bond

were considered in their entirety,it was clear that it was intendedthat the bank would vary theinterest rate to that applicable andas usually required by the bankfor the kind of transaction inquestion. The parties therefore

agreed on the framework withinwhich the interest rate would bedetermined and did not agree thatthe variation of interest ratewould be within the unfettereddiscretion of the bank.

The framework within which theinterest rate would be determinedwas the market for loans asgoverned by the supply of moneyto banks by investors and thedemand for money from bank byborrowers. The interest ratespayable by banks would deter-mine the interest rates they exactfrom those who borrow fromthem. The fact that the formerwere subject to fluctuation wasreason to expect that the latterwould also be subject to change,and banks were entitled to varytheir interest in accordancetherewith. Once a bank gavenotice of an increase in interestrate, the mortgagor would beentitled to terminate the bond andif it did not, the increased interestrate would become of force andeffect between them. In thisrespect, there was no differencebetween an overdraft arrange-ment entered into between a bankand its customer and the mort-gage bond terms entered intobetween a mortgagor and mortga-gee.

A court should, if at all possible,uphold a contract rather thandeclare it invalid. In the presentcircumstances, the court could doso on the basis of reasonablenessand fairness and commercialreality.

Summary judgment wasgranted.

Credit Transactions

22

INVESTEC BANK (PTY) LTD v GVNPROPERTIES CC

A JUDGMENT BY WUNSH JWITWATERSRAND LOCALDIVISION26 JANUARY 1999

1999 CLR 20 (W)

Where a loan agreement providesthat the interest rate applicable tothe loan shall be at the currentrate charged by the creditor fromtime to time in respect of therelevant facility, a sufficientcondition to the right to vary willhave been provided for to ensurethat the provision is not invalidfor being vague. Such a conditioncould also be read into the loanagreement where this is notexpressly provided for.

THE FACTSInvestec Bank (Pty) Ltd lent

money to GVN Properties CC, theloan being secured by a bond. Thebond provided that financecharges on all amounts secured bythe bond would be reckoned atthe current rate charged by thebank from time to time in respectof the relevant facility (clause 3.4).

The bond also provided that theborrower was to pay interest onthe capital balance outstandingfrom time to time at the ratespecified in a Transaction Sched-ule, the rate being specified as18,5% variable. It was providedthat the variable rate could beamended from time to time,provided that the rate could notexceed the maximum rate deter-mined in accordance with theUsury Act (no 73 of 1968) wherethat Act was applicable.

The Usury Act did apply to theloan and the rate of interestapplicable at the time Investecbrought an action for payment interms of the loan was 22,5% perannum. Investec applied forsummary judgment against GVN.Its application was unopposed.However, the court raised thequestion of the validity andenforceability of the provisionentitling Investec to vary theinterest rate, in view of previousdecisions which held that such aprovision was not valid or en-forceable.

THE DECISIONA rate variation clause contained

in a bank’s lending documentsmust be understood as requiringthe variation to conform withgeneral movements in the bank’sinterest rate. So understood, thebank would be entitled to vary itsinterest rate in accordance withcurrent rates charged by it forfacilities of the same kind grantedby it at that time.

In the present case, Investec’sright to increase the interest ratewas subject to the condition thatsuch increase be to the prevailingrate charged by the bank for thetype of loan in question. Thiscondition was expressly stated inclause 3.4 of the bond, but couldalso have been read into the loanagreement had it not been sostated. The bank therefore did nothave an unrestricted right to varythe interest rate and the provisionin the bond entitling it to vary therate was accordingly not invalid.

Summary judgment wasgranted.

Credit Transactions

23

GIANNAROS v MERCHANTCOMMERCIAL FINANCE (PTY) LTD

A JUDGMENT BY LEVESON JWITWATERSRAND LOCALDIVISION12 JUNE 1998

1998 CLR 529 (W)

An examination of a plaintiff’sclaim under section 11 of theUsury Act (no 73 of 1968) requiresthat admissible evidence beprovided by the plaintiff. Wherethe evidence given by the plaintiffis inadmissible, no suchexamination would have takenplace.

THE FACTSP Giannaros borrowed money

from Merchant CommercialFinance (Pty) Ltd, and EJGiannaros was surety for therepayment of the money soborrowed. Merchant Commercialbrought provisional sentenceproceedings against both parties,claiming default in repaying theloan.

Giannaros defended the actionon the grounds that the moneylending transaction fell within theterms of the Usury Act (no 73 of1968) and that interest rates inexcess of those permitted by theAct had been charged. The maxi-mum interest rate allowed underthe Act was 26% per annum.Giannaros requested that Mer-chant Commercial be called as awitness to prove its claim in termsof section 11 of the Act. Section 11allows a defendant against whomfinance charges are claimed toexamine the plaintiff in regard tothe claim.

Merchant Commercial gaveevidence of the interest chargedagainst Giannaros’ debt and therate pertaining thereto. Its witnesswas a chartered accountant inprivate practice who normallyacted as its auditor. In calculatingthe interest due to MerchantCommercial, he used informationfurnished to him by the companypertaining to the amount and dateof each payment, and did notconfirm the amounts paid byGiannaros and the dates on whichthey were paid. When it waspointed out that the interest rate

used in demonstrating thesecalculations was not that agreed tobetween the parties, the account-ant gave further evidence basedon the agreed interest rate, despiteobjections to the leading of thisfurther evidence.

Provisional sentence in the sumclaimed by Merchant Commercialwas then given against Giannaros.Giannaros appealed.

THE DECISIONThe fact that section 11 refers to

the evidence of the plaintiff doesnot prevent the plaintiff’s agentfrom giving evidence, where theplaintiff is a corporate body. Theagent would have to have per-sonal knowledge of the facts of thematter.

In the present case, no agent ofMerchant Commercial havingpersonal knowledge of the trans-actions giving rise to the compa-ny’s claim gave evidence. Theaccountant did not have personalknowledge of the amount anddate of payments made byGiannaros, nor were his calcula-tions based on any such personalknowledge. His evidence wastherefore based on hearsay andwas inadmissible. The result wasthat no examination within themeaning of section 11 had takenplace.

Since there was some evidencethat interest rates in excess ofthose permitted by the Act hadbeen charged, provisional sen-tence had to be refused and thematter proceeded to trial.

Credit Transactions

24

DUNLOP TYRES (PTY) LTD v BREWITT

A JUDGMENT BY LEVESON JWITWATERSRAND LOCALDIVISION23 NOVEMBER 1998

1999 CLR 34 (W)

An advantage to creditors for thepurposes of a final sequestrationwill be shown where facts come tolight suggesting that therespondent might have assetswhich could become available fordistribution to creditors

THE FACTSDunlop Tyres (Pty) Ltd brought

an application for confirmation ofthe provisional order of sequestra-tion it had obtained againstBrewitt. Brewitt opposed theapplication on the grounds thatthere would be no advantage tocreditors in the sequestration, aswas required by section 12 of theInsolvency Act (no 24 of 1936).

Brewitt’s liabilities to creditorsamounted to R5 896 000 and hiscontingent liabilities arising fromdeeds of suretyship entered intoamounted to R3 100 000. Inopposing the application, Brewittclaimed to have no assets whatso-ever. He and his wife earned ajoint salary of R12 000 fromScoreprops (Pty) Ltd and thecompany also paid the monthlymortgage bond instalment ofR6 000 on the family residentialproperty as well as other expensesamounting to approximatelyR2 500 per month.

The shares in Scoreprops (Pty)Ltd were owned by a trust createdfor the benefit of the three chil-dren of the Brewitts. Brewitt hadbound himself as surety for thedebts of this company to theextent of R2,5m.

THE DECISIONThe financial arrangements

disclosed by the evidence sug-gested that Brewitt and his wifewere enjoying the profits ownedand earned for their children.They suggested that the trust hadbeen set up in order to protect thebusiness of the company from theclaims of creditors of the Brewitts.

In view of this possibility, itwould be an advantage to credi-tors if the provisional trustee wereto investigate the position andquestion Brewitt as to the exactnature of these financial arrange-ments. These investigations mightreveal that Brewitt and his wifewere owners of the shares inScoreprop and therefore havefurther assets which could becomeavailable for distribution tocreditors.

The fact that Brewitt had boundhimself as surety for the debts ofScoreprop suggested that he hadan interest in the company greaterthan that disclosed in his opposi-tion to the application. This wasalso a matter which the provi-sional trustee could investigate tothe advantage of creditors.

Insolvency

25

STANDARD BANK OF SA LTD v MASTER OFTHE HIGH COURT

A JUDGMENT BY NIENABER JA(HEFER JA, ZULMAN JA,PLEWMAN JA and STREICHERJA concurring)SUPREME COURT OF APPEAL27 NOVEMBER 1998

UNREPORTED

The Master is entitled to issue asubpoena and conduct an inquiryin terms of section 415(1) of theCompanies Act (no 61 of 1973)after the liquidation anddistribution account of thecompany in question has beenfinalised and distributions madein terms thereof.

THE FACTSUnique Press (Pty) Ltd was

finally liquidated on 5 January1994. The joint liquidators pre-pared a first and final liquidationand distribution account whichwas confirmed by the Master ofthe High Court on 27 March 1995.A week later, the liquidators madea distribution to creditors.

Thereafter, Paperlink (Pty) Ltdrequested the Master to issue asubpoena in terms of section414(2)(a) of the Companies Act(no 61 of 1973) requiring theattendance of a Mr Chase, acommercial manager employed bythe Standard Bank of SA Ltd, atan inquiry into the affairs ofUnique Press, the inquiry beingheld in terms of section 415(1) ofthe Act. At the inquiry, questionswere put to Mr Chase byPaperlink’s attorney which weredesigned to elicit informationwhich could be used against thebank, either to recover assetsbelieved to be owing to Unique bythe bank or to found a claim fordamages against the bank basedon an alleged misrepresentationmade by Chase regardingUnique’s creditworthiness.

The bank objected to the inquiryand attacked the Master’s decisionto call it. It contended that theMaster acted beyond his powersin authorising the interrogation,and it brought an application todeclare that after the approval ofthe liquidation and distributionaccount, the Master was no longerable to exercise his powers in thatmanner.

THE DECISIONSection 415(1) of the Act pro-

vides that the Master may call andadminister an oath to or accept anaffirmation from any personpresent at, or subpoenaed toappear at, a meeting of creditorsof a company which is beingwound up and unable to pay itsdebts, and any creditor may

interrogate the person so called.The bank contended that because

the section refers to a companywhich is being wound up, theperson subpoenaed to attend mustbe required to attend the meetingat a time when the company isbeing wound up. After the distri-bution made by a liquidatorpursuant to a final liquidation anddistribution account, the windingup process is complete, so that thesection is inapplicable at that time.

The description of the companyin question as one which is beingwound up and unable to pay itsdebts merely qualifies the type ofcompany being referred to. It doesnot purport to impose a timescalewithin which the holding of theinquiry must take place. It wastherefore incorrect to impose therequirement that at the time thesubpoena was issued or theinterrogation conducted, Uniqueshould have been undergoing awinding up and unable to pay itsdebts. Section 415(1) was con-cerned with the details of theexamination and not with itstimescale. The section was distin-guishable from section 417 in thisrespect.

The winding up process in theliquidation of a company is alsonot necessarily complete when theliquidator makes a distribution inrespect of a confirmed account. Aliquidator may be required tomake adjustments or recoversubsequently-discovered assets. Insuch a case, the liquidator wouldbe entitled to employ the machin-ery of the Act for these purposes,including the employment ofsection 415(1) or section 417.

The Master also retained thepower to hold and inquiry andsubpoena attendances thereat forso long as he had not yet issued acertificate, in terms of section 419of the Act, that the affairs of thecompany had been completelywound up. His functions weretherefore not complete, ie he was

Insolvency

26

not functus officio, when he didissue the subpoena and conductthe inquiry in question. His powerto do so was not conditional on

the distribution of funds not yethaving been made.

The bank’s objections weredismissed and its applicationdismissed.

MOKOENA v THE MASTER

A JUDGMENT BY DE WET AJWITWATERSRAND LOCALDIVISION17 NOVEMBER 1998

1999 CLR 41 (W)

The presiding officer at an enquiryconducted in terms of section 152of the Insolvency Act (no 24 of1936) has a discretion to makerulings relevant to the conduct ofthe enquiry, including a rulingallowing the presence of a personemployed by the petitioningcreditor who has intimateknowledge of the facts giving riseto the enquiry.

THE FACTSThe joint estate of Mokoena and

her husband was placed under afinal order of sequestration. At therequest of the petitioning creditor,SA Breweries Ltd, the Masterinstituted an inquiry in terms ofsection 152(2) of the InsolvencyAct (no 24 of 1936).

During the course of the inquiry,Mokoena objected to the presenceof a Mrs van den Broek, the creditmanager of SA Breweries. Thepresiding officer ruled that shewas entitled to be present.

Mokoena then applied for anorder reviewing and setting asidethis ruling. Mokoena contendedthat section 152 dealt with a‘private’ enquiry as opposed to apublic one and that for thatreason, Mrs Van den Broek wasnot entitled to be present at theenquiry.

THE DECISIONThe inquiry in the present case

was not a public enquiry, asenvisaged in sections 42 and 65 ofthe Act. The presence of Mrs Vanden Broek did not change thenature of the enquiry from aprivate one to a public one.

The presiding officer at enquiriesunder section 152 has always hada discretion to make rulingsregarding the proper conduct ofthe enquiry. This has included thediscretion to allow legal assistanceto the insolvent and witnesses,and could include the discretionto allow a person such as the SABreweries credit manager to bepresent at the enquiry. This wouldespecially be allowed in circum-stances where such a person hasan intimate knowledge of the factsgiving rise to the enquiry.

There was no evidence thatMokoena had been prejudiced bythe presence of Mrs Van denBroek. There were therefore nogrounds upon which it could besaid that she had not been entitledto be present at the enquiry.

The application was dismissed.

Insolvency

27

DOYLE v BOARD OF EXECUTORS

JUDGMENT BY SLOMOWITZ AJCAPE OF GOOD HOPE PROVIN-CIAL DIVISION18 DECEMBER 1998

[1999] 1 All SA 309 (C)

A beneficiary of a trust is entitledto an accounting of transactionsinvolving trust assets prior tothat date on which thebeneficiary’s rights vest, where itcan be shown that the assets ofthe trust, when vested in him, area result of investments andreinvestments effected by thetrustee over the preceding years.

THE FACTSIn 1951, the Board of Executors

was appointed a trustee of a trustestablished by Mrs SM Doyle in1939. During Mrs Doyle’s lifetime,income from the trust was paid toher by the trustees, who thenincluded the Board of Executorsand others who subsequentlydied.

The object of the trust directedthat its income was to be paid toMrs Doyle during her lifetime,and thereafter be utilised for thebenefit of her children until theyattained the age of 25 years. Onattaining that age, a child’s shareof the capital would be paid tohim or her.

Mrs Doyle died in 1994. At thattime, her only son, the plaintiff,became entitled to the capital ofthe trust.

Doyle brought an action againstthe Board of Executors claimingthat it give an accounting settingout each and every asset the trustowned at the time of its inceptionor at the time of the Board’sappointment, as well as an ac-counting of every transactionconcluded on behalf of the trustfrom its inception from the sametime.

The parties approached the courtfor a determination of whether ornot Doyle was entitled to anaccounting for the period beforehis mother’s death and of theperiod for which such an account-ing could be required.

THE DECISIONAn agent is bound to give an

accounting of all that he has donein the execution of his mandate.Aa an agent, a trustee is similarlybound. The question was whetherthis duty rested on the Board infavour of Doyle, or whether thefact that his right was only contin-gent during the period of hismother’s lifetime, denied him aright to an accounting.

It was true that Doyle’s right tothe capital of the trust was contin-gent upon him reaching the age of25 and his mother dying. How-ever, the capital to which hewould be entitled at that pointwas a result of investments andreinvestments over the precedingyears. Doyle was therefore enti-tled to a satisfactory explanationat the time it was handed to him,that that capital was what itpurported to be. This wouldrequire a proper accounting of it,including an explanation of whatportion of income accruing from itwas not paid out but capitalisedover the years.

Doyle was entitled to an account-ing of the assets of the trust frominception of the Board as trusteeof the trust in 1951, including allrealisations and reinvestments ofthem from that time.

Trusts

28

OWNERS OF THE MV FORTUNE 22 vKEPPEL CORPORATION LTD

A JUDGMENT BY THRING JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION28 JUNE 1998

1999 (1) SA 162 (C)

An associated ship may not bearrested in respect of a claimagainst the ship of which it is anassociated ship where the latterhas already been arrested.

THE FACTSKeppel Corporation Ltd had a

maritime claim arising fromrepairs carried out on the MountYmitos in 1996 at Singapore. Itissued a summons in rem againstthe ship claiming the balance ofmoney allegedly due to it andapplied for a warrant of arrestagainst the ship. The ship wasarrested and sold. Keppel’s claimcould not be satisfied from theproceeds of the sale. It applied forand obtained default judgment inthe sum of 2 264 902 Singaporedollars.

Keppel then arrested the Fortune22 at Saldanha Bay as an associ-ated ship, thereby commencing anaction in rem against it. Theowners furnished security for therelease of the ship, the ship wasreleased, and the owners thenapplied for the deemed arrest,which followed in terms of section3(10)(a)(i) of the AdmiraltyJurisdiction Regulation Act (no105 of 1983), to be set aside.Keppel contended that the arrestof an associated ship was possibleonly if effected instead of thearrest of the ship in respect ofwhich the maritime claim arose,and not as well as the latter ship.

THE DECISIONSection 3(6) of the Act provides

that an action in rem may bebrought by the arrest of an associ-ated ship instead of the ship inrespect of which the maritimeclaim arose. This provision is to beread in the light of the English lawrule that there may be an arrest ofonly one ship in respect of any oneclaim which the claimant seeks toenforce by means of an action inrem. Proceedings in rem beinginternational in operation, it couldbe expected that section 3(6)would refer to arrests beyond thejurisdiction of the South Africancourts. It could therefore beinterpreted to mean that an actionin rem could be brought by thearrest of an associated shipnotwithstanding the earlier arrestof the ship in respect of which theclaim originally arose.

Section 3(8) provides that prop-erty shall not be arrested andsecurity therefor shall not be givenmore than once in respect of thesame maritime claim by the sameclaimant. This provision was notintended to be of local applicationonly and was indicative of theintention that more than one shipshould not be arrested in respectof the same claim.

The deemed arrest of the Fortune22 was set aside.

Shipping

29

INTERCONTINENTAL EXPORTS (PTY) LTD v FOWLES

A JUDGMENT BY SMALBERGERJA (MAHOMED CJ, HOWIE JA,PLEWMAN JA and FARLAMAJA concurring)SUPREME COURT OF APPEAL23 MARCH 1999

UNREPORTED

A document which is reasonablycapable of an interpretationconsistent with its validityshould be interpreted in thatmanner, rather than in a mannerwhich is inconsistent with itsvalidity. A deed of suretyshipwhich is reasonably capable of aninterpretation which givesseparate identities to debtor andsurety should therefore beaccepted since this upholds thevalidity of the deed of suretyship.

THE FACTSFrank Turner Fowles signed a

document which recorded that‘the suretyship’ bound andinterposed himself as surety andco-principal debtor for the indebt-edness of the debtor towardIntercontinental Exports (Pty) Ltd.The document defined the debtoras Mr Frank Fowles and MrsLinda Fowles, and the surety asthe party executing the suretyshipas surety and co-principal debtor.

The preamble recorded that thesuretyship was furnished inconsideration of Intercontinentalallowing the debtor or any thirdparty all or any party of whoseindebtedness to Intercontinentalwas guaranteed by the debtor,such banking facilities as Intercon-tinental deemed fit.

Intercontinental claimed that thedocument incorrectly recorded anagreement entered into between itand Fowles in which (i) SecurityDepot (Pty) Ltd was the debtor,not F.T. Fowles, (ii) it was notintended that Intercontinentalwould allow the debtor bankingfacilities, and (iii) it was notintended that Fowles would bindhimself as surety and co-principaldebtor for his own indebtedness.It alleged that the document’sinaccuracies were occasioned byan error common to both parties,and claimed an appropriaterectification of the agreement.Intercontinental alleged thatSecurity Depot had becomeindebted toward it in the sum ofR2 178 844,43 and that Fowles wasliable to it in the same amount, hisindebtedness arising from hisobligations as surety in terms ofthe document he had signed, asrectified. Intercontinental claimedpayment of R2 178 844.

THE DECISIONIntercontinental’s averments

concerning the incorrect recordingof the agreement between it andFowles were undisputed and theymade out a proper case for rectifi-cation. Provided that it could beshown that the agreement wasformally valid, rectification couldbe allowed. Formal validity of theagreement depended upon propercompliance with section 6 of theGeneral Law Amendment Act (no50 of 1956). The section providesthat no contract of suretyship shallbe valid unless the terms thereofare embodied in a written docu-ment and signed by the surety.Compliance with this sectionrequires proper identification ofthe principal debtor, the suretyand the creditor.

The document identified thesurety as the person signing thesuretyship. The person who didsign the document was FrankTurner Fowles and was identifiedas such. The document alsoidentified the creditor as Intercon-tinental.

As far as the principal debtorwas concerned, it was clear thatthe debtor as defined was not thesame party as the surety asdefined. The debtor was definedas Frank Fowles whereas thesurety was defined as FrankTurner Fowles. These were notnecessarily the same person. Uponthis interpretation of the docu-ment, the debtor could be consid-ered a separate party from thesurety. This being an interpreta-tion which was consistent with thevalidity of the document, it oughtto be accepted.

The document therefore properlyrecorded a valid contract ofsuretyship. Intercontinental wasentitled to payment of R2 178 844.

Suretyship

30

BOE BANK LTD v TRUSTEES, KNOX PROPERTY TRUST

A JUDGMENT BY McCALL JDURBAN AND COAST LOCALDIVISION18 JANUARY 1999

[1999] 1 All SA 425 (D)

A trust may be considered aseparate entity where theintention is that the entitythereby described is the trustee ofa trust in his capacity as such. Adeed of suretyship whichincorrectly cites the registrationnumber of the creditor sufficientlyidentifies the creditor and is notinvalid for failure to do so.Although a contract entered intoby a trustee before the issue ofletters of authority may lack theauthority to enter into thecontract, the terms of thatcontract may be incorporated in acontract later entered into by thetrustee after the issue of theletters of authority.

THE FACTSBy a letter of grant, NBS Bank

Ltd granted a loan to the Trusteeof the Knox Property Trust, theterms thereof being recorded in a‘Letter of Grant’. The Trust Deedof this trust was signed by thedonor and trustees on the follow-ing day, and the Master’s letters ofauthority were issued some threeweeks later.

The terms of the loan were thenrecorded in a document entitled‘Action Bond Agreement’ whichcited the Knox Property Trust asthe borrower, and this documentwas signed by Choudree, thesecond defendant. He signed apower of attorney to pass acovering mortgage bond to securethe loan and the mortgage bondwas subsequently registered overcertain property. Choudree alsosigned a deed of suretyshipbinding himself for all amountswhich were then or might in thefuture become due by the KnoxProperty Trust. The suretyshipdocument was headed with thelogo of NBS and the words ‘NBSBank Ltd’ followed by ‘RegisteredBank Reg No 84/1151/06’. Thisregistration number was in factincorrect, the correct numberbeing 87/01384/06.

The trust defaulted in makingmonthly repayments of the loanand the bank obtained judgmentagainst the trustees for payment ofthe full amount of the loan to-gether with interest thereon. Thebank also sought judgmentagainst Choudree, but this wasopposed on three grounds. Thefirst ground was that the trustcould not be a debtor since it hadno separate personality in law.The second ground was that sincethe registration number of thecreditor was cited incorrectly, thedeed of suretyship recorded acreditor that did not exist and wasinvalid for that reason. The thirdground was that the agreement

recorded in the Letter of Grantwas invalid because when signedby Choudree, letters of authorityhad not been issued by the Masterso that he lacked the authority toconclude the agreement on behalfof the trust.

THE DECISIONWhereas a trust might not be

properly considered a separatelegal entity, since the trust has notbeen recognised to be such in ourlaw, a trust as a separately de-fined arrangement whereby assetsand liabilities are vested in atrustee has been so recognised. Inconsequence, a trust is often givena name in the trust deed by whichit was constituted and treated inpractice as a separate entity. Whena ‘trust’ is referred to in such acontext it is this arrangementwhich is being recognised, eventhough in fact the entity holdingthe assets and incurring theliabilities is the trustee in hiscapacity as such.

In the present context, theexistence or otherwise of the trustas a separate legal entity was aquestion subsidiary to the firstquestion, which was whether ornot the principal debtor wassufficiently identified in the deedof suretyship. A proper identifica-tion would have been one citingthe trustees in their capacity assuch, but evidence of the identityof the principal debtor could bedrawn from sources other than thedeed of suretyship itself. Suchsources included the trust deeditself as well as the evidence of theparties themselves as to thenegotiations entered into prior tothe entering into of the deed ofsuretyship and the consensus theyreached.

As far as the second ground wasconcerned, the deed of suretyshipclearly defined the creditor asNBS Bank Ltd. Whether or not theregistration number of the bank

Suretyship

31

had been incorrectly cited in theheading to the document embody-ing the deed, the creditor asdefined was undoubtedly NBSBank Ltd which existed at thetime the deed of suretyship wasentered into. Even if it wereaccepted that the citation of thecreditor included by reference thedescription of the bank in theheading to document, whichincorporated the incorrect regis-tration number, it would bepermissible to lead evidence thatthe parties intended NBS BankLtd to be the creditor. Suchevidence might include the Letterof Grant and evidence to the effect

that no company with the registra-tion number as cited in the deedactually existed at the time it wassigned by the surety.

As far as the third ground wasconcerned, it was true that theLetter of Grant stated that to-gether with the terms of theAction Bond Agreement, itformed part of the agreementbetween the parties. However, itwas severable from the ActionBond Agreement. The latter madeno mention of the Letter of Grantand was not dependent on it. Itsterms and those of the coveringbond which was later passed,contained sufficient terms to form

the basis for the action for repay-ment of the loan, which NBS hadbrought against the principaldebtor. It therefore made nodifference whether or notChoudree had had the necessaryauthority to sign the Letter ofGrant. Even assuming that suchauthority had been necessary,when entering into the ActionBond Agreement, both parties hadintended that the terms of theLetter of Grant would be incorpo-rated into that agreement.

The deed of surertyship wastherefore valid and the bank wasentitled to judgment against thesurety.

Suretyship

Since, in terms of the Deed of Suretyship, the second defendantbound himself for all amounts then and in the future becoming due`from whatever cause and howsoever arising' he bound himself assurety for the repayment of the loan which was advanced to the firstdefendant pursuant to the Action Bond Agreement without thenecessity for the incorporation of the terms and conditions of theletter of Grant.

32

ADMINISTRATORS, ESTATE RICHARDS v NICHOL

A JUDGMENT BY SCOTT JA(SMALBERGER JA, HARMS JA,ZULMAN JA and PLEWMAN JAconcurring)SUPREME COURT OF APPEAL25 SEPTEMBER 1998

1999 (1) SA 551 (A)

Trustees of trusts are duty boundto ensure a proper balancebetween the security of trustinvestments and their capitalgrowth. Where the authority toinvest in more risky investmentsis not given to trustees by a trustdeed, they are neverthelessentitled and obliged to effect suchinvestments giving prudent regardto the requirements of preservingtrust investments. In the exerciseof their discretion in this regard,trustees must spread theinvestments made in the name ofthe trust so as to achieve asnearly as possible both capitalgrowth and security.

THE FACTSJ H Richards executed a will in

terms of which he bequeathedcertain of his property to hiswidow and others. In clauses 4and 11 of the will, it was providedthat payment of annuities tonamed beneficiaries from invest-ments was to be made from theresidue of the estate, such invest-ments to be made by the adminis-trators of the will with full powerand at their absolute discretion torealise or acquire property.

In terms of clause 12 of the will,provision was made for theestablishment of a trust in respectof the residue of the estate uponthe death of the longest survivingbeneficiary or earlier if this wasnot inconsistent with the adminis-trators’ obligations to any remain-ing beneficiaries. It was providedthat the administrators coulddetermine who the trustees wouldbe, what they were to be paid andthe terms and constitution of thetrust. The income of the trust wasto be used for the benefit ofspecified relations of Richards andhis wife, and for charitable institu-tions to be determined by thetrustees in their discretion.

The will made no provision forthe distribution of the capital ofthe trust but for continuation ofthe trust in perpetuity.

The administrators consideredthat clause 12 might constitute animproper delegation of testamen-tary power, and if so would bringabout partial intestacy. Theytherefore applied for an order thata valid trust had been createdpursuant to clause 12 and thatRichards had not died intestate.The administrators included theBoard of Executors, a companywhich obtained on-going invest-ment advice from a team ofexperts, as well as an attorney in awell-established firm of attorneys.

The application was granted, butsubject to certain restrictions on

the powers of investment of thetrustees. The restrictions imposedon the trustees were that theycould invest trust assets in securi-ties quoted on the JohannesburgStock Exchange and/or licensedunit trusts, provided that (i) nomore than 50% of the value of thetrust assets were to be so invested,and (ii) before such investmentswere made the trustees were toobtain advice from an independ-ent stockbroker to each suchinvestment, and (iii) a quarterlyreport was to be rendered to theMaster setting out details of suchinvestments.

The administrators appealedagainst the imposition of therestrictions.

THE DECISIONIt was clear from the provisions

of clauses 4 and 11 of the will thatRichards had had considerableconfidence in his administratorsand intended them to have widediscretionary powers of invest-ment. Nevertheless, in terms ofthe common law, his administra-tors were still required to deal andinvest in trust assets with due careand diligence, and not expose thetrust to business risks.

This restriction on trustees has inthe past caused trustees who arenot given wider powers of invest-ment, to invest trust assets only ininvestments attracting less risk,such as fixed deposits, loans onmortgage and immoveable prop-erty. However, this policy hasbeen countered by the trustee’sneed to preserve the capital of thetrust in inflationary times, andtrustees have been entitled andobliged to invest in more riskyinvestments in order to preservethe trust investments in suchcircumstances. A trustee mustmake such investments, carefullyassessing the prudence of eachone, avoiding speculative invest-ments and spreading the invest-

Trusts

33

ment forms in order to obtain abalance of stability and growth inthe capital value of the trust andthe income it produces.

Applying this approach in thepresent case, the question waswhether there was any basis uponwhich the restrictions imposed bythe first court could be made.There appeared to be no basis forimposing such a restriction. Thetrustees were bound by thecommon law to the rules pertain-ing to the making of investmentsas established over time and giventhe need for flexibility which theserules required, to impose a 50%limit on the investment in shareswould be to attempt to override

the rules and deny the flexibilityanticipated by them. There werealso impracticalities attached tothe imposition of such a limit,such as the difficulties of havingto dispose of shares as a result oftheir having exceeded the 50%limit through capital gain.

The imposition of the require-ment of obtaining the advice ofbrokers prior to investing infurther securities was also neithernecessary nor appropriate. Thetrustees already had advice from ateam of investment experts as wellas the judgment of an attorney ina well-established firm of attor-neys. This, together with theobvious confidence with which

Richards had appointed hisadministrators, indicated thattheir decisions should not besubjected to the overriding adviceof a firm of stockbrokers.

As far as the requirement of aquarterly report to the Master wasconcerned, this was not appropri-ate given the fact that the Masterwas not equipped to assessinvestment decisions of trusteesand should not be burdened withsuch a duty. The Master in anyevent had wide powers to calltrustees to account in terms of theTrust Property Control Act (no 57of 1988).

The restrictions imposed by thefirst court were set aside.

Trusts

MOHAMMED N.O. v ALLY

A JUDGMENT BY SCHUTZ JA(VAN HEERDEN DCJ, SMAL-BERGER JA, ZULMAN JA andMELUNSKY AJA concurring)SUPREME COURT OF APPEAL27 NOVEMBER 1998

UNREPORTED

A trust deed which makesprovision for trustees to representthe persons for whom the trustwas established should beinterpreted as requiringrepresentation of all those personsand not classes of them, evenwhere the trust deed has madeprovision for the originalappointment of trustees inproportions relating to varioussectional interests of thosepersons.

THE FACTSThe trust deed of the Juma

Musjid Trust provided for theconstitution of a board of ninetrustees who, in terms of clause4(a), were to represent foursections of the congregation inspecified proportions. The speci-fied proportions were five trusteesfor the ‘Memon’ section, two forthe ‘Surtee’ section and one eachfor the ‘Kooknee’ and ‘ColonialBorn’ sections.

The object of the trust was toown and continue the control andadministration of the Grey StreetJuma Musjid for the benefit of thefollowers of the Sunni Muslimreligious faith. The deed providedthat in the event of the office of atrustee becoming vacant, theremaining trustees would appoint

a replacement who would con-tinue in office until the nextAnnual General Meeting. Inmaking the appointment, thetrustees were to comply with theprovisions of clause 4(a) in respectof the class of trustee to be ap-pointed.

In terms of clause 4(e), all vacan-cies of the board of trustees wereto be filled at the Annual GeneralMeeting, provided that anynominated trustee was to belongto the class of trustee whose placewas to be filled, the intentionbeing that the trustees wouldalways be chosen from andrepresent the class to which thefirst trustee belonged in likeproportion.

Clause 7(a) provided for theholding of an annual general

34

meeting by not later than 31January in each year. Clause 7(d)provided that voting was to be bya show of hands and that a major-ity of 75% would pass a resolu-tion.

An annual general meeting hadnot been held since 1987 and fourof the trustees who had beenappointed in this period hadtherefore not been appointed bythat meeting. Members of thecongregation opposed the con-tinuation of this state of affairsand called for the holding of anannual general meeting. Theboard of trustees conceded thatone had to be held but contendedthat the appointment of trusteeswas to be effected by separatemeetings of each section and wasto take place only by members ofthat particular section. The

congregants opposing the boardcontented that this interpretationof the trust deed was contrary toits terms.

THE DECISIONWhile there was provision for a

quota system for trustees ap-pointed to the board, the trustdeed made no provision for aseparate voting system whenappointments were to be made bythe annual general meeting. Onthe other hand, it did provide forthe voting requirements forpassing a resolution. This did notcontain any reference to a separateelectoral college for differentclasses of voter and did not intendto cater for different classes in themanner contended for by theboard of trustees. There was noreference to any right to vote at aclass meeting.

The trust deed also containedother indications that separateelectoral colleges were to electtrustees to represent the varioussections. For example clause 4(b)provided for the ‘remainingtrustees’ to make the appointmentof a trustee whose office had beenvacated. Such an appointmentwas to be made regardless ofsection.

When the trust deed referred tothe function of the trustee torepresent the congregants it meantthat the trustee was to representall of the congregants and not asection of them. There was nobasis upon which it could be saidthe trust deed provided forrepresentation of sections asopposed to the congregation as awhole.

The contentions of the board oftrustees were rejected.

Trusts

There is, to my mind, also substance in the submission for the respondentthat giving effect to the appellants’ interpretation will inevitably lead to thefragmentation of the congregation into artificial blocks leading to potentialfriction and disharmony. A consequence of applying the appellants’ inter-pretation might well be that a representative of one section could refuse toaccount to or have regard to the interests of other sections. This would notaccord with the broad object of the trust, which is to advance the interests ofmembers of the Sunni Muslim faith, whatever their racial or ethnic origin.

35

LOW WATER PROPERTIES (PTY) LTD v WAHLOO SAND CC

A JUDGMENT BY LIEBENBERG JSOUTH EAST COAST LOCALDIVISION7 JANUARY 1998

1999 (1) SA 655 (SECLD)

Personal rights created andrecorded in a notarial deed ofservitude do not become realrights merely by registration ofthe notarial deed. A successor intitle to the dominant propertymay therefore not enforce any ofthe obligations owed by theservient property where these arepersonal rights, even where thesuccessor was aware of theexistence of these rights beforetaking ownership of the property.

THE FACTSLow Water Properties (Pty) Ltd

and the second applicant weregranted servitudes over theremainder of farm 809 situated inthe district of Humansdorp by theowner of that property, a certainAW Pringle. The servitude wasrecorded and executed in anotarial deed on 5 September1991, and registered in the DeedsOffice on 25 June 1992. The deedprovided for the rights of LowWater and the second applicant todraw water from a borehole, storethe water in a demarcated areaand convey the water from theservient tenement to their proper-ties by way of a pipeline and aservitude right of way. In terms ofthe deed, Pringle was obliged toextract water from the borehole,supply the borehole, supply thepump for extracting water fromthe borehole, ensure the supply ofwater for domestic use by theoccupiers of the dominant proper-ties and maintain the pipeline.

In May 1996, Pringle sold hisproperty to Wahloo Sand CC.Low Water and the second appli-cant alleged that the new ownerrefused to comply with the obliga-tions created in the notarial deed.They brought an applicationagainst Wahloo to enforce compli-ance with these obligations.Wahloo defended the applicationon the grounds that the rightsrecorded in the notarial deed werepersonal rights, were unenforce-able against successors in title toPringle.

THE DECISIONSection 63(1) of the Deeds

Registries Act (no 47 of 1937)provides that no deed purportingto create or embodying a personalright, and no condition whichdoes not restrict the exercise ofany right of ownership in respectof immovable property, shall becapable of registration, providedthat a deed containing such acondition may be registered if, inthe opinion of the Registrar, suchcondition is complementary orotherwise ancillary to a registrablecondition or right contained orconferred in such deed.

Although this section authorisedthe registration of personal rightsit did not provide for the creationof a real right merely by virtue ofsuch registration. In the past,before the enactment of theproviso to section 63(1), courtshad allowed the registration ofpersonal rights but had not, by sodoing, sought to transform thepersonal right so registered into areal right. The intention of section63(1) was not to change thissituation but to accommodate asituation in which no provisionhad been made for the registrationof personal rights no matter howpertinent they might have been tothe creation of real rights. Theproviso did not allow the registra-tion of personal rights irrespectiveof connection with the creation ofreal rights but allowed this onlywhen they were complementaryor otherwise ancillary to thecreation of such rights.

The fact that Wahloo might haveknown of the existence of thepersonal rights recorded in thenotarial deed did not make anydifference. Not being a party tothe agreement which createdthose rights, Wahloo was entitledto ignore them.

The application was dismissed.

Property

36

DE KOCK v HÄNEL

A JUDGMENT BY DAVIS AJCAPE OF GOOD HOPE PROVIN-CIAL DIVISION16 OCTOBER 1996

1999 (1) SA 994 (C)

A servitude does not impose aburden greater than it did beforemerely by the subdivision of theland over which it exists.

THE FACTSIn 1963, a servitude was created

in favour of and against erf 3Welbeloond and erf 9Welbeloond. The servitude was aroad common to both propertieswhich was used to gain access toportions of them. The two ervenwere subsequently subdivided,Hänel becoming owner of erf10231, Constantia, and otherrespondents becoming owners ofvarious adjoining erven. De Kockbecame the owner of erf 4814,Constantia, another propertyresulting from the subdivisions.Both properties were transferredsubject to the servitude.

De Kock contended that theeffect of the subdivisions was tobring about a change in theservitude which created anexcessive burden on the servienttenements effectively terminatingthe servitude. He consequentlysought an order that, taking intoaccount the present circumstancesof the servitude, the servitude didnot create any rights against hisproperty in favour of Hänel’s.

THE DECISIONThere was no need to take into

account the present circumstancesof the servitude since, as recordedin the title deeds, there was noambiguity regarding its applica-tion. It expressly provided for aright of passage along an existingroad, and there was no dispute asto which properties the servitudewas applicable.

The subdivision which had takenplace did not in itself create anygreater burden than had previ-ously existed. There was also noevidence that the result of thesubdivision was to impose anygreater burden on the servienttenements. Accordingly it couldnot be argued that the servitudehad been terminated by anyexcessive burden imposed onthese properties.

De Kock also argued that sincethe utility of the servitude nolonger existed, the servitude itselfhad to terminate. However, theauthorities were that there mustbe utility in a servitude for it tocome into existence but there wasno authority for the propositionthat the utility must continue tosubsist in order for the servitudeto continue. In any event, Hänelcontended that the servitude wasof use to him and as a reasonableclaim, this was sufficient toestablish the utility of the servi-tude.

De Kock’s application wasdismissed.

Property

37

CALDEIRA v RUTHENBERG

A JUDGMENT BY VIVIER JA(VAN HEERDEN DCJ, HOEXTERJA, NIENABER JA ANDNGOEPE AJA concurring)SUPREME COURT OF APPEAL27 NOVEMBER 1998

UNREPORTED

A person who takes delivery of anitem which it knows is not ownedby the person selling it and inrespect of which another personholds rights is not entitled toownership of the item since itdoes not take delivery thereof ingood faith.

THE FACTSCaldeira owned a Mercedes

Benz motor car which he broughtfrom England to South Africa inJanuary 1996. It was then deliv-ered to Exclusive Boys Toys CCwhere it was displayed for sale,Caldeira having given Exclusive amandate to sell the vehicle at aminimum price of R560 000.

Exclusive sold the vehicle toRandburg Motorlink CC, whichsold the vehicle to Bloomsbury(Pty) Ltd, which sold it toRuthenberg. When Motorlink tookdelivery of the vehicle fromExclusive, it was told that Exclu-sive was the owner of the vehicle,and shown the vehicle’s registra-tion certificate reflecting Exclusiveas the owner first registered assuch in the country. It was how-ever, aware of Caldeira’s interestin the vehicle as it was informedthat the vehicle had to be obtainedfrom Caldeira who had earlierrevoked the mandate in favour ofExclusive and re-taken possessionof the vehicle.

Caldeira was not paid thepurchase price and he secured theenforcement of a search warrantand seizure order in respect of thevehicle. Ruthenberg, Motorlinkand the other purchasers then

applied for the lifting of the searchand seizure order, claiming thatCaldeira was estopped fromasserting any rights to the vehicle.Caldeira counter-claimed for anorder that he was the owner of thevehicle and entitled to possessionof it.

THE DECISIONMotorlink had not obtained the

vehicle in good faith as it knew ofCaldeira’s interest in the vehicle. Itwas also not misled into the beliefthat Exclusive was entitled todispose of the vehicle. It wastherefore not entitled to assert anyrights in respect of the vehicle asagainst Caldeira who could not beestopped from asserting his ownright to the vehicle.

While it is true that there is saidto be a common law rule that aperson who gives something to anagent to sell cannot recover theitem from a third party to whomthe item is sold, but the person towhom it is sold must take it ingood faith. This was not theposition in this case.

Motorlink was also not misledinto believing that Exclusive hadthe right to dispose of the vehicle.

The application was dismissed.

Property

38

ERF 167 ORCHARDS CC v GREATERJOHANNESBURG METROPOLITAN COUNCIL

A JUDGMENT BY WUNSH JWITWATERSRAND LOCALDIVISION8 DECEMBER 1995

1999 CLR 91 (W)

An owner of property is entitledto make representations regardingthe approval of building planssubmitted by its neighbour wherethis might affect the value of itsown property.

THE FACTSThe Greater Johannesburg

Metropolitan Council approvedbuilding plans submitted by thesecond respondent for the con-struction of a games room on hisproperty. The property adjoinedthat of Erf 167 Orchards CC(‘Orchards’).

Orchards objected to the con-struction of the games room onthe grounds that it was unsightlyand objectionable and derogatedfrom the value of its own propertyand disfigured the area. It con-tended that it should have beengiven an opportunity to object tothe approval of the plans and itsconsent to them obtained. Italleged that the building was anadditional subsidiary dwellingunit which was disallowed by theJohannesburg Town-planningScheme. It brought an applicationto review and set aside the coun-cil’s decision to approve thebuilding plans.

THE DECISIONThe structure was not a subsidi-

ary dwelling unit since it was nota structure intended to be lived inby people unrelated to the owner.

The approval of the council hadbeen given in terms of the Build-ing Standards Act (no 103 of1977). As such, the council’s

decision was made as an adminis-trative act which required thebona fide exercise of its judgment.If the council failed to exercise itsjudgment in this manner, thecourt could interfere to set asidethe decision. There was however,no evidence that the council hadfailed to exercise its judgment inthis manner. Similarly, there wasno evidence that the council hadfailed to properly apply theprovisions of the Town-planningScheme.

Orchards did however, have aright to make representationsregarding the effect of the build-ing on the value of its own prop-erty. The council had to take intoaccount that the approval of thebuilding plans might have aneffect on the value of neighbour-ing properties. It therefore had tonotify neighbouring propertyowners of any application forapproval of building plans.Orchards had a right to be heardon this subject and it had a legiti-mate expectation that it would beso heard.

As far as the rights conferred bythe Scheme were concerned, itwas significant that it omitted anyright to be heard upon the submis-sion of building plans for ap-proval. It therefore excluded theapplication of the audi alterampartem rule.

Property

39

ODENDAAL v EASTERN METROPOLITANLOCAL COUNCIL

A JUDGMENT BY LEWIS AJWITWATERSRAND LOCALDIVISION29 SEPTEMBER 1998

1999 CLR 77 (W)

A person may not object to thedecision of a local authority inrelation to a neighbouringproperty which affects its rightsof ownership where the localauthority is empowered to makesuch a decision without any rightto object being provided for in theapproval mechanism, and wherethe decision does not affect thecommunity as a whole.

THE FACTSOdendaal and the other appli-

cants owned property adjacent toWynnbrand Properties CC in thesuburb of Bryanston in Johannes-burg, its property being some 3000m² in extent.

Wynnbrand applied for therezoning of its property to ‘Resi-dential 2’ which would enable itto build ‘cluster houses’ on it. Onthe same day, the Eastern Metro-politan Local Council approvedbuilding plans for the constructionof a single house on the property.Odendaal and the other applicantsalleged that they were not notifiedof the approval of the buildingplans, and brought an applicationfor a review of the Council’sdecision to grant the approval.They contended that the result ofthe approval was that the buildingwould be constructed in onecorner of the site and that becauseof that, when the rezoning appli-cation was brought, the Councilwould have no option but toapprove the application. Theyobjected to the rezoning of theproperty on the grounds that itwould be out of keeping withother properties in the area.

The Council denied that theapproval of the building planspre-empted a decision on therezoning application, and con-tended that it was not obliged toafford Odendaal and the otherapplicants a hearing before theirapproval.

THE DECISIONSection 7(1) of the National

Building Regulations and Build-ing Standards Act (no 103 of 1977)provides for the conditions underwhich a local authority shouldapprove or disapprove an applica-tion for the erection of a buildingon property within its area ofjurisdiction. It does not however,provide for the right of interestedparties such as neighbours, to

object to any approval givenunder the section. On the otherhand, the Town Planning Schemeprovides positively for the rightsof interested parties to object toand make representations con-cerning applications for rezoningof properties.

Both the Act and the Scheme arelegislative instruments for ensur-ing the harmonious, safe andefficient development of urbanareas. They have been enacted foran environment in which propertyowners have diverse and some-times conflicting interests. Theproperty rights of one might beaffected by what a neighbour doeson its property, hence the right toobject to rezoning applications.Where however, no right to objectto what one property ownerwishes to do on its property isprovided for, where approvalmechanisms are extensively setout without reference to a right toobject to other peoples’ plans, theinference to be drawn is thatwould-be objectors have no rightto set aside any decision of theCouncil in approving such plans.

While those affected by theexercise of the powers of adminis-trative authorities should beafforded a hearing before thepower is exercised, such a legiti-mate expectation did not arise inthe present case. This was becausethe Council’s decision to approvethe building plans did not affectthe community as a whole. It wasalso a decision which was notcalculated to cause prejudice to anindividual or group of individu-als.

It followed that neighbours donot even have an expectation thatthey may be heard in relation tothe erection of a building exceptwhere the Scheme expresslyaffords a right to make objectionsor where the erection of thebuilding will be in breach of theAct or the Scheme.

The application was dismissed.

Property

40

WILKEN N.O. v REICHENBERG

A JUDGMENT BY GOLDSTEIN JWITWATERSRAND LOCALDIVISION16 SEPTEMBER 1997

1999 (1) SA 852 (W)

A debtor does not avoidcommitting an act of insolvencyin terms of section 8(b) of theInsolvency Act (no 24 of 1936) bymerely indicating that he hascertain property in a certain place.In order to do so, he must indicatewhat property he has and where itis located so that the sheriff canattach and sell the property insatisfaction of the judgment he isseeking to enforce.

THE FACTSA warrant of execution was

issued against Reichenberg,directing the Sheriff of the Su-preme Court, Cape Town, toattach his movable goods and sellthem by public auction. Thewarrant was executed againstReichenberg, and the sheriffreported that no assets wereshown to him and he was unableto find any assets to satisfy thesum claimed and that he thereforegave a nulla bona return of service.He added that Reichenberg toldhim that he had movable assets atan address in Sandton.

Sequestration proceedings werethen brought against Reichenbergand a provisional order wasobtained. On the return day,Reichenberg opposed the confir-mation of the order on thegrounds that he had not commit-ted an act of insolvency as pro-vided for in section 8(b) of theInsolvency Act (no 24 of 1936).The section provides that a debtorcommits an act of insolvency if acourt has given judgment againsthim and he fails to satisfy it orindicate to the officer executingthe judgment disposable propertysufficient to satisfy it, or if itappears from that officer’s returnof service that he has not foundsufficient disposable property tosatisfy the judgment.

The court determined the issueof whether or not this section hadbeen complied with and an act ofinsolvency committed.

THE DECISIONOne could not say that the

additional movable assets referredto as being in Sandton should beconsidered worthless, in view ofthe fact that no assets of anyworth had been found at the placewhere the warrant of executionwas enforced. The return ofservice indicated that Reichenberghad no money or assets apartfrom the movables in Sandton.The question was whether theindication of the existence of theseassets entailed that Reichenberghad not committed an act ofinsolvency within the meaning ofsection 8(b).

One of the ways to avoid com-mitting an act of insolvencywithin the meaning of this sectionis for the debtor to ensure that hehas indicated sufficient propertyto satisfy the judgment givenagainst him. If the debtor merelyindicates that certain propertyexists without indicating theparticular nature of the goods andtheir locality so that the sheriff canattach and sell them, then thedebtor has not avoided commit-ting an act of insolvency. As far asthe sheriff’s duties are concerned,the section does not provide thatthe officer executing the judgmentmust inquire from the debtorwhat property he has and where itis situated. It provides merely thatthe officer must request the debtorto indicate sufficient property tosatisfy the judgment.

In the present case, this had beendone and Reichenberg had notresponded with an indication ofwhich of his goods could beattached and where they weresituated. He had therefore com-mitted an act of insolvency.

Insolvency

41

GREUB v THE MASTER

A JUDGMENT BY FRIEDMAN JP(BRAND J concurring)CAPE OF GOOD HOPE PROVIN-CIAL DIVISION1 OCTOBER 1998

1999 (1) SA 746 (C)

A court is entitled to review and ifnecessary set aside a decision ofthe Master not to recommend therehabilitation of a sequestratedperson. In doing so, the court willdeny the application where theapplicant has not been frank andhas failed to explain fully thereasons for his sequestration andthe circumstances surrounding it.

THE FACTSGreub was sequestrated follow-

ing an application brought for hissequestration by his mother-in-law whose claim against himamounted to R20 000. The onlycreditor which proved a claim inhis insolvent estate was the NatalBuilding Society. It was a securedcreditor but the property sold inrealisation of its security fetched aprice below that required tosatisfy its claim. The petitioningcreditor had to make a contribu-tion to the costs of sequestration.

Greub did not assent to hissequestration but did not apply toset it aside because of financialconstraints. He did however, havemoney overseas and offered topay R65 000 to concurrent credi-tors were he to be rehabilitated.He estimated this to be the extentof his total liability to such credi-tors, while his wife (to whom hehad been married in communityof property at the time of hissequestration) estimated the totalto be R81 059. Greub disputed theclaims of some of these creditors.

Fifteen months after his seques-tration, Greub applied for hisrehabilitation. His trustees op-posed the application. Amongstthe grounds for their oppositionwas that in the administration ofhis insolvent estate, Greub hadbeen obstructive, no dividend hadbeen paid to creditors and arelatively short time had elapsedsince the time of his sequestration.The Master of the High Court alsoopposed the application on thegrounds that no statement ofaffairs had been lodged, and thatduring the administration of hisinsolvent estate Greub had beenhighly obstructive. The Masterrefused to recommend Greub’srehabilitation as was requiredwhen such an application wasbrought within four years ofsequestration.

Simultaneously with the applica-tion for his rehabilitation, Greubapplied for an order reviewingand setting aside the Master’sdecision not to recommend hisrehabilitation.

THE DECISIONThe Master’s decision not to

recommend the rehabilitationapplication was a decision whichwas subject to review in terms ofsection 151 of the Insolvency Act(no 24 of 1936). That sectionentitles a court to review thedecision of the Master, considerthe matter de novo and substitutethe Master’s decision for that of itsown.

In the present case, it was clearthat Greub’s application forrehabilitation was based on theallegation that at the time of hissequestration he had not beeninsolvent, and could have appliedfor the setting aside of the seques-tration order but had not beenable to do so for financial reasons.

Greub’s reasons for his rehabili-tation were however, incomplete.He had not stated which creditor’sclaims he disputed and the rea-sons therefor. He had not dealtwith the discrepancy between thetotal of creditors he admitted andthose cited by his ex-wife. Further-more, he had not explained whyhe could not use his overseasassets and the income generatedfrom overseas in order to pay hiscreditors. He had not explainedthe causes of his insolvency, norwhat his objections were to theclaims of the petitioning creditorand of the Natal Building Society.

From this it was clear that Greubhad not been frank in applying forhis rehabilitation. Frankness wasrequired in such an application.The application therefore had tobe refused.

Insolvency

42

MULLER v DE WET

A JUDGMENT BY LEWIS AJWITWATERSRAND LOCALDIVISION15 JANUARY 1999

1999 CLR 119 (W)

An insolvent person has the rightto bring an action in matterspertaining to the administrationof the estate where it is allegedthat there have been irregularitieswith regard to its administration.

THE FACTSA final order sequestrating

Muller was given against him inAugust 1997. Meetings of credi-tors were convened, and at thesecond meeting the creditorsresolved to sell two fixed proper-ties in the estate and instruct thetrustees to proceed to do this.

The properties were sold bypublic auction in July 1998. Mullerthen brought an application torestrain his trustees, De Wet andother respondents, from confirm-ing the sales pending the outcomeof actions to be instituted by himagainst various creditors. Mullerbased the application on theallegation that the sales had beenaffected by a number of irregulari-ties. The respondents opposed theapplication by denying the irregu-larities and by denying thatMuller had the right (locus standi)to bring the application.

THE DECISIONAn insolvent person has a

reversionary interest in his estateand is therefore entitled to litigatein matters concerned with theadministration of the estate wherethe trustee has refused to take thenecessary steps, or where healleges maladministration of theestate by the trustee or where heobjects to an improper sale ofassets by the trustee.

There is no authority for theproposition that an insolventperson may bring such actioneven where there has been noirregularity. There must in fact besome factor which would permitthe insolvent to institute proceed-ings with regard to the adminis-tration of his estate. In the presentcase, the only factor upon whichMuller could rely in this regardwas the alleged invalidity of theauction. This was a basis uponwhich he could bring the presentapplication and did afford him theright to do so.

The alleged irregularities werehowever, not substantiated. Theapplication was dismissed.

Insolvency

43

TALACCHI v MASTER OF THE SUPREME COURT

A JUDGMENT BY HOWIE JA(VIVIER JA, NIENABER JA,PLEWMAN JA andMELUNSKY AJA concurring)SUPREME COURT OF APPEAL20 NOVEMBER 1999

1999 (1) SA 959 (A)

It cannot be inferred from thetakeover of a business of an entitywhich continues to trade in itsexisting name that the parties tothe takeover have agreed to confera benefit on trade creditors of thebusiness entitling them to claimas against the party taking overthe business payment of debts tobe incurred by the business. Whilea creditor may claim against theparty taking over as undisclosedprincipal, if it has made anelection to claim against thebusiness, it cannot change thatdecision at a later stage and claimagainst the party which took overthe business.

THE FACTSLite Magic (Pty) Ltd took over

the assets of Litesell Distributors(Pty) Ltd and undertook to pay itsliabilities. Thereafter, goods wereordered in the name of Liteselland were paid for by Lite Magic.

Lite Magic was finally liquidatedon 3 December 1991. At that date,certain goods ordered in the nameof Litesell had not been paid for.The supplier ceded its claims forpayment to Talacchi who cededthem onward to P Hegter, thesecond appellant. Hegter claimedpayment from Litesell, andobtained judgment against it. Thejudgment was unsatisfied.

Talacchi also obtained a judg-ment against Litesell for paymentof legal fees, and that judgmentwas also unsatisfied.

Talacchi and Hegter then lodgedclaims against the liquidatedestate of Lite Magic. The claimswere admitted at a creditors’meeting but later expunged by theMaster of the Supreme Court. Theappellants sought an order re-viewing and setting aside thedecision to reject their claims.

THE DECISIONThere was no basis upon which

the claim for legal fees could bemade against the liquidated estateof a company against which thelegal fees were not payable. Thisclaim could not be allowed.

As far as the claim for paymentof the goods supplied was con-

cerned, the basis suggested wasthat when Lite Magic took overthe business of Litesell, thisconstituted in part an agreementintended to benefit third parties,ie a stipualtio alteri, and that thethird parties benefited in this casewere the creditors of Litesell.

This contention could not besupported. There was no indica-tion that Lite Magic intended totake over the future trade liabili-ties of Litesell such as the obliga-tions to pay for the goods sup-plied following orders made inthe name of Litesell. The liabilitiesassumed by Lite Magic were allthe existing liabilities of Litesell.

The second basis for the claimwas that the claim for payment forthe goods supplied could be madeagainst Lite Magic as undisclosedprincipal, Litesell having acted asits agent in those circumstances.

This contention too could not besupported. Talacchi had learnt ofthe existence of Lite Magic and itsrelationship with Litesell beforehe had brought Hegter’s claim.The first claim had been broughtagainst Litesell in the knowledgeof Lite Magic’s relationship withLitesell. This meant that anelection had been made to sueLitesell rather than Lite Magic.Hegter was bound by that deci-sion and could not change it bybringing his claim now againstLite Magic.

The order sought by the appel-lants was refused.

Insolvency

44

PREMIER WESTERN CAPE v PARKER &MOHAMMED

A JUDGMENT BY DAVIS AJCAPE OF GOOD HOPE PROVIN-CIAL DIVISION8 DECEMBER 1998

[1999] All SA 176 (C)

Theft of money may give rise to aliquidated claim which wouldsupport an application forsequestration of the thief or anaccomplice of the thief. A claimfor restitution following thecancellation of a contract maylikewise support such anapplication, provided that theclaim is liquidated.

THE FACTSThe Premier of the Western Cape

appointed Parker & Mohammedas conveyancers who would alsoadminister a scheme on subsidiesfor individuals purchasinghouses. Pursuant thereto, R13 302625 was paid to Parker & Moham-med.

The Premier alleged that of thismoney, R617 250 was paid outwithout authorisation and incontravention of an instructionincorporated in an implementa-tion manual. He also alleged thatfurther money was paid to BDSDevelopers for work purportedlydone but not done.

The Premier alleged that themoney had been misappropriatedand that they therefore had aliquidated claim against Parker &Mohamed in the sum of at leastR3 486 914. He alleged that thefirm was unable to pay this sumand that it was to the advantage ofcreditors that the firm be seques-trated. An application was thenbrought for its sequestration.

Parker & Mohamed contestedthe allegation that the Premier hada liquidated claim against them.

THE DECISIONA liquidated claim means a

claim to money, the amount ofwhich is fixed and determinedeither by agreement, judgment orotherwise. Such a claim couldarise from the theft of moneywhere the evidence reveals thatthe theft has given rise to a fixedand determined claim.

In the present case, the evidenceshowed that a third party, BDCDevelopers received money towhich it was not entitled, but notthat Parker & Mohamed acted inconcert with BDS to achieve this.The firm might have placed toomuch trust in members of BDS,but this did not make it a party totheft. The evidence did not pointinevitably to a theft having takenplace.

While the evidence did supportthe allegation that the Premierwas entitled to restitution of whathe had paid under a contract,which he was entitled to cancel,this contractual remedy mighthave been available to the Premierbut it had also not been shownthat rescission was yet a course ofaction open to him, nor that itgave rise to a liquidated claim.Furthermore, this was a step hecould take without recourse tosequestration proceedings.

The application was refused.

Insolvency

45

COMMERCIAL UNION INSURANCE COMPANYOF SA LTD v LOTTER

A JUDGMENT BY FARLAM AJA(VIVIER JA, SCOTT JA, ZULMANJA and STREICHER JA concur-ring)26 NOVEMBER 1998SUPREME COURT OF APPEAL

UNREPORTED

An insured is under a duty todisclose to an insurer that theitem insured is alleged to havebeen stolen, because the fact thatthe item might have been stolencompromises the insurer’s right ofsubrogation.

THE FACTSIn March 1994, Lotter leased a

motor vehicle from the StandardBank which it bought fromSutherlands Executive, a motordealer. In terms of the leaseagreement, the risk of loss of thevehicle passed from the StandardBank to Lotter.

After leasing the vehicle andtaking it into his possession,Lotter was informed that thevehicle had been stolen fromLombards North Central PLC inEngland. Police officials from theSouth African Police Servicesattempted to seize the vehicle butthe warrant empowering them todo so was quashed. Police officialsfrom the British police servicesexamined the vehicle, identified itas stolen and advised Lotter not tosell the vehicle, contact the ownerof it and inform his insurer thatthe vehicle had been identified asstolen.

In May 1995, Lotter changed theinsurers of the vehicle to Commer-cial Union Insurance Company ofSA Ltd. Before his broker signedthe insurance proposal form onhis behalf, Lotter did not informCommercial Union that thevehicle was possibly stolen, northat it was subject to recovery bythe true owner and he had no titleto the vehicle.

Three months later, the vehiclewas stolen. Lotter claimed indem-nification for the loss againstCommercial Union. CommercialUnion repudiated liability on thegrounds that Lotter had noinsurable interest in the vehicleand that he had failed to disclosethe fact that the vehicle had beenpreviously stolen, which materi-ally affected the insurer’s assess-ment of the risk it had assumedunder the policy.

THE DECISIONWhether or not there has been a

material non-disclosure is deter-mined by whether or not a reason-able man would consider theinformation not disclosed shouldhave been disclosed so as toenable the insurer to form its ownview as to its effect.

In the present case, Lotter’sfailure to disclose the ealier theftof the vehicle compromisedCommercial Union’s rights ofsubrogation, subrogation beingthe substitution of one person foranother so that the person substi-tuted succeeds to the rights of theperson whose place he takes.Commercial Union would nothave been able to assume therights of subrogation if it could bemet with the answer that itsinsured, Lotter, had no title to thevehicle.

It was no answer to say that therisk of loss of the vehicle hadpassed to Lotter in terms of thelease agreement entered into withthe Standard Bank. Since the riskof loss lay initially with the trueowner of the vehicle, it could nothave passed to a third party suchas Lotter from the bank which hadnot owned the vehicle. It couldnot therefore be said that Com-mercial Union could have as-sumed any of the rights it wouldhave had to have had in order toexercise the right of subrogation.

The fact that the vehicle hadbeen stolen was a factor which areasonable man would considershould have been disclosed toCommercial Union. It had there-fore been entitled to repudiatedthe policy. The action for paymentunder the policy was dismissed.

Insurance

46

ADEL BUILDERS (PTY) LTD v THOMPSON

A JUDGMENT BY MPATI JSOUTH EASTERN CAPE LOCALDIVISION15 APRIL 1998

1999 (1) SA 680 (SECLD)

Damages for breach of contractshould be assessed by reference toany provisions in the contractwhich relate to the quantificationof damages including the extent towhich consequential damagesmay be claimed. They must beassessed taking into account theclaimant’s duty to mitigate hisdamages which itself may takeinto account the claimant’sfinancial ability to havemitigated his damages at therelevant time. The claimant mayclaim interest on damages fromthe date referred to in section 2 ofthe Prescribed Rate of Interest Act(no 55 of 1975) even where thedamages were agreed to havearisen before the coming intooperation of that section.

THE FACTSAdel Builders (Pty) Ltd and

Thompson entered into a contractin terms of which Adel undertookto build a house for Thompson. Interms of clause 16.3 of the con-tract, Adel was only to be respon-sible for defects arising as a resultof faulty workmanship and/ormaterials as provided for in clause16.1, and was under no circum-stances to be responsible forconsequential loss or damage.Clause 16.1 provided that Adelwas obliged to make good anymaterial latent faults or defectsand any roof leakages or damageto the building works causedthereby.

Adel brought an action againstThompson for payment of thebalance of the amount payable interms of the contract andThompson counterclaimed forpayment of a much larger sum asdamages for failing to completethe work in a proper and work-manlike manner.

After the commencement of thetrial of the matter, Adel consentedto judgment in respect of thecounterclaim. Subsequently,Thompson increased the amountof the counterclaim claimingspecial damages resulting fromhaving to make alternative ar-rangements for occupation andstorage of goods in differentpremises from those whichThompson was supposed to havebuilt. The counterclaim was alsoincreased as a result of an escala-tion of estimated costs of remedy-ing the uncompleted work, theescalation having taken placeduring a period when Thompsonwas unable to complete the workhimself due to financial con-straints but could have realisedassets in order to put him in fundsto complete the work.

Thompson also contended thathe was entitled to claim intereston the counterclaim in terms of

section 2A of the Prescribed Rateof Interest Act (no 55 of 1975)which was amended in 1997 so asto allow a claim for interest on anunliquidated debt from the date ofsummons for payment of such adebt or date of demand. Theparties agreed that the damagessustained by Thompsonamounted to R330 000 as atFebruary 1992.

Adel denied that it was liable forspecial damages as this had beenexcluded by clause 16.3. It alsodenied that it was liable for thepayment of the escalation in costs.

THE DECISIONThe exclusion of liability for

consequential damages as pro-vided for in clause 16.3 applied toboth the defects referred to in thatclause and the defects referred toin clause 16.1. There was noreason to apply the exclusion tothe factors referred to in the oneclause and not the other. Since theparties intended to excludeliability for consequential dam-ages in both circumstances therewas no room for allowing a claimfor special damages as contendedfor by Thompson.

As far as the escalation in costswas concerned, it was possible totake into account the financiallimitations of a party, who hassuffered a breach of contract bythe other party, where this mightaffect his ability to mitigate hisdamages. However, in this case,Thompson could have sold assetsin order to enable him to remedythe defects brought about by Adeland he was therefore not entitledto the escalation in costs caused bythe delay in remedying the de-fects.

As far as the claim for interestwas concerned, it would not beapplying the amended PrescribedRate of Interest Act retrospec-tively to allow this claim from thedate on which the amount of

Contract

47

damages were agreed, ie February1992. The obligation to pay thedebt arose when the partiesagreed on the amount of the debt,

and it was the purpose of the Actto allow interest on such a debt toassist a plaintiff who has to wait along period of time to establish hisclaim.

Thompson was entitled tojudgment for payment of R330 000with interest from February 1992to date of payment.

NAMPESCA (SA) PRODUCTS (PTY) LTD v ZADERER

JUDGMENT BY VAN REENEN JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION27 MAY 1998

1999 (1) SA 886 (C)

A restraint of trade agreementwill not be enforced where theterms of the restraint are moreextensive than necessary toprotect the interests of thecovenantor but may be enforcedwhere these terms are capable ofconvenient qualification so thatthey are confined to the protectionof such interests.

THE FACTSNampesca (SA) Products (Pty)

Ltd employed Zaderer as itsmanaging director. Previously,Zaderer had managed and oper-ated the business conducted bythe company, building it up sothat it achieved a turnover ofR45m per year and a customerbase. In terms of the employmentagreement, Zaderer undertook notto carry on or become engaged inany business undertaken byNampesca during the subsistenceof the agreement and for a yearafter termination thereof (the firstrestraint). He also undertook notto use for his own benefit, duringor after the restraint period, anyinformation obtained by him as aresult of his employment whichcould be regarded as a tradesecret (the second restraint).

This restraint was to operate inEurope, North and SouthAmerica, and Africa south of theequator (South Africa beingspecifically mentioned) and inother specified countries in Asia.

After Zaderer’s resignation,Nampesca conducted investiga-tions which led it to believe thatZaderer had contravened theterms of the restraint. Following adisciplinary enquiry, it summarilydismissed him. It then brought anapplication to enforce the re-straint. Zaderer admitted having

engaged in competitive activitiesagainst Nampesca and havingencouraged business fromNampesca’s customers, butcontended that the restraint wenttoo far as regards territorialextent. Nampesca’s application forenforcement of the restraintlimited the territories of applica-tion to less than those providedfor in the agreement.

THE DECISIONThe first restraint was too widely

stated in regard to its territorialextent for it to be enforceable.Nampesca’s legitimate interestsdid not need protection to theextent provided for. In order totailor the provisions of the re-straint so as to protectNampesca’s interests only to theextent necessary, the order itsought limited the territorialapplication of the restraint.However, in doing so, the courtwas being asked to rewrite thecontract to an extent that theresult would be inconsistent withthe parties’ original intentions.

The first restraint could not beenforced.

As far as the second restraintwas concerned, given the admit-ted fact that Zaderer had built upthe company prior to his employ-ment by it, Nampesca did have aprotectable interest. Zaderer could

Contract

48

not contend that because this wasan advantage he had given to thecompany it was not an advantagein which Nampesca enjoyed anyproprietary rights. The period ofthis restraint was longer than that

necessary to protect the compa-ny’s interests, but it was possibleto reduce this neatly and conven-iently by deleting the reference to‘or after’ in the restraint periodprovided for in the agreement.

So qualified, the second restraintcould be enforced.

An order was granted enforcingthe second restraint imposed onZaderer in terms of the agree-ment.

Contract

VAN DEN BERG & KIE REKENKUNDIGE BEAMPTES vBOOMPROPS 1028 BK

A JUDGMENT BY VANHEERDEN AJTRANSVAAL PROVINCIALDIVISION6 MARCH 1998

1999 (1) SA 780 (T)

Since most business transactionsare attended by financial pressureon one or both parties, theallegation that one party enteredinto the transaction as a result ofduress by the other party will notbe sustained where the allegedduress is no more than this kind offinancial pressure.

THE FACTSBoomprops 1028 BK held a

mandate to sell a farm owned byLodwichs Lust Ondernemings(Edms) Bpk. It found a buyer forthe farm who was prepared to paya purchase price of R19 800 000.As the buyer required certainfinancial information relating tothe seller prior to concluding thesale, the representative ofBoomprops was referred toLodwichs’ accountant for thepurpose of obtaining the informa-tion. The accountant representedVan den Berg & KieRekenkundige Beamptes.

The accountant agreed to supplythe information but required thatin return, Boomprops was to pay aportion of the commission it wasto earn from the sale. This wasR200 000 of the commission of R1900 000. Boomprops needed theinformation for the purposes ofconcluding the sale and could notobtain it from anyone other thanthe accountant. It therefore agreedto the apportionment of its com-mission as required by the ac-countant.

After conclusion of the sale,Boomprops received payment ofits commission but refused to payVan den Berg & Kie R200 000. Vanden Berg & Kie sued for paymentand Boomprops defended theaction on the grounds that theagreement had been entered intounder duress and was thereforevoid.

THE DECISIONThe idea that duress as a reason

for avoiding a contract could beapplied in circumstances whereduress was directed at the assetsof the aggrieved contracting partywas accepted in South Africanlaw. However, ‘economic duress’in the sense that financial pressureis brought to bear on the contract-ing party, while a ground foravoiding a contract in English lawwas not such a ground in SouthAfrican law. Even so, the circum-stances of this case would not fallwithin the definition of economicduress as understood in Englishlaw.

In the present case, although itcould be accepted that there was a

49

degree of financial pressure onBoomprops to agree to the pay-ment of the sum of R200 000 toVan den Berg & Kie, the incentivewas the large commission which itwas to receive. At the point whenit was known that only the fur-nishing of the information re-quired by the purchaser would

conclude the sale and hencesecure the commission, it wasdecided that payment of the R200000 was acceptable in order toachieve this object. The financialpressure with which this transac-tion was associated was the kindof pressure with which mostbusiness transactions were associ-

ated and there was nothingunusual or contra bonos mores inthe application of this pressure inthis case.

A binding contract had beenconcluded between the partiesand Van den Berg & Kie wasentitled to enforce it. The actionsucceeded.

Contract

CONSOLIDATED EMPLOYERS MEDICALAID SOCIETY v LEVETON

A JUDGMENT BY SCHUTZ JA(VIVIER JA, HOWIE JA,ZULMAN JA and FARLAM AJAconcurring)SUPREME COURT OF APPEAL27 NOVEMBER 1998

UNREPORTED

Interpretation of the terms of amedical aid scheme

THE FACTSIn terms of his employment

agreement with Southern LifeAssociation Ltd, Leveton was toremain a member of the medicalaid schemes of which AffiliatedMedical Administrators (Pty) Ltd(Ama) was a member. In terms ofclause 12 of the agreement, it wasagreed that on termination of theappointment, Leveton wouldremain a member of the medicalaid and provident fund and betreated in this regard as if he hadretired. Leveton became a memberof Consolidated EmployersMedical Aid Society (Cemas), andAma, which was controlled bySouthern, paid the employer’scontributions to Consolidated.Rule 6.3 of the scheme providedfor the retention of membership ofthe scheme in the event of amember retiring from the serviceof his employer.

In terms of a settlement agree-ment entered into betweenLeveton and Southern on 12August 1991 ending Leveton’semployment, it was provided thatLeveton would be entitled to

remain a member of the providentfund and medical aid scheme andwould pay contributions applica-ble to a retired member aftertermination of his employment on30 June 1992. Southern wouldhonour all its obligations in termsof the employment agreement upto the date of termination. There-after, Ama paid Leveton’s contri-butions as it had in the past.

In March 1994, Ama informedLeveton that it had decided totransfer its continuation membersto the Southern Health medicalaid. Leveton disputed its right todo so. He appealed to Cemas’sdisputes committee. That commit-tee disagreed with the Cemasmanagement committee’s decisionto transfer all continuation mem-bers to Southern Health medicalaid and recommended rescissionof the earlier decision. The Cemasmanagement committee refusedto do so. It contended thatLeveton had left the service of hisemployer in 1992 and so becamesubject to the provisions of Rule10.2 of the Cemas medical schemerules. That rule provided that a

50

member who left the service of theemployer for any reason wouldcease to be a member and allrights of participation in thebenefits under the Rules wouldthereupon cease.

Leveton then brought an applica-tion for an order that the decisionof the disputes committee wasbinding on Cemas and that he bereadmitted to membership. Healso claimed that the decision totransfer his membership bereversed as the transfer was abreach of the settlement agree-ment.

THE DECISIONEven if Leveton had left the

service of his employer, therebybecoming subject to the provisionsof Rule 10.2, he remained amember of the medical aidscheme. A ‘member’ was defined

in the Medical Schemes Act (no 72of 1967) as a person who has beenenrolled or admitted as and is stilla member of a scheme. Levetonhad shown that he fell within thisdefinition because he had shownhis original certificate of member-ship and the continuation of hismembership in terms of thesettlement agreement.

Since he was a member of thescheme at the time of the pur-ported transfer of membership tothe Southern Health medical aid,he was entitled to challenge thattransfer on the basis of his rightsas they already existed and wereprovided for in the Cemas medi-cal aid scheme. This included hisright to remain a member and notbe transferred to another scheme.

Leveton was also entitled toreinstatement of his membershipof the Cemas medical aid scheme

on the grounds that the finding ofthe disputes committee wasbinding on the managementcommittee. The managementcommittee had acted in a high-handed manner in ignoring orbrushing aside the decision of thedisputes committee. That decisionwas taken by a body which, interms of section 20(1)(g) of theAct, was a tribunal independentof management and enabled toperform a function akin to that ofan arbitration. It was a decisionthat the management committeewas not entitled to ignore and onewhich it would have to apply forreview of, should it wish tocontest its decisions.

The decision of the disputescommittee was binding on Cemasand Leveton was readmitted tomembership.

Contract

Even supposing that the appellants’ argument on interpretation is good,does it allow them to ward off the main relief sought by Leveton? I thinknot. The principal argument advanced by Mr Goodman on behalf of theappellants was that Leveton’s seeming membership between 1 July 1992and 31 March 1994 was a nullity. In other words, he was not a memberalthough he was, if I may be permitted to put it that way.

51

BASIL READ SUN HOMES (PTY) LTD v NEDPERMBANK LTD

A JUDGMENT BY Van HeerdenDCJ (VIVIER JA, HARMS JA,SCOTT JA AND FARLAM AJAconcurring)SUPREME COURT OF APPEAL20 NOVEMBER 1998

1991 (1) SA 831 (A)

A bank which accepts a stolencheque for collection and givesconsideration for it is liable to thetrue owner for the amount of thetrue owner's loss.

THE FACTSThe United Building Society

drew 12 cheques in favour of BasilRead Sun Homes (Pty) Ltd,crossed them and marked them‘not negotiable’. The cheques weretaken from the United and paidinto a Nedperm Bank suspenseaccount and used by the deposi-tors for their own purposes. Thedepositors stated that they consid-ered themselves entitled to themoney and that in depositing themoney they were not doinganything wrong. In fact, theyknew that they were not entitledto the cheques, and took themwith the intention to steal.

United Bank paid the cheques inthe belief that Sun Homes orNedperm was entitled to thecheques. The cheques were paidby the drawee bank under circum-stances which did not render thatbank liable in terms of section81(1) the Bills of Exchange Act (no34 of 1964). Nedperm Bank Ltdbecame a possessor of the chequesafter the theft, and gave consid-eration for the cheques.

Basil Read Sun Homes (Pty) Ltdtook cession of United BuildingSociety’s right of claim againstNedperm, and brought an actionagainst Nedperm for payment ofthe total amount of the cheques.Nedperm defended the action onthe grounds that United was nolonger the owner of the cheques.

THE DECISIONSection 81(1) provides that if a

cheque is stolen or lost whilecrossed and marked ‘not negoti-able’ and paid by the banker onwhich it is drawn in circumstanceswhich do not render the bankerliable in terms of the Act, the trueowner shall be entitled to recoverfrom any person who was apossessor of the cheque after thetheft or loss and gave considera-tion for it or took it as donee, anamount equal to the true owner’sloss or the amount of the cheque.

There was no evidence as to theprecise circumstances in which thecheques were taken from United.However, it could be inferred thatthey were stolen. Ownership inthe cheques nevertheless re-mained vested in United since itintended to pass ownership inthem to Basil Read and not thoseto whom the cheques were actu-ally given. Section 81(1) wastherefore directly applicable to thesituation which had arisen andNedperm, which had become apossessor of the cheques and gaveconsideration for them, was liableto United in terms of that section.Basil Read had taken cession ofUnited’s right as against Nedpermand was therefore entitled topayment of the amount of thecheques.

The appeal succeeded.

Cheques

52

CROWTHER & PRETORIUS v WARDA BUTCHERY BK

A JUDGMENT BY HOWARD JP(VAN DER REYDEN J concur-ring)NATAL PROVINCIAL DIVISION30 SEPTEMBER 1998

1999 (1) SA 847 (N)

While an agent may receivepayment of its principal’s debt byaccepting a cheque drawn infavour of the agent, paymentmight be accepted in the name ofthe agent, where for example thecheque is indorsed in favour of theagent. Then when the agent paysits principal from the proceeds,the agent becomes the holder forvalue of the cheque and may sueas a holder in due course if allother requirements for being aholder in due course are satisfied.

THE FACTSWarda Butchery BK drew a

cheque for R27 000 in favour ofPienaar in payment of goods to bedelivered to it. Pienaar indorsedthe cheque and negotiated it toattorneys Crowther & Pretoriusand delivered it to that firm. Thecheque was given in payment of aclaim Crowther & Pretorius hadinstituted against Pienaar onbehalf of Bekker and for whichjudgment had been obtained.

Crowther & Pretorius depositedthe cheque to its trust account,then paid this amount to Bekker.Pienaar’s cheque was dishon-oured because it was stopped byWarda. Warda stopped thecheque because Pienaar failed todeliver the goods he was obligedto deliver to Warda.

Crowther & Pretorius brought anaction against Warda for paymentof the amount of the cheque,alleging that it was the holder indue course. Warda defended theaction on the grounds thatCrowther & Pretorius did not takethe cheque for value.

THE DECISIONThe cheque had been given in

payment of a debt. This was adischarge of Pienaar’s liability andtherefore the cheque had beentaken for value.

Crowther & Pretorius mighthave taken the cheque as agent foranother party, ie Bekker, but in sodoing the firm would have pro-cured the extinction of Pienaar’sdebt had the cheque been paid.However, the evidence showedthat Crowther & Pretorius did nottake the cheque as agent but tookit in its own name, since it hadbeen indorsed in its favour.Having so taken the cheque, thefirm gave value itself for it, payingBekker and thereby dischargingthe debt payable to him.

Having taken the cheque forvalue, Crowther & Pretoriusbecame the holder in due courseof the cheque and were entitled tosue on it. The action succeeded.

Cheques

53

EX PARTE GRIFFIN SHIPPING HOLDINGS LTD

A JUDGMENT BY LEVINSOHN JNATAL PROVINCIAL DIVISION30 JULY 1998

1999 (1) SA 754 (D)

A scheme of arrangement involvesthe company which is the subjectof the scheme by virtue of the factthat the company must recognisethe transfers in shareholdingwhich take place as a result of theadoption of the scheme. A schemewill not be considered to involvemerely an expropration of theshares of minority shareholderswhere those shareholders receiveother shares in consideration oftheir losing their shares in thescheme company. The statementissued to holders of scheme sharespreparatory to the completion of ascheme of arrangement need notstate fully the voting rightentitlements of various types ofshares in the company since theshareholder subject to the schememay inform himself of thesevarying rights by perusing theArticles of Assocation. The valueof shares in a company is notequivalent to the net asset valueof the company.

THE FACTSGriffin Shipping Holdings Ltd

applied for the sanctioning of ascheme of arrangement. Thescheme of arrangement proposedthat Grindrod Unicorn Group Ltd,the holding company of theholding company of Griffin,would acquire all the sharesowned by minority shareholdersin Griffin, thus making Grindrodthe holding company of Griffin. Inreturn for obtaining the shares inGriffin, Grindrod offered one ‘N’ordinary share in itself plus 60cents per share in Griffin. ‘N’ordinary shares entitled the holderto one vote per share compared toone hundred votes per sharegiven to other ordinary shares inGrindrod. The scheme was pro-posed by Griffin and Grindrod.

In its explanatory statementmade to minority shareholders,references to the two types ofshares were made, including thefact that ‘N’ shares traded at adiscount to ordinary shares. Thestatement did not disclose thatearlier, Grindrod had acquired24% of the shares in Griffin fromSafmarine at a price of R4,40 pershare.

At the meeting called to considerthe scheme, 96% of the minorityshareholders voted in favour ofthe arrangement. A Mr Cutten, ashareholder holding 100 000shares in Griffin opposed thescheme at the meeting. He alsoopposed the application for thesanction the scheme by the court.

THE DECISIONFirst objection: the scheme wasnot a true scheme of arrangement

The scheme was attacked on thegrounds that it amounted to amere expropriation of shares,there being no quid pro quobeyond a cash payment andGriffin itself playing no role in thescheme.

This however, was untrue. The

shares were not expropriatedsince the shareholders receivedsomething in exchange for theirshares. Furthermore, they re-ceived more than cash. Theyreceived shares in the holdingcompany. Griffin did play a rolein the scheme: it had to recognisethe changed status of its members’shares, transfer the shares, collectthe scheme consideration fromGrincor and consider any rights todividends by the minority share-holders as waived.Second objection: the scheme didnot comply with section 312 of theCompanies Act (no 61 of 1973)

Section 312 requires that noticessummoning the meeting to con-sider a scheme must include astatement explaining the effect ofthe scheme and stating all infor-mation material to the value of theshares and debentures concernedin any arrangement. Cuttencontended that this section wasnot complied with because minor-ity shareholders were not in-formed of the implication of theallocation of ‘N’ shares inGrindrod.

The statement that was sent outdid refer to ‘N’ shares . Anyreader would be able to discernthe difference between theseshares and the ordinary shares.Furthermore, the reader wouldhave seen that the Articles ofAssociation of the both companieswere available for inspection inwhich the distinction betweenthese two types of shares wasapparent. The fact that these twotypes of shares traded at differentprices, the ‘N’ shares trading at adiscount to ordinary shares,would also have alerted theminority shareholder to thedifference between the two typesof share.

The fact that the statement didnot disclose the acquisition of theshares from Safmarine or the priceat which they were acquired, was

Companies

54

not relevant. The market price ofthe Griffin shares was relevantand this was set out in the state-ment.Third objection: the scheme wasinherently unreasonable

This objection rested on thecontention that the value of thescheme consideration was less

than the net asset value of Griffin,and that ‘N’ shares were beingissued instead of ordinary sharesso that the existing majority couldretain control.

The value of the shares was notdetermined by the net asset valueof the company. The fact that theprice offered for the shares was

less than the net asset value wastherefore no reason to consider thescheme unreasonable. A minorityshareholder accepting the schememight have compared the lowervalue attached to the shares to theprospect of increased dividends.

The scheme could not be consid-ered unreasonable.

Companies

55

ABSA BANK LTD v AMOD

A JUDGMENT BYSCHWARTZMAN JWITWATERSRAND LOCALDIVISION23 FEBRUARY 1999

1999 CLR 260 (W)

The Prevention of Illegal Evictionfrom and Unlawful Occupation ofLand Act (no 19 of 1998) does notapply to the unlawful occupationof property, on which a structurehas been built, by a person whoseoccupation was originally lawfulin terms of some contract enteredinto between the person and theowner of the land.

THE FACTSAbsa Bank Ltd owned fixed

property in a residential suburbon which was constructed a housethen occupied by Amod. Absabrought an application for theeviction of Amod from the prop-erty. The matter was settled byagreement between the parties,Amod undertaking the vacate theproperty by 31 March 1999. Theparties asked that the agreementbe made an order of court.

Prior to settlement of the matter,Amod had argued that in terms ofthe Prevention of Illegal Evictionfrom and Unlawful Occupation ofLand Act (no 19 of 1998) the courtwas not entitled to make an orderthat Amod vacate the property.The court raised the questionwhether, in view of the provisionsof this Act, it could make theagreement an order of court.

Section 4 of the Act provides thata court may grant an evictionorder if an unlawful occupier ofland has occupied the land for lessthan six months, and the court isof the opinion that it is just andequitable to do so after consider-ing all the relevant circumstances.If the unlawful occupation ex-ceeds six months, the same con-siderations apply, and the courtmust also consider whether landhas been made available for therelocation of the unlawful occu-pier.

Property

THE DECISIONLike its predecessor, the Illegal

Squatting Act (no 52 of 1951), thepurpose of the Act was to controlthe unlawful occupation of land.Though the present Act deals withthe same subject matter in acompletely different manner fromthe manner in which the previousAct dealt with this subject matter,both Acts directed their purposeat the unlawful occupation ofland, as opposed to the unlawfuloccupation of property lawfullybuilt on the land. Reading the Actas a whole, ‘land’ as used in itmeans vacant land.

The Act cannot be interpreted tomean that its application involvesthe complete denial of the forceand significance of the law oflandlord and tenant. If this wereso, it would apply in the case of allleases entered into betweenlandlord and tenant irrespectiveof the location of the propertyleased and irrespective of theneeds and financial ability of thetenants. Having regard to theAct’s definition of an ‘unlawfuloccupier’ and ‘building or struc-ture’, the person to whom the Actreferred was a person who movedonto the vacant land of an ownerwithout the permission of theowner and constructed or occu-pied a building or structurethereon. The Act therefore did notapply to a person who had takenlawful occupation of property interms of a contract and whosecommon law right to occupationhad come to an end.

The agreement was made anorder of court.

56

BODY CORPORATE OF THE LAGUNA RIDGESCHEME NO 152/1987 v DORSE

A JUDGMENT BY McCALL JDURBAN AND COAST LOCALDIVISION23 OCTOBER 1998

1999 (2) SA 512 (D)

A decision of trustees of the bodycorporate of a sectional titlescheme is reviewable under thecommon law, and may be setaside where it is shown that inmaking the decision, the trusteesfailed to take into account factorsrelevant to the decision which itsgeneral policy pertaining theretodictated should be taken intoaccount.

THE FACTSDorse was the owner and occu-

pier of sectional title unit no 121 inthe apartment block Laguna Ridge.In terms of the rules of the sec-tional title scheme, no animals orpets could be kept in the buildingunless that was permitted inwriting by the trustees. The houserules of the scheme providedsimilarly. The restriction onkeeping animals was designed toavoid the causing of nuisance toother occupants of properties ofthe sectional title scheme.

Dorse kept a dog in her apart-ment without the permission ofthe trustees. In August 1997, themanaging agents of the sectionaltitle scheme sent her a letterrequesting her to make alternativearrangements for the accommoda-tion of the dog. Dorse requestedpermission to keep her dog at herapartment. This request wasconsidered by the trustees of thescheme, but was rejected. Dorsefailed to remove her dog and thebody corporate then brought anapplication to compel compliancewith the rules.

Dorse brought a counter-applica-tion for permission to keep thedog on the premises subject to theconditions that the dog remain ather unit, that it be carried whenremoved from the unit, that it notconstitute a nuisance to otherresidents of the scheme and that itnot be replaced when it died.

The body corporate had a policythat permission for the keeping ofa pet would not be granted unlessspecial circumstances existedwarranting a departure from thegeneral policy. When the decisionwas taken to refuse permission toallow the dog on Dorse’s

premises, the trustees took intoaccount the general policy, andalso the fact that allowing thepresence of the dog might estab-lish a precedent which wouldaffect future decisions.

THE DECISIONWithout the counter-application,

the body corporate would haveestablished its right to have thedog removed without furthermotivation than a reference to therule prohibiting the keeping ofdogs. However, the counter-application obliged the bodycorporate to give reasons for itsdecision in Dorse’s particular case.The question then was whetherthat decision had been properlytaken and was not reviewableunder the common law.

In analysing the reasons for thetrustees’ decision, because of thepolicy of the body corporateregarding the keeping of pets, itwas necessary to determine onwhat grounds they found that nospecial circumstances existed inrelation to the keeping of the dogat Dorse’s premises. In its found-ing affidavits, the body corporatehad not dealt with this expressly,but it was clear that in taking intoaccount only its general policyand the danger of establishing aprecedent, the trustees had nottaken into account other factorswhich were relevant to the deci-sion and which had been raisedby Dorse in applying for permis-sion to keep her dog. Because ofthis, the trustees’ decision wasreviewable under the commonlaw.

The decision of the trustees wasset aside.

Property

57

HOFFMAN v HOFFMAN

A JUDGMENT BY VAN ZYL J(BLIGNAULT J concurring)CAPE OF GOOD HOPE PROVIN-CIAL DIVISION8 JANUARY 1999

[1999] 2 All SA 80 (C)

Although an agreement for thesale of fixed property is requiredto be in writing, in terms ofsection 2(1) of the Alienation ofLand Act (no 68 of 1981), wheresuch an agreement has beenentered into orally and thereafterperformed fully by both parties toit, one of the parties cannot setaside the agreement on the basisof unjust enrichment.

THE FACTSMr A Hoffman sold to his

brother, Mr I Hoffman, erf 4099,Langebaan, in terms of an oralagreement entered into in October1995. The purchase price of R70000 was payable only upon Mr IHoffman’s death.

At the time of conclusion of thisagreement, A Hoffman was notthe owner of the property but inDecember 1995, a close corpora-tion of which he was one of themembers, purchased propertywhich included erf 4099, theintention being to subdivide theproperty and transfer erf 4099 to IHoffman thereafter. This arrange-ment was later changed so that erf4099 was to be transferred directto I Hoffman and payment of thepurchase price of R22 500 was tobe made to the owners of theproperty. This was done in termsof a written agreement enteredinto between A Hoffman and theowners of the property, thepurchase price being payable by AHoffman and not I Hoffman.

I Hoffman paid the purchaseprice for the property earlier thanprovided for in terms of theoriginal agreement and theproperty was transferred to him.He later brought an action againstA Hoffman for repayment of theR70 000 paid to his brother, basingthe claim on the allegation thatsince the agreement for the sale ofthe property had been an oralagreement and not in writing, asrequired by section 2(1) of theAlienation of Land Act (no 68 of1981), it was an invalid agreementand A Hoffman had consequentlybeen unjustifiably enriched by thepayment of the purchase price ofR70 000.

The action succeeded in themagistrates’ court. A Hoffmanappealed.

THE DECISIONIt was clear that the oral agree-

ment did not comply with the

requirements of section 2(1) of theAct. However, section 28(2) of theAct was also applicable. Thissection provides that any aliena-tion of land which does notcomply with the requirements ofsection 2(1) is in all respectsenforceable if the person to whomthe alienation was made has fullyperformed in terms of the agree-ment of sale and the relevant landhas been transferred to thatperson.

This section was introduced inrecognition of the principleestablished in Wilken v Kohler 1913AD 135 which holds that althougha contract which conflicts withstatutory formalities is void andunenforceable, it does not followthat the consequences of thecontract which are implementedby agreement of the parties mayalso be declared void and unen-forceable. Where both partieshave performed in terms of such acontract, there is no basis forfinding that one or other of themhas been unjustifiably enriched.

The present case fell squarelywithin this principle, and had thusto be dealt with by reference tosection 28(2). Applying thissection, the transfer of the prop-erty and the payment of the R70000 were therefore, properlyunderstood, based on contract andhad nothing to do with unjustifiedenrichment. Had I Hoffman notreceived transfer of the property,he might have had a good claimfor repayment of the R70 000.However, this was not the case. AHoffman had obtained rights tothe property which securedtransfer of it to I Hoffman. Thefact that the method originallydevised to do so, ie through theclose corporation, was not ad-hered to, was irrelevant: section28(2) imposed no requirements asto the precise method of perform-ance of the relevant obligations ofthe contract.

The appeal succeeded.

Property

58

DENEL (PTY) LTD v CAPE EXPLOSIVE WORKS LTD

A JUDGMENT BYHARTZENBERG JTRANSVAAL PROVINCIALDIVISION25 NOVEMBER1998

1999 (2) SA 419 (T)

The obligations recorded in anagreement which is void forvagueness is not registrable as acondition of title in a deed oftransfer. Where a conditionprovided for in a sale agreement isregistrable in terms of section63(1) of the Deeds Registries Act(no 47 of 1937) the parties maynot intend that it be registered (byfor example, not providing for itsregistration) and if so, it is notnecessary that the condition beretained as a condition of title inany subsequent deed of transfer.Conversely, if the parties providefor the registration of a non-registrable condition, it may alsobe omitted from any subsequentdeed of transfer.

THE FACTSIn the early 1970s, Armscor

acquired land from Cape Explo-sive Works Ltd (Capex). The saleagreement stipulated two restric-tions on use of the land: (i) thatthe land could only be used forthe manufacture of armaments bythe government for any defence ormilitary purpose, and not incompetition with AE&CI Ltd, and(ii) Capex was entitled to repur-chase the land exclusive of theimprovements thereto, if Armscorno longer required the land for themanufacture of armaments for thegovernment. If Capex wished topurchase any of the improve-ments which Armscor might wishto sell, it could give notice toArmscor that it wished to do sowhereupon the parties would berequired to reach agreement uponthe terms of sale. Armscor agreedto the registration of this conditionin the deed of transfer by which itwas to assume ownership of theland. Both restrictions were in factrecorded in the Deed of Transferby which it became owner of theland.

The land was later consolidatedwith other land which was muchlarger in extent and not subject tothe restrictions applicable to theland acquired from Capex. Therepurchase restriction was how-ever, omitted altogether. Theomission and the failure to imposethe restrictions in respect of thewhole of the consolidated landwas a result of a mistake made bythe conveyancer who attended tothe consolidation of the property.

After a subdivision of the prop-erty, the remainder was trans-ferred to Denel (Pty) Ltd subject tothe first restriction originallyimposed, but again not the sec-ond. Denel consolidated theproperty with other property andthe land use restriction wasrepeated in the certificate ofregistered title. One of the por-

tions of the consolidated propertywas originally part of the land inrespect of which the restrictionswere imposed; only part of theother portion was originally partof that land.

Denel applied for an order thatits property was not bound by anyof the restrictions originallyimposed. Capex counter-appliedfor an order rectifying Denel’s titledeed by the reintroduction of theoriginal conditions.

THE DECISIONThe fact that the repurchase

condition stated that the sellerwas entitled to repurchase theproperty exclusive of improve-ments which might have beenmade by the purchaser was anindication that between theseparties, there was an ongoingbusiness relationship. This,together with the fact that succes-sors in title were not expresslybound to the condition, showedthat the rights and obligationswere created between the directparties to the agreement.

The repurchase agreement itselfwas vague insofar as it left unde-termined essential terms of thesale of the improvements. Thesewere to be agreed between theparties and were therefore inde-terminable until such time as suchan agreement was made. Therepurchase agreement in respectof the improvements to theproperty was therefore void.

This aspect of the repurchaseagreement was indivisible fromthe whole of the repurchaseagreement. Being indivisible fromit, the fact that it was void ren-dered the whole agreement void.Being so, there was no basis uponwhich it could be incorporated asa condition in the title deed.

Even if it were not considered avoid agreement, it and the otherrestrictive condition, would not beregistrable in terms of section

Property

59

63(1) of the Deeds Registries Act(no 47 of 1937). This sectionprovides that no condition in adeed purporting to create orembodying any personal right andno condition not restricting theexercise of any right of ownershipin respect of immoveable prop-erty, shall be capable of registra-tion unless such condition iscomplementary or otherwiseancillary to a registrable conditionor right contained in such deed.

Applying this section, one couldcompare the right in question withthe correlative obligation in order

to ascertain whether the obligationwas a burden upon the land itselfor something performed by theowner personally. The purpose ofthe first condition was to protectAE&CI from competition byArmscor. As such it constituted acurtailment of a right and fellwithin the provisions of section63(1). It was clear however, fromthe fact that the parties to the firstsale (Capex and Armscor) did notprovide for the right to registra-tion of this condition, that it wasto constitute a non-registrablecondition applicable between the

two parties and not to successor intitle. Since their intention was thatit should not be registered, therewas no need to impose it as aregistrable condition in anysubsequent title.

While there was provision forthe registration of the secondcondition, this was clearly notregistrable in terms of section63(1). It could also not be said tobe so by virtue of its associationwith the first condition.

Denel’s application was grantedand Capex’s counter-applicationdismissed.

Property

If a two-stage test is applied it is in my view easier toascertain whether a right is a real right or not. The firstleg of the exercise is to determine if the right is capableof being a real right. Having found it capable of being areal right it must, secondly, be investigated whether thecreator thereof intended it to be a real right.

60

GOVERNMENT OF THE REPUBLIC OF SOUTHAFRICA v VAN HULSTEYNS ATTORNEYS

A JUDGMENT BY LE ROUX JTRANSVAAL PROVINCIALDIVISION3 DECEMBER 1998

[1999] 2 All SA 29 (T)

A person is deemed to have been apossessor of a cheque when thecheque is paid into his account,whether or not the person actuallypossessed the cheque eitherpersonally or through an agent.Accordingly, such a person will beliable to the true owner of thecheque in terms of section 81 ofthe Bills of Exchange Act (no 34 of1964) when the cheque has beenstolen.

THE FACTSAn attorney of the firm Van

Hulsteyns received a telephonecall from a person, named RoyLaasen, who requested the attor-ney to act for him in promotinghis business interests in SouthAfrica. Part of the attorney’sduties would include receivingand paying out money onLaasen’s instructions. The attor-ney agreed to do so and requestedwritten instructions for thispurpose.

A week later, written instruc-tions were given together with arequest that the attorney furnishhis firm’s trust account numberfor the purpose of depositingfunds described as ‘commissions’due to Laasen from the Govern-ment of the Republic of SouthAfrica. The account number wasgiven, a cheque for R483 477,48deposited into the account andVan Hulsteyns then paid this sum,less its fee, to a beneficiary nomi-nated by Laasen.

The cheque paid into the VanHulsteyns account was crossedand marked ‘not negotiable’. Itwas made payable to OTKKoöperasie Bpk and was stolenafter having been made out by thegovernment and before its depositin the Van Hulsteyns bank ac-count. When the cheque wasdeposited into the account, it wasnot deposited in the normal way,through tellers delegated toreceived deposits made into bankaccounts, but inserted in thebank’s system of cheque collectionat some point thereafter.

The government brought anaction against Van Hulsteynsbased on section 81 of the Bills ofExchange Act (no 34 of 1964) andagainst the collecting bank basedon allegations of negligence in itscollection of the cheque. Section 81provides that if a crossed ‘notnegotiable’ cheque is stolen andpaid by the drawee bank whichdo not render the bank liable tothe true owner, the true ownershall be entitled to recover anyloss suffered as a result of the

theft from any person who was apossessor thereof after the theftand gave consideration therefor ortook it as a donee. In terms of sub-section 2 of this section, a personis deemed to have been a posses-sor if he has paid any such chequeinto his account with a banker.

Van Hulsteyns defended theaction on the grounds that it hadnot become the possessor of thecheque and did not give consid-eration for it.

THE DECISIONIn deciding whether or not Van

Hulsteyns had been a possessor ofthe cheque, it was irrelevantwhether it was to be held one byvirtue of Laasen having been itsagent in holding and depositingthe cheque into its account orwhether he was properly consid-ered a principal acting on his ownbehalf at that point. Sub-section 2of section 81 renders the customerof a bank the possessor wheneverthe cheque reaches the bank as thecustomer’s mandatory and iscollected for the customer. On thebasis of this provision VanHulsteyns was the possessor ofthe cheque.

Van Hulsteyns argued that thecheque had not been paid into itsaccount because it had not beenproperly deposited but had beeninserted into the bank’s collectionsystem at a point beyond thetellers and supervisors of thebank. It is not however, themethod of deposit which is thedeciding factor when determiningthat a payment has been made. Itis the fact that a cheque has beenpaid. In the present case, thecheque had been paid into theVan Hulsteyns account. It hadbeen a possessor of the chequeand gave consideration for it.

Van Hulsteyns was thereforeliable to the government in termsof section 81 of the Act. Thecollecting bank, whether negligentor not, was not liable to thegovernment since no damageshad been proved against it.

Cheques

61

SHROSBREE N.O. v SIMON

A JUDGMENT BY LIEBENBERG JSOUTH EASTERN CAPE LOCALDIVISION17 JUNE 1998

1999 (2) SA 498 (SECLD)

An agreement which prescribesthe method of cancellation of itrequires that the party wishing tocancel the agreement does soaccording to that method before itmay enforce its remedies flowingfrom such cancellation. Unlikecases where the prescribed noticeof cancellation is dispensed with,such as cases where there has beena clear repudiation, where themethod of cancellation isprescribed in the agreement, thismust be followed in order to effecta proper cancellation of theagreement.

THE FACTSIn his capacity as trustee in the

insolvent estate of O. Ahmed,Shrosbree N.O. sold certainimmoveable property in the estateto Simon for R145 000. Clause10(f)(2) of the agreement of saleprovided that in the event ofbreach of the agreement,Shrosbree had the right to cancelthe agreement by giving notice ofsuch cancellation.

Simon failed to pay a depositwhich she was obliged to do interms of the agreement, andShrosbree addressed a letter to herindicating her default as well asher failure to pay certain occupa-tional interest. It notified her thatshould the default not be rem-edied within seven days, stepswould be taken to have herevicted and the property sold bypublic auction.

A few weeks later, Shrosbree’sattorneys addressed a letter toSimon indicating her default onvarious grounds and demandingthat they be remedied within 14days failing which Shrosbreewould have the right to choose itsremedies in terms of the agree-ment, and cancel the sale. Simonalleged that she had not receivedthis letter.

Shrosbree then applied for theejection of Simon from the prop-erty and an order directing her togive vacant possession of it tohim. The grounds relied upon forthe application were that Simonhad not received a response to theletter sent by the attorneys buthad instead insisted on the right toremain in occupation of theproperty.

THE DECISIONIn order to obtain the relief he

sought, Shrosbree had to showthat the agreement had beenproperly cancelled. This had notbeen shown.

The agreement had not beencancelled by the service on Simonof the notice of motion in thepresent application. While serviceof a plaintiff or applicant’s legalaction on a defendant or respond-ent might itself constitute thecancellation of a contract, thiscannot occur where the method ofcancellation is prescribed in thecontract itself. In the present case,the method of cancellation wasprescribed in the contract andcould not be substituted by theservice of the application forejectment.

As far as the letter sent to Simonby the attorneys was concerned,this did not constitute cancellationbecause it did not state that failingcompliance with its demands, theagreement would be cancelled.Instead, it stated that failingcompliance, the seller would havethe right to cancel. Withoutcancellation actually having takenplace, Simon’s rights of possessionof the property therefore contin-ued unaffected and Shrosbree wasnot entitled to attack them.

Unlike cases where the partyalleged to be in breach of anagreement which entitles the otherparty the right to cancel upon theoccurrence of the breach withoutgiving the prescribed notice, in thepresent case the method of cancel-lation prescribed by the contracthad not been followed. There wasalso not a clear repudiation of theagreement in the present case, andon the basis of this distinction, thesame pre-emptive remedy couldnot be applied.

The application was refused.

Contract

62

KIA INTERTRADE JOHANNESBURG (PTY) LTD vINFINITE MOTORS (PTY) LTD

A JUDGMENT BY WUNSH JWITWATERSRAND LOCALDIVISION16 SEPTEMBER 1998

[1999] 2 All SA 268 (W)

The authority of a company’sdirector to act for the companymay be established by ratificationof actions taken prior to theauthority having been given,including action taken in anapplication for the winding up ofanother company.

THE FACTSKia Intertrade Johannesburg

(Pty) Ltd and Infinite Motors (Pty)Ltd entered into an agreement interms of which Infinite was to sellvehicles supplied to it by Kia onconsignment. The agreement wassigned for Kia by a certain HDYoon.

The agreement was later can-celled following allegations ofdefault on the part of Infinite, andKia brought an urgent applicationfor the liquidation of Infinite onthe grounds that it was just andequitable that it should be woundup. The application was sup-ported by the founding affidavitof Jin Soo Do who was alleged tobe a director and marketingmanager of Kia.

Infinite challenged the authorityof Do to sign the affidavit for Kia.In response, Kia furnished a CM29company form showing theregister of directors. It showedthat Do was a director of Kia as atthe date of bringing the applica-tion. A resolution of the board ofdirectors of Kia adopted andratified the bringing of proceed-

ings for the winding up of Infiniteand nominated Do to sign all suchdocuments as were necessary togive effect thereto.

THE DECISIONIf a person signs a founding

affidavit without having properauthority to do so, the defect canbe remedied by ratifying whatwas done and proving suchratification. Alternatively, if theperson did have authority, betterproof thereof can be put before thecourt.

It was clear in the present case,that the directors of Kia author-ised or ratified the application towind up Infinite. The decision toembark on litigation was nodifferent from any other decisionwhich Kia might have taken andcould be ratified in the samemanner as any other decision.This had been done effectively bythe resolution concluded by theboard of directors of Kia whichestablished the authority of Do tosign the founding affidavit in theapplication.

Infinite’s challenge to Do’sauthority was rejected.

Corporations

63

STAFFORD v LIONS RIVER SAW MILLS (PTY) LTD

A JUDGMENT BY MCLAREN J(KONDILE J concurring)NATAL PROVINCIAL DIVISION17 NOVEMBER 1998

[1999] 1 All SA 275 (N)

A person who is unaware thatthere has been a failure to complywith section 23(2)(b) of the CloseCorporations Act (no 69 of 1984)is not personally liable under thatsection.

THE FACTSOn 17 October 1995, Stafford

telephoned a Mr Charlton of theLions River Saw Mills (Pty) Ltdand ordered timber for a purchaseprice of R51 890,31. This wasfollowed by a signed order formreflecting the orderer’s name as‘Natal Agricultural Co’. The orderform was signed on behalf ofKwazulu Industrial & Agricul-tural Services CC, the entity forwhich the order was earlier madetelephonically, by a person whohad been authorised to sign byStafford.

The timber was delivered but thepurchase price was not paid.Lions brought an action againstStafford for payment, claimingthat he was liable to it in terms ofsection 23(2)(b) of the CloseCorporations Act (no 69 of 1984).This provides that a person whoauthorises or issues an order forgoods on behalf of a close corpo-ration without the name of thecorporation on the order shall beliable to the holder thereof for theamount of the order.

Stafford contended that before itcould be said that he had author-ised the signature on the orderform, it had to be shown that heknew that the order did notcomply with section 23(2)(b).

In an alternative claim, Lionscontended that Stafford was liableto it on the grounds that he hadacted for an undisclosed principal.

THE DECISIONThe section had to be interpreted

strictly and literally. Its purpose isto ensure that persons dealingwith a close corporation are awareof the fact that they are dealingwith a close corporation.

To be personally liable under thesection, a person need not haveknown of the unlawfulness ofhaving failed to properly complywith the section. However, tohave authorised a signature on anorder for goods, the person soauthorising must be aware ofwhat was being authorised. SinceStafford did authorise the makingof the order, he must have knownwhat was being authorised.However, there was no evidencethat he knew that the particularorder failed to comply with therequirements of section 23(2)(b).Lions was therefore not entitled topayment on this ground.

Lions was however entitled topayment on the grounds thatStafford had acted as an agent foran undisclosed principal. Lionsdid not know that it was contract-ing with the close corporation, thisbeing a result of Stafford’s failureto disclose that he was acting forthe close corporation.

The action succeeded.

Corporations

64

CUYLER v SHIERSCUYLER v C&S MARKETING CC

A JUDGMENT BYSHAKENOVSKY JWITWATERSRAND LOCALDIVISION17 SEPTEMBER 1998

1999 CLR 175 (W)

A member of a close corporationhas the right to sue anothermember of the close corporationwhere the basis of the action is abreach of the fiduciary duties ofmembers to the close corporationas provided for in section 42 of theClose Corporations Act (no 69 of1984).

THE FACTSCuyler and Shiers each owned a

50% member’s interest in C&SMarketing CC. Cuyler alleged thatShiers and others were engagingin unlawful competition with himand the close corporation andbrought an application to preventcontinuation of this. He alsosought an order in terms ofsection 36(1) of the Close Corpora-tions Act (no 69 of 1984) that hepurchase Shiers’ interest in theclose corporation. In a separateapplication, Shiers claimed anorder for the seizure of documen-tation which would be evidentialmaterial relevant to the unlawfulcompetition application.

When he brought these applica-tions, Shiers alleged that he alsoacted for C&S Marketing but hehad obtained no formal resolutionauthorising him to bring theapplications. Shiers and the otherrespondents contended thatCuyler did not have the right tobring the applications.

The question of whether or notCuyler did have such a right wasdecided as a preliminary issue.

THE DECISIONSection 50 of the Act provides

that where a member is liable to aclose corporation on account ofbreach of duty arising from afiduciary relationship to thecorporation in terms of section 42,any other member of the corpora-tion may institute proceedingsagainst the corporation againstsuch member.

The provisions of section 42 wereapplicable in the present case:they provided for the liability of amember to a corporation forbreach of duty arising from themember’s fiduciary relationship.It was this liability which Cuylerdepended upon in his applicationsand which gave him the right tobring them.

The preliminary issue wasdecided in favour of Cuyler.

Corporations

65

HILDEBRAND v KLEIN RHEBOKSKLOOF (PTY) LTD

A JUDGMENT BY LEWIS AJWITWATERSRAND LOCALDIVISION11 SEPTEMBER 1998

1999 CLR 196 (W)

A court has a discretion to order achange of a company’s namewhere confusion may arisebetween that company andanother entity even if the latter isnot a company. It is unlikely thatsuch an order will be made wherethe company whose name it iscontended should be changed doesnot trade in a similar trade tothat of the entity requiring thechange.

THE FACTSHildebrand acquired the farm

‘Rhebokskloof’ and ran a guest-house on the farm under the name‘Klein Rhebokskloof’. Her neigh-bour, a certain Du Toit, owned asubdivided portion of the farmthrough a company known asInvestment Facility CompanyFour Four Three (Pty) Ltd.

Some time later, Du Toitchanged the name of the companyto Klein Rhebokskloof (Pty) Ltd.When Hildebrand applied for theregistration of a company with thesame name, she discovered thatDu Toit had changed the name ofhis company to reflect the name ofher farm and business. Therespondent did not trade butmerely held the property whichwas a subdivision of Hildebrand’sfarm. Hildebrand requested DuToit to change the name of thiscompany. Du Toit agreed to do so,subject to Hildebrand’s compli-ance with certain conditions.Hildebrand refused to accept theconditions and applied for anorder compelling the respondentto change its name on the groundsthat the name was undesirableand could be objected to in termsof section 45 of the Companies Act(no 61 of 1973).

THE DECISIONThe underlying objection to the

use of similar names for differententities of any nature is theconfusion which may arise be-tween them. This is an objectionwhich ranges beyond the groundsfor objection laid down in theDirective on Names of Companieswhich has been issued by theRegistrar of Companies.

The only possible basis uponwhich it could be said that thissort of confusion might arise wasthat the two parties were tradingin similar businesses and a similarname for both might give rise tosuch confusion. However, it wasclear that the respondent was nottrading at all, so that no confusioncould arise. Furthermore, thename under which the respondentwas registered at the time theapplication was brought was notin itself undesirable. Accordingly,there were no grounds uponwhich the respondent could becompelled to change its name.

The application was dismissed.

Corporations

66

NOVATECH ADHESIVES LTD v DOHERTY

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION18 DECEMBER 1998

1999 CLR 135 (C)

A company alleging a breach offiduciary and contractual dutiesmust seek redress for such abreach without delay and provethe existence of the breach in orderto achieve its remedy.

THE FACTSDoherty and his brother (the

second respondent) were directorsof Novatech Adhesives Ltd.Novatech manufactured and soldadhesives, including one popu-larly known in South Africa as‘superglue’. The manufacture ofthe adhesive required the use of asubstance known as ethyl-cyanoacetate (ECYA) the price ofwhich began to rise. As a result ofthis, as a means to retain profit-ability, Doherty and his brother onbehalf of a company controlled bythem, Truloc Ltd, entered intoagreements with Novatech underwhich Truloc agreed to purchaseall superglue requirements fromNovatech and Novatech wouldhave the exclusive right to use theECYA process.

Variations of this agreementwere entered into involvingchanges of the ownership ofshareholding in Novatech, butaffirming the purchase agreementof the superglue and Novatech’sexclusive licence with regard tothoe ECYA process.

In March 1997, Doherty in-formed one Hynes, a director ofNovatech, that he was setting upan ECYA plant in South Africawith a view to supplying thepharmaceutical market. Novatechdid not object, but in November1997 it ascertained that Truloc wasselling superglue in competitionwith Novatech.

In June 1998, Novatech broughtlegal proceedings against Trulocand the Dohertys in the HighCourt of Dublin, where thoseparties resided. In September1998, it brought similar proceed-ings against them in South Africa,alleging breach of contractual andfiduciary duties and that Trulochad engaged in unlawful competi-tion with it.

The Dohertys denied each of theallegations and also challengedthe application on the grounds

that it was not urgent and thecourt did not have jurisdiction tohear the matter, the parties allbeing resident in Ireland.

THE DECISIONWhereas all of the parties except

the company controlled by theDohertys manufacturingsuperglue in South Africa wereIrish, the court could assumejurisdiction in the matter. Thecourt had jurisdiction in thematter since the act to be pre-vented was one alleged to be donewithin the area of the court’sjurisdiction.

As far as the question of urgencywas concerned, there was noevidence that there was anyprejudice to Novatech in theactivities of Truloc or its directorsor associate company. The factthat breaches of contractual orfiduciary obligations were allegedto be taking place was insufficientto establish that the matter wasurgent. Novatech should havebeen aware, long before it broughtits application against theDohertys, that it might sufferprejudice by their activities andshould therefore have broughtproceedings against them at thattime. When the Dohertys beganmanufacturing superglue inOctober 1997, Novatech did nottake any steps to stop this fromhappening, nor did it make anyclaim relating to any proprietaryor other interest in the ECYAprocess. It was only when thepresent application was brought,that it became clear that Novatechwas opposed to the Dohertysengaging in these activities.

It followed that the applicationwas not sufficiently urgent towarrant it having been brought onan urgent basis.

As far as the merits of the appli-cation were concerned, the allega-tion against Truloc was that it hadbreached the agreement entered

Corporations

67

into between the parties obligingit to purchase superglue. How-ever, it was clear from the transac-tions entered into by the partiesthat Truloc had not been obligedto continue purchasing supergluefrom Novatech from a certainpoint, and that therefore it couldnot be said to have breached anycontract with Novatech in thatregard.

Novatech also alleged that theDohertys were in breach of theirfiduciary duties toward it. It wastrue that the Dohertys, as directorsof Novatech, owed such duties tothat company. However, at acertain point, they resigned asdirectors of that company andwere therefore under no suchduties toward it.

Novatech’s final allegation wasthat the Dohertys were competingunlawfully with it. However,while they were using the tech-nique of ECYA, there was nothingconfidential about this technique,nor did Novatech have anyexclusive right to use it.

The application was dismissed.

Corporations

There is, in my view, another reason why this court should assume jurisdiction ina matter of this nature. The reduction of the world to a proverbial ‘global village’makes it necessary to adopt a more flexible approach in matters of jurisdictionthan has been the case in the past. Wide ranging and ever increasing interna-tional commerce require commensurate international co-operation in rendering iteffective. Our courts are not excluded from this form of co-operation. On thecontrary, greater reliance than previously may be placed on the courts of differentcountries to assist in the process of doing justice between parties of divergentnationalities and allegiances.

68

REGISTRAR OF BANKS v NEW REPUBLIC BANK LTD

A JUDGMENT BY HURT JNATAL PROVINCIAL DIVISION8 MARCH 1999

1999 CLR 157 (N)

The Registrar of Banks required toobtain the leave of the court tobring application for winding upof bank

THE FACTSAs a result of a report that New

Republic Bank Ltd was unable tocomply with statutory liquidityrequirements, some of the bank’sdepositors withdrew their fundsfrom the bank. This had a severelyadverse effect on the liquidity ofthe bank. Following a request ofthe Chief Executive Officer of theBank to the Registrar of Banks, theMinister of Finance appointed acurator to the bank. This was donein terms of section 69(1)(a) of theBanks Act (no 94 of 1990).

This sub-section provides that ifany bank is, in the opinion of theRegistrar, in financial difficulties,the Minister may appoint acurator to the bank and thencertain provisions of the Compa-nies Act (no 61 of 1973) relating tojudicial management of compa-nies shall apply in relation to thebank and the curator. For thepurposes of the section, thepowers conferred and the dutiesimposed by those provisions uponthe court, the Master and thejudicial manager respectively,would devolve upon the Minister,the Registrar and the curatorrespectively.

Shortly after the appointment ofthe curator, the Registrar, sup-ported by the curator, applied forthe winding-up of the bank. Thebasis of the application was thatthe bank was insolvent, had lostits entire share capital, and wasunable to comply with the re-quirements of sections 72 and 74of the Banks Act and posed a riskto the general public in thatdepositors might suffer irrepara-ble loss.

The bank opposed the applica-tion. The opposing parties dif-fered on the proper valuation ofthe bank’s assets, the Registrarand the curator attaching a lowervalue to them than the bank. Theparties agreed however, that butfor the curatorship, the bank was

commercially insolvent as itwould be unable to meet its debtsas they fell due. Both parties alsoagreed that in determiningwhether the bank should bewound up, the interests of thedepositors should be protected inthe most effective manner possi-ble.

THE DECISIONWhatever the proper valuation

of the bank’s assets, in its applica-tion to wind up the bank theRegistrar had to take into accountthe effect of section 69(6). Thissub-section provides that while abank is under curatorship, alllegal proceedings against the bankwere to be stayed and were not tobe instituted or proceeded withwithout the leave of the court.

The restriction provided for bythis sub-section included withinits ambit proceedings for thewinding-up or judicial manage-ment of a bank as contemplated insection 68(1) of the Act. Thelegislation preceding the BanksAct provided that the Ministerwould not have the power to staylegal proceedings against a bankunder curatorship. However, thiswas later amended so as to conferthis power and reached theformulation as given in thepresent section 69(6). Once theprovisions of section 69(1) hadbeen applied and a curator ap-pointed thereunder, the provi-sions for the staying of legalproceedings under section 69(6)had to be applied. Section 69(1)provided for the appointment of acurator merely upon it beingshown that a bank was ‘in finan-cial difficulties’. The intention wasnot to provide a temporary shield,as in the case of judicial manage-ment, but to provide for theprotection of depositors for aslong as this was necessary. Giventhese statutory requirements, theRegistrar could not bring the

Banking

69

application for the winding-up ofthe bank without first obtainingthe leave of the court.

A further indication that theRegistrar was not entitled to anorder winding up the bank wasthe fact that unlike the provisionsof the Companies Act relating to

judicial management, the func-tions of the court, the judicialmanager and the Master weresubstituted with the Minister, thecurator and the Registrar. Cura-torship was thus considered to bea matter for administrative andnot judicial control, not a tempo-rary protection mechanism and a

procedure under which enjoyedthe staying provisions of section69(6) could be effective.

Since the Registrar had notapplied for the leave of the courtprior to bringing the winding upapplication, the application was tobe dismissed.

Banking

ABSA BANK BPK v CL VON ABO FARMS BK

A JUDGMENT BY LOMBARD JORANGE FREE STATE PROVIN-CIAL DIVISION1 SEPTEMBER 1998

1999 CLR 294 (O)

Transfer of all assets andliabilities from one bank toanother

THE FACTSAbsa Bank Bpk brought an

action against CL Von Abo FarmsBK for payment of R8,9m. In itsparticulars of claim it alleged thatBankorp Bpk had taken transfer ofall the assets and liabilities ofTrust Bank, and that during 1992,Absa had taken transfer of all theassets and liabilities of Bankorp, interms of section 54 of the DepositTaking Institutions Act (no 94 of1990).

Von Abo denied this allegation,and the dispute between theparties over this question wasthen brought to court for separateadjudication.

In evidence presented by Absa, itappeared that in January 1992, theMinister of Finance approved thetransfer of the assets and liabilitiesof Bankorp Bpk to Absa. In March1992, Absa and Bankorp BeherendBpk entered into an agreement interms of which Bankorp wouldbecome a wholly owned subsidi-ary of the holding company(Bankorp Beherend Bpk) andBankorp Beherend would becomea wholly owned subsidiary of

Absa. The agreement included aprovision that subject to thefulfilment of certain conditions,Bankorp would transfer to Absaall its assets and liabilities.

The conditions were that theshareholders confirm the transferof Bankorp’s assets and liabilitiesto Absa, the passing of a specialresolution by Bankorp authorisingthe cancellation of its registrationas a deposit-taking institution andthe registration of the specialresolution by the Registrar ofCompanies.

The agreement also providedthat Bankorp would hold a gen-eral meeting of shareholders topass a special resolution approv-ing the transfer. A meeting washeld and the transfer was ap-proved, as well as the cancellationof the the registration of Bankorpas a deposit-taking institution. TheRegistrar of Companies did notregister the resolutions as herequired a letter of approval fromthe Registrar of Banks for theresolutions. This requirement wasnot complied with as Absa was ofthe opinion that a special resolu-

70

tion had not been necessary forthe purposes of section 54, andthat all that was necessary was theapproval of the shareholders asprovided for in the agreement. Anordinary resolution confirmingthe transfer was then taken byBankorp shareholders, and asimilar one by Absa shareholderswas then passed. The agreementwas amended to provide for thepassing of ordinary resolutionsinstead.

Von Abo contended that thefailure to implement fully theprovisions of the agreement madethe agreement ineffective.

THE DECISIONAlthough, strictly speaking,

clauses 6.2 and 6.3 of the agree-

ment had not been complied with,these conditions had either beensubstantially complied with to thesatisfaction of the parties or theyhad waived compliance of theseconditions.

The agreement had to be inter-preted so as to uphold its effec-tiveness. None of the parties to itwished it to be ineffective. Theywere in fact closely related to eachother and none of them had anydoubt about its purpose. Theagreement had in fact been carriedout, Bankorp’s assets and liabili-ties having been transferred andBankorp’s registration as a bank-ing institution having been can-celled. In the circumstances, therewas no reason to cast a strong andliteral interpretation on theagreement.

Von Abo was claiming, as a thirdparty, a greater right to cancella-tion or to declare the agreementnull and void, than that possessedby the parties to the agreement. Athird party cannot have a greaterright to the cancellation of anagreement than that possessed bythe contracting parties themselves.

During 1992, in terms of theprovisions section 54 of theDeposit-taking Institutions Act,Bankorp transferred all its assetsand liabilities to Absa Bank. Thebank was entitled to payment ofits claim.

Banking

Wat die verweerders in wese hierin verlang, is dat die Hof aan hulle asderdes 'n sterker reg tot kansellasie of nietigverklaring van die Ooreenkomsmoet verleen as dit waaroor die partye daartoe self beskik—dit behoef geenbetoog dat geeneen van die partye op hierdie stadium en op die gronde soosdeur die verweerders tans aangevoer die Ooreenkoms suksesvol sal kan laatnietig of ongeldig verklaar nie. Daar bestaan myns in siens geen beginsel,regtens of andersins, waarkragtens derdes 'n sterkere reg tot die kansellasievan 'n ooreenkoms kan verwerf as dít waaroor die kontrakterende partye selfbeskik nie.

71

JOOSTE v DE WITT N.O.

A JUDGMENT BY VAN DENHEEVER AJTRANSVAAL PROVINCIALDIVISION30 OCTOBER 1998

1999 (2) SA 355 (T)

THE FACTSJooste’s husband owned fixed

property which was valued atR360 000. He formed a closecorporation and applied for a loanfor it for R150 000. Nedbankgranted a loan in this amount,taking as security the fixed prop-erty. Simultaneously, the closecorporation took transfer of theproperty and paid off the existingloan secured by a bond over theproperty. Jooste purchased herhusband’s 100% interest in theclose corporation for R10. Joosteand her husband were married toeach other out of community ofproperty.

Jooste’s husband’s estate wassequestrated. As a result, controlof Jooste’s assets was assumed byhis trustee, De Witt. Jooste thenapplied for the release of hermember’s interest in the closecorporation.

De Witt opposed the applicationon the grounds that Jooste did nothold any right to the member’sinterest which was effective asagainst the creditors of her hus-band.

Insolvency

THE DECISIONThe probabilities were that there

had been an intentional attemptby Jooste and her husband to putthe fixed property beyond thereach of creditors. The reason forrepaying the loan already inexistence was to cover the tracksof their transaction and create anew loan in favour of a newentity. The purpose was to preju-dice existing creditors and ensurethat the asset would be retainedby both Jooste and her husbandfollowing the sequestration of hisestate.

The member’s interest was notobtained by Jooste in order toobtain the interest as interest, butin order to obtain control over theasset of the fixed property whichwas owned by the close corpora-tion.

Jooste had had an opportunity toshow to the court that she had aright to the member’s interest asagainst the claims of creditors inthe insolvent estate, but had notdone so. The trustee had, on theother hand, shown that Jooste andher husband had executed ascheme the purpose of which wasto prejudice creditors. In thesecircumstances, it could be ac-cepted that this had been theeffect of the transaction theseparties had entered into.

The application was dismissed.

72

EX PARTE WESSELS N.O.

A JUDGMENT BY WRIGHT JORANGE FREE STATE PROVIN-CIAL DIVISION19 FEBRUARY 1999

[1999] 2 All SA 22 (O)

A trustee in an insolvent estate ofa person who enjoys the rights ofa fiduciary conferred in terms of awill may alienate those rights aspart of the duty of a trustee to sellthe assets of an insolvent estate.However, rights conferred on thefiduciary which are personal tothe fiduciary may not be assumedby the trustee and the trustee mustabide any conditions provided forin the will in relation to theexercise of such rights.

THE FACTSIn his will, CJ van der Merwe

bequeathed two farms to FJ vander Merwe. The bequest wassubject to the condition that hisheir was not to encumber thefarms with mortgage bondsduring his lifetime and was not tosell them to anyone other than thetestator’s immediate family. Thebequest was further subject to thecondition that if a son was bornout of the marriage of one of theheirs, the farms were to be be-queathed to one of the heir’s sons,preference being given to the sonwho showed an interest in farm-ing.

After the death of CJ van derMerwe, his heir, FJ van derMerwe became insolvent and hisestate was sequestrated. Thetrustee of the insolvent estateapplied for an order that the farmscould be sold free of the testamen-tary conditions provided for in thewill. The court consideredwhether or not such an ordercould be granted.

THE DECISIONThe condition contained in the

will was a conditionalfideicommissum. If the heirexercised the right to sell theproperty, the fideicommissumwould fall away, and if he did not,

it would persist. This right whichhad been conferred on FJ van derMerwe in terms of the will vestedin his trustee, although the right ofthe ultimate (conditional) holderof the right, did not.

The right conferred on FJ van derMerwe was a fiduciary right, not aright to ownership of the prop-erty. This right, subject to therestrictions relating to alienation,was assumed by the trustee. Inconsequence, no order allowingthe trustee to exercise rights freeof these restrictions could begranted.

The trustee was obliged to sell allthe assets in the sequestratedestate. This included the fiduciaryrights of FJ van der Merwe butcould not include the right of thatindividual to sell the propertyupon the conditions stipulated inthe will. That right was a personalright and had to be exercisedupon a decision made by FJ vander Merwe himself. In this respect,the conditions provided for in thewill were, since they were con-nected with a fideicommissum,different from other conditionsrestricting alienation of an asset.The trustee was not entitled toexercise such rights and theconditions stipulated in the willhad to be observed.

The order was refused.

Insolvency

73

DU PLESSIS N.O. v OOSTHUIZEN

A JUDGMENT BY OLIVIER J(CILLIÉ J and MATSEPE J concur-ring)ORANGE FREE STATE PROVIN-CIAL DIVISION20 NOVEMBER 1997

1999 (2) SA 191 (O)

A creditor of a party inliquidation will not normally beconsidered to have carried on thebusiness of that party and willtherefore not be consideredpersonally liable for the debts ofthat party in terms of section64(1) of the Close CorporationsAct (no 69 of 1984).

THE FACTSDuring 1990, Hennenman

Meulens BK was experiencingcash flow problems. Its liabilitiesexceeded its assets and it faced thepossibility of liquidation. Acertain Mr Barry devised ascheme to ensure the continuationof the close corporation’s business.The scheme, which was imple-mented, involved the formation ofa company, West Star MillingBpk, to which Hennenman wouldmake payments for the supply ofmielies. West Star itself wouldobtain the mielies from farmersand pay them and Hennenmanwould pay West Star from theproceeds of its sales of the proc-essed mielies.

West Star invested R60 000 inHenneman, and Oosthuizen andthe second respondent investedR300 000 by way of a loan to theclose corporation. Neither of therespondents held a member’sinterest in Henneman and neitherof them were directors of WestStar.

The scheme did not work butinstead, Henneman’s creditorsincreased by R1 355 837. The closecorporation was finally put intoliquidation. The liquidator allegedthat the respondents had con-ducted the business of the closecorporation recklessly and thatsection 64(1) of the Close Corpora-tions Act (no 69 of 1984) should beapplied. The section provides thatif it appears that the business of aclose corporation has been carriedon recklessly, then a court maydeclare that anyone who was aparty to the carrying on of thebusiness is personally liable for allor any of the debts of the closecorporation.

The liquidator brought anapplication for an order in thoseterms. He also brought an applica-tion in terms of section 29 of the

Insolvency Act (no 24 of 1936) thatpayments made by Henneman tothe respondents within the sixmonth period prior to its liquida-tion had the effect of preferringone creditor over another andwere to be set aside. The respond-ents were however, not repaid theloan of R300 000 which they hadmade to Henneman.

THE DECISIONMerely to make a loan to a

business in order to put it in aposition to continue its operationscannot be described as taking anystep in the carrying on of thatbusiness. The respondents hadonly made a loan to Henneman inthe present case. They had notparticipated in the running of itsbusiness, and were thereforeproperly considered mere finan-ciers of the business. The fact thatHenneman had incurred moreand more debt was in any caseattributable to the actions of themanagers of the business, iepersons other than the respond-ents.

The respondents had also beenunder no duty to bringHenneman’s operations to an endby placing it in liquidation. Acreditor is not obliged to do such athing, even if the creditor is awarethat its debtor is in a weak finan-cial position.

As far as the application in termsof section 29 was concerned, theevidence had shown that therespondents had received pay-ments just as other creditors hadin the six months leading up to theliquidation of Henneman. Theywere therefore payments whichwere made in the ordinary courseof business and the purpose hadnot been to prefer one creditorover another.

The application was dismissed.

Insolvency

74

InsolvencyMASTERBOND PARTICIPATION TRUST vMILLMAN N.O.

A JUDGMENT BY CLEAVER JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION5 MAY 1999

1999 CLR 270 (C)

An application by a defendantrequiring the furnishing ofsecurity for costs or the provisionof an indemnity brought againstthe liquidators of a company inliquidation must show that thecompany has insufficient assets topay the costs of the actionbrought against it. Where theapplication is unsuccessfulbecause this has not been shown,it will be equally unsuccessfulagainst another party bringing theaction under section 32(1)(b) ofthe Insolvency Act (no 24 of 1936).An application against theliquidators for the provision of anindemnity cannot succeed wherethe applicants have failed to showthat they are creditors of thecompany in liquidation.

THE FACTSGolf Estates (Pty) Ltd and Ma-

Africa Group Holdings (Pty) Ltd,the third and fourth respondents,brought an action againstMasterbond Participation Trustand the other applicants seekingan order setting aside dispositionsallegedly made without value byFancourt Properties (Pty) Ltd intheir favour. The liquidators ofFancourt Properties, Millman andthe second respondent, haddeclined to bring the action and ithad proceeded at the instance ofGolf Estates and Ma-Africa alone.Fancourt Properties held assetsworth some R5m but the liquida-tors were not willing to allow theuse of this to fund the action.

Masterbond applied for an orderthat the liquidators, alternativelyGolf Estates and Ma-Africa,furnish security for costs in theaction, alternatively that GolfEstates and Ma-Africa furnish anindemnity to the liquidators.

THE DECISIONHolding assets worth R5m,

Fancourt was certainly able tomeet the costs of the action. Thereason for an order requiring thefurnishing of security for costswas therefore absent. It wasirrelevant that the liquidatorswere unwilling to allow the use ofFancourt’s assets for the action, asMasterbond could always havesecured an indemnity from GolfEstates and Ma-Africa to ensurethat Fancourt’s assets were not

dissipated. There being no reasonto believe that Fancourt would notbe able to pay the costs of theaction if unsuccessful, an orderrequiring the liquidators tofurnish security for costs could notbe granted.

As far as the alternative wasconcerned, the third and fourthrespondents were clearly bringingthe action as the real plaintiffs,although the named plaintiffswere the liquidators. This how-ever, did not constitute a basisupon which they could be com-pelled to furnish security for costsof the action. In any event, sincethe liquidators themselves werenot obliged to furnish security forcosts, the third and fourth re-spondents were not so obligedeither. In such circumstances, itwas open to the liquidators tosecure from the third and fourthrespondents whatever indemnitythey considered adequate. Since itwas not in the position of theliquidators, Masterbond did nothowever, have any right to claimthe provision of such an indem-nity.

Masterbond also did not havethe right to claim that the liquida-tors secure an indemnity from thethird and fourth respondents.While they might have had such aright in terms of section 387(4) ofthe Companies Act (no 61 of 1973)they had not alleged that theywere creditors of Fancourt.

The application was dismissed.

75

STRUWIG N.O. v MARAIS

A JUDGMENT BY EDELING JORANGE FREE STATE PROVIN-CIAL DIVISION27 NOVEMBER 1997

1999 (2) SA 214 (O)

A credit receiver is entitled totransfer possession of an itemwhich he possesses under a creditagreement, notwithstanding anyprovision in the credit agreementreserving ownership of the item tothe credit grantor. Since such anagreement is valid, the person towhom the item has been given isentitled to retain possession onthe basis of the rights held by thecredit receiver.

THE FACTSBefore his death, JA Nel entered

into a credit agreement withBankfin in respect of a motorvehicle. In terms of the agreement,Bankfin was to remain the ownerof the vehicle until the last pay-ment due thereunder had beenpaid.

Before the final payment wasmade, Nel sold the vehicle toMarais. They agreed that Maraiswould pay to Nel the instalmentsdue under the credit agreementand Nel would pay these toBankfin.

Nel died, and his executor,Struwig, contended that theagreement between Nel andMarais was void and that thevehicle was an asset in the de-ceased estate. He brought anapplication for an order compel-ling the delivery of the vehicle.

Credit Transactions

THE DECISIONThe agreement entered into

between Nel and Marais was notvoid. The purpose of that agree-ment had been to hand over thevehicle to Marais and arrange forhis payment of the instalmentsdue to Bankfin. In itself, there wasnothing unacceptable about that.

Although the vehicle had beenhanded to Marais, it had not beentransferred to him. Section 8(3) ofthe Credit Agreements Act (no 75of 1980) may provide for notifica-tion to the credit grantor in theevent of the credit receiver aban-doning possession of the goods,but this did not affect the validityof the agreement. The provisionwas there to protect the creditgrantor but it did not affect theagreement.

As the executor in the deceasedestate, Struwig had no better rightto the vehicle than did Nel.Having surrendered his right ofpossession of the vehicle he, likeNel, was therefore not entitled todelivery of the vehicle.

The application was dismissed.

76

HINDRY v NEDCOR BANK LTD

A JUDGMENT BY WUNSH JWITWATERSRAND LOCALDIVISION2 DECEMBER 1998

1999 CLR 202 (W)

A taxpayer’s constitutional rightsare not violated by theapplication of section 99 of theIncome Tax Act (no 58 of 1962).

THE FACTSIn making its annual returns of

employees’ tax paid for the 1987and 1989 tax years, Hindry’semployer erroneously showedprovisional tax payments whichhad been made by Hindry as partof the employee’s tax deductedfrom his salary. The Receiver ofRevenue thought that the tax paidby Hindry exceeded the taxpayable in those years and re-funded him amounts of R43003,58 and R36 387,33 for each ofthese years.

When the Receiver of Revenuediscovered the mistake, by journalentries he adjusted Hindry’saccount and assessed Hindry’sliability toward him in the sum ofR79 462,18. Hindry objected to theassessment. The Commissioner forthe Inland Revenue Service thenissued a notice to the Isandobranch of Nedcor Bank Ltd,Hindry’s bank, that it was de-clared Hindry’s agent and obligedto pay the sum of R79 462,18 fromHindry’s account as and whenfunds became available. He did soin terms of sections 99 and 100 ofthe Income Tax Act (no 58 of 1962). These provisions enable theCommissioner to declare anyperson an agent of any otherperson and require the agent sodeclared to pay any tax due frommoney which may be held by theagent.

Hindry then applied urgently foran interdict to prevent the bankfrom making payment to theCommissioner pursuant to thisnotice and attacked the constitu-tionality of section as inconsistentwith the Constitution of theRepublic of South Africa.

THE DECISIONSection 99 empowers the Com-

missioner to require an agent topay any tax due to him. Hindry’scontention was that the Commis-sioner did not seek payment of a

tax due by him but a refund of analleged erroneous refund. How-ever, paragraph 28(7) of theFourth Schedule to the IncomeTax Act provides that if theCommissioner pays to any persona refund which was not properlypayable, the amount of the pay-ment shall forthwith be repaidand recoverable by the Commis-sioner as if it were a tax. Thiscontention could therefore not beupheld.

Hindry also contended that hehad not been afforded him theconstitutional right to fair andjustifiable administrative action,in that he had not been given ahearing before the notice in termsof section 99 was issued and theCommissioner had not givenreasons for issuing the notice. Thiscontention could also not beupheld in view of the fact that theCommissioner had entered intoconsiderable correspondence withHindry before and after issuingthe notice.

As far as the attack on theconstitutionality of section 99 wasconcerned, Hindry’s objection wasa theoretical one since he had notshown that he was not liable topay the amount claimed by theCommissioner. The reason for theobjection was that the enforce-ment procedures of section 99 didnot require prior notice to thetaxpayer, nor that the taxpayer begiven an opportunity to makerepresentations regarding theproposed action to be taken. Thequestion was whether or not thisviolated the taxpayer’s basichuman rights because of its extra-judicial and summary nature.

Section 36 of the Constitutionallows the limitation of rights tothe extent that the limitation isreasonable and justifiable in anopen and democratic societybased on human dignity, equalityand freedom. Given the fact thatthe system of revenue collection in

77

South Africa depended on self-assessment by the taxpayer andwas hampered by limited co-operation from taxpayers, andtherefore required speedy andefficient means of collection of taxwhere this had been assessed asbeing due, the principle of section

99 was a legitimate limitation of ataxpayer’s rights.

In the present case, Hindry hadin any case, had an opportunity topresent his case to the Commis-sioner before the issue of thenotice in terms of section 99. Inany event, the section did not

deny the taxpayer a later hearingon the question of liability for taxin terms of the Income Tax.

Any limitation on constitutionalrights in section 99 was reasonableand necessary in an open anddemocratic society as provided forin section 36 of the Constitution.The application was dismissed.

The evidence overwhelmingly shows that the principle of section 99 is alegitimate limitation of a taxpayer’s rights in terms of section 36 of theConstitution. The criticism of its terms is that the appointment does nothave to be in writing, that the Commissioner is not required to givenotice to the taxpayer of the appointment of his/her agent and that thetaxpayer is not afforded a prior hearing. In this case the appointmentwas in writing and it is implicit that the agent had to communicate itscontents to the taxpayer, which it did. The applicant had an adequateopportunity to put his case to the Commissioner. The alleged defects insection 99 are, in this case, academic.

78

EXTEL INDUSTRIAL (PTY) LTD v CROWN MILLS(PTY) LTDQUATREX MARKETING (PTY) LTD v CROWNMILLS (PTY) LTD

JUDGMENT BY SMALBERGER JA(NIENABER JA, SCHUTZ JA,SCOTT JA, STREICHER JA andNGOEPE AJA concurring)SUPREME COURT OF APPEAL17 SEPTEMBER 1998

1999 (2) SA 719 (A)

A contract which results from abribe having been entered into isvoidable at the instance of thecontracting party which is thevictim of the bribe where it isshown that the bribe broughtabout the formation of thecontract. A party which cancelssuch a contract does so effectivelynotwithstanding the failure totender restitution of what hasbeen received under the contract.

THE FACTSThrough companies controlled

by them, Malcolm Fallet andFrancois Macray sold sheep orhog intestines, known as ‘casings’,to Crown Mills (Pty) Ltd. Duringthe period 2 December 1988 to 28January 1992, Crown Mills paidR5 903 056,45 to the companiescontrolled by Fallet and Macray inconsideration for invoices ren-dered in respect of these goods.Among these companies wereExtel Industrial (Pty) Ltd andQuatrex Marketing (Pty) Ltd.

In the same period, Cooper, anemployee and a director of CrownMills, received from Fallet andfrom companies controlled byFallet, some R263 000. Pillay, themanaging director of CrownMills, received some R148 000.These payment were bribes paidto these individuals in order tosecure the continued custom ofCrown Mills in the supply ofcasings from the companiescontrolled by Fallet and Macray.

In respect of some of the casings,delivery notes were not signed bya representative of Crown Mills,but were signed by the factorymanager of Extel and Quatrex’scasing factory. Cooper would thenpresent to the creditors’ clerk aninvoice together with a handwrit-ten goods received voucher, andobtain a cheque in favour of oneof the companies controlled byExtel or Quatrex.

In respect of other casings,delivery did take place.

Crown Mills failed to pay forcasings falling into both catego-ries. Extel and Quatrex brought anaction for payment of the pur-chase price. Crown Mills de-fended the action on the groundsthat it was not obliged to pay adebt, if any, which arose throughbribery.

THE DECISIONUnlike the case where an agree-

ment has taken place between thebriber and the bribed, in this case,the agreement took place betweenthe briber and a party which hadno knowledge of the bribe. Thequestion was whether the legalconsequence of this was that theinnocent party, Crown Mills,could avoid the agreement.

An agreement which is inducedby a bribe is voidable at theinstance of the party which is thevictim of the bribe. Between thebriber and the bribed it is void. Onthis basis, Crown Mills wasentitled to avoid the agreementgiving rise to the supply of thecasings, provided that it couldshow that the bribery gave rise tothe agreement, ie was the cause ofit. Extel contended that CrownMills would have entered into theagreement and accepted thesupply of the casings notwith-standing the bribe.

Crown Mills would however, nothave done so. The effect of thebribe was to taint the agreementupon which the supply of casingswas made, and when the fact ofthe bribed came to the notice ofCrown Mills, it refused to makepayment. This was an indicationthat Crown Mills would not haveentered into the agreement andwas consequently entitled toavoid it.

Extel also contended that ifCrown Mills wished to avoid theagreement, it was obliged totender restitution of the goodswhich it had received, alterna-tively the market value of thegoods. This however, could not beinsisted upon. The casings hadbeen used and resold and conse-quently could not be returned.The fact that Crown Mills had nottendered to return these goods didnot nullify its cancellation of theagreement. The cancellation of anagreement is effective notwith-

Contract

79

standing the failure to tenderrestoration of what has beenreceived by the cancelling party.Furthermore, to require of CrownMills that it pay the market valueof the goods would be to require itto perform in terms of the agree-ment, which it was not obliged todo in view of the fact that it hadavoided the agreement.

Extel also contended that it wasentitled to compensation because

Crown Mills had been unjustifi-ably enriched at its expense. Thiscontention had not been raised inthe pleadings and consequentlycould not be dealt with fully.However, it was clear that were itto be dealt with, the question ofwhether the prices on the invoiceswere distorted by the briberywould have to be determined, aswould the question of whetherequity and justice favoured the

payment of any amount by whichCrown Mills might have beenenriched.

The action for payment failed.

Contract

MOSSGAS (PTY) LTD v SASOL TECHNOLOGY (PTY) LTD

A JUDGMENT BY SNYDERS JWITWATERSRAND LOCALDIVISION19 MARCH 1999

[1999] 3 All SA 321 (W)

A restraint of trade must be aprovision which restricts a partyin the conduct of its trade. Whenthat party did not have such aright before concluding a contractincorporating a restriction on itsright to trade, the incorporation ofthe restriction will not beconsidered unenforceable.

THE FACTSSasol Technology (Pty) Ltd

granted Mossgas (Pty) Ltd alicence to use Sasol’s proprietaryinformation to construct certainunits and operate them for thepurposes of production of fuels.The licence expressly limited therights of Mossgas to the produc-tion of fuels only.

The licence was entered into inorder to afford Mossgas the abilityto produce fuel from gas. Theprocess by which this was donewas known as the synthol process.This process involved the produc-tion of propylene, a chemicalcomponent which could beconverted into acrylic acid.

Mossgas wished to produceacrylic acid and sell it, but wasrestricted from doing so by thelimitation of its rights of produc-tion as set out in the terms of thelicence. Mossgas however, con-

tended that the restriction wasunenforceable in that it was arestraint of trade and harmful tothe public interest. It applied foran order upholding this conten-tion.

THE DECISIONMossgas’ contention was that the

restriction was not necessary forthe protection of Sasol’s syntholprocess and was against thepublic interest since it preventedthe exploitation of the propyleneby itself without promoting theprotection of that process. How-ever, it was necessary to deter-mine firstly, whether the restric-tion amounted to a restraint oftrade at all.

A restraint of trade normallyconsists in an independent nega-tive stipulation which persistsbeyond the date of termination ofthe contract in which it is incorpo-

80

rated. In the present case, therestriction was not phrased as anegative stipulation, nor was itstated to persist beyond theperiod of operation of the con-tract. To that extent, it did notresemble a restraint of trade.Applying the test whether thepractical effect of the provisionwas to restrict Mossgas in theconduct of its trade, it had to beaccepted that before Mossgas

contracted with Sasol, it had hadthe right to acquire and exploit thepropylene. It still could do so if itdid so without using the produc-tion method which had beenlicensed to it by Sasol. The restric-tion on it was therefore not toprevent absolutely the exploita-tion of the propylene nor even toprevent Mossgas from competingwith Sasol in so doing.

Comparing Mossgas’ right to

exploit the propylene before itcontracted with Sasol and after, itwas clear that nothing had beentaken away from Mossgas byentering into the contract. Beforeentering into the contract,Mossgas had not been entitled toproduce propylene using thesynthol process and this contin-ued to be the case after the con-tract was entered into.

Mossgas’ application failed.

Contract

JAMES v MICOR HOLDINGS LTD

A JUDGMENT BY VAN DERLINDE AJWITWATERSAND LOCALDIVISION26 NOVEMBER 1998

1999 CLR 237 (W)

A party appointed in terms of anagreement to make adetermination as an expert is alsoentitled to interpret and apply theprinciples stated to be those interms of which the determinationis to be made. Where thedetermination is not to apply inthe case of it being affected by‘manifest error’ the error inquestion may only be a reason fornot applying the determinationwhere it has resulted in no properdetermination having been madeat all. A debtor is also required topay interest on a debt from a datespecified in an agreement obligingthe payment of interest where theamount on which the interest is tobe paid has not been determinedtill a later date.

THE FACTSJames, Niewenhuizen and

various companies associatedwith them concluded an agree-ment with Gateway InternationalBV involving the sale of variousitems, including shares in TrekAmerica Ltd, a property situatedin Staten Island, New York, and abusiness owned by the companies.

In terms of the agreement, Micorguaranteed Gateway’s perform-ance. The purchase price wasUS$500 000 payable in two equalinstalments. The first was payableas soon as the audited tradingprofits of the company andbusiness had been determined,expected by no later than 31March 1985, and the second waspayable on 30 November 1985.Interest at 2% over the Citibankprime lending rate from due dateof payment to actual date ofpayment was payable.

The purchase price was variabledepending on the extent of anypre-tax profit made by the com-pany and the business in the year

following1 December 1983, theeffective date of the agreement. Ifthe profit were to be less thanUS$300 000, the purchase pricewould be less and if it were to bemore than US$300 000, the pur-chase price would be more.‘Profit’ was to have its generallyaccepted meaning in accordancewith generally accepted account-ing principles (GAAP), and wouldtake into account all overheadexpenses.

In the event of a dispute betweenthe parties as to the combined pre-tax profits of the company andbusiness, these were to be deter-mined by a chartered accountantin England and Wales, whosedetermination would be final andbinding on the parties, save in thecase of manifest error.

Gateway did not produce thefigures of trading profits by 31March 1985 and James brought anaction to compel it to do so. Theparties agreed that the combinedpre-tax profits would be deter-mined by no later than 29 January

81

1993. When these were produced,they showed a loss for the yearfollowing 1 December 1983. Jamesdisputed this conclusion, and achartered accountant was nomi-nated to determine the profits, asprovided for in the agreement.

The accountant received writtenrepresentations from both partiesand determined the profit atUS$369 920, basing the determina-tion solely on the informationplaced by the parties before him.He then took the figures allegedby each party to represent theactual profit for the period andadjusted each of them afterresolving fifteen areas of dispute.After adjusting James’ figuredownward and Gateway’s figureupward, there remained a differ-ence of US$123 595 attributable todifferent accounting approaches.The accountant then adjusted thedifferent figures further by apply-ing another reduction to James’sfigure and another increase toGateway’s figure in the sameproportions by which the firstadjustments had been made. Theresult was a combined net profitof US$221 952. He ordered thepayment of the purchase price onthe basis of this determination ofnet profit, with interest as pro-vided for in the agreement.

Gateway failed to pay thepurchase price so payable. James,having taken cession of the othersellers’ claims, applied for en-forcement of the agreement. Micorand Gateway opposed the appli-cation on the grounds that theaccountant’s determinationcontained manifest errors, that hefailed to apply his mind properlyto the determination, that theprocess applied by him containedfundamental irregularities and

that he was not empowered todirect the payment of interest. Insupport of its contention that theaccountant had contained mani-fest errors, Micor alleged that theaccountant had, in a number ofinstances, deviated from a properapplication of GAAP.

THE DECISIONThe agreement empowered the

accountant to determine anydispute as to the combined pre-taxprofits. Since the same agreementhad defined profits as having themeaning attributed to them byGAAP, any dispute as whatGAAP required in relation to pre-tax profits was also a dispute to bedetermined by the accountant. Asa professionally qualified person,the nomination of an accountantby the parties showed an intentionthat the person so nominated,being capable of doing so, wouldmake such a determination. Sincehe had been appointed as anexpert and not as an arbitrator, itcould be accepted that the partiesintended the accountant to use hisown expertise in arriving at hisdetermination.

It followed that in making hisdetermination, the accountant wasentitled to make a determinationof the meaning of GAAP, and theexercise of his expertise in thisregard could not be contestedmerely on the grounds of a differ-ence of opinion as to the properinterpretation and application ofGAAP. Micor’s objections to theaccountant’s interpretation andapplication of GAAP, whethergood or not, could therefore notconstitute a basis for avoidingcompliance with his determina-tion.

The qualification that the deter-mination not be attended by‘manifest error’ was not a qualifi-cation which referred to anincorrect application of GAAP. Toallow that ‘manifest error’ in-cluded an error relating to theapplication of GAAP would be toallow a redetermination of thematter. It was more appropriate tointerpret the ‘manifest error’ as anerror which was patent, or onewhich the accountant himself hadnot intended.

The accountant’s determinationwas final and binding, even if thedetermination contained a mani-fest deviation from GAAP.

As far as the objection to thedirection for the payment ofinterest was concerned, theessence of it was that interestcould not run from a date beforewhich the amount owing wasdetermined. Since the account-ant’s determination had beenmade later than the dates onwhich the agreement specifiedwould be the dates on which theprice would be payable, interestcould not run until that determi-nation had been made.

However, the failure to deter-mine the profits by the originaldate had been a result of defaultby Gateway itself. Being in defaultby the specified date, it was inmora, and could not avoid theconsequences thereof by contend-ing that it did not know howmuch it had to pay. Interest was torun from the dates originallyspecified in the agreement.

The agreement was to be en-forced, and James entitled topayment of US$369 920 withinterest from 1 December 1985 todate of payment.

Contract

82

TESORIERO v BHYJO INVESTMENTSSHARE BLOCK (PTY) LTD

A JUDGMENT BY WUNSH J(SCHABORT J concurring)WITWATERSRAND LOCALDIVISION1 JUNE 1999

1999 CLR 364 (W)

The contractual capacity of aperson is determined by the law ofthe place where the contract isentered into, not the law of thematrimonial property regime towhich the person’s marriagepertains. Where it is clear that acontract is entered into by aperson who knows andunderstands the meaning of thecontract, there will be no groundfor a finding that the contract wasentered into by mistake.

THE FACTSTesoriero signed a deed of

suretyship in favour of BhyjoInvestments Share Block (Pty) Ltdin respect of the debts of a closecorporation, Sellavie Clothing CC,which she operated as a businessconcern manufacturing clothingand selling to boutiques. At thetime, she was married accordingto the matrimonial propertyregime of Argentina which shesaid was the same as that of SouthAfrica.

Tesoriero was Spanish-speakingand did not have a good com-mand of the English language. Atthe time when she signed the deedof suretyship, she asked questionsconcerning the nature of theagreements she was concludingincluding the terms of the leasegiving rise to the principal indebt-edness. She depended on theother member of the close corpo-ration to explain to her the natureof the contracts she was thenentering into.

Bhyjo brought an action forpayment under the deed ofsuretyship. Tesoriero appealedagainst the judgment givenagainst her on the grounds thatbeing married in community ofproperty, she had lacked thecontractual capacity to enter intothe deed of suretyship, alterna-tively that she had not understoodthe nature of the transaction shehad entered into.

THE DECISIONThe law applicable to the deter-

mination of contractual capacity isthe law of the place where thecontract is concluded. In thepresent case, this was SouthAfrica. The law pertaining to thematrimonial property regime wasnot relevant.

In terms of sections 11 and 14 ofthe Matrimonial Property Act (no88 of 1984) Tesoriero had contrac-tual capacity. In terms of section15(2)(h) of that Act, she could notbind herself as surety without herhusband’s consent except wherethe suretyship was signed in theordinary course of her profession,trade or business (an exceptionprovided for in section 15(6) of theAct).

It was true that no discussion ofthis exception had taken place inthe trial proceedings, but theevidence presented did make itpossible to determine whether ornot the section applied. It wasclear that Tesoriero had enteredinto the deed of suretyship as partof her activities in a profession,trade or business.

The deed of suretyship had alsobeen entered into without anymistake on her part as to thenature and content thereof. It hadbeen entered into in conjunctionwith a lease. It was not a compli-cated document and stood sepa-rately from the lease and Bhyjo’srepresentative had done nothingto encourage a misunderstandingof the document on her part.

The appeal was dismissed.

Contract

83

GEROLEMOU/THAMANE JOINT VENTURE v AJCONSTRUCTION CC

A JUDGMENT BY VANDIJKHORST JTRANSVAAL PROVINCIALDIVISION26 MARCH 1999

[1999] 3 All SA 74 (N)

A provision in a sub-contract thatdisputes be submitted toarbitration only after thepractical completion of the sub-contract works applies in respectof works which must becompleted in respect of the maincontract to which the sub-contract relates.

THE FACTSGerolemou/Thamane Joint

Venture and AJ Construction CCentered into a contract in terms ofwhich AJ Construction undertookto restore certain external facadesat the Palace of Justice in Pretoria.The contract was a sub-contractentered into as part of a maincontract subsisting betweenGerolemou and the Minister ofPublic Works.

In terms of clause 37.1 of thecontract, if any dispute arosebetween the parties in regard tothe contract then each party wasto give the other written notice ofthe dispute requiring that suchdispute be referred to arbitration.In terms of clause 37.3 of thecontract, any reference to arbitra-tion was not to be opened untilafter practical completion of thesub-contract works, with theexception of a reference to arbitra-tion in respect of monthly applica-tions by Gerolemou for certificatesof payment.

Gerolemou was dissatisfied withthe work done by AJ Constructionand it cancelled the contract. AJConstruction alleged that this wasa repudiation of the contract andclaimed damages under variousheads, including under certificatesof payment, totalling R1,645m.Gerolemou counterclaimed andthe disputes were submitted toarbitration.

Gerolemou applied for an orderthat the adjudication of the dis-putes be stayed until after practi-cal completion of the works.

Construction

THE DECISIONThe arbitrator’s jurisdiction to

arbitrate the dispute between theparties is not a matter which thearbitrator himself can decide.Even if the determination of sucha matter could be considered aquestion of interpretation of thecontract which is, in the contract,specifically provided for as amatter for determination byarbitration, an arbitrator cannotdetermine the issue, since hispower to act is brought intoquestion by the issue itself. It wastherefore appropriate for the courtitself to decide whether or notclause 37.3 of the contract pre-cluded the commencement ofarbitration proceedings betweenthe two parties.

In interpreting clause 37.3 it wasclear that the ‘works’ referred toin the clause were the works asdefined in the main contract.These works were the completecontract works for the restorationof the building of which theexternal facades were a part. Thearbitration was therefore subjectto the suspensive condition thatthese works be completed. Thecompletion of the works referredto in the clause encompassed thecompletion of the whole of theworks including those to beexecuted by the other contractorsengaged in the whole project.

Since those works had not beencompleted, the reference toarbitration was premature, exceptin regard to the claim undercertificates of payment.

The application was grantedexcept in regard to such claims.

84

BOTHA’S TRUCKING v GLOBAL INSURANCE CO LTD

A JUDGMENT BY FABRICIUS AJTRANSVAAL PROVINCIALDIVISION1 DECEMBER 1998

1999 (3) SA 378 (T)

An exemption from liability infavour of an insurer contained inan insurance policy does notconstitute a warranty by theinsured in favour of the insurerwhich would entitle the insurer torepudiate liability should it befound that the circumstances ofthe exemption exist. An insurermay repudiate liability on thebasis of the exemption if it isfound that such circumstancesindeed exist.

THE FACTSGlobal Insurance Co Ltd insured

a truck tractor and semi-trailerowned by Botha’s Truckingagainst damage. The policyprovided that Global would notbe liable for any accident, injury,loss or damage if the insuredvehicle was found to be in a stateor condition which was deemed tobe not roadworthy.

The vehicle was damaged. At thetime, three of the vehicle’s 22 tyreswere in a state which did notcomply with the Road Traffic Act(no 29 of 1989) in that they hadbecome worn in various degrees.Their condition was such that theywould render the vehicle danger-ous under certain weather condi-tions. The vehicle was not road-worthy within the meaning of theAct.

Global repudiated liability underthe policy, basing its right torepudiate on the exemptioncontained in it.

The parties approached the courtfor a determination of (i) themeaning of the ‘state or conditionwhich was deemed to be notroadworthy’, (ii) whether thevehicle was deemed not to beroadworthy, and (iii) whether thecause of the accident which gaverise to the damage could beattributed to the allegedunroadworthiness of the vehicle.

THE DECISIONThe exemption upon which

Global relied was not a warrantysince it did not place a duty onBotha’s Trucking to keep thevehicle in a roadworthy state inorder to retain the insurancecover. The validity of the policydid not depend on the vehiclebeing kept in a roadworthy state.Botha’s Trucking was not underan absolute obligation to keep thevehicle in a roadworthy condition.

The proper interpretation of themeaning of the word ‘road-worthy’, as used in the policy, wasthat the vehicle would be fit foruse on the road. It did not meanthat the vehicle was to be road-worthy within the meaning of theterm as used in the Act. Havingregard to the fact that 19 of the 22tyres were in a proper conditionand that the vehicle itself was ableto travel on the road withinreasonable stopping distances, thevehicle itself could not be said tobe in an unroadworthy condition.

Global had not shown that thevehicle was in an unroadworthycondition and was accordingly notentitled to repudiate liabilityunder the policy on the groundsof the vehicle’s allegedunroadworthiness.

Insurance

85

UNIMARK DISTRIBUTORS (PTY) LTD vERF 94 SILVERTONDALE (PTY) LTD

A JUDGMENT BY VAN DERWESTHUIZEN AJTRANSVAAL PROVINCIALDIVISION9 OCTOBER 1998

1999 (2) SA 986 (T)

Whether or not an item accedes tofixed property is a questiondetermined by reference to theintention of the party affixing theitem to the fixed property and thedegree to which removal of theitem is possible without causingdamage to the fixed property. Aperson who was in possession ofan item which has not so accededto its fixed property will be liableto compensate the owner in theamount of the value of the itemwhere the item no longer exists orhas been lost to his possession.

THE FACTSUnimark Distributors (Pty) Ltd

was in occupation of certainpremises and considered itself tobe the sub-lessee of them. Thesub-lessee was in fact its holdingcompany. During 1989, it installedcertain items at the premises,including certain chipcore walls,an alarm system, an electricalsystem, under-cover parking, twosteel canopies, steel security gates,air conditioners, a kitchen sinkand eleven fire extinguishers.

In 1994, Unimark was ordered tovacate the premises and it did so.It was prevented from removingany of the items it had installed atthe premises.

Erf 94 Silvertondale (Pty) Ltdpurchased the property on whichthe premises were situated andtook delivery of it. Unimark thenbrought an action against it fordelivery of the items it had in-stalled at the premises based onthe rei vindicatio, alternatively forthe value of the items basing thisclaim on the actio ad exhibendumor upon unjust enrichment.

THE DECISIONWhen Unimark installed the

items, it did so thinking that itwould be compensated for theirinstallation. It probably regardeditself as the owner of these items.While this was important indeciding whether or not Unimarkremained the owner of the itemsafter their installation, it was alsorelevant to determine the mannerof their installation.

As far as the chipcore walls wereconcerned, these were officepartitions which weredemountable and had beeninstalled with a view to theireventual removal. They weretherefore, properly considered,the property of Unimark and hadnot acceded to the property laterowned by Erf 94 Silvertondale.

As far as the alarm and intercom

system was concerned, the con-tract whereby it was installedexpressly stated that it was notbecome part of the premises inwhich it was to be installed. Theintention of the parties was that itwould be removable. As opposedto a residential dwelling, the itemwas generally considered remov-able and to be adapted to chang-ing needs of the occupant. Ittherefore remained the propertyof Unimark.

The electrical system was super-ficially surface-mounted and wastherefore considered not part ofthe property. It remained theproperty of Unimark.

As far as the steel canopies andsteel gates were concerned, theycould not be removed withoutcausing considerable damage tothe premises. This was sufficientindication that they acceded to theproperty and had become part ofthe property owned by Erf 94Silvertondale.

The air conditioners were easilyremovable and were not consid-ered part of the property. Thefloor tiles and kitchen sink hadbecome part of the property, butthe fire extinguishers were clearlyremovable and could not beconsidered as part of it.

Where Erf 94 Silvertondale wasin possession of items which hadnot acceded to the property, thesewould have to be returned toUnimark since it was entitled tothem on the basis of its rights asowner. However, where the itemswere no longer in the possessionof Erf 94 Silvertondale, Unimarkhad to proceed against thatcompany for the value of them,proving that it had been in posses-sion of them and had disposed ofthem with knowledge ofUnimark’s rights of ownership inrespect of them. Unimark had infact proved the value only of theoffice partitioning and was enti-tled to payment thereof.

Property

86

Where Erf 94 Silvertondale wasin possession of items which hadacceded to the property, the basisof Unimark’s right of recoveryhere was unjust enrichment.

Taking into account the amountby which Unimark was impover-ished and by which Erf 94Silvertondale was enriched,Unimark would be entitled to

payment thereof. However,Unimark had not demonstratedwhat this amount was.

Unimark’s action succeeded inpart.

HAYES v MINISTER OF HOUSING, PLANNING ANDADMINISTRATION (WESTERN CAPE)

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION8 JUNE 1999

1999 CLR 334 (C)

Zoning scheme regulationsapplicable to erven of a certainsize are applicable to erven whichtogether are of the size providedfor even if the erven by themselvesare not of the required size.Consultation includes thereceiving of writtenrepresentations after a requesttherefor. A party whose rights areaffected by an appeal against adecision affecting those rights isconstitutionally entitled to benotified of the appeal and to begiven an opportunity to makerepresentations regarding theappeal.

THE FACTSThe third and fourth respondents

applied for permission to departfrom the Stellenbosch townplanning scheme in respect oferven 2375 and 2376, Stellenbosch,encroach on the building line toaccommodate a refuse storagearea and applied for the removalof restrictions pertaining to theerven to permit the establishmentsof apartments thereon. Hayes andthe second applicant who ownedproperties neighbouring theerven, opposed the application,and they presented objections tothe Stellenbosch Municipality.

The municipality rejected theapplication and the third andfourth respondents appealed tothe Minister of Housing, Planningand Administration (WesternCape) against this decision. Acopy of the appeal was served onthe municipality but not on theobjectors.

The Minister invited the munici-pality to submit comments on theappeal prior to its considerationand the municipality did so in aletter with annexure. The Ministerupheld the appeal. Hayes thenapplied for the review of theMinister’s decision on the groundsthat he had misdirected himself,

had failed to comply with section44(2) of the Land Use PlanningOrdinance (no 15 of 1985) and hadfailed to give notice of the appealto objectors thereby infringingtheir constitutional right toprocedurally fair administrativeaction.

THE DECISIONCertain provisions of the zoning

scheme regulations pertained toerven measuring 2000m² andover. Each of the erven was lessthan this, but together theymeasured more than this. TheMinister had considered theappeal as if the erven were con-solidated as the developmentproposed by the third and re-spondents would involve thefuture consolidation of the erven.

The fact that each of the ervenwas less than 2000m² was not animpediment to the proper consid-eration of the appeal, given thefact that the erven were to beconsolidated for the purposes ofthe development for which theappeal had been brought. Therewas no need for the erven to bebrought into common ownershipmerely in order to bring theapplication. If this was required,the subdivision of the property

Property

87

might be required at a later stageif the application was not granted.This would be in conflict withcommercial realities and imposean unduly heavy burden onproperty developers.

The failure to comply withsection 44(2) of the Land UsePlanning Ordinance was allegedto have consisted in a failure toconsult with the StellenboschMunicipality, which was requiredin terms of that section. Consulta-tion did however, take place whenthe municipality submitted itscomments on the appeal. It didnot object to the method of consul-

tation chosen by the Ministerwhen he invited comments on theappeal, nor did it contend that themethod chosen by him wasunreasonable. Consultation,understood in the wide sense ofthe term, had taken place.

As far as the failure to givenotice of the appeal was con-cerned, the absence of a specificprovision in the Ordinance confer-ring the right to notification of anappeal and the right to makerepresentations in it, did notdeprive a party of the constitu-tional right to administrativejustice. A party is entitled to

expect lawful and procedurallyfair administrative action, insofaras his rights, interests or legiti-mate expectations are concerned.The right to be given notice and beheard was consonant with thefundamental right to lawful andfair administrative action asenvisaged in section 33 of theConstitution.

The objectors had a legitimateexpectation that they would benotified of the appeal and of theirright to make representationsthereat.

The application for review wasgranted.

Property

On consideration of the authorities dealt with above, I am of the view thatthe approach of the Queen’s Bench in the Wilson case (supra) [Wilson vSecretary of State for the Environment v Castle Point District Council andW J Martin & Sons (Builders) Ltd [1988] JPL 540] is correct and shouldbe followed. The absence of a specific provision in the Ordinance or accom-panying regulations as to the right of a successful party to be apprised of,and to make representations in, an appeal to the first respondent by theunsuccessful party, cannot, in my view, deprive the successful party of hisconstitutional right to administrative justice. This means that, in so far ashis rights, interests or legitimate expectations may be affected by the out-come of the appeal, he should be entitled to expect that lawful andprocedurally fair administrative action will be taken by the first respondentin hearing, considering and determining the appeal.

88

FW WOOLWORTH & CO (ZIMBABWE) (PVT) LTD vSUNRAY STORES (PVT) LTD

A JUDGMENT BY GILLESPIE JZIMBABWE HIGH COURT11 FEBRUARY 1998

1999 (2) SA 887 (Z)

In order to show that a party hasunlawfully competed againstanother, it must be shown that theparty alleging unlawfulcompetition has establishedgoodwill in the particularbusiness in which unlawfulcompetition is alleged.

THE FACTSFW Woolworth & Co (Zimba-

bwe) (Pvt) Ltd was incorporatedin 1956 and carried on the busi-ness of a chain of retail depart-ment stores in Zimbabwe. It heldthe exclusive right to the use ofthe name FW Woolworth in thatcountry.

Woolworths (Pty) Ltd, a com-pany incorporated in SouthAfrica, wished to commencebusiness in Zimbabwe, and begannegotiations with FW Woolworthwith a view to acquiring itsbusiness. These negotiations failedand Woolworths then turned toSunray Stores (Pvt) Ltd for thispurpose. Negotiations withSunray Stores resulted in theacquisition by that company of asole franchise for the operation ofthe business of Woolworths inZimbabwe. That business beganwith the opening of a departmentstore known as the W storelocated in a large and prestigioussuburban shopping complex.

The W store was expensivelydecorated and contained goodsselling at relatively high prices.The goods reflected the name ‘TheW Store’ and where the name‘Woolworths’ was on the goods,this name was replaced with the‘The W Store’ name. Garmentsand hangers bore the name‘Woolworths’. Notices displayedin the store stated that the W Storewas the sole Zimbabwean fran-chise of the Wooltru Group ofSouth Africa and that there wasno connection with the Wool-worth companies of Zimbabwe.

The stores run by FW Woolworthwere less luxurious and shabby inappearance. The goods displayedin them appeared to be old andunattractive. Its logograms weredifferent from those used in the WStore although they also consistedin a stylised letter ‘W’. Many of itsgoods did not bear the mark of thelogogram.

After the W Store began operat-ing, FW Woolworth broughtinterdicts against Sunray torestrain it from passing its goodsoff as those sold by the businesswhich was owned and operatedby FW Woolworth and from usingits name and logogram. It allegedthat Sunray had engaged inunlawful competition against it.

THE DECISIONIn order to show that passing off

had taken place, FW Woolworthhad to show that it had estab-lished some goodwill in its name,mark or get-up of its goods. It hadnot done so.

Given the period during whichFW Woolworth had been doingbusiness in the country, the name‘Woolworth’ had considerablerecognition value, but this did notnecessarily confer any goodwill.The fact that goodwill had beenestablished had to be proved, butthere was no proof of this. Thesame could be said of the markused in FW Woolworth logo-grams.

The use of the name ‘W Store’was not an imitation of FWWoolworth’s name. The name hadin fact been used to distinguishthe store from that owned by FWWoolworth. The name ‘Wool-worths’ was used on goods keptin the W Store as a result of thatname actually being that ofSunray’s franchisor, which itselfwas a result of the common originof both businesses.

As far as the potential for confu-sion was concerned, there waslittle likelihood of this happeninggiven that the two parties wereselling very different goods in twodifferent sectors of the market.Taking into account the class ofperson which would frequent thetwo stores, there was little or nopotential for confusion.

The application was dismissed.

Competition

89

ABSA BANK BPK v RETIEF

A JUDGMENT BY BUYS JNORTHERN CAPE DIVISION2 OCTOBER 1998

1999 (3) SA 322 (NC)

A court cannot accept asestablished a trade usage whichmight have been proved to exist inanother court merely on the basisof the acceptance of its existenceby the other court. It may takenotice of a fact, such as thatbanks charge interest onoverdrawn accounts, providedthat the requirements foraccepting the fact have beenestablished.

THE FACTSAbsa Bank Bpk brought an

action against Retief for paymentof R109 246,27 being the amountoutstanding under an overdraftplus interest and costs. Absaalleged that the amount of theoverdraft facility had been deter-mined by itself in its own discre-tion, that Retief had been obligedto repay the amount owing at anytime upon demand being made,and the bank would be entitled tocharge interest on the amountoutstanding on Retief’s account ata rate determined by the bank inits entire discretion, alternativelyat an agreed rate, such interest tobe calculated once per month onthe daily balance and capitalised.Absa alleged that these termswere express, alternatively tacit orimplied terms of their agreement,or that the rights constituted bythem arose from established tradeusage.

Retief opposed the action. As apreliminary proceeding, the bankapplied for a determination thatthe court could, upon the basis ofprevious judgments of the courtand findings of it, take notice ofthe trade usages of commercialbanks whereby, in the absence ofagreement, they were entitled tocharge interest on overdrawnaccounts, and further interest onany debit by which the maximumlimit of such account was ex-ceeded, the rate of interest to bedetermined by the bank in its owndiscretion and to be calculatedonce per month. The court wasalso asked to determine which ofthe trade usages had been provedand which required the leading ofevidence in order to prove them.

Absa contended that evidence ofthese matters was not required inview of the fact that in Absa Bank vSaunders 1997 (2) SA 192 (NC) ithad been held that a bank had theright to charge interest in themanner described, in the absenceof agreement between the bankand customer.

THE DECISIONIn the Saunders judgment, the

court held that on the basis ofevidence given by an expert, therewas a trade usage that bankscharged interest on overdrawnaccounts and the rate of interestapplied was determined in thediscretion of the bank. The judg-ment did not hold that this tradeusage would necessarily applywhere there had been no expressagreement between the parties asto the applicable rate of interest.That court’s judgment was con-fined to a determination of onlythose issues relating to the charg-ing of interest on an overdrawnaccount and the rate of interestthen applicable and not to thewider issues which were ofconcern to the present litigants.

There was no basis upon whichthis court could take notice ofevidential determinations madeby the court in the Saundersmatter. However, the court couldtake notice of the fact that credi-tors did charge interest on loansmade by them and that this wouldapply in the case of a loan consti-tuted by a bank overdraft. Thisdid not mean that the court, uponthe basis of the finding of thecourt in another matter, couldinfer that a bank was entitled todetermine the applicable interestrate in its discretion.

A court could accept that a tradeusage existed if it were shown tohave been long established,notorious, reasonable and certain.But such a finding did not bindanother court since it would bemade upon the basis of evidencepresented to it in a specific case.The only basis upon which a courtcould take judicial notice of atrade usage was that it had beenshown to exist with all the charac-teristics required for a tradeusage. This could not be donemerely because another court hadaccepted the existence of such atrade usage.

The application was dismissed.

Banking

90

KAPLAN N.O. v THE PROFESSIONAL ANDEXECUTIVE RETIREMENT FUND

A JUDGMENT BY HOWIE JA(HEFER JA, GROSSKOPF JA,PLEWMAN JA and STREICHERJA concurring)SUPREME COURT OF APPEAL14 MAY 1999

UNREPORTED

The nomination of beneficiaries interms of the rules of a pensionfund does not preclude theoperation of the provisions ofsection 37C(1) of the PensionFunds Act (no 24 of 1956) and willnot effectively prevent theallocation of the benefits of thefund to all the dependants of aperson to whom such benefitsaccrue.

THE FACTSMr A R Kaplan was a member of

two pension funds. In terms of therules of the funds, he nominatedhis two sons as the beneficiaries inrespect of each fund in the eventof his death. On his death, he wassurvived by his two sons and hiswidow, all of whom were hisdependants.

Liberty Life Association of AfricaLtd which managed the funds,allocated the benefits payable bythe funds to all three dependants.It did so acting in terms of section37C(1) of the Pension Funds Act(no 24 of 1956) which providesthat notwithstanding anything tothe contrary contained in any lawor in the rules of a registered fund,any benefit payable by such afund in respect of a deceasedmember, shall not form part of theassets in the estate of such amember, but shall be paid to suchdependants as are identified bythe fund within twelve months ofthe death of the member.

The trustees of trusts created forthe benefit of the two sons thenbrought an application for anorder declaring that the benefitswere payable to them to theexclusion of the widow.

The application was refused. Thetrustees appealed.

THE DECISIONKaplan’s nomination of his two

sons as the beneficiaries in respectof the funds was made in terms ofthe rules of the funds, but thequestion was whether section

Trusts

37C(1) of the Act overrode thenomination.

The trustees argued that theprovisions of this section aimed toexclude from the estate of themember of the pension fund thatwhich would have fallen into it.Since the benefits of the fundswould not have fallen intoKaplan’s estate, because he hadnominated beneficiaries in respectof them, the provisions of thesection did not apply.

This argument however, wentagainst the plain meaning of thesection, which aimed to excludeall benefits payable in respect of adeceased member whether subjectto a nomination or not. The phrase‘notwithstanding anything to thecontrary contained in the rules’made in clear that whatever therules said, the benefits were to bedisposed of according to thescheme provided for in the Act.

The trustees also argued that thepension fund had improperlydelegated its power when divid-ing the benefits between the threedependants. Since Liberty Lifehad been delegated the power todo this, it was not itself entitled todelegate this power to one of itsemployees to do so.

This argument however, failed totake into account the fact that aperson managing the business of afund as envisaged in the Actmight be a company, which couldnot act except through the agencyof its officers and employees. Thepower to delegate therefore had tobe implied in the provisions of theAct.

The appeal failed.

91

S A I INVESTMENTS v VAN DER SCHYFF N.O.

A JUDGMENT BY NICHOLSON JNATAL PROVINCIAL DIVISION27 OCTOBER 1998

1998 (3) SA 340 (N)

A contract for the sale of propertyentered into by the trustee of aninsolvent estate without the priorconsent of the Master having beenobtained is null and void since itfails to comply with section 18(3)of the Insolvency Act (no 24 of1936). Such a contract cannot berevived by subsequently obtainingthe consent of the Master to thesale.

THE FACTSOn 12 September 1997, a written

contract was entered into betweenSAI Investments and Van derSchyff acting in his capacity astrustee in the insolvent estate of MPillay. The contract recorded thesale of erf 382, Umzinto, on whichwas situated a business complex,and the price was R850 000. Thesignatory for SAI was a certainChetty, whose authority to signfor SAI was not given or annexedto the document.

Van der Schyff requested theconsent of the Master to the saleand on 23 September 1997, theMaster approved the sale.

SAI made certain payments interms of the contract, but was puton terms to comply fully with theterms thereof. Van der Schyffalleged that compliance had notbeen forthcoming, and he can-celled the contract and returnedpayments which had been madeby SAI. He proceeded to sell theproperty to Inclusive Investments(Pty) Ltd. Before completion ofthat sale, negotiations beganbetween Van der Schyff and SAIwith a view to reviving theoriginal sale. These did not resultin a completed sale, and Van derSchyff finally concluded anagreement of sale in respect of theproperty to Inclusive Investments,the price being R950 000.

SAI alleged that the originalcontract was valid and enforce-able between it and Van derSchyff and sought an interdictpreventing the transfer of theproperty to Inclusive Investments.Van der Schyff contended that theoriginal contract was not enforce-able as it had been signed byChetty without written evidenceof his authority to do so as re-quired by section 2(1) of theAlienation of Land Act (no 68 of1981) and that it was not clearlyindicated that the contract wassigned by him in a representative

capacity. He also contended thatsection 18(3) of the Insolvency Act(no 24 of 1936) had not beencomplied with. That sectionrequires that the trustee of aninsolvent estate shall not sell anyproperty without the authority ofthe court or the Master.

THE DECISIONThe authority of Chetty to sign

the sale agreement should havebeen proved once it had beenchallenged. However, the chal-lenge was a formalistic one andthere was no reason to deny SAIits claim on the basis of a failure toprove the authority of the personit contended was its agent.

The fact that it was not clearlyindicated on the written contractthat Chetty was signing as anagent was not destructive of thecontract. Extrinsic evidence is notadmissible to prove that a personis acting as agent for the sellerwhere there is no indication exfacie the written contract that thesignatory does so act, but in thepresent case the seller was clearlystated to be SAI Investments. Thesignatory was consequentlybound to be signing in a repre-sentative capacity despite the lackof any express indication thereof.

As far as section 18(3) of theInsolvency Act was concerned, thequestion was whether the priorconsent of the Master was re-quired or his consent which wasgiven after the sale was sufficient.In certain circumstances, a re-quirement contained in a statutefor the proper execution of someaction must be complied withprior to execution and not after-wards, in order to validly executethat action. The statute itself mustbe examined in order to determinewhether it requires compliancebeforehand and whether theintention was that a contractentered into without prior compli-ance is null and void.

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92

By implication, section 18(3) didrequire prior compliance with therequirement that the consent ofthe Master be obtained to anysale. Whether or not the intentionwas that the sale should be con-sidered null and void because ofthe failure to comply depended inpart on whether there would beany resulting inconvenience from

the nullity of the contract. Therewould certainly be inconvenienceto SAI but there would also beinconvenience to concurrentcreditors if the contract was notrendered null and void—theywould not enjoy the benefits of thesurplus realised by the sale at thehigher price of R950 000.

Taking into account the purpose

of section 18(3), the implicationwas that it did intend to rendercontracts void which were enteredinto without the prior consent ofthe Master. SAI therefore couldnot be said to have a contractupon which it was entitled tobring the interdict proceedingsagainst Van der Schyff. Theapplication was dismissed.

BEDDY N.O. v VAN DER WESTHUIZEN

A JUDGMENT BY SCHUTZ JA(VAN HEERDEN JA, HEFER JA,NIENABER JA AND MARAIS JAconcurring)SUPREME COURT OF APPEAL24 MAY 1999

1999 CLR 381 (A)

The spouse of an insolvent personmay not secure the release of herassets from the insolvent estatewithout proof that in anytransaction, the spouses did notcollude to secure the transfer ofassets from the insolvent spouseto the other.

THE FACTSVan der Westhuizen married her

husband out of community ofproperty in 1957. In 1982, Mr vander Westhuizen purchased ahouse for R62 500. In 1990, he soldthe house to his wife for R67 000and it was transferred into hername. Mrs van der Westhuizenpaid for the house by means ofpayments from her bank accountdirect to the bondholder. Shealleged that some R45 000 of thisalso constituted a set off of debtsowed by her to her husband.

In 1989, when an application forthe sequestration of Mr van derWesthuizen’s estate was made byBoland Bank, in an opposingaffidavit he assessed the value ofthe house at R120 000. He also didnot show any debt owed to hiswife in his list of liabilities.

Van der Westhuizen alleged thatduring her marriage, she hadgenerated an income independ-ently of her husband, chiefly fromfarming activities. She alleged that

in 1990, she received someR110 000 from the sale of assetsacquired over this period. Fromthese resources, she stated she hadpaid for the house purchased fromher husband.

In 1989, van der Westhuizen’shusband sold his farms. Afterpaying creditors, a surplus ofsome R75 000 was available andused to pay two sons for inad-equate remuneration receivedwhen farming for Mr van derWesthuizen and to support adaughter. A creditor was not paid,the Davis Myles Trust, and itbrought an application for thesequestration of Mr van derWesthuizen’s estate. It succeeded.The trustee then appointed,refused to release Mrs van derWesthuizen’s property which, bysection 21 of the Insolvency Act(no 24 of 1936) had come withinthe control of the trustee. Thetrustee contended that the housesold to Mrs van der Westhuizen in1990 was worth R180 000 at that

Insolvency

93

time, and furnished a valuation tothis effect.

Van der Westhuizen applied forthe release of her property interms of section 21(2) of the Act.

THE DECISIONThe purpose of section 21 is to

prevent or hamper collusionbetween spouses to the detrimentof creditors of the insolventspouse, and to ensure that prop-erty which properly belongs to theinsolvent ends up in the estate.The allegations made by van derWesthuizen in response to thetrustee’s assertion that her prop-erty fell within the insolvent estatewas therefore of crucial impor-

tance in deciding whether or notsuch collusion had taken place.What had to be determined waswhether or not the sale of thehouse to Mrs van der Westhuizenconstituted a collusive donationconferring no title on her asagainst creditors of her husband.

In examining Mrs van derWesthuizen’s response to theclaim made by the trustee, it wassignificant that her explanationsomitted substantiating evidencewhich could have assisted her. Nodetails were given of the disposalof the assets which gave her someR110 000, and she furnished noalternative valuation of the houseto that given by the trustee. It was

clear that at the time of the sale ofthe house, both spouses wereaware that Mr van derWesthuizen would be left withpractically nothing if all hiscreditors were paid. By allowingMrs van der Westhuizen to set offher claims against debts owing byher husband, they ensured thatthey would not all be paid andthat Mrs van der Westhuizenwould be paid in full.

The effect of this transaction wasto confer on Mrs van derWesthuizen a preference to whichoperated to the detriment ofcreditors of the insolvent estate.Her application for the release ofher assets was refused.

Insolvency

The purpose of section 21 is to ‘prevent or at least to hamper collusionbetween spouses to the detriment of creditors of the insolvent spouse’(as van Heerden JA put it in De Villiers N.O. v Delta Cables (Pty)Ltd 1992 (1) SA 9 (A) at 13 I); and, viewed from the other angle, ‘toensure that property which properly belonged to the insolvent ends upin the estate’ (as Goldstone J put it in Harksen v Lane N.O. 1998 (1)SA 300 (CC) at 318 E).

94

DEACON v CONTROLLER OF CUSTOMS AND EXCISE

A JUDGMENT BY HORN AJSOUTH EASTERN CAPE LOCALDIVISION20 JANUARY 1999

1999 (2) SA 905 (SECLD)

Where draconian provisions affectthe right of an individual therebyprejudicing his right to lawful andprocedurally fair administrativeaction, the individual is entitledto be heard by the officials whoapply such provisions against theinterests of such an individual.Whereas the right to be so heard isnot an absolute right, it will existwhere circumstances show thatthe administrative official has notfully considered matters whichcould properly have beenconsidered before taking theaction affecting the individual.

THE FACTSIn November 1995, Deacon

bought an imported Rolls RoyceSilver Spirit from Gib Motors CC.He took delivery of the vehicle inMarch 1996. It then came toDeacon’s attention that the docu-mentation relating to the import ofthe vehicle may have reflected anundeclared value. He brought thematter to the attention of officialsof the Controller of Customs andExcise. It was agreed betweenthem that Deacon could retain thevehicle if he provided a guaranteefor payment of R275 959,14pending a final determination ofthe assessment of import duties inrespect of the motor vehicle.

The Controller of Customs andExcise then investigated thematter and discovered that theinvoice used at the time clearancefor the import of the vehicle wasgiven was false and the vehiclewas liable for forfeiture in termsof the Customs and Excise Act (no91 of 1964). The Controller in-formed Deacon of this and de-manded removal of the vehicle tothe State warehouse, release of itbeing permitted against paymentof the full duty, VAT thereon anda penalty of 10% of the previousunderpayment.

In order to avoid seizure of thevehicle, Deacon paid R268 487,14under protest. The Controllerrefused to accept this and re-turned Deacon’s cheque. Deaconthen brought an application for areview of the Controller’s decisionto seize the vehicle and claimedthat the decision should be cor-rected and set aside. Deaconbased the application on hisconstitutional right to fair admin-istrative action, both procedurallyand administratively, and that hehad been denied this in that theController had assumed that hewas the owner of the vehicle at thetime of its importation and hadfailed to consider any steps to betaken against Gib Motors CC.

THE DECISIONSection 87(1) of the Customs and

Excise Act provides that anygoods imported contrary to theprovisions of the Act shall beliable to forfeiture wheresoeverand in possession of whomsoeverthey are found. Section 88(1)(a)provides that goods may bedetained for the purpose ofestablishing whether or not theyare liable to forfeiture.

The Controller of Customs andExcise contended that uponbreach, these provisions entitledhim to impose forfeiture of thegoods, no matter who dealt withthe goods or committed theirregular acts.

Section 33 of the Constitution ofthe Republic of South Africa Act(no 108 of 1996) provides thatevery person has the right tolawful and procedurally fairadministrative action where therights of that person are affectedor threatened. While this rightcould not be stretched to such apoint that it undermined thefoundation of a competent andcivilised administration, theapplication of discretionary powerby an official of such administra-tion had to be done with regard tothe spirit and objects contem-plated in section 33 of the Consti-tution.

Section 87 and section 88 did notexclude the right to be heard onthe part of a person whose goodswere liable to forfeiture underthem. Taking into account theobjects of the Customs and ExciseAct, the nature of the discretion-ary power conferred on theController under it, the conductbeing controlled under it and theprejudice to the individual con-cerned, the right of the individualto be heard in any matter wherethat individual’s rights would beaffected by the Controller couldnot be said to have been excludedby the provisions of the Act. Itwould not have been a difficult

Constitution

95

matter for Deacon to have beenheard on the question of whetherthe vehicle he had purchasedshould be forfeited. The Control-ler’s view was that once he hadformed the view that duty waspayable in terms of the Act, hewas entitled to invoke the provi-sions of sections 87 and 88 of theAct. However, in the light ofsection 33 of the Constitution, hewas not entitled to do so withoutaffording Deacon the right tomake representations concerningthe matter.

Deacon had tendered the fullamount claimed in respect of

duties and penalties. He haddenied any involvement in theirregular importation of thevehicle and had alerted theController to the irregularities assoon as he discovered them. Asagainst this, the Controller hadnot afforded him an opportunityto be heard and had not consid-ered the position of Gib MotorsCC. The inference to be drawnfrom this was that Deacon was aninnocent owner. It would not haveaffected the Controller signifi-cantly to allow him an opportu-nity to be heard; were he to have

done so, he might have appliedthe mitigating provisions ofsection 93 of the Act in Deacon’sfavour. These were circumstancesin which the right of the indi-vidual to be heard and allowedlawful and procedurally fairadministrative action as providedfor in the Constitution.

The Controller’s decision to seizethe vehicle and levy the dutiesand penalties thereon was setaside. The Controller was directedto reconsider the matter afterconducting a full and properhearing.

Constitution

The only reasonable inference to be drawn from all the facts isthat the respondent must have unknown or at least shouldhave known that the applicant was an innocent owner. Per-mitting the applicant to make the necessary representationsand hearing the applicant in respect of those representationswas but a small sacrifice for the repondent to make in order toto get to the truth of the matter.

96

BMW FINANCIAL SERVICES (PTY) LTD v MOGOTSI

A JUDGMENT BY WILLIS JWITWATERSRAND LOCALDIVISION16 APRIL 1999

1999 (3) SA 384 (W)

A credit grantor is entitled to anorder that the goods which are thesubject of the credit agreement bepreserved pending the institutionof an action for the enforcement ofthe credit grantor’s rights despitethe fact that the 30-day periodprovided for in section 11 of theCredit Agreements Act (no 75 of1980) has not elapsed by the timethe order is applied for.

THE FACTSBMW Financial Services (Pty)

Ltd leased a motor vehicle toMogotsi, the lease being governedby the Credit Agreements Act (no75 of 1980). In terms of the lease,BMW retained ownership of thevehicle. In the event of default byMogotsi in making any rentalpayment, BMW would be entitledto obtain possession of the vehicleand recover such damages asmight have been suffered inconsequence of Mogotsi’s breachof the agreement.

Mogotsi failed to pay certainmonthly rentals, and BMW gavenotice to him to return the vehiclein terms of section 11 of the Act.The section provides that a creditgrantor cannot claim return ofgoods supplied under a credittransaction by reason of defaulton the part of a credit receiverunless the credit grantor has giventhe credit receiver written noticerequiring compliance within 30days.

Before the expiry of the 30-daynotice period, BMW applied foran order that the sheriff be author-ised to attach the vehicle and keepit in his possession pending theoutcome of an action for thereturn of the vehicle to be insti-tuted by BMW.

Credit Transacations

THE DECISIONThe return of goods contem-

plated in section 11 of the Act isnot the same thing as forfeiture ofthe goods by the credit receiver.The former does not envisage thetermination of the agreement asthe latter does. It is therefore opento a credit grantor to enforce theterms of a credit agreement afterhaving claimed return of thegoods.

The fact that a right of action hasnot yet accrued—because demandas provided for in section 11 of theAct has not been effected—doesnot deny a credit grantor the rightto preservation of the propertyforming the subject matter of acredit agreement. A credit grantormay secure such property pend-ing the institution of an action andis entitled to ensure that it isproperly kept until its rights inrespect thereof have been finallyestablished. BMW was thereforeentitled to an order achieving thatobject.

The application was granted.

97

NUNSOFAST SHIPPING (PTY) LTD vGLENASHLEY SERVICE STATION

A JUDGMENT BY GALGUT JDURBAN AND COAST LOCALDIVISION23 DECEMBER 1998

1999 CLR 360 (D)

A creditor holding a documentwhich is liquid but for the propercitation of the creditor, is entitledto provisional sentence on thedocument where it is alleged thatthe creditor is the plaintiff. Suchan allegation may be made eitherexpressly or impliedly.

THE FACTSNunsofast Shipping (Pty) Ltd

held a cheque made in favour ofNunsofast Shipping. It brought anaction for provisional sentenceagainst Glenashley Service Stationfor payment of the amount of thecheque, claiming that it wasentitled to payment according tothe terms of the cheque fromGlenashley Service Station.

Glenashley Service Stationcontended that the plaintiff,Nunsofast Shipping (Pty) Ltd, wasnot the holder of the cheque as theholder was reflected merely asNunsofast Shipping. It contendedthat provisional sentence couldaccordingly not be granted againstit.

THE DECISIONProvisional sentence affords a

remedy to a plaintiff which holdsa liquid document, ie one in whichthe defendant has unconditionallyacknowledged its indebtedness

owing to a particular creditor.Where therefore, the identity ofthe creditor does not appear inthat document, provisionalsentence will not be possible,unless the plaintiff can be identi-fied as the creditor by an appro-priate allegation to that effect.Accordingly, if the name of thecreditor reflected in the liquiddocument is the name underwhich the plaintiff trades or isknown, this will be considered tobe the plaintiff if an allegation ismade that this is the creditor.

The allegation that the creditoras named in the liquid documentis the same as the plaintiff may bemade impliedly and not expressly.This is done where it is allegedthat the cheque is payable to theplaintiff, and the cheque is madein favour of a party other than theplaintiff. The plaintiff had donethis in the present case.

Provisional sentence wasgranted.

Credit Transactions

98

ABP 4X4 MOTOR DEALERS (PTY) LTD v IGIINSURANCE CO LTD

A JUDGMENT BY MARAIS JA(SMALBERGER JA, GROSSKOPFJA, MELUNSKY AJA andMADLANGA AJA concurring)SUPREME COURT OF APPEAL27 MAY 1999

1999 CLR 315 (A)

The suspension of the running ofprescription in favour of acreditor which is a person undercuratorship applies to bothnatural and juristic persons undercuratorship.

THE FACTSIGI Insurance Co Ltd claimed

from ABP 4X4 Motor Dealers (Pty)Ltd the purchase price of thesalvage value of certain vehicles.At the time, it had been placedunder curatorship in terms ofsection 6 of Act no 39 of 1984.

ABP contended that the claimhad prescribed in terms of thePrescription Act (no 68 of 1969).IGI contended that the running ofprescription had been delayedbecause it had been placed undercuratorship. It contended thatsection 13(1)(a) of the Act appliedto it. The section provides that ifthe creditor of a debtor is (interalia) a person under curatorship,the period of prescription shall notbe completed before a year haselapsed after the date of comple-tion of prescription in the normalcourse. ABP contended that thesuspension of the running ofprescription in terms of section13(1)(a) of the Act was not appli-cable to IGI as the reference to aperson under curatorship was areference to a natural person only.

ABP further contended that thecourt order placing IGI undercuratorship had put the short terminsurance business of the com-pany under the control of acurator and had done no morethan this. IGI had therefore, in anyevent, not become a person undercuratorship within the meaning ofAct no 39 of 1984.

THE DECISIONSection 13 of the Prescription Act

contains elements of the interrup-tion and suspension of prescrip-tion. Depending on how farprescription has run at the timethe impediment referred to in the

section takes place, the period ofprescription may be extended ormay not be affected at all.

The usual interpretation to begiven to the word ‘person’ wouldinclude a juristic person as well asa natural person. With thechanges introduced by the newPrescription Act, which aban-doned any distinction betweenabsolute and relative inability tosue, any reason to continue such adistinction was similarly aban-doned. Upon the normal interpre-tation of the word, both naturaland juristic persons were referredto by the term ‘person undercuratorship’.

As far as the argument that IGIwas not a person under curator-ship, but a company whosebusiness was partially under thecontrol of a curator, was con-cerned, it had to be rememberedthat the idea of a curatorship wasa broadening one, as statutorycreations of curatorship increased.It was apparent that a personunder curatorship would beconsidered broadly and loosely.The fact that a curator is ap-pointed to a person makes itappropriate to refer to the personas being under curatorship, butthe appointment of a curator for aparticular purpose does notalways result in the person beingunder curatorship.

In the present case, IGI’s shortterm insurance business had beenplaced under curatorship givingthe curators extensive powers andthe company immunity from legalproceedings brought against it.This assumption of control meantthat IGI was a person undercuratorship within the meaning ofthe Act.

IGI’s claim was upheld.

Prescription

99

BELFRY MARINE LIMITED v PALM BASE MARITIME SDN BHDTHE HEAVY METAL

A JUDGMENT BYSMALBERGER JA (NIENABERJA, MARAIS JA and MELUNSKYAJA concurring) FARLAM AJAdissentingSUPREME COURT OF APPEAL31 MAY 1999

UNREPORTED

THE FACTSPalm Base Maritime SDN BHD

purchased the Sea Sonnet fromDahlia Maritime Ltd. Palm Basealleged that Dahlia breached aterm of the sale agreement, whichwas recorded as clause 11 andimposed on Dahlia the duty tonotify the Classification Society ofany matters which would lead tothe withdrawal of the vessel’sclass or the imposition of a recom-mendation relating to her class.Palm Base intended to bringarbitration proceedings in Londonagainst Dahlia, claiming US$2 737776,49. It sought an order for thearrest of the Heavy Metal, a shipowned by Belfry Marine Ltd, assecurity for this claim. Belfryappealed against the grant of thisorder.

Palm Base contended that theHeavy Metal was an associatedship of the Sea Sonnet by virtue ofthe nominee ownership of theshares in Dahlia and Belfry by acertain Emilios Lemonaris, anadvocate in Cyprus where bothcompanies were registered. Itcontended alternatively, that theships were associated ships byvirtue of the ultimate control overboth ships by a certain N H Vafiaswhose company managed andoperated them.

Lemonaris denied that he heldthe shares in the two companies asnominee for Vafias and allegedthat 52% of the shares in Dahliawere held by himself as nomineefor a Liberian corporation, and48% of them by another Liberiancorporation, the ultimate benefi-cial owner of the Sea Sonnet beinga certain Mr Tsavliris. Lemonarisstated that he could not disclosethe beneficial ownership of theHeavy Metal but could confirmthat Tsavliris had no interest inthe ship.

The application for the arrest ofthe Heavy Metal was based onsections 3 and 5 of the Admiralty

Jurisdiction Regulation Act (no105 of 1983). Section 3(6) entitles aclaimant to bring an action in remby the arrest of an associated shipinstead of the ship in respect ofwhich a maritime claim hasarisen. In terms of section 3(7)(a)an associated ship is a ship ownedby a person who either owned theship in respect of which themaritime claim arose, directly orthrough a company, or a companycontrolled by such a person.

Belfry opposed the applicationfor the arrest of the Heavy Metal onthe grounds that Palm Base couldnot arrest an associated ship of aship which was its own property,alternatively that the Sea Sonnetwas Palm Base’s property whenthe claim against Belfry arose andcould not for that reason, be anassociated ship as defined in theAct. Belfry also contended thatLemonaris did not have the powerto control Dahlia and itself so thatthe two ships were not associatedships as referred to in the Act.

THE DECISION(per Farlam AJA)

An important indication ofParliament’s intention in regard tothe ownership of the ‘guilty’ shipwhen the arrest of an associatedship is made is found in section3(7)(a)(i) of the Act. This sectionprovides that an associated ship isone which is owned at the timethe action commenced by a personwho was the owner of the shipconcerned at the time when themaritime claim arose. This showsthat changes of ownership afterthe time the claim arose areirrelevant and that it does notmatter that the guilty ship is notowned by the person who ownsthe associated ship at the time ofits arrest. There was therefore noimpediment to the arrest of theHeavy Metal on the grounds that atthat stage, Belfry did not own theSea Sonnet.

Shipping

100

As far as the time when PalmBase’s cause of action arose wasconcerned, it was clear that thisoccurred when Belfry became inbreach of contract. This was whenit breached clause 11 of thememorandum of agreement,alleged to have happened beforedelivery of the Sea Sonnet tookplace. That meant that PalmBase’s cause of action arose at atime when Dahlia was still theowner of the Sea Sonnet. Conse-quently, the Heavy Metal beinglinked by the alleged ultimatecommon ownership, could beconsidered an associated ship andsusceptible to arrest in terms ofsection 3 of the Act.

As far as the position ofLemonaris was concerned, section3(7)(b)(ii) was relevant. The sub-section provides that a personshall be deemed to control acompany if he has power, directlyor indirectly, to control the com-pany. Belfry argued that asLemonaris was merely a nomineeshareholder of Dahlia, he couldnot be said to control the com-pany.

Against Lemonaris’s allegationthat he was merely the nominee

shareholder was the allegation byPalm Base that he had a control-ling interest in the companieswhich owned the two ships andtherefore the power to controlthem. Lemonaris had however,alleged that Tsavliris was theultimate beneficial owner of theSea Sonnet, and had not deniedthat Vafias was the ultimatebeneficial owner of the HeavyMetal. Without further evidence, ithad to be accepted that this wasthe position. Consequently, thetwo ships could not be said to beassociated ships.

The nominee ownership of theshares on the part of Lemonariscould not, in any event, be said toindicate real control of the ships.The Act intended to refer to realcontrol and not merely nominalcontrol. It did not envisage thepossibility of two repositories ofcontrol.

(per Smalberger JA (Nienaber JA,Marais JA and Melunsky AJAconcurring))

When interpreting section3(7)(b)(ii), it had to be remem-bered that the object of the associ-ated ship provisions, was to

enable an associated ship to bearrested instead of the ship inrespect of which the maritimeclaim arose. The principal purposeof the Act is to assist the partyapplying for arrest.

The section refers to the power tocontrol a company, directly orindirectly. Lemonaris controlledthe companies through his nomi-nee shareholding in them, andwas therefore in a position ofindirect control of the companiesowning the two ships. WhileLemonaris might have merelybeen a nominee shareholder, hehad factual control of the compa-nies. As a result, the two shipscould be considered associatedships for the purposes of the Act.

Belfry had also failed to answerthe allegation that the powerbehind Lemonaris was the samepower that controlled both ships.It had disclosed the identity of theSea Sonnet but had refused todisclose the identity of its ownbeneficial owner. In those circum-stances, Palm Base could not becriticised for failing to lead evi-dence contradicting that pre-sented by Belfry.

The appeal was dismissed.

Shipping

101

TRADAX OCEAN TRANSPORTATION SA vMV SILVERGATE

A JUDGMENT BY FARLAM AJA(NIENABER JA, MARAIS JA,PLEWMAN JA and STREICHERJA concurring)SUPREME COURT OF APPEAL24 MAY 1999

UNREPORTED

A dispute between the parties to acharter party which is decided ina foreign court will be consideredres judicata in a South Africancourt where there is nothingunfair or unjust about thedecision given by the foreign courtand both parties have been given afull and fair opportunity tolitigate the dispute in the foreigncourt. A letter of undertakinggiven by one of the parties that itwill not re-arrest a ship owned bythe other precludes that partyfrom re-arresting the ship after theproceedings in connection withthe letter of undertaking normallyapplies to arrests beyond thejurisdiction in which the letter ofundertaking was first given.

THE FACTSOn 7 July 1983, Tradax Ocean

Transportation SA concluded avoyage charter party with a partydescribed as ‘PanagiotisStravelakis SA Piraeus asdisponent owners of [the vessel]’,a party which did not exist. Thevessel was the MV Silvergatewhich was owned by AstyanaxSA. A dispute arose betweenTradax and the owner’s repre-sentatives who claimed US$218895,83 as demurrage. Tradax paidthis amount under protest to SStravelakis SA against receipt ofan owner’s fleet guarantee torepay the amount either bywritten agreement or by finalarbitration award. S Stravelakissigned the fleet guarantee onbehalf of eight companies in hisgroup, binding them as surety andco-principal debtor in favour ofTradax for the discharge by theregistered owners of Astyanax inwhatever amount the principaldebtor was found to be indebtedto Tradax.

In August 1985, arbitrationproceedings began in Londonbetween Tradax and PanagiotisStravelakis SA in respect ofTradax’s claim for repayment ofthe demurrage. These proceedingswere resisted, the respondent’srepresentatives failing to informthe other parties that the respond-ent did not exist. The arbitrationended in an award in favour ofTradax, the total amount payablein terms thereof being US$500 960.

In June 1986, the Silvergate wasarrested in the Netherlands at theinstance of the Chase ManhattanBank, the mortgagee of the vesseland Astyanax SA was ordered topay US$139 487 734 to the bank. Ajudicial sale was held and thevessel was sold to Carla MaritimeInc which sold it to Silver TridentShipping Co Ltd. A year later, theSilvergate was sold to GardeniaMaritime Inc and registered in the

Panamanian registry.Tradax then sought and obtained

an order from a Greek courtagainst Panagiotis Stravelakis SAenforcing the arbitration award.The order was served at theoffices of the companies in the SStravelakis group, but it was thenrevealed that PanagiotisStravelakis SA did not exist.Tradax then began proceedingsagainst all the companies whichhad given the guarantee, as wellas against Stefanos and PanagiotisStravelakis basing its claimagainst them on delict.

Before obtaining judgment underthese proceedings, Tradax ob-tained a writ of attachment issuedby the District Court for theCentral District of California, andcaused the Silvergate to be arrestedat Long Beach, California. Thevessel was released after a letter ofundertaking was furnished byGardenia’s attorneys, and thematter proceeded to trial. In termsof the letter of undertaking,Tradax promised to release thevessel immediately, restrict itsclaim to US$600 000, and not tore-arrest the vessel. In the mean-time, Tradax obtained an order bya Greek court that Astyanax paythe amount of the arbitrationaward given in the arbitrationproceedings. The proceedings inthe District Court in Californiaresulted in the grant of an applica-tion brought by Gardenia forsummary judgment in its favour.Tradax appealed against thisjudgment but the appeal was notproceeded with because in No-vember 1992, the Silvergate wasarrested in Durban in order toenforce certain judgments givenby the Greek court. In the Durbanand Coast Local Division, theparties proceeded to trial on thequestion of whether the judg-ments given by the Greek courtcould be enforced and in whomownership of the Silvergate vested.

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In the US Court of Appeals,Gardenia applied for the dismissalof the appeal still pending byTradax. This application wasgranted on the grounds thatTradax had stated before theDurban court that it had aban-doned and withdrawn the appeal.

Tradax appealed against theunfavourable judgment given inthe Durban and Coast LocalDivision. In argument, a numberof issues were debated. The courtdecided the matter on the basis oftwo issues, ie (i) whether thequestion of the ownership of thevessel was res judicata as aconsequence of the decision of theDistrict Court in California, and(ii) whether the terms of the letterof undertaking given to secure therelease of the vessel from attach-ment in the California proceed-ings precluded Tradax frompursuing the proceedings in theDurban and Coast Local Division.

THE DECISIONTradax argued that the courts in

California had not given a final ordefinitive decision because the USCourt of Appeals had dismissedits appeal without giving it a fulland fair opportunity to litigate thedispute in California. It alsoargued that because of the manner

in which the District Court arrivedat its decision and the manner inwhich the appeal was dismissed,the principle of audi alterampartem had not been applied. Itargued that the matter wastherefore not res judicata ascontended for by Gardenia.

The dismissal of the appeal bythe US Court of Appeals washowever, given in the exercise ofits plenary power to dismiss anappeal and there was nothingunfair or unjust in what it did. Themanner in which the DistrictCourt reached its decision wasequally unobjectionable. Bothparties were afforded a fullhearing at the summary judgmentapplication, and given an oppor-tunity to present further argu-ment. There was no compellingshowing of unfairness in thedecisions of these courts. Whetheror not a South African courtwould have made similar deci-sions, they were made afterTradax had been given a full andfair opportunity to litigate thedispute in California and werefinal or definitive in nature.

Tradax’s alternative argumentthat a judgment of the Greek courtshould be preferred to that givenby the District Court was also tobe rejected on the grounds that the

judgment of the Greek court givenafter that of the District Court hadbeen extinguished pending adecision on a contention of abuseof right.

The judgments of the UnitedStates courts therefore renderedthe dispute between the partiesres judicata.

As far as the second issue wasconcerned, the letter of undertak-ing did not relate only to claimsmade in the California proceed-ings. The parties would not havecontemplated further arrests inCalifornia, since security had beengiven for Tradax’s claim, andGardenia would have beenconcerned about arrests in otherjurisdictions. The letter of under-taking was, properly construed,an undertaking not to arrest inany country in respect of the sameclaim. The fact that Gardenia’sattorneys contended that the letterof undertaking became voidfollowing the decision by theDistrict Court was no indicationthat the obligation not to re-arrestthe vessel fell away. Tradax’scounter-promise remained effec-tive.

The terms of the letter of under-taking therefore precluded Tradaxfrom pursuing its claim in theDurban and Coast Local Division.

The appeal was dismissed.

Shipping

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WELTMANS CUSTOM OFFICE FURNITURE (PTY) LTD vWHISTLERS CC

A JUDGMENT BY MELUNSKYAJA and NIENABER JA(HEFER JA, SCHUTZ JA andMADLANGA AJA concurring)SUPREME COURT OF APPEAL1 JUNE 1999

1999 (3) SA 1116 (A)

A transfer of assets under a sale ofbusiness agreement which takesplace after the institution ofproceedings for the enforcement ofa claim against the seller is voidas against the creditor claimingenforcement. To the extent thatproceedings are broughtsubsequent to the transfer of suchassets, the creditor cannot enforceits claim against the seller.Though a settlement agreementmay replace the agreement interms of which a creditor hasbrought its claim, proceedings forthe enforcement of the settlementagreement may still be consideredas having begun with the originalinstitution of proceedings for theenforcement of the originalagreement.

THE FACTSIn February 1994, Mr I Weltman

purchased a business known asDMS Woodcraft from WhistlersCC for R140 000. The purchaseprice was payable in monthlyinstalments of R5 000 starting on 1May 1994.

Weltman failed to pay theinstalments due for each month of1994. At various stages, Whistlersissued four summonses againstWeltman for payment of instal-ments then due to it, the first inrespect of the May and Juneinstalments being served on 20June. in January 1995, Whistlersobtained judgments in respect ofeach action, except that institutedfor the July instalment, the total inits favour amounting to R37188,57.

In August 1995, the partiesentered into a settlement agree-ment. This recorded that insettlement of a dispute betweenthem, the purchase price would bereduced to R114 000, payable inmonthly instalments of R8 000,and that Weltman would sign aconsent to judgment in terms ofsection 58 of the Magistrates’Court Act (no 32 of 1944).Weltman signed the consent tojudgment. Weltman made onlytwo payments under the agree-ment and Whistlers obtainedjudgment in terms of the consentto judgment. A warrant of execu-tion was issued, and in December1995, the sheriff attached propertyin satisfaction of the judgment.

In September 1994, Weltman hadsold his own business, whichincluded the assets of the businesspurchased from Whistlers, toWeltmans Custom Office Furni-ture (Pty) Ltd (‘the company’).These assets were transferred tothe company in terms thereof. Thesale agreement provided that thesale would not be advertised interms of section 34 of the Insol-vency Act (no 24 of 1936). At this

time, Whistlers’ claims againstWeltman amounted to R22 188,57.

After the attachment of theassets, the company alleged that itwas the owner of them, andclaimed them as owner. Thesheriff issued an interpleadersummons the result of which wasa rejection of the company’s claim.The company appealed.

THE DECISION(per Melunsky AJA (MadlangaAJA concurring)

Section 34 of the Insolvency Actprovides that if a trader transfersany business belonging to himand has not advertised the in-tended transfer as specified in thesection, the transfer shall be voidas against his creditors for aperiod of six months after suchtransfer. Sub-section 3 of thesection provides that if any personwho has any claim against thetrader in connection with thebusiness has, before transfer,instituted proceedings against thetrader for the purpose of enforc-ing his claim, the transfer shall bevoid as against him for the pur-pose of such enforcement.

Whistlers contended that thissection was directly applicable,and that because it had institutedproceedings against Weltmanbefore transfer of the assets for thepurpose of enforcing its claim, thetransfer of them to the companywas void. The company con-tended that the settlement agree-ment terminated the originalagreement for the sale of thebusiness and that Whistlers’ claimwas being brought in terms of thelater agreement, so that it had notinstituted proceedings before thetransfer of the assets.

The settlement agreementamounted to a compromise, ie theconclusion of a new agreementwhich replaced the originalagreement. This however, did notchange the essential nature of

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Whistlers’ claim against Weltmanwhich related to the sale of thebusiness. Even though the settle-ment agreement changed theamount payable and the methodof payment, it did not changeWhistlers’ claim or Weltman’sobligation. The proceedingsinstituted by Whistlers beforetransfer of the assets were there-fore sufficiently closely connectedto its claim under the settlementagreement to warrant the conclu-sion that the transfer was void forthe purposes of section 34(3) ofthe Act.

The transfer was however, voidonly in respect of those claims forwhich Whistlers had institutedproceedings by the time transfer

took place. Those claims amount-ed to R22 188,57 at that time andWhistlers was entitled to considerthose transfers void which madeup that amount. There being somerelationship between these claimsand previously instituted proceed-ings, section 34(3) was applicableto them and Whistlers was enti-tled to consider the transfer of theassets void to that extent. To theextent that its claims exceededthose claims, the transfer of theassets could not be consideredvoid.

(per Nienaber JA (Hefer JA andSchutz JA concurring)

While it was true that the trans-fer was void to the extent of

Insolvency

R22 188,57, Whistlers had neverasserted that it was entitled tosatisfaction of its claim to anygreater extent than this. It hadobtained a judgment in excess ofthis amount, in terms of theconsent to judgment, but theextent to which it could satisfythat judgment was not in issuebetween the parties. What was inissue was whether or not Whis-tlers could obtain satisfaction ofthe judgment to any extent, inview of the provisions of section34.

Since Whistlers had shown that itcould, it was entitled to judgmentin its favour. The appeal wastherefore to be dismissed.

The resolution of the dispute, however, is dependent upon a proper construc-tion of s 34(3) and not only on whether at common law a compromise ordinar-ily precludes the creditor from enforcing the original debt. What is necessary todecide is whether the creditor loses his protection under the subsection if, afterthe institution of proceedings, the contract on which the claim is based isamended or superseded by a subsequent agreement. The determining factor ineach case is the closeness of the connection between the original agreement andthe amending or subsequent agreement. It is, for instance, unthinkable that themere reduction of the original contract price after the institution of proceedingsto enforce the debt would result in the removal of the protection that a creditorhad acquired under the subsection. Section 34(3) was intended, inter alia, tobenefit a vigilant creditor and not to penalise him for reducing his claim inorder to resolve a festering dispute.

105

WYNLAND EIENDOMME BK v POTGIETER

A JUDGMENT BY MOOSA J(VAN REENEN J concurring)CAPE OF GOOD HOPE PROVIN-CIAL DIVISION17 JUNE 1999

[1999] 3 All SA 567 (C)

An estate agent must prove that itwas the effective cause of a saleand that no intervening party wasthe cause thereof, in order to showthat it fulfilled its mandate to sellthe property.

THE FACTSIn March 1994, Potgieter gave

Wynland Eiendomme BK amandate to find a purchaser forher property, to be sold for R335000. In October 1994, Wynlandshowed the property to a MrsDurr who was attracted to theproperty but put off by certaindefects in the bricks with which ithad been built. The defects causedher to lose interest in the property.

In January 1995, upon thesuggestion of her sister-in-law,Mrs Durr contacted Potgieterwithout the intervention of theestate agent, and inspected theproperty again. The partiesconcluded a sale agreement inFebruary, the purchase pricebeing R315 000. They also agreedthat in the event of Potgieter beingheld liable for commission byWynland, Mrs Durr would con-tribute a maximum sum of R5 000in respect thereof.

Wynland brought an actionagainst Potgieter for payment ofcommission of R21 546 on the saleof the property. It alleged that ithad properly performed itsmandate in that it had introduced

Property

Mrs Durr to the property and asale had eventuated, it being theeffective cause thereof. In conse-quence, it was entitled to paymentof commission calculated at 6,84%of the price, ie R21 546.

THE DECISIONThe intervention of Mrs Durr’s

sister-in-law represented theintervention of an agency otherthan Wynland in the conclusion ofthe sale. This intervention broughtabout the sale and was thereforethe cause of it. Wynland wastherefore not the effective cause ofthe sale.

In any event, Wynland did notsubstantially fulfil its mandatebecause the mandate was to sellthe property for R335 000, givingPotgieter a net amount of R315000. The property was in fact soldfor R315 000 and if the commis-sion of R21 546 was subtractedfrom that, Potgieter would receiveless than the amount she hadagreed to be satisfied with uponcompletion of the mandate givento Wynland, ie R293 454.

Wynland was therefore notentitled to payment of the com-mission it claimed.

106

JOSEPH FORMAN HOLDINGS (PTY) LTD vFORIM HOLDINGS (PTY) LTD

A JUDGMENT BY NAVSA J(SOGGOTT AJ and MALEKA AJconcurring)WITWATERSRAND LOCALDIVISION14 MAY 1999

1999 CLR 395 (W)

In deciding whether a curator adlitem should be appointed for theinstitution of proceedings by acompany, a court is obliged toexamine the allegations beingmade against the directors of thecompany, determine whether ornot such grounds existed, and thendetermine whether or not theappointment of a curator wasdesirable or justified.

THE FACTSJoseph Forman Holdings (Pty)

Ltd held 14,7% of the issued sharecapital in Forim Holdings (Pty)Ltd (‘the company’). The companywas a successful company, beingmanaged by M Gelbart and JEForman firstly through a partner-ship and later as executive direc-tors of the company.

In November 1990, a companywholly owned by Gelbart andForman, Tyre Import Agencies(Pty) Ltd (TIA), purchased theshares in Kemtrade, a pharmaceu-tical company which was then inliquidation. In the following years,the company acquired the sharesin TIA in order to obtain effectiveownership and control ofKemtrade. It firstly acquired 65%of the shares, then acquired theremaining 35%. The secondacquisition was paid for by theissue of further ordinary shares initself. The pharmaceutical inter-ests of the company proved to beextremely profitable.

Joseph Forman, a foundingmember and shareholder ofJoseph Forman Holdings (Pty) Ltd(‘Forman’), took the view that theacquisition of the shares in TIAwas wrongful and the process bywhich Kemtrade was acquiredand the shares in TIA transferredto the company constituted abreach of trust by Gelbart and JEForman. He alleged that the pricepaid for the acquisition of theremaining 35% of the shares inTIA was unwarranted, wasexacted at an expense to thecompany and constituted a wrongcommitted against the company.

Forman applied for an order interms of section 266 of the Compa-nies Act (no 61 of 1973) for theappointment of a curator ad litemto investigate an alleged claim tobe instituted by the companyagainst Gelbart and JE Forman.The company opposed the appli-cation.

THE DECISIONSection 266 of the Companies

Act provides that where a com-pany has suffered damages or lossas a result of any wrong commit-ted by any director and thecompany has not instituted actionfor the recovery of such damagesor loss, any member of the com-pany may initiate proceedings onbehalf of the company againstsuch director notwithstandingthat the company has ratified orcondoned any such wrong. Thesection provides for such proceed-ings to be brought by a curator adlitem after the appointment of acurator. It requires that there beprima facie grounds for proceed-ings to be brought by the com-pany and that an investigationinto the desirability of institutingthe proceedings is justified.

The wrong alleged to have beencommitted against the companywas a breach of the fiduciary dutyof Gelbart and JE Forman asdirectors of the company, in thatthey had not acquired for thecompany the full complement ofshares in TIA but only 65% in thefirst instance.

The allegation in itself did notestablish the prima facie groundsfor proceedings to be broughtagainst Gelbart and JE Forman—the court was obliged to examinethe allegation, determine whetheror not such grounds existed, andthen determine whether or not theappointment of a curator wasdesirable or justified.

In examining the allegation, itbecame apparent that the acquisi-tion of the shares was done withfull disclosure of the interest ofGelbart and JE Forman in thetransaction and with Forman’sknowledge and apparent ap-proval. The reason for the reten-tion of the 35% interest in TIA wasto ensure that Gelbart and JEForman retained an incentive inensuring the success of that

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company. There was nothingwrong in this and it was not anindication that the directors hadbreached their fiduciary dutiestoward the company.

The acquisition of the pharma-ceutical business being conductedby Kemtrade did not represent acorporate opportunity which wasrightfully the company’s. It had

been an opportunity taken up byGelbart and JE Forman in an areain which the company did notoperate and which involved aspeculative acquisition, the risk ofwhich had not rested on thecompany. In any event, theopportunity had eventually beenbrought to the company. Therehad also been full disclosure of the

interest of Gelbart and JE Forman,no material information havingbeen withheld by them from thecompany.

No prima facie grounds havingbeen shown for proceedings to bebrought by the company, theapplication for the appointment ofthe curator had to fail.

KNIGHT FRANK SA (PTY) LTD v NACHINVESTEMENTS (PTY) LTD

A JUDGMENT BY GOLDSTEIN JWITWATERSRAND LOCALDIVISION17 NOVEMBER 1998

1999 (3) SA 891 (W)

Where a party is induced to buy aproperty because an agentmandated to sell the property hasfound a buyer of the property andhas notified that party of thebuyer, the agent will be theeffective cause of the sale of theproperty to that party.

THE FACTSNach Investements (Pty) Ltd

gave Knight Frank SA (Pty) Ltd amandate to sell its property. Theproperty was occupied by Ful-crum Engineering (Pty) Ltd undera lease which gave Fulcrum theright of first refusal in the event ofNach wishing to sell its property.Knight Frank was aware of theright held by Fulcrum.

Knight Frank introduced a buyerto Nach. Fulcrum was advised ofthe offer and it exercised its rightof first refusal.

Knight Frank contended that itwas the effective cause of the saleand it claimed commission ofR342 000 from Nach. Nach de-fended an action for payment onthe grounds that the effectivecause of the sale was the exerciseof the right of first refusal held byFulcrum in terms of its lease, itsexercise thereof having beeneffected in order to retain its rightof occupation of the property.

THE DECISIONA common sense view of the

matter would point to the effec-tive cause of the sale having beenthe exercise of Fulcrum’s right offirst refusal, which itself waseffected as a result of the introduc-tion of the buyer by Knight Frank.The introduction of the offer byKnight Frank thus induced theexercise of the right of refusal andhence the sale of the property. Itwas therefore the effective causeof the sale.

Were it not for the fact thatKnight Frank knew of Fulcrum’sinterest in the property andapproached Fulcrum with theoffer it had secured from thebuyer, it might not have followedthat it was the effective cause ofthe sale. However, Knight Frankhad in fact known of Fulcrum’sinterest and had approached itwith the offer. This distinguishedthe situation from that where asale to a buyer other than thatintroduced by the agent is broughtabout because of the buyer havingbeen motivated by the agenthaving secured another buyer.

Knight Frank were the effectivecause of the sale.

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BODY CORPORATE OF GREENWOOD SCHEME v75/2 SANDOWN (PTY) LTD

A JUDGMENT BY WEPENER AJWITWATERSRAND LOCALDIVISION30 NOVEMBER 1998

1999 (3) SA 480 (W)

Section 424 of the Companies Act(no 61 of 1973) also applies to thebusiness of a company relevant toaffairs other than financialaffairs.

THE FACTSThe Body Corporate of Green-

wood Scheme brought an actionagainst 75/2 Sandown (Pty) Ltdand two other defendants for thepayment of damages arising fromits failure to construct buildings ina proper and workmanlike man-ner. The buildings were con-structed as part of a sectional titledevelopment, and the bodycorporate was responsible for thecontrol, administration andmanagement of the commonproperty pertaining thereto.

The action against the thirddefendant, the sole director of 75/2 Sandown, was based on section424 of the Companies Act (no 61of 1973) which entitles a court todeclare any person knowingly aparty to the reckless carrying on ofthe business of a company person-ally responsible for the debts ofthe company.

Two exceptions were raisedagainst the claims, one of whichwas that section 424 of the Com-panies Act applies only to thefinancial affairs of a company anddoes not apply to a company’sbuilding activities.

THE DECISIONSection 424 was not limited to

apply solely to the financial affairsof the company in question. Itcould apply to the carrying on ofany business conducted by thecompany. The company’s finan-cial position might be sound andthe company itself might still becarrying on business, at a timewhen the provisions of the sectionare applied to those to whom thesection can be applied, usually itsdirectors.

It was clear from past decisionson cases concerned with thesection, that the purpose of thesection has been considered to beto supplement the common lawremedies available against aperson who has engaged inreckless trading and to simplifythe evidential requirements of adelictual claim. This object isachieved by applying the sectionto matters other than those rel-evant to the financial affairs of thecompany.

The exception was dismissed.

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BOOKWORKS (PTY) LTD v GREATER JOHANNES-BURG TRANSITIONAL METROPOLITAN COUNCIL

A JUDGMENT BY CLOETE J(HEHER JA and PRELLER AJconcurring)WITWATERSRAND LOCALDIVISION6 AUGUST 1999

1999 CLR 437 (W)

A court considering anapplication for the furnishing ofsecurity for costs is required toexercise a narrow discretion indeciding whether or not to furnishsuch security. This means thatcourt is required to decide uponthe furnishing of security orotherwise in a judicial manner, ienot capriciously or upon a wrongprinciple or with bias. In doing so,the constitutional rights of thelitigant must be considered, butthere is no reason for the court tobe predisposed to denying anapplication for security on thegrounds that this would deny thelitigant access to the courts.

THE FACTSBookworks (Pty) Ltd brought an

action for damages against theGreater Johannesburg TransitionalMetropolitan Council (GJTMC)and against the second respond-ent. Bookworks was ordered toprovide security for costs in termsof section 13 of the Companies Act(no 61 of 1973) and Rule 47 of theUniform Rules of Court.

Bookworks wished to appealagainst the order and brought anapplication for condonation withregard to its prosecution of theappeal. The respondents opposedthe application on the groundsthat there were no prospects ofsuccess on appeal.

The order that security for costsbe furnished was given afterconsideration of the argumentpresented by Bookworks that ifsecurity for costs was ordered,Bookworks would be unable toprovide it, thus denying it theconstitutional right of access to thecourts. That court also took intoaccount the fact that Bookworkswas in a bad financial situation forthe two years preceding theactions alleged to have been thecause of Bookworks’ damages. Italso considered that the actionbrought by Bookworks wasultimately for the benefit of thesole shareholder of the companyand his father, both of whom hadnot been prepared to offer securityfor costs. On appeal, the soleshareholder offered to undertakesuretyship obligations in hispersonal capacity for the costs ofthe action.

Bookworks contended that theorder was given without a properexercise of judicial discretion andthat there were reasonable pros-pects of success in overturning theorder on appeal.

THE DECISIONIn deciding whether or not an

appeal should be allowed, the testwas whether or not the discretiongiven a court in terms of section13 of the Act had been exercised

judicially in the narrow sense ofhaving not been exercised capri-ciously or upon a wrong principleor with bias. The discretionconferred by section 13 is adiscretion so understood. Thesection provides that ...

A court’s discretion in decidingwhether or not to order thatsecurity be furnished is a narrowdiscretion because it concerns amatter of costs, involves a regula-tion by the court of its own proce-dures and requires the exercise ofa value judgment.

The argument that the effect ofthe constitutional right of access tothe courts was to impose on acourt a predisposition to upholdthat right could not be accepted.The court was bound to exerciseits discretion under section 13with due regard to the litigant’sconstitutional rights, but withouta predisposition to deny anapplication for the provision ofsecurity for costs. The decision togrant the application for securityfor costs had been made withoutaccepting that any predispositionwas required, and had not beenwrongly made for that reason.

The fact that the court took intoaccount the bad financial situationof Bookworks in the two yearspreceding the events in respect ofwhich it brought its action fordamages indicated that the courthad exercised its discretion afterconsidering Bookworks’ allegationthat its inability to furnish securityfor costs was brought about by theconduct of those who had causedits damages.

The court might have misdi-rected itself in considering thefather of the sole shareholder aperson who would ultimatelybenefit from a successful action,but it remained true that the soleshareholder would benefit from asuccessful action. The suretyshipoffered on appeal could not assisthim since the offer had not beenmade when the court was askedto exercise its discretion.

The appeal failed.

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BAFOKENG TRIBE v IMPALA PLATINUM LTD

A JUDGMENT BY FRIEDMAN JPBOPHUTATSWANA HIGHCOURT17 SEPTEMBER 1998

1999 (3) SA 517 (B)

Beneficiaries of a trust may bringan action to recover losssustained by the trust not onlywhere the loss is caused by thetrustee, but also where the trusteefails to take steps to recover theparticular loss sustained by thetrust.

THE FACTSDuring the period 1871 to 1935,

the Bafokeng tribe purchased 13farms. It was then and thereafterheld in trust for it by variousparties as it could not be regis-tered directly in its own name inview of the racial policies of thegovernment of the day.

In 1977, a government officialholding the land in trust for thetribe granted a mining lease overthe land and the lease was cededto Impala Platinum Ltd in thesame year. At a later stage, thegovernment official’s position wassuperseded by the State Presidentof Bophutatswana as trustee forthe tribe and thereafter by theMinister of Land Affairs in whosename the land was then registeredin his capacity as trustee.

In 1995, the tribe brought anaction against Impala PlatinumLtd in which it sought a declara-tion that the registration of certainof its land in the name of the StatePresident of Bophutatswana wasinvalid, and that a deed of cessionand mining lease concluded byhim in respect of the land in 1986were void.

Prior to trial, the tribe sought toamend its particulars of claim.One of the amendments allegedthat the Minister of Land Affairswas precluded from bringing theaction or it would be improper forhim to do so, having regard toconflicts of interest which wouldarise from his position as trusteeand his position as Minister ofState. It alleged that such a conflictof interests arose in regard to theaction being brought by it againstImpala.

Impala objected to the amend-ment on a number of grounds, oneof which was that as beneficiary ofthe trust, the tribe did not havethe right to sue, and that only thetrustee of the trust could do so onits behalf.

THE DECISIONA beneficiary of a trust may

bring an action to recover a losssustained by the trust where adefaulting or delinquent trusteefails to do so. The action mayeither be brought on behalf of thetrust or by the beneficiary in hisown right.

This exception to the general rulethat such an action should bebrought by the trustee of the trustextends beyond actions againstthe trustee himself in cases wherethe action is founded on thetrustee’s breach of duty. In thepresent case therefore, where itwas not certain that the Ministerof Land Affairs made commoncause with the previous trusteewho, it was alleged, acted againstthe interest of the trust and itsbeneficiaries, an action could bebrought by the beneficiaries basedon allegations that the Ministerfailed to take action on behalf ofthe trust. The trustee’s immobilitygave as much a reason for thebeneficiaries to bring an action onbehalf of the trust as his havingcaused loss to the trust.

The Constitution also provided areason to confer on the tribe theright to bring the action againstImpala. Sections 7(4)(a) and 38 ofthe Constitution of the Republic ofSouth Africa Act (no 200 of 1993)provide for the right to enforce aright in court. This was what thetribe sought to do in the presentcase.

The tribe therefore did have theright to bring the action againstImpala.

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GOLDEN LIONS RUGBY UNION v FIRST NATIONALBANK OF SA LTD

A JUDGMENT BY SCHUTZ JA(HEFER JA, VIVIER JA, FHGROSSKOPF JA and MARAIS JAconcurring)SUPREME COURT OF APPEAL26 MARCH 1999

1999 (3) SA 575 (A)

Although a provision in anagreement that the terms thereofare to operate in perpetuity isunusual, it is effective between theparties. The plain meaning of theprovision will not be construed soas to destroy the effectivenessthereof by inferring a limitationon the duration of the right.

THE FACTSIn August 1987, First National

Bank of SA Ltd agreed to lendR26,65m to the Golden LionsRugby Union to allow the Unionto obtain cession of a lease over itsrugby stadium and the sharecapital of Ellis Park Stadium (Pty)Ltd (EPS) which managed thestadium. In terms of the agree-ment, the bank was given apreferential right to finance salesor leases of suites or seats at thestadium and the Union undertookto place all banking business withthe bank.

In terms of clause 9.1 of theagreement, the Union was obligedto ensure that the bank’s namewas used in connection with allpublicity campaigns and pro-grammes, tickets and otherdocumentation relating to thestadium and sporting activitiestaking place there, in such amanner as to convey the bank’sclose association with the stadiumand the Union. Clause 9.2 pro-vided that this promotion was toendure in perpetuity or untilterminated by the bank. Clause 9.3provided that the parties wouldprocure that the area immediatelyabove the TV screen at the sta-dium, as well as other specifiedareas, would carry free advertis-ing of the bank’s name.

In May 1988, the agreement wasvaried as a result of a decision thatthe Union would secure a listingfor EPS on the Johannesburg StockExchange, thereby enabling anearly repayment of the Union’sindebtedness to the bank. Variousprovisions of the first agreementwere amended but it was pro-vided that the provisions of clause9 would continue to apply,whether or not that agreementwas cancelled. The EPS listingtook place. Thereafter, the Uniondecided to buy back the shareswhich were had then been issued.The bank refused to supply the

funds necessary for this and theUnion turned to Trust Bank forthis.

The Union contended that it waslonger bound by the provisions ofclause 9 as they did not survivethe ending of the close associationbetween it and the bank. The banksought and obtained a declarationthat the provisions did operate inperpetuity. The Union appealed.

THE DECISIONThe Union contended that the

right to publicity for the bank’sname was a right which was to beexercised so as to convey thecontinuing business associationbetween the Union and the bank.When that association ended, theright would similarly terminate.

This contention was inconsistentwith the plain meaning of thewords used in clause 9.2, ie thatthe right would endure in perpe-tuity. No reference to the contin-ued association between theUnion and the bank was made. Toaccept the contention would be toinsert the words ‘for so long as theclose association lasts’ in the termsof the clause. This would directlycontradict the words ‘in perpetu-ity’.

It was also clear that the partiesintended the right to continue inperpetuity as the obligation tocontinue placing banking businesswith the bank terminated with therepayment of the loan. A termina-tion date for the associationbetween the parties was envis-aged, yet the continuation of thepublicity rights beyond that datewas provided for. Furthermore,the agreement entered into in May1988 clearly distinguished clause 9of the original funding agreementas incorporating provisions whichwould continue to apply.

The provisions of clause 9.1 and9.2 therefore survived the endingof the close association betweenthe Union and the bank and wereeffective between the parties.

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Clause 9.3 was however differentin that it did not incorporate thewords ‘in perpetuity’ and it didnot refer to any close associationbetween the parties. Its subjectmatter was also different fromthat of clauses 9.1 and 9.2. There

was no reason to consider itsapplication as continuing inperpetuity.

The provisions of clauses 9.1 and9.2 were therefore effectivebetween the parties but not thoseof clause 9.3.

Contract

CONSOLIDATED EMPLOYERS MEDICAL AID SOCIETY v LEVETON

A JUDGMENT BY SCHUTZ JA(VIVIER JA, HOWIE JA,ZULMAN JA and FARLAM AJAconcurring)SUPREME COURT OF APPEAL27 NOVEMBER 1998

UNREPORTED

As a member of a medical aidsociety in terms of a settlementagreement terminating hisemployment, Leveton asserted hisrights to continuation as amember without being transferredto another medical aid society. Itwas held that in terms of therules, Leveton was entitled toretain his existing membershipwithout transfer and that thedecision to transfer him had beentaken unauthorisedly in the faceof a decision of a disputescommittee that the transfer wasnot acceptable.

THE FACTSIn terms of his employment

agreement with Southern LifeAssociation Ltd, Leveton was toremain a member of the medicalaid schemes of which AffiliatedMedical Administrators (Pty) Ltd(Ama) was a member. In terms ofclause 12 of the agreement, it wasagreed that on termination of theappointment, Leveton wouldremain a member of the medicalaid and provident fund and betreated in this regard as if he hadretired. Leveton became a memberof Consolidated EmployersMedical Aid Society (Cemas), andAma, which was controlled bySouthern, paid the employer’scontributions to Consolidated.Rule 6.3 of the scheme providedfor the retention of membership ofthe scheme in the event of amember retiring from the serviceof his employer.

In terms of a settlement agree-ment entered into betweenLeveton and Southern on 12August 1991 ending Leveton’semployment, it was provided thatLeveton would be entitled toremain a member of the providentfund and medical aid scheme andwould pay contributions applica-ble to a retired member after

termination of his employment on30 June 1992. Southern wouldhonour all its obligations in termsof the employment agreement upto the date of termination. There-after, Ama paid Leveton’s contri-butions as it had in the past.

In March 1994, Ama informedLeveton that it had decided totransfer its continuation membersto the Southern Health medicalaid. Leveton disputed its right todo so. He appealed to Cemas’sdisputes committee. That commit-tee disagreed with the Cemasmanagement committee’s decisionto transfer all continuation mem-bers to Southern Health medicalaid and recommended rescissionof the earlier decision. The Cemasmanagement committee refusedto do so. It contended thatLeveton had left the service of hisemployer in 1992 and so becamesubject to the provisions of Rule10.2 of the Cemas medical schemerules. That rule provided that amember who left the service of theemployer for any reason wouldcease to be a member and allrights of participation in thebenefits under the Rules wouldthereupon cease.

Leveton then brought an applica-tion for an order that the decision

113

of the disputes committee wasbinding on Cemas and that he bereadmitted to membership. Healso claimed that the decision totransfer his membership bereversed as the transfer was abreach of the settlement agree-ment.

THE FACTSEven if Leveton had left the

service of his employer, therebybecoming subject to the provisionsof Rule 10.2, he remained amember of the medical aidscheme. A ‘member’ was definedin the Medical Schemes Act (no 72of 1967) as a person who has beenenrolled or admitted as and is stilla member of a scheme. Levetonhad shown that he fell within this

definition because he had shownhis original certificate of member-ship and the continuation of hismembership in terms of thesettlement agreement.

Since he was a member of thescheme at the time of the pur-ported transfer of membership tothe Southern Health medical aid,he was entitled to challenge thattransfer on the basis of his rightsas they already existed and wereprovided for in the Cemas medi-cal aid scheme. This included hisright to remain a member and notbe transferred to another scheme.

Leveton was also entitled toreinstatement of his membershipof the Cemas medical aid schemeon the grounds that the finding ofthe disputes committee was

binding on the managementcommittee. The managementcommittee had acted in a high-handed manner in ignoring orbrushing aside the decision of thedisputes committee. That decisionwas taken by a body which, interms of section 20(1)(g) of theAct, was a tribunal independentof management and enabled toperform a function akin to that ofan arbitration. It was a decisionthat the management committeewas not entitled to ignore and onewhich it would have to apply forreview of, should it wish tocontest its decisions.

The decision of the disputescommittee was binding on Cemasand Leveton was readmitted tomembership.

Contract

KELVINATOR GROUP SERVICES OF SA (PTY) LTD v McCULLOCH

A JUDGMENT BY NUGENT J(SHABORT JA and GOODMANAJ concurring)WITWATERSRAND LOCALDIVISION7 JUNE 1999

1999 CLR 454 (W)

A tacit term will not be importedinto an agreement where that termis in conflict with the other termsof the agreement. An assumptioncommonly held by the parties toan agreement which is incorrectnullifies the agreement only if theagreement is dependent on thecommon assumption.

THE FACTSMcCulloch was employed by

Kelvinator Group Services of SA(Pty) Ltd. The company had notbeen profitable for some yearswhen, in 1996, it informed itsemployees, including McCulloch,that because it had been unable tobecome profitable, it intended todiscontinue operations. Thecompany informed employeesthat it had been in negotiationwith a potential purchaser of itsbusiness, but it considered that thenegotiations would not be suc-cessful.

On 27 November 1996,Kelvinator addressed a letter toMcCulloch in which it terminated

her services due to the discontinu-ation of the business. It offeredbenefits amounting to R147 759and requested confirmation ofacceptance. McCulloch signed heracceptance of these terms.

On 13 December 1996,Kelvinator issued a notice toemployees that negotiations forthe sale of the business of thecompany had been successful andthat the business would notdiscontinue. The terms of redun-dancy agreements previouslyentered into would be honouredwhere the redundancy wasconfirmed.

McCulloch took the view thather retrenchment benefits could

114

not be retracted and insisted thatKelvinator perform its obligationsin terms of its letter terminatingher services. Kelvinator re-sponded that both parties hadbeen aware of the negotiations forthe sale of the business, and it hadbeen entitled to revoke the termi-nation letter were these negotia-tions to prove successful. Itcontended that it was a tacit termof the termination agreement thatif the intended retrenchment wasnot required for operationalreasons and McCulloch was offer-ed continued employment with it,the agreement would lapse and beof no force or effect. In the alterna-tive, it contended that the agree-ment was concluded on the basisof a common assumption thatKelvinator’s business would bediscontinued, and that becausethis did not take place the agree-ment was of no force or effect.

THE DECISIONA tacit term must be a term

which both parties must haveintended would have been in-cluded in their agreement, orwould have intended it to be soincluded if they had turned theirminds to that aspect. Such a termwill therefore not be considered tobe part of an agreement if itwould be in conflict with theexpress provisions of the agree-ment.

In the present case, the termwhich Kelvinator contendedshould be seen as a tacit term wasin conflict with the express provi-sions of the agreement. Thereference to McCulloch’s redun-dancy was no indication that theemployment contract was toterminate only if it transpired thatshe did become redundant. Thatreference was an indication of thereasons for the agreement and not

the establishment of a conditionprecedent for the conclusion of it.

As far as the alternative conten-tion was concerned, the rule wasthat whatever the common as-sumption accepted by both partiesto an agreement, those parties willbe bound to the agreement unlessthe existence of the agreementwas dependent on the commonassumption. If the commonassumption relates to a futurestate of affairs, different consid-erations do not apply: the agree-ment remains unaffected by thecommonly held (incorrect) as-sumption so long as the existenceof the agreement is not dependenton it.

The agreement was clear andunambiguous and there were nogrounds for importing a termwhich would make it conditional.

Contract

a contract will fail only if it can be said that it was the parties’ inten-tion that the existence of the contract should be dependant upon theexistence of the assumed state of affairs. Whether that was theirintention will depend upon the construction to be placed upon theparticular contract, seen in the context of any evidence of surround-ing circumstances that might be admissible

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MERVIS BROTHERS v INTERIOR ACOUSTICS

A JUDGMENT BY LEVESON J(FLEMMING DJP and BLIEDEN Jconcurring)WITWATERSRAND LOCALDIVISION6 NOVEMBER 1997

1999 (3) SA 607 (W)

An arbitrator exceeds his powerswhere he gives an order forspecific performance and theparties have appointed thearbitrator to make an award forthe payment money. Although anarbitrator is entitled to make anaward of specific performance interms of section 27 of theArbitration Act (no 42 of 1965) hemay not do so where a court willnot make such an order in thesame circumstances.

THE FACTSInterior Acoustics contracted

with Mervis Brothers to performcertain works for the latter. Adispute arose between themregarding the performance of theworks and Interior Acousticsproceeded against Mervis with anaction in the High Court. Beforethe hearing of the matter, theparties agreed that the disputewould be determined by arbitra-tion, the arbitrator to decide onthe amount owing to InteriorAcoustics. The second respondentdrew up an agreement to arbitra-tion which Mervis signed. InteriorAcoustics also signed it, addingfurther terms to which bothparties agreed.

The arbitrator directed theappointment of a third party tooversee specified remedial workand upon completion thereof,payment by Mervis. He did notassess the cost of the remedialwork and completion thereof, butordered Interior Acoustics tocomplete the works and Mervis topay it thereafter.

The arbitrator’s award wassubsequently set aside by order ofcourt. Mervis appealed againstthis order.

THE DECISIONThe order setting aside the

arbitrator’s award was correctlygiven, in view of the fact that thearbitrator had been appointedmerely to decide upon whatamount was owing to InteriorAcoustics. The arbitrator had infact ordered that completion ofthe work was to take place, iespecific performance, and thismeant that he had exceeded hispowers. In terms of section33(1)(b) of the Arbitration Act (no42 of 1965), where an arbitrationtribunal has exceeded its powersin making an award, the court isentitled to set the award aside.

In terms of section 27 of the Act,an arbitrator may order specificperformance in circumstanceswhere a court would have thepower to do so. However, a courtwould not make such an order inthe present case as it would bedifficult for the court to enforce anorder of specific performance ofthe works. The arbitrator’s ap-pointment of the third party tooversee the work did not over-come this difficulty as a courtwould not have exercise thepower to do so, and in any eventconstituted an unauthoriseddelegation of the arbitrator’spowers. Furthermore, the partieshad never agreed that the arbitra-tor would be entitled to order thespecific performance of the work.

Another objection to the awardwas that the arbitrator left unde-termined the issues upon whichthe parties were in dispute, yetwhen the arbitrator gave theaward, his functions were com-plete.

The appeal was dismissed.

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TESORIERO v BHYJO INVESTMENTS SHAREBLOCK (PTY) LTD

A JUDGMENT BY WUNSH J(SCHABORT J concurring)WITWATERSRAND LOCALDIVISION1 JUNE 1999

1999 CLR 364 (W)

The contractual capacity of aperson is determined by the law ofthe place where the contract isentered into, not the law of thematrimonial property regime towhich the person’s marriagepertains. Where it is clear that acontract is entered into by aperson who knows andunderstands the meaning of thecontract, there will be no groundfor a finding that the contract wasentered into by mistake.

THE FACTSTesoriero signed a deed of

suretyship in favour of BhyjoInvestments Share Block (Pty) Ltdin respect of the debts of a closecorporation, Sellavie Clothing CC,which she operated as a businessconcern manufacturing clothingand selling to boutiques. At thetime, she was married accordingto the matrimonial propertyregime of Argentina which shesaid was the same as that of SouthAfrica.

Tesoriero was Spanish-speakingand did not have a good com-mand of the English language. Atthe time when she signed the deedof suretyship, she asked questionsconcerning the nature of theagreements she was concludingincluding the terms of the leasegiving rise to the principal indebt-edness. She depended on theother member of the close corpo-ration to explain to her the natureof the contracts she was thenentering into.

Bhyjo brought an action forpayment under the deed ofsuretyship. Tesoriero appealedagainst the judgment givenagainst her on the grounds thatbeing married in community ofproperty, she had lacked thecontractual capacity to enter intothe deed of suretyship, alterna-tively that she had not understoodthe nature of the transaction shehad entered into.

Contract

THE DECISIONThe law applicable to the deter-

mination of contractual capacity isthe law of the place where thecontract is concluded. In thepresent case, this was SouthAfrica. The law pertaining to thematrimonial property regime wasnot relevant.

In terms of sections 11 and 14 ofthe Matrimonial Property Act (no88 of 1984) Tesoriero had contrac-tual capacity. In terms of section15(2)(h) of that Act, she could notbind herself as surety without herhusband’s consent except wherethe suretyship was signed in theordinary course of her profession,trade or business (an exceptionprovided for in section 15(6) of theAct).

It was true that no discussion ofthis exception had taken place inthe trial proceedings, but theevidence presented did make itpossible to determine whether ornot the section applied. It wasclear that Tesoriero had enteredinto the deed of suretyship as partof her activities in a profession,trade or business.

The deed of suretyship had alsobeen entered into without anymistake on her part as to thenature and content thereof. It hadbeen entered into in conjunctionwith a lease. It was not a compli-cated document and stood sepa-rately from the lease and Bhyjo’srepresentative had done nothingto encourage a misunderstandingof the document on her part.

The appeal was dismissed.

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BOE BANK BPK v VAN ZYL

A JUDGMENT BY GRIESEL JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION19 APRIL 1999

1999 (3) SA 813 (C)

Duress which vitiates theformation of a contract may beexercised by one party as againstanother subtly and byimplication, as when one partyraises the possibility of criminalsanction which can be appliedagainst the one and this inducesthe other party to enter into thecontract. In such circumstances,the application of the duress willbe unlawful and contra bonosmores, and a basis upon which thecontract will be avoided.

THE FACTSBOE Bank Bpk and Karsten

entered into a floor plan agree-ment in terms of which BOEfacilitated Karsten’s second-handmotor vehicle business by financ-ing the sale of motor vehicleswhich were sold by Karsten in thecourse of that business. The bankdiscovered that certain vehiclesowned by it and which it thoughtwere still in Karsten’s possessionhad been sold by Karsten or lostby him without it being paid theamount due to it under the financ-ing agreement. It issued a demandfor payment of this amount, R200000, and terminated his overdraftfacility of R100 000.

A meeting then took placebetween Karsten’s father-in-law,Van Zyl, and two officials of thebank. (Karsten was married incommunity of property.) At themeeting, the bank posited variousoptions available to the parties,one of them being to sequestrateKarsten’s estate, another being tobring criminal charges of theft andfraud, and another to give acapital injection into the businesswith the addition of furthersecurity by way of a suretyshipundertaking given by Van Zyl.The meeting terminated with thedecision to await the discharge ofKarsten himself from hospital andrestore the overdraft facility in themeantime.

After a second meeting hadtaken place, the bank increasedKarsten’s overdraft facility byR200 000 to be used to settle theamount it claimed as owed underthe floorplan agreement, andobtained a suretyship undertakingby Van Zyl limited to the extent ofR200 000 and effective only afterKarsten’s indebtedness were toexceed R100 000.

The bank alleged a furtherdefault by Karsten under thefloorplan agreement and it de-manded payment of the outstand-

ing amount from him and fromVan Zyl as surety. It brought anaction against Van Zyl claimingthe amount by which Karsten’sliability exceeded R100 000. VanZyl defended the action on thegrounds that he had been inducedto sign the deed of suretyship byduress and that accordingly thedeed was of no force or effectbetween the parties.

THE DECISIONIn order to prove that duress has

taken place in the formation of acontract, it must be shown that thefear experienced by the one partyvis-a-vis the other was a reason-able fear, was caused by the threatof some considerable and immi-nent evil, the threat was unlawfuland the moral threat must havecaused damage.

In the context of the present case,after the bank first discovered thatKarsten had not adhered to thefloorplan agreement properly, itcould exercise the right to demandrepayment of all debts due to it,sequestrate Karsten’s estate,attempt to regain possession ofthe sold motor vehicles and bringcriminal charges of theft andfraud against Karsten. Both thebank and Van Zyl were aware ofthese things when the deed ofsuretyship was signed. Van Zylwas therefore influenced by thepressure of these circumstanceswhen he signed the deed ofsuretyship, but he had to showthat the bank officials exercisedpressure on him which was bothunlawful and contra bonos mores.

The pressure which was exer-cised by the bank was expressedsubtly and by implication. At themeeting attended by the bank, itas well as the other parties, knewthat the criminal sanction forKarten’s dishonesty was a prisonterm without the option of a fine.Van Zyl was aware of the negativeimplications of this for his daugh-

Contract

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ter and her children. The possibil-ity of criminal sanction thereforeconstituted pressure put uponhim by the bank when it insistedon his signing the deed ofsuretyship. This was pressure

which could be considered unlaw-ful and contra bonos mores.

This duress was a basis uponwhich the deed of suretyshipcould be set aside. The deed ofsuretyship was void and ineffec-tive.

OWNERS OF CARGO LATELY LADEN ON BOARDTHE MT CAPE SPIRIT v CAPE SPIRIT

A JUDGMENT BY OLIVIER JA(VAN HEERDEN DCJ, VIVIER JAand HOWIE JA concurring,FARLAM AJA dissenting)SUPREME COURT OF APPEAL9 JUNE 1999

[1999] 3 All SA 529 (A)

An admiralty action lapses interms of section 1(2)(b) read withsection 3(10)(a) of the AdmiraltyJurisdiction Regulation Act (no105 of 1983) where security for theaction is furnished aftercommencement of the action.

THE FACTSThe owners of certain liquid

cargo which was carried fromRotterdam to Durban under aTanker Bill of Lading by the CapeSpirit brought an action in remagainst the ship alleging that thecargo was contaminated bycashew nut shell oil during thevoyage, and claiming damages.This was done by the issue ofsummons on 18 January 1995, andthe issue of a warrant of arrest. On15 February 1995, the ship wasreleased after it furnished securityfor the claim brought against it.

Nothing further was done topursue the action and some twoyears later, the ship began pro-ceedings for a declaration that thesecurity which had been furnishedhad lapsed and that the action hadlapsed. These proceedings werebased on section 1(2)(b) of theAdmiralty Jurisdiction RegulationAct (no 105 of 1983) which pro-vides that an admiralty actionshall lapse if property taken assecurity upon the commencementof the action is deemed to havebeen released and discharged in

terms of section 3(10)(a)(ii) of theAct. That section provides thatproperty deemed to have beenarrested shall be deemed to havebeen released if no further step inthe proceedings is taken withinone year of the giving of security.

The owners opposed the applica-tion on the grounds that the shipwas in fact arrested, and thereforenot deemed to have been arrested.Since Section 3(1)(a)(ii) dealt onlywith property deemed to havebeen arrested, it was not applica-ble in the present case where theship had in fact been arrested.

THE DECISIONThe plain meaning and intention

of section 3(1)(a) is that propertydeemed to have been arrested issuspectible to release as much asproperty which has actually beenarrested, where the action hascommenced with the furnishing ofsecurity as provided for in section1(2)(a). The section incorporatesno distinction between propertydeemed to have been arrested andproperty actually arrested.

The correct interpretation of

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section 3(1)(a) was to understandproperty deemed to have beenarrested or attached as any prop-erty which had been arrested orattached, whether because it wasdeemed to have been arrested orattached or because it actually hadbeen arrested or attached. Whenthe second part of the sectionreferred to the first part, in in-

cluded within it the description ofthe property as given in the firstpart and thereby made no distinc-tion between the two cases.

Were there to be a distinction,the release and discharge mecha-nism provided for in section3(10)(a)(ii) would operate wheresecurity is given for a ship a daybefore its arrest but not where it

was given a day after its arrest.That nuance would be of nopractical concern to the partiesand could not have been a distinc-tion the legislature contemplatedwhen enacting the section.

The admiralty action brought bythe cargo owners had thereforelapsed.

COMMISSIONER OF CUSTOMS AND EXCISE vCONTAINER LOGISTICS (PTY) LTDCOMMISSIONER OF CUSTOMS AND EXCISE vRENNIES GROUP LTD

A JUDGMENT BY HEFER JA(VIVIER JA, NIENABER JA,PLEWMAN JA and FARLAMAJA concurring)SUPREME COURT OF APPEAL28 MAY 1999

1999 (3) SA 771 (A)

The Commissioner of Customsand Excise is obliged to satisfyhimself that an importer orexporter has not taken allreasonable steps to prevent non-fulfilment of payment of customsduty before he may imposeliability for payment on the agentof the clearer in terms of section99(2)(a) of the Customs and ExciseAct (no 91 of 1964).

THE FACTSContainer Logistics (Pty) Ltd and

Rennies Group Ltd attended tothe clearance of goods throughDurban harbour upon instructionsbeing given to them by twocompanies, Access Freight andAnglo Dynamic. They did so,signing the relevant bills of entryas agent for the remover orexporter. The goods were destinedfor a neighbouring country andwere therefore entered for re-moval in bond. The effect of thiswas that liability for payment ofcustoms duty imposed by theCustoms and Excise Act (no 91 of1964) would be conditional onproof that the goods had beenduly taken out of the commoncustoms area.

In due course, the bills of entrywere presented to the Controllerof Customs and Excise dulysigned and stamped by an officialat a border post showing that thegoods had been removed from thecommon customs area. It laterappeared that the stamps andsignatures thereon were counter-feit and the goods had never left

the common customs area. Thecircumstances of the forgery andthe cause thereof remainedunknown to all the parties to theensuing litigation.

The Commissioner of Customsand Excise then demanded fromContainer Logistics and Renniespayment of duties and othercharges alleged to be due inrespect of the goods. The twoparties’ attorneys then requestedthe Commissioner to withdrawthe demand. The Commissionerinvited representations in regardto the request, listing documentshe required in support of theapplication. The list did notinclude the licences held by theparties in terms of which theywere entitled to clear goods. TheCommissioner rejected the appli-cations.

Later, the Commissioner indi-cated that he was required toconsider the applications upon thebasis of section 99(2)(a) of the Actand invited further representa-tions this time taking into accountthe licences in terms of which theparties cleared goods. The Com-

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missioner again rejected theapplications, citing the absence inthe applications of any referenceto the relationship of trust be-tween the parties and himselfwhich had convinced him that anyeffort was expended by them toensure that the bills of entry werecorrect.

The parties contested the Com-missioner’s decision to reject theirapplications.

THE DECISIONSection 99(2)(a) of the Act

provides that an agent of animporter or exporter will be liablefor the fulfilment of payment ofcustoms duty and charges unlesshe proves to the satisfaction of theCommissioner that he was not aparty to the non-fulfilment ofpayment, notified the Commis-sioner as soon as he became aware

of the non-fulfilment, and took allreasonable steps to prevent suchnon-fulfilment.

The Commissioner was satisfiedas to the first two requirements,but not the third. It appearedhowever, that in deciding that hewas not satisfied as to the third,the Commissioner had not appliedhis mind properly to the secondapplications made by the parties.In bringing into account therelationship of trust, the Commis-sioner had shown no change in hisassessment of the applications buthad merely repeated the sameassessment as had been given ofthe first. This showed that theCommissioner had merely de-cided that they were obliged tofulfil their obligations as definedin section 99(2)(a) and had notdetermined whether the third of

the proviso requirements of thatsection had been fulfilled, iewhether the parties had taken allreasonable steps to prevent thediversion of the goods. Such adetermination would involvedetermining what reasonableconduct would be in the context ofthe clearing and forwardingindustry. No mention was how-ever made of this in the Commis-sioner’s decision. The Commis-sioner had also not required thefurnishing of documentation suchas invoices and confirmations ofsale which might indicate whetheror not the parties had taken allreasonable steps to prevent thediversion of the goods.

Since the Commissioner had notproperly applied his mind to theparties application, the decision toreject it was set aside.

TOSEN ENTERPRISES CC v COMMISSIONEROF CUSTOMS AND EXCISE

A JUDGMENT BY THIRION JDURBAN AND COAST LOCALDIVISION18 DECEMBER 1998

1999 (3) SA 432 (D)

Evidence that an importer executesan order for goods from a party in aforeign country, being invoiced forthe goods by the exporter, the placeof delivery being the place wherethe importer resides, indicates thatthe importer has purchased thegoods and become the owner ofthem, despite the fact that it hascharged the ultimate buyer acommission on the goods. Goods intransit may be considered to beimported goods for the purposes ofthe application of section 114 of theCustoms and Excise Act (no 91 of1964).

THE FACTSTosen Enterprises CC received

two orders for clothing and fabricfrom a firm in Malawi acting fortwo firms in Tanzania. It con-firmed the orders with the twofirms in Tanzania and stipulatedthat payment was to be made inadvance and delivery would takeplace ‘14 days from despatch fromour bond’. Charges ex bond storewould be for the buyer’s accountand commission at 3% would becharged on the goods.

Tosen then ordered the goodsfrom Spectra Exim PTE Ltd inSingapore. Spectra invoiced thegoods to Tosen and showed theirdestination as Durban. Toseninstructed Sealandair, shippingand forwarding agents in Durban,to clear one consignment of goods

for warehousing in South Africa.Sealandair cleared the goodsunder a bill of entry which re-flected Tosen as the importer andwarehoused them with DTBWarehousing Co. Tosen instructedEvergreen Shipping CC to clearanother consignment of goods forwarehousing for export. Ever-green did so, removing them inbond from Durban harbour andwarehoused them in the ware-house of Containerlink. The bill ofentry showed the destination ofthe goods as South Africa and thepurpose of entry for warehousingfor export.

Shortly afterwards, on 7 Septem-ber 1995, both consignments weredetained by the Controller ofCustoms and Excise, Durban,under section 88(1) of the Cus-

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toms and Excise Act (no 91 of1964) and removed to the Statewarehouse. The Controller allegedthat earlier in the year, certaingoods imported by Tosen werenot exported to Tanzania asalleged by Tosen, that an indica-tion on a bill of entry that theyhad been was a misstatement ofthe truth and that the goods hadbeen distributed in South Africa.As a result, Tosen was liable forthe payment of customs duty inrespect of those goods, and VATthereon. Tosen asserted that thegoods were exported to Tanzania,and brought an application for anorder declaring that the detentionand seizure of the consignmentswas unlawful and for an order fortheir release.

On 9 January 1996, the Control-ler withdrew his opposition to theapplication and agreed to therelease of the containers. On 16January 1996, he served a noticeon Tosen that the goods weredetained in terms of section 114 ofthe Customs and Excise Act.

Tosen applied for an ordersetting aside the detention of thegoods as unlawful. The disputebetween the parties as to whetheror not the goods were exported toTanzania was referred to thehearing of oral evidence. Thequestion whether or not theCommissioner was entitled todetain the containers undersection 114 at all was then decidedupon.

THE DECISIONTosen argued that the agreement

to allow the release of the goodswhich was concluded on 9 Janu-ary 1996 incorporated an impliedterm that the Commissionerwould not detain the goods again.However, the withdrawal of theopposition to Tosen’s first applica-tion did not carry such an implica-tion and the second detention ofthe goods was a new cause ofaction with which Tosen wasobliged to deal.

Section 114 entitles the Commis-sioner to detain (i) goods in aCustoms and Excise warehousebelonging to a person who owesduty, (ii) goods afterwards im-ported or exported by that person,(iii) imported goods in the posses-sion or under the control of thatperson, and (iv) imported goodson any premises in the possessionof or under the control of thatperson.

The first question was whetheror not the goods belonged toTosen, ie whether it owned them.Despite the fact that Tosen im-posed the charge of a commissionon the goods, the true nature ofthe transaction between theTanzanian firms, Tosen andSpectra was that the goods werepurchased from Spectra by Tosen,which then sold them to theTanzanian firms. This was evidentby the fact that the goods wereinvoiced by Spectra to Tosen andtheir destination was given asDurban. The orders from theTanzanian firms also gave no

indication other than that Tosenwas the seller of the goods. Tosentherefore became the owner of thegoods by the time of their deliveryin Durban.

The second question waswhether or not the goods were ina Customs and Excise warehouseat the time of their detention.There was some doubt as towhether the goods were beingheld lawfully during the period 9January to 16 January since at thistime, the Controller had agreed totheir release and was thereforeholding them without lawfulcause. This was a matter that hadto be decided by recourse to oralevidence.

The question whether or not thegoods were ‘afterwards imported’depended on whether or not theycould be considered to have beenimported despite the fact that theywere in transit at the time of theirdetention. The term ‘imported’ asused in section 114 followed theterm as used in section 18(1)(a), ieincluded within its ambit goods intransit. The purpose of this was toensure that the object of the Act,the control of the movement ofgoods in and out of the country,was achieved, and that an oppor-tunity for avoiding the payment ofduty by making an import appearto be a temporary transit, wasminimised.

The goods in question weretherefore, properly considered,imported goods within the mean-ing of the phrase in section 114and were liable to be detained interms of that section.

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FAZENDA N.O. v COMMISSIONER OF CUSTOMSAND EXCISE

A JUDGMENT BY STAFFORD JTRANSVAAL PROVINCIALDIVISION22 MAY 1998

1999 (3) SA 452 (T)

A vehicle which is detained interms of section 87(1)(c) of theCustoms and Excise Act (no 91 of1964) must be released where it isshown that the owner of thevehicle did not give consent to theuse of the vehicle in the carriageof goods liable to forfeiture. Thisis so even if the person lawfully inpossession of the vehicle wasaware of the carriage of suchillicit goods.

THE FACTSOn 10 August 1997, a driver of a

vehicle owned by Fazenda, andwho had been employed byFazenda for a period of twoweeks, crossed the border intoSouth Africa when returning froma job delivering goods in Mozam-bique. The vehicle included amanhorse, trailer and container inwhich 160 cartons of PeterStuyvesant cigarettes were hid-den. The driver intended tosmuggle the cigarettes into SouthAfrica and sell them at a profit,but they were discovered by acontroller appointed as suchunder the Customs and Excise Act(no 91 of 1964). Under section88(1)(d) of the Act, the controllerattached and seized the cigarettesas well as the vehicle.

On 25 August 1997, the executorof Fazenda’s deceased estateinformed the Commissioner ofCustoms and Excise that the estatewas the owner of the vehicle, thatthe driver had been under strictinstructions to return from Mo-zambique with an empty vehicleand that she had had no knowl-edge of the cigarettes found on thevehicle and hidden in the com-partment.

On 29 September 1997, theDirector of Legal Services, Cus-toms and Excise, acting in terms ofsection 87(2)(a) of the Act, decidednot to return these items. Thissection provides that any ship orvehicle used in the removal orcarriage of goods liable to forfei-ture under the Act is liable toforfeiture unless it is shown thatthe ship or vehicle was so usedwithout the consent or knowledgeof the owner of the ship or vehicleor other person lawfully in posses-sion thereof. The Director allegedthat the container had been foundto have been adapted by theprovision of the hidden compart-ment for the purposes of conceal-ment of the illicit goods.

After making this decision, theDirector considered an affidavitmade by the driver in which hestated to the police upon his arrestthat his employer had no knowl-edge that he was transporting thecigarettes. The Director neverthe-less decided again that the vehiclewould not be returned to theowner. The Director stated that hedid not accept that Fazenda wasunaware of the adaptation of thevehicle to conceal goods, and thathe did not accept that the driverdid not have knowledge of this.

Fazenda’s executrix then broughtan application for an order re-viewing and setting aside thedecision not to return the seizeditems.

THE DECISIONThe reasoning put forward by

the Director in making the deci-sion not to release the vehicle wasthat since the driver knew of thecigarettes, the vehicle was to beforfeited. This assumed that solong as the driver knew of thegoods being illegally brought intothe country, the owner’s lack ofconsent or knowledge in regardthereto was irrelevant. However,section 87(2)(a) clearly referred tothe lack of consent or knowledgeof either the owner or the personlawfully in possession of thevehicle. Where either person didnot have the consent or knowl-edge referred to, the proviso of thesection became effective.

The purpose of the section is toprotect the rights of innocentowners of goods which wouldotherwise be liable to forfeiture interms of the Act. It does notrequire that the owner also showthat the person lawfully in posses-sion of the vehicle did not consentto or had no knowledge of the useof the vehicle for smugglingpurposes.

Since the Director interpreted thesection improperly, he performed

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his duty and exercised his discre-tion improperly and failed toapply his mind to the issue beforehim in accordance with theprovisions of the Act. The decision

not to release the vehicle wastherefore to be rescinded and setaside and the vehicle was to bereturned to Fazenda forthwith.

OWNERS OF THE MV URGUP v WESTERN BULKCARRIERS (AUSTRALIA) (PTY) LTD

A JUDGMENT BY THRING JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION4 FEBRUARY 1999

1999 (3) SA 500 (C)

Section 5(5)(a)(i) of the AdmiraltyJurisdiction Regulation Act (no105 of 1983) must be applied so asto preserve evidence relevant to amaritime claim and not so as toenable one party to determinewhether or not it has asustainable claim against theother.

THE FACTSWestern Bulk Carriers (Aus-

tralia) (Pty) Ltd arrested the MVUrgup in terms of section 5(3)(a) ofthe Admiralty Jurisdiction Regula-tion Act (no 105 of 1983) for thepurposes of obtaining security fora claim to be brought againstMargem Chartering Co Inc. Theclaim was for the balance offreight and demurrage alleged tobe due by that company to West-ern Bulk arising out of a voyagecharterparty in respect of the MVMuzeyyen Ana.

Western Bulk alleged that theMuzeyyen Ana was an associatedship of the Urgup because the twoshareholders and directors of thecompany which owned the Urgupalso owned 75% of the shares inMargem. It alleged that becausethe Urgup was an associated ship,it was entitled to arrest the ship inrespect of its claim against theMuzeyyen Ana. It determined theownership of the two companiesfrom an examination of theRegistry of Commerce in Istanbul.

Two other parties also arrestedthe Urgup on the basis of otherclaims made against its owners,alleging that other ships wereassociated with the Urgup for thispurpose.

The owners of the Urgup thenapplied for the setting aside of thearrests. They disputed that theUrgup was an associated ship asalleged by Western Bulk and theother respondents. They allegedthat by the time of the arrest, 99%of the shares in itself were ownedby someone other than the share-holders of Margem.

Prior to the hearing of theapplication, the respondentsapplied for an order that theapplicant make discovery orotherwise make available to them,documents relating to and prov-ing the transfer of shares in theowners of the Urgup. For thisapplication, the respondentsrelied on section 5(5)(a)(i) of theAct, alternatively Admiralty Rules15 and 25 and Uniform Rule 35.The court considered the respond-ents’ application.

THE DECISIONSection 5(5)(a)(i) provides that in

the exercise of its admiraltyjurisdiction, a court may make anorder for the examination, testingor inspection of any ship cargo,document or any other thing andfor the taking of evidence. Thepurpose of the section is, like thepurpose of an Anton Piller order,

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to preserve evidence which isknown to exist and which consti-tutes a vital substantiation of aknown cause of action. Its purposeis not to provide an opportunityfor a party to compel another todisclose the existence of docu-ments and produce them. Thesection was therefore not a basisupon which the respondentscould obtain the order of discov-ery they sought.

Admiralty Rule 25 provides thatthe court may give any directionwhich it considers proper for thedisposal of any matter before it.

While that, like section 5(5)(a)(i),gave the court a wide discretion, itdid not authorise an order whichwould give a party the right tosearch through the documents ofanother party in order to deter-mine if there was sufficientevidence to substantiate a caseagainst that party. It could notprovide a basis for the ordersought by the respondents in thiscase.

As far as Uniform Rule 35 wasconcerned, the discovery proce-dures authorised by it were to beused in application proceedings

only in exceptional circumstances,ie where there were reasonablegrounds for doubting the correct-ness of allegations made by one ofthe parties. There were aspects ofthe allegations made by theowners of the Urgup in thepresent case which excited ameasure of suspicion, there werenot reasonable grounds for doubt-ing its allegations. The respond-ents were therefore not entitled tothe order they sought on this basiseither.

The respondents’ applicationwas dismissed.

MANLEY APPLEDORE SHIPPING LTD v OWNERS OF THEMV RIZCUN TRADER

A JUDGMENT BY KNOLL AJCAPE OF GOOD HOPE PROVIN-CIAL DIVISION26 APRIL 1999

1999 (3) SA 956 (C)

The party which has arrested aship may not obtain discovery ofdocuments alleged to be necessaryto prove that the arrested ship isan associated ship of the shipagainst which it has a claimunless exceptional circumstancesexist. Such circumstances will notexist where the arresting partybears the onus of proving that thearrest was justified and not all ofthe affidavits necessary todetermine the competency of thearrest have been filed.

THE FACTSManley Appledore Shipping Ltd

arrested the MV Rizcun Trader assecurity for a claim it intended tobring against Ikhlas OffshoreShipping Co Ltd. The claim was tobe brought by arbitration proceed-ings in London for payment ofUS$1 028 535, the claim arisingfrom the time charter of theManley Appledore to Ikhlas.Manley alleged that the RizcunTrader was an associated ship ofthe Manley Appledore.

The Rizcun Trader furnishedsecurity for its release, and thenapplied for the setting aside of itsarrest on the grounds inter aliathat it was not an associated shipof the Manley Appledore. Its owneradmitted that the Rizcun Traderhad been transferred to a thirdparty following its arrest, and

alleged that it held no control overIkhlas at the time of its arrest.

Manley then applied for an orderthat the alleged owners of theRizcun Trader discover documen-tation relating to the ownership inthe companies thought to be incontrol of the ships which wouldreveal whether or not they wereassociated ships. The owners ofthe Rizcun Trader opposed theapplication.

THE DECISIONDiscovery of documents was to

be granted if there was reasonabledoubt as to the correctness of theallegations made in the applica-tion for the arrest of the RizcunTrader. However, discovery was tobe ordered only if exceptionalcircumstances existed, and wouldnot normally be ordered where

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the parties had not filed all theaffidavits necessary to determinethe dispute. It was significant thatthe owners of the Rizcun Traderhad not filed their answeringaffidavit, and that the onus of

proving that the arrest waswarranted rested on Manley. Bothwere factors militating againstgranting an order of discovery inits favour. To order discoverywould be to give Manley anopportunity to seek out evidence

which it needed to make its casefor the arrest—a purpose forwhich the discovery procedurewas not created.

The application for an order fordiscovery was refused.

Shipping

MANLEY APPLEDORE SHIPPING LTD v OWNERSOF THE MV RIZCUN TRADER (2)

A JUDGMENT BY KNOLL AJCAPE OF GOOD HOPE PROVIN-CIAL DIVISION26 APRIL 1999

1999 (3) SA 966 (C)

In exercising its admiraltyjurisdiction in deciding whetheror not to order that security forcosts be furnished by a partyapplying for the setting aside ofan arrest of a ship after fullsecurity for the release of the shiphas been given, the court maydirect such an order at the personwho has taken up the defence ofthe ship, where the ship is theapplicant in the application to setaside the arrest. A court may takeinto account common lawprinciples applicable in such anapplication and should exerciseits discretion with therequirement that the need forsecurity be genuine andreasonable.

THE FACTSManley Appledore Shipping Ltd

arrested the MV Rizcun Trader assecurity for a claim it intended tobring against Ikhlas OffshoreShipping Co Ltd. The claim was tobe brought by arbitration proceed-ings in London for payment ofUS$1 028 535, the claim arisingfrom the time charter of theManley Appledore to Ikhlas.Manley alleged that the RizcunTrader was an associated ship ofthe Manley Appledore.

The Rizcun Trader furnishedsecurity for its release to the fullvalue of the ship, and then ap-plied for the setting aside of itsarrest on the grounds inter aliathat it was not an associated shipof the Manley Appledore.

Manley then applied for an orderdirecting the Rizcun Trader tofurnish security for costs of theapplication brought by RizcunTrader for the setting aside of itsarrest. It did so in terms of section5(2)(b) of the Admiralty Jurisdic-tion Regulation Act (no 105 of1983).

THE DECISIONSection 5(2)(b) of the Act pro-

vides that in the exercise of itsadmiralty jurisdiction, a courtmay order any person to givesecurity for costs. This section is to

be distinguished from section 5(3)which authorises an order for thearrest of any property for thepurpose of providing security fora claim. Where the former sectionis employed, and the object of thearrest is not a person but a ship, itis appropriate to consider theperson who causes the defence tobe entered or application to bebrought on behalf of the arrestedship, such as the owner of theship, to be the person againstwhom security for costs may beclaimed.

However, in the present case,Manley sought an order forsecurity for costs against the shipitself and not the person who haddefended the ship against itsarrest. In such circumstances, thequestion arose whether Manleywas entitled to more security thanthat provided for the release of theship, ie the full value of the ship.

Assuming that it would bepermissible to order that theperson who had defended theship in the present case furnishsecurity for costs, the discretionwhich a court could apply indoing so was not an unlimiteddiscretion. In exercising thisdiscretion, the court could haveregard to common law principlesregarding the furnishing ofsecurity, and was entitled to

126

KIA MOTORS (SA) (EDMS) BPK v VAN ZYL

A JUDGMENT BY PRETORIUS AJORANGE FREE STATE PROVIN-CIAL DIVISION11 FEBRUARY 1999

1999 (3) SA 640 (O)

An owner of property is estoppedfrom asserting its rights ofownership where it has made arepresentation to a third partythat another person is entitled todispose of the property or assertthe right to dispose of it.

THE FACTSOn 14 December 1998, Van

Niekerk sold a motor vehicle toVan Zyl for R137 500. VanNiekerk was a motor car dealerand he sold the vehicle in thecourse of his business activities assuch.

Van Niekerk had obtained thevehicle from Kia Motors (SA)(Edms) Bpk, and he purchased thevehicle from Kia on 21 December1998. At the time of this sale, Kiaknew of the previous sale to VanZyl. The sale agreement recordedthat ownership of the vehiclewould remain with Kia. Kia took acheque from Van Niekerk in theamount of R125 000 in payment ofthe purchase price. The chequewas postdated to 5 January 1999.It was presented for payment butdishonoured.

Kia then brought an applicationfor the delivery of the vehicle,basing its claim on the reivindicatio, the owner’s right ofrecovery of its property. Van Zylopposed the application on thegrounds that Kia was estoppedfrom relying on its rights ofownership.

THE DECISIONKia’s right of recovery as owner

of the vehicle was subject to thequalification that it should beestopped from recovering itsproperty if it delivered the vehicleto Van Niekerk knowing that hewas a motor dealer and sold to thegeneral public vehicles such asthat delivered to him, and Kia didnothing to inform the generalpublic of its interest in suchvehicles.

Kia had known that Van Niekerkoperated as a motor dealer. Thevehicle had been displayed alongwith other vehicles for sale at VanNiekerk’s premises and had beenshown to Van Zyl with a view to itbeing sold to him. The impressionhad been given that Van Niekerk’sbusiness owned the vehicle orheld the right to dispose of it andKia had taken no steps to warnthe general public that it was theowner of the vehicle.

Under these circumstances, Kiashould be estopped from assertingits rights of ownership in respectof the vehicle. The application wasdismissed.

require that—as in the case ofsecurity ordered in terms ofsection 5(3)—the need for securitybe genuine and reasonable.Taking into account factors suchas that a foreign ship had beenarrested by a peregrine applicant,

that the purpose was to providesecurity for a claim to be broughtin a foreign jurisdiction, that theclaim was against a peregrinethird party, that the court’sjurisdiction was based on thechallenged allegation that it was

an associated ship, that the arrestwas made by an ex parte applica-tion and that the full value of theship had been put up as security,the need for security was notgenuine or reasonable in thepresent case.

The application was dismissed.

Credit Transactions

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ABBOTT LABORATORIES v UAP CROP CARE (PTY) LTD

A JUDGMENT BY CLEAVER JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION10 DECEMBER 1998

1999 (3) SA 624 (C)

Comparative advertisingconstitutes an infringement oftrade mark rights where the trademark rights of a competitor areused unauthorisedly in the courseof trade in relation to goods inrespect of which the trade mark isregistered.

THE FACTSAbbott Laboratories was the

registered proprietor of two trademarks, ‘Promalin’ in respect ofagricultural chemicals, and‘Abbott’ in respect of chemicalproducts used in agriculture,horticulture and forestry. Thesecond respondent was theapplicant of the trade mark‘Perlan’ in respect of chemicalproducts for use in agricultureand horticulture and relatedactivities. It and Abbott werecompetitors in the sale of productsto which their trade marks wereattached.

The second respondent pro-duced a colour brochure in whichits products were compared withthose of Abbott and Perlan statedto be a better product. The trademarks of both parties were used inthe brochure. Copies of thebrochure were handed to employ-ees of UAP Crop Care (Pty) Ltd ata training session held for thepurpose of acquainting them withthe second respondent’s products.UAP was the second respondent’sdistributor in South Africa.Abbott’s trade marks were usedwithout its permission.

Abbott contended that the use ofits trade marks constituted a trademark infringement in terms ofsection 34(1)(a) of the TradeMarks Act (no 194 of 1993). Itapplied for an interim interdictpreventing UAP and the secondrespondent from infringing itstrade mark rights, ordering themto deliver up all printed materialcontaining its trade marks andrestraining them from comparingtheir respective products, pendingan action to be brought for a finalinterdict and the determination ofdamages.

Competition

THE DECISIONThe use of Abbott’s trade marks

constituted comparative advertis-ing. The question was whether ornot section 34(1)(a) of the TradeMarks Act (no 194 of 1993) pro-hibited such use of a trade mark.

Section 34(1)(a) of the Actprovides that the rights acquiredby registration of a mark areinfringed by the unauthorised usein the course of trade in relation togoods or services in respect ofwhich the trade mark is regis-tered, of an identical mark or amark so nearly resembling it as tobe like to deceive or cause confu-sion.

UAP argued that becauseAbbott’s trade marks had not beenused in relation to goods otherthan Abbott’s, there had been noinfringement of its trade markrights. While it was true that theuse of a trade mark in relation tothe trade mark owner’s goodscould not constitute an infringe-ment of the rights of the trademark owner, all of the require-ments of section 34(1)(a) of the Acthad been met. UAF hadunauthorisedly used Abbott’strade marks in the course of tradein relation to Abbott’s products. Ithad done so as part of a compara-tive advertising effort, andthereby infringed Abbott’s trademark rights as provided forinsection 34(1)(a).

The interim interdict wasgranted.

128

MINISTER OF PUBLIC WORKS AND LAND AFFAIRS vGROUP FIVE BUILDING LTD

A JUDGMENT BY SCHUTZ JA(HEFER JA, NIENABER JA andMARAIS JA concurring,PLEWMAN JA dissenting)SUPREME COURT OF APPEAL28 MAY 1999

1999 (4) SA 12 (A)

An employer under aconstruction contract isentitled to claim against thecontractor properperformance of asubcontractor’s work wherethe contractor has undertakento carry out and complete thework to the satisfaction of theemployer.

THE FACTSThe Minister of Public Works

and Land Affairs entered into acontract of construction withGroup Five Building Ltd interms of which Group Fiveundertook to convert theRoeland Street gaol into a Statearchive. Group Five undertookto deliver the works whencompleted ‘fit for occupationand complete in every particu-lar’.

The contract provided that afire-alarm system to be in-stalled by a nominated subcon-tractor would be part of theworks in accordance with thedrawings, specifications, billsof quantities and conditions ofcontract. The Minister, repre-sented by the director-generalof his department, was entitledto nominate a subcontractorbut this would not createprivity of contract between thedirector-general and the nomi-nated subcontractor. Thecontract provided that GroupFive as contractor would enterinto a contract with a nomi-nated subcontractor in respectof the work for which he wasnominated. Group Five wasobliged to ensure that thenominated subcontractorcarried out and completed thework to the director-general’ssatisfaction and was entitled toenforce completion of suchwork or payment of damages inthe event of default. The direc-tor-general was entitled to takecession of any such claim aspart of the remedies availableto him.

The subcontractor nominatedto install the fire alarm systemgave defective performance,including the installation offield wiring with joints whichshould have been continuous.This led to a claim for damagesby the Minister against GroupFive being the cost of remedy-

ing the defective work. TheMinister had also earlier takencession of Group Five’s rightsagainst the subcontractor.

Group Five defended theclaim on the grounds that itwas not liable for work doneunder a sub-contract which wasseparate from the constructioncontract entered into betweenit and the Minister.

THE DECISIONA distinction between work

done under the main contractand work done under a sub-contract was recognised in theconditions of contract. How-ever, were the work done bysubcontractors not consideredpart of the works as a whole,certain clauses in the maincontract would become un-workable. Clause 6(7) entitlingthe employer’s engineer toinstruct the contractor toremove any part of the workscould not be enforced were thesubcontract works consideredseparate from the main works.Clause 9 entitling the engineerto be notified by the contractorwhenever a portion of theworks subject to measurementis to be covered up would beunworkable were the subcon-tract works to be excepted.What Group Five had to deliverwas work which included a fire-alarm system.

Accepting that Group Five hadto deliver the work including afire-alarm system, there was noreason to exclude the supervi-sion of this work from theduties imposed on Group Fivein terms of the contract. Thecontract expressly included theduty to co-ordinate the nomi-nated subcontractor’s workand to ensure that the nomi-nated subcontractor carriedout the work to the director-general’s satisfaction. This wasa duty imposed on Group Five

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and given the force of law byGroup Five’s right to enforceperformance as against thesubcontractor. Group Fivewould not have been entitled toconsider its duty dischargedmerely upon advising theMinister of the subcontractor’sdefault, wherever this mighthave taken place. It was obligedto deliver the works with sub-contract work completed

satisfactorily as required by themain contract.

The fact that there was noprovision for ‘technical super-vision’ in the bills of quantitieswas no indication that techni-cal supervision was not re-quired.

The cession which the Minis-ter had taken of Group Five’srights agains the subcontractordid not prevent the Minister

from enforcing his rightsagainst Group Five. The effectof the cession was not sodrastic as to terminate all ofthe Minister’s remedies againstGroup Five as provided for inthe contract.

The Minister was entitled todamages as against Group Fivein respect of the defectiveperformance rendered by thesubcontractor.

Construction

The entire machinery [the nominated sub-contract], evolved over manyyears, is designed to avoid privity between the employer and the nomi-nated sub-contractor, whilst retaining substantial control over the sub-contract works in the employer’s hands. Anyone who has had experienceof the electrician driving a hole through the wall after the plasterer hascompleted his work, or the installer of the alarm lights putting nails intothe handiwork of the waterproofer, will understand the frustrationscaused by everybody blaming someone else, in the absence of a singlecontractor to whom one may look to sort out such matters. This is themain motive behind the avoidance of privity with sub-contractors. Butthe machinery does have disadvantages for the contractor, who has toput up with a sub-contractor whom he might not himself have selected.In more recent times forms of contract have been evolved which press lessheavily upon the contractor, but the contract with which we are con-cerned in this case is of the traditional kind, and I think that my generaldescription is appropriate to it.

130

HOLLARD INSURANCE CO LTD v LECLEZIO

A JUDGMENT BY HURT J(HOWARD JP and LEVINSOHN Jconcurring)NATAL PROVINCIAL DIVISION12 FEBRUARY 1999

1999 (4) SA 132 (N)

An insurer which proposes newterms to an insurance policyapplicable upon renewal of thepolicy proposes a new contract tobe entered into between it and theinsured. If the insured fails tocomply with the terms soproposed, no insurance coverbecomes applicable between theparties.

THE FACTSLeclezio effected a policy of

insurance with Protea InsuranceCo Ltd, covering himself fordamage caused to his motorvehicle.

Simultaneously, Leclezioeffected a policy of insurancewith Hollard Insurance Co Ltd,the purpose of which was tocover the possibility of Proteajustifiably repudiating thepolicy covering possible dam-age to the vehicle. This policyprovided that Hollard wouldprovide cover in circumstanceswhere the vehicle was dam-aged, written off or stolenduring the period of insurance,and a policy condition of theunderlying (Protea) insurancepolicy was violated resulting inrepudiation of liability for aclaim by the insurance com-pany. This policy also con-tained a provision that Lecleziowas obliged to continue com-prehensive insurance of thevehicle for its full market valuein terms of the underlyingpolicy, and failure to do sowould result in forfeiture of allbenefits under the policy.

Prior to expiry of cover appli-cable during 1995/6, Proteasent Leclezio a notice that itinvited renewal of insurancecover subject to confirmationthat the vehicle was protectedby an anti-theft device. Thenotification also stated thatcover would not be extendedwhere an anti-theft device hadnot been fitted to the vehicle.

The premiums on both poli-cies were payable annually, andLeclezio paid the premium duefor 1996/7 on 1 May 1996. Hedid not however, fit an anti-theft device to his vehicle. On19 July 1996, the vehicle was

stolen. Protea repudiated a claimfor indemnity under the policy onthe grounds that no anti-theftdevice had been fitted. Lecleziothen claimed against Hollard interms of the policy of insuranceentered into with it. Hollardrepudiated the claim on thegrounds that Leclezio had notcomprehensively insured thevehicle as required by the policy.

Leclezio brought an applicationfor an order that Hollard wasobliged to indemnify him.

THE DECISIONThe endorsement added to

the policy by Protea prior toexpiry of the cover applicableduring 1995/6 did not amountto an exclusionary provision.Provisions designed to excludecover during the currency ofthe policy formed part of anexisting policy and would not,if applicable, entitle Hollard tocontend that Leclezio had notcontinued comprehensiveinsurance cover in respect ofthe vehicle. These differedfrom an endorsement whoseterms had to be accepted if thepolicy was to continue at all.This was the position in thecase of the endorsement re-garding the anti-theft devicewhich was notified by Protea.

The endorsement contained aclear notification of intentionnot to insure Leclezio againsttheft if his vehicle was notfitted with an anti-theft device.Each renewal of the policyconstituted a new contractbetween Leclezio and Protea.The renewal which Proteasought to effect incorporatingthe endorsement had thereforenot been effected.

The application was dis-missed.

Insurance

131

ANOOP v IGI INSURANCE CO LTD

A JUDGMENT BY LEVINSOHN J(PILLAY J concurring)DURBAN AND COAST LOCALDIVISION20 OCTOBER 1999

1999 CLR 555 (D)

If an insurer’s rights ofsubrogation are prejudiced byits insured having signed aRelease purporting to absolvea party of all liability inrespect of a claim arising byanother party the insurerclaiming against its insured asa result of having signed theRelease must show that itwould have been successful inthe claim for damages againstthe third party and wouldhave recovered at least theamount by which itindemnified its insured.

THE FACTSIGI Insurance Co Ltd insured

Anoop for damage caused tohis vehicle. The policy includedclause 9(ii) which provided thatIGI would be entitled to takeover and conduct in the nameof the insured the defence orsettlement of any claim andpursue in the name of theinsured for its own benefit anyclaim or damage or otherwise.It further provided that noadmission, statement, offer,promise, payment or indemnitywould be made by the insuredwithout the prior writtenconsent of IGI.

Anoop’s vehicle was damagedin a motor collision and heclaimed an indemnity againstIGI in terms of the policy. Insettlement of his claim, IGIreplaced Anoop’s vehicle. Itadvised him to claim againstthe third party with whom hewas involved in a collision forthe loss of certain improve-ments to his vehicle which hehad effected prior to its colli-sion and for which he did notreceive any indemnity from IGI

Anoop claimed against thethird party, who paid him thesum of R16 634 in settlementof this claim and received aRelease from Anoop. In termsof the Release, Anoop releasedand discharged the third partyfrom all claims arising from thecollision in which his vehiclehad been damaged.

IGI claimed against the thirdparty payment of the amount ithad paid to Anoop in settle-ment of his claim. The thirdparty then produced the Re-lease. IGI was unable to pro-ceed against the third party. Itbrought an action againstAnoop claiming payment ofR16 634 as damages for breachof contract.

THE DECISIONIGI had not indemnified

Anoop for the full amount ofhis damages. It could havedone so under its rights ofsubrogation as provided for inthe insurance policy, and had itdone so, the problem it facedwith the Release would nothave arisen.

IGI was, in any event, notentitled to recover damagesagainst Anoop because it hadnot proved that it would havebeen successful against thethird party in an action forrecovery of Anoop’s damages,and would have recovered atleast the amount it paid out toAnoop.

Even if IGI were considered tohave proved its damages, ithad not shown that the Releasepresented a complete answerto any claim it might havebrought against the third party.The evidence showed that theRelease was signed by the thirdparty in the knowledge thatAnoop had a greater claimwhich was settled with IGI. Thepossibility therefore existedthat the Release mistakenlyreferred to all claims arisingfrom the collision and not justthe claims in respect of theextras effected to the vehicle. Ifthat possibility were shown tobe real, IGI would have had ananswer to the defence that theRelease prevented a successfulaction for damages against thethird party.

IGI had not shown that anyaction instituted against thethird party would have failed.The action failed.

Insurance

132

BELING v SOUTHERN LIFE ASSOCIATION LTD

A JUDGMENT BY JONES J(MELUNSKY J concurring)EASTERN CAPE DIVISION25 SEPTEMBER 1997

UNREPORTED

A policy of insuranceconstitutes a contract betweeninsurer and insured andwithout a reasonableinterpretation thereofshowing an intention to be acontract for the benefit of athird party, does not confer abenefit on any third party.

THE FACTSThe Southern Life Association

Ltd issued a policy of insur-ance to the Johnson andJohnson Provident Fund interms of which Southern Lifeundertook to provide riskbenefits for members of theFund, including disabilitycover. The policy provided thatpayments would be made tothe Fund upon satisfaction ofthe provisions of the rulesestablished by the policy.

Beling brought an actionagainst Southern Life claimingpayment under the policy. Healleged that he had been amember of the Fund and thatwhile he was a member, hadbecome permanently disabledthus entitling him to paymentof the benefits specified in thepolicy.

Southern Life excepted to theclaim on the grounds that thepolicy between it and the Fundprovided no basis for a claimby a member of the Fundagainst it. Beling appealedagainst the upholding of theexception.

THE DECISIONThe policy could not be un-

derstood to constitute a con-tract for the benefit of a thirdparty conferring rights onBeling by agreement betweenSouthern Life and the Fund,which he could accept in orderto enjoy their benefits. It wasmerely a contract betweenSouthern Life and the Fund andwas not intended to confer anybenefits on another person.

The fact that the policy statedthat it provided risk benefits tomembers in accordance withits rules and conditions was noindication that the policy didintend to confer any benefit ona third party. That provisioncreated no ambiguity and wasno reason to accept that thepolicy’s intention was to conferany such benefit.

Insurance

133

SINGH v FUTURE BANK LTD

A JUDGMENT BY LEVINSOHN JNATAL PROVINCIAL DIVISION20 OCTOBER 1999

1999 CLR 547 (N)

If one party induces a mistakein the mind of the other partyto a contract, the other partyis entitled to consider thecontract voidable andunenforceable.

THE FACTSSingh obtained a loan from

Future Bank Ltd for the pur-chase of a motor vehicle. Priorto concluding the loan agree-ment, Singh requested thebank to attend to insurance ofthe vehicle and it undertook todo so.

When Singh signed the docu-mentation recording the loanagreement, he noticed that itincluded provision for a‘backstop premium’. A bankofficial explained to him thatthis was a premium whichinsured for cover in the differ-ence between the market valueof the vehicle and the bookvalue of it at the time any losstook place, and could not existindependently of a primaryinsurance policy. Singh signedthe documentation and thevehicle was released to him. Hebelieved that at that point, thevehicle had been insured.

Clause 5.1 of the agreementprovided that Singh wasobliged to insure the vehicle.Clause 13 provided that novariation of its terms would beof any force or effect unless inwriting and signed by theparties thereto.

A little more than a monthlater, the vehicle was stolen.The bank claimed the fullpurchase price from Singh andbrought an action to enforce its

Contract

claim. Singh contended that theagreement upon which thebank depended was voidablebecause of a misrepresentationmade by the bank regardingthe insurance cover.

The bank denied that anyrepresentations regardinginsurance had been made andit averred that clause 13 pre-vented Singh from relying onterms other than those con-tained in the agreement.

THE DECISIONBecause the bank had under-

taken to insure the vehicle, ithad represented to Singh thatit had done this by the time theloan documents were signed.The belief that the bank hadinsured the vehicle was rein-forced by the explanation ofthe backstop insurance givento him by the bank.

The bank ought to have beenaware of the real possibilitythat Singh was signing theagreement under a misappre-hension and was acting inerror. It was therefore under aduty to alert Singh to the trueposition and remove anymisapprehension from hismind. Because it had not doneso, Singh made an error whensigning the agreement whichwas excusable.

The action against Singh wasto be dismissed.

134

BERNSTEIN v SMART TAGINTERNATIONAL (PTY) LTD

A JUDGMENT BY PINCUS AJCAPE OF GOOD HOPE PROVIN-CIAL DIVISION3 SEPTEMBER 1996

1999 CLR 532 (C)

An agreement providing thata third party will performsome obligation cannot beenforced against the thirdparty until such time as thatparty is a party to theagreement. Enforcement ofthe agreement will not beordered where this wouldamount to the enforcement ofspecific performance incircumstances where a courtwould alternatively order thepayment of damages.

THE FACTSBernstein and the second

respondent agreed to become50% shareholders in a companyto which Smart Tag Interna-tional (Pty) Ltd would sell all ofits assets. They further agreedthat the company to be formedwould later ratify the agree-ment to sell Smart Tag’s assetsto it.

Some months later, SmartTag’s attorney informedBernstein that it intendedselling all of its assets to anoff-shore company. Bernsteinthen applied for an interiminterdict restraining Smart Tagfrom selling, transferring or inany other way dealing with oralienating any of Smart Tag’sassets pending the institutionof an action for final relief. Anaction for final relief wasbrought some three monthslater. In the action, Bernsteinsought an order that a newcompany be formed in whichhe and the second respondentwould be 50% shareholders andthe assets of Smart Tag trans-ferred to it.

THE DECISIONThe question was whether or

not Bernstein had made out acase requiring Smart Tag totransfer its assets as allegedlyagreed.

Smart Tag was not a party tothe agreement. There was noconnection between it andBernstein. Accordingly, therewere no grounds upon whichan order against Smart Tagrestraining it from transferringits assets could be made.

Another ground for refusingthe order was that there wasno basis of trust between theparties, which would be re-quired in order for the pro-posed new company to func-tion properly. An order requir-ing the formation of such acompany would be an inappro-priate order of specific per-formance. A company formedon such a basis would probablyresult in the shareholdersapproaching court for itsdissolution on the groundsthat there was a lack of confi-dence between the memberswhich was required for theproper functioning of thecompany.

The delay in bringing theaction was another reason torefuse the interim relief nowsought.

The application for the in-terim interdict was refused.

Contract

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TEK CORPORATION PROVIDENTFUND v LORENTZ

A JUDGMENT BY MARAIS JA(VAN HEERDEN DCJ,SMALBERGER JA, GROSSKOPFJA and HOWIE JA concurring)SUPREME COURT OF APPEAL3 SEPTEMBER 1999

1999 CLR 491 (A)

An employer is not entitled tothe surplus of a pension fundcreated during the existenceof the fund, but may enjoy thebenefit of it to the extent ofnot having to makecontributions to the fund aslong as the surplus exists. If apension fund’s rules fail toprovide for how a surplus is tobe dealt with upon thetransfer of members of thefund to a newly establishedfund then no power totransfer the surplus from onefund to another can beinferred in the rules.

THE FACTSTek Corporation Pension Fund

was established on 1 January1991. In terms of its rules, theemployees were obliged to payrecurring fixed contributions.The employer was obliged topay an amount to be agreedwith the fund’s trustees, butnot less than an amount calcu-lated as necessary to ensurethe financial soundness of thefund.

A substantial surplus ofassets over liabilities accumu-lated, with the consequencethat after 1 December 1991,Tek was obliged to make nofurther contribution to thefund and did not do so. Thiswas termed a ‘contributionholiday’.

On 1 June 1993, the TekCorporation Provident Fundwas established. An over-whelming majority of employ-ees transferred from the pen-sion fund to the providentfund, taking with them theactuarially assessed value oftheir interest in the pensionfund. The surplus remained inthe pension fund. Tek never-theless took the contributionholiday in respect of the provi-dent fund, thinking that atransfer of the surplus wouldhave been permissible.

As a result of the sale of theDefy division of Tek to Malbak,on 1 April 1994 Tek employeesbecame members of the Malbakprovident fund and took withthem into the fund the fullamount of the credit whichthey then held. They thencontended that the surpluswhich should have been trans-ferred to the Tek providentfund should be transferred tothe Malbak provident fund. Thechairman of the board oftrustees of the Tek pensionand provident funds rejectedthe contention and declined to

give an undertaking thatshould the surplus be used forthe enhancement of Tek em-ployee benefits, Defy ex-mem-bers of the fund would benefitproportionally.

Lorentz, one of the affectedemployees, then brought anapplication for orders that (i)the trustees of the pensionfund were not entitled to usethe surplus in the pension fundto enable Tek to avoid payingcontributions to the providentfund, (ii) the trustees were todetermine the portion of thesurplus to be transferred to theprovident fund and effectpayment thereof, (iii) thetrustees were to determine themanner in which the fundswere to be used for the pur-pose of increasing the benefitspayable to the provident fundto those who became membersin 1993.

These orders were grantedand the provident fund ap-pealed.

THE DECISIONNo rule of common law enti-

tled Tek to claim the surpluswhich was an integral part ofthe fund. If it had any suchentitlement, this would haveemanated from the rules of thefund itself. Rule 19.5.2 pro-vided that if a valuation dis-closed a substantial surplus ora deficit which required to befunded, the manner of dealingwith either was to be consid-ered by the trustees and rec-ommendations were to bemade to the employer for adecision. This showed that theemployer did not have anunfettered power in regard to asurplus, but there was a poten-tial for the employer to benefitfrom the surplus, for examplein not having to make contribu-tions while the surplus per-sisted.

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The employer may enjoy thebenefit of a surplus by nothaving to make a contributionin those circumstances irre-spective of how the surplusarose, ie whether it arose frompast overcontributions or not,provided the pension fund isnot a defined benefit scheme inwhich the employer is obligedto make a fixed contribution.

While these were the obliga-tions under which the em-ployer was obliged to function,the relief sought by Lorentzdepended not so much on anysuch obligations but on anassertion of the rights ofemployees. The question waswhether or not the Rulesprovided any basis for assert-ing these rights. The Rules

however, were silent on thepoint. They conferred no poweron the trustees to transfer anysurplus from the fund toanother fund and no power todo so could be inferred fromanalagous provisions containedin them. Rule 16.4 provided forthe situation where the em-ployer ceased to be liable tocontribute to the pension fundas a result of a decision toestablish or participate inanother pension fund. How-ever, this had not happenedand the provisions of the rulecould therefore not apply.

Hindsight indicated that theproblem which had arisenbetween the parties was aresult of their common butincorrect assumption, at the

time when the transfer to theprovident fund took place, thatwhat had to be done with thesurplus was a matter entirelyin the hands of Tek. Because ofthat, the problem of what hadto be done with the surplushad not been dealt with. Theresult was that the surplus hadto remain in the pension fund,its benefits out of reach ofboth the employees and Tek.

The employees were entitledto the first order they soughtas the employer’s obligationsprevented it from using thesurplus in the pension fund forthe purpose of enabling anavoidance of the need to paycontributions. However, theywere not entitled to any otherof the orders they sought.

Contract

TRIDENT INSURANCE BROKERS (PTY) LTD v ELLWOOD

A JUDGMENT BY LABE JWITWATERSRAND LOCALDIVISION20 DECEMBER 1996

1999 (4) SA 455 (W)

A restraint preventing aformer employee fromcommunicating with clients ofan employer following thetermination of employmentdoes not prevent the employeefrom communicating withsuch clients where theintention of thecommunication is not to solicitthe business of the client.

THE FACTSTrident Insurance Brokers

(Pty) Ltd employed Ellwood as adirector of the company withthe duty to manage its clientservices department as well asits marketing division. Ellwoodundertook, for a period of 24months after leaving the com-pany, not to communicate withany of the company’s clientsnor solicit business from them,either directly or indirectly.

Ellwood’s employment withTrident terminated. Within thesubsequent 24-month period,Trident received an instructionto terminate an existing insur-

ance policy and was informedthat a company which thenemployed Ellwood,Bannockburn Financial Services(Pty) Ltd, had assumed theposition of Trident’s broker.The instruction came from anexisting client of Trident whohad been introduced to thecompany by Ellwood. Afterleaving the service of Trident,Ellwood had met the clientsocially and had informed himthat he had left Trident. Theclient then requested Ellwoodto transfer his insurance busi-ness to Ellwood.

137

Contract

In other cases, clients ofTrident contacted Ellwood inorder to transfer their insur-ance business to him and haddone so, in each case, of theirown accord and without initia-tion of the contact fromEllwood.

Trident then brought anapplication that Ellwood berestrained from communicat-ing with any of its clients.

THE DECISION‘Communicate with clients’ as

recorded in the agreementmeant a positive act performed

by Ellwood with the hope orintention of obtaining busi-ness. ‘Solicit’ connoted a posi-tive act of solicitation.

This meant that the prohib-ited communication wouldinclude Ellwood telling a clientof Trident that he had leftTrident’s employ and wasworking for another person inthe hope that the client wouldgive him business. The inten-tion of the communicationwould be to inform the clientthat Ellwood was then withanother entity.

The evidence did not show

that Ellwood had communi-cated in this manner. That hewas entitled to communicatewith former clients withouthaving the intention of inform-ing them of his change ofemployment or of persuadingthem to switch their businessto himself, was apparent fromthe fact that the restraint uponhim did not include a restric-tion on him trading for himselfor another entity in the samecapacity in which he hadtraded for Trident.

The application was dis-missed.

Whatever else it may mean, `communicate' cannot meanthat the respondent is not entitled to communicate withclients otherwise than in relation to insurance. If therewere so it may well be that the clause is invalid.

138

COURTIS RUTHERFORD AND SONS CC vSASFIN (PTY) LTD

A JUDGMENT BY VAN ZYL J(MOTALA J concurring)CAPE OF GOOD HOPE PROVIN-CIAL DIVISION5 AUGUST 1999

1999 CLR 514 (C)

A party to a contract allegingthat the other party ought tohave mitigated its damagesresulting from the first party’sbreach of contract must provethat the innocent party failedto take steps which mightreasonably have been takento mitigate its damage. Aclause in a leasing transactionentitling the credit grantor tocancel such a transactionwhere the credit receiver is indefault, and claim as damagesarrear rentals as well asfuture rentals which wouldhave been paid had theagreement not been cancelledis not in itself a penaltystipulation which can beavoided in terms of theConventional Penalties Act(no 15 of 1962).

THE FACTSCourtis Rutherford and Sons

CC and Sasfin (Pty) Ltd enteredinto a rental agreement interms of which Sasfin leased toCourtis a PABX telephonesystem. In the event of defaultby Courtis, Sasfin would beentitled either to claim immedi-ate payment of all amountspayable in terms of the agree-ment, or terminate the agree-ment and take possession ofthe goods, retain all amountsso far paid and claim all out-standing rentals and, as agreedpre-estimated liquidated dam-ages, the aggregate of allrentals which would have beenpayable had the agreementcontinued until expiry.

Courtis failed to pay certainrentals due in terms of theagreement, and Sasfin can-celled the agreement andclaimed return of the goods.

Courtis informed Sasfin thatit wished to find a substitute aslessee under the lease agree-ment. Sasfin replied that itcould do so but any substituteuser would be subject to thenormal credit approval condi-tions applied by it in respect ofits debtors. Courtis proposed asubstitute user, but nothingfurther was done to establishthe substitute as debtor underthe lease agreement. Courtisalleged that this was a result ofSasfin being unresponsive in itsattempts to do so, but Sasfinalleged that Courtis had takenno serious steps in bringingthis about.

Sasfin cancelled the leaseagreement and brought anaction for payment of arrearrentals and payment of futurerentals as pre-estimated liqui-dated damages.

Courtis defended the actionon the grounds that Sasfin hadfailed to mitigate its damagesby accepting the substitute

user and that the result of thiswas that it was not entitled toclaim future rentals. Courtisalso contended that Sasfin’sclaim for pre-estimated liqui-date damages amounted to theenforcement of a penaltycontrary to the provisions ofthe Conventional Penalties Act(no 15 of 1962).

THE DECISIONA breach of contract entitles

the party not responsible forthe breach to claim damages,subject to the proviso that hemust mitigate such damages.The duty to mitigate damageswas a duty which would rest onSasfin in the present case,which was the party that hadexperienced the breach ofcontract by the other party.The other party is obliged toprove that such damages hadnot been appropriately miti-gated.

In the present case, Sasfin hadindicated that it was willing toaccept a substitute user, sub-ject to its normal credit condi-tions. The substitute userwhich had been proposed didnot in fact become the substi-tute user and there was noth-ing to indicate that this was aresult of any reluctance on thepart of Sasfin. If there were anysteps which should have beentaken by Sasfin to obtain asubstitute user, it was notapparent what should havebeen done in this regard as noevidence as to what mightreasonably have been done wasled by Courtis. It had also notshown that Sasfin could havefound another user to assumeCourtis’ obligations under theagreement. Failure by Sasfin tomitigate its damages had notbeen proved.

As far as the allegation of apenalty was concerned, it wastrue that section 3 of the

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139

Conventional Penalties Actenabled a court to reduce anexcessive penalty, ie where thepenalty is out of proportion tothe prejudice suffered by acreditor, and this would be

applied where necessary toensure that justice is donebetween the parties to a con-tract. However, the partyalleging that an excessivepenalty has been imposed

must prove that, and theamount by which the penaltyshould be reduced. Courtis hadnot done so in the presentcase.

The action succeeded.

McCARTHY v CONSTANTIA PROPERTY OWNERS’ ASSOCIATION

A JUDGMENT BY DAVIS JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION13 JULY 1999

1999 (4) SA 847 (C)

A party having a direct andsubstantial interest in amatter has the right toenforce compliance inaccordance with its interestdespite the fact that it has norights established by privatelaw obligation as against theparty against which it assertsthose rights, provided theright can be considered theenforcement of constitutionalrights.

THE FACTSAlphen Park Trust registered

servitudes over its property infavour of the Constantia Prop-erty Owner’s Association (theCPOA). The servitudes limitedthe construction of buildingsand structural improvementsto the property as well as theextent of such improvements.

Construction work began onthe property, but it exceededthe limitations imposed by theservitude. Alphen justified thison the grounds that earlier,there had been two land swapagreements between itself andthe CPOA which amended theterms of the servitude. Theagreements were concludedfollowing a meeting of CPOA atwhich the member mandatedthe committee to proceed withnegotiations regarding develop-ment of the property to sign aformal agreement. A resolutionwas then passed for ‘continuednegotiations to secure thefuture of Constantia’s commer-cialisation’. Later, memberswere requested to approve anagreement with the developersof the property which modifiedalterations to the existingbuilding works allowing forextension and a new servitude

to be registered reflecting thechange. This resolution wasvoted down.

McCarthy and other membersof the CPOA contended that inallowing the amendment, theCPOA had failed to uphold itsown objectives. The CPOA, avoluntary association, had theobjective of promoting andsafeguarding the interests ofthe registered property ownersin the Constantia Valley. Theyapplied to court for an orderthat the agreements concludedbetween the CPOA and Alphenwere void, having been con-cluded on behalf of the CPOAwithout proper authority, andthat the servitudes were of fullforce and effect. McCarthy andthe other applicants wereproperty owners in Constantia.

The CPOA contestedMcCarthy and the other appli-cants’ right to bring the appli-cation, on the grounds thatthey enjoyed no rights underthe servitudes. The applicantscontended that CPOA did nothave the authority to agree tothe amendment of the terms ofthe servitude upon whichAlphen had contended thebuilding limitations had beenexceeded.

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THE DECISIONAn application of public law

principles to the question oflocus standi, ie the right tobring an action, would providea basis for a party’s right tosue, where that party has adirect and substantial interestin the matter in regard towhich it sues, even if that partyhas no personal right which itmay enforce against its defend-ant. In the present case, theapplicants did not have per-sonal rights enforceableagainst the CPOA or Alphenbecause the servitude con-ferred rights not on them buton the CPOA. It followed thatalthough the applicants had adirect and substantial interestin the case, they did not havethe right to enforce theirinterests as against the CPOAbecause there was no publiclaw basis for this.

The question of locus standicould however, not be exam-ined without regard to theConstitution. The Constitutionaffords extensive rights ofaccess to the courts and in-tends to protect the environ-ment. Power exercised bypersons in a private capacity isas subject to the application ofthe Bill of Rights as is powerexercised by bodies establishedto perform public functions.The old distinction betweenpublic law and private lawapplications of the locus standiprinciple are no longer applica-ble and could serve no basisfor disallowing the applicantsfrom proceeding against theCPOA. Having applied to pre-serve the environmental fabricof their suburb, the applicantshad the right to enforce thesame in the present applica-tion.

As far as the lack of authoritywas concerned, it was clearfrom the constitution of theCPOA that the management ofthe association was to beconducted by an executivecommittee. This however,provided no basis upon whichan agreement for the alienationof property could take placewithout the express authorityof member of the associationas the alienation of propertycould not be considered part ofthe management of the asso-ciation. No express mandate toamend the servitude had beengiven.

The Turquand rule, whichentitles a third party to hold abody corporate bound to acontract despite the lack ofauthority of that body’s repre-sentatives, was not applicablein the present case because thedevelopers knew of the lack ofauthority of the representa-tives of CPOA.

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DEUTSCHE BANK AG v MOSER

A JUDGMENT BY MOTALA J

CAPE OF GOOD HOPE PROVIN-CIAL DIVISION25 NOVEMBER 1998

1999 (4) SA 216 (C)

A court will grant a provisionalorder of sequestration against aforeigner where it appears that theimplementation of thesequestration will be best securedin this country rather than in thecountry in which the debtor resides.THE FACTS

Deutsche Bank AG brought anapplication for the provisionalsequestration of the estate of

Moser. Moser was a Germancitizen and permanently resi-dent in Germany, but ownedproperty in Plettenberg Bay.

Moser opposed the applica-tion on two grounds, one ofwhich was that it was notconvenient nor equitable thathis estate should be seques-trated in South Africa and thatthe bank should have soughtsequestration against him inGermany.THE DECISION

The provisions of the InsolvencyAct (no 24 of 1936) applicable tothe procedures attendant uponthe administration of a sequestra-tion might be inconvenient toapply and involve considerableexpense, but that had to beconsidered against the conven-ience of dealing with the onlyrelevant asset of the sequestratedestate, ie the fixed property.

Once the order of sequestra-tion was granted, the imple-mentation of the order bysecuring the sale of the prop-erty could be attended to farmore expeditiously in SouthAfrica.

The order was granted.

Insolvency

142

PREMIER TRADING COMPANY (PTY) LTD vSPORTOPIA (PTY) LTD

A JUDGMENT BY NIENABER JA(HEFER JA, SCHUTZ JA,PLEWMAN JA and FARLAM AJAconcurring)SUPREME COURT OF APPEAL1 JUNE 1999

An importer of a product onwhich there is amanufacturer’s trade markwill not normally be able toprove that it has acquired areputation in relation to theproduct which would entitle itto establish a case of passingoff against a competitor sincethat mark is not its mark butthat of the manufacturer andas such likely to haveestablished a reputation infavour of the manufactureralone.

THE FACTSIn September 1993, Sportopia

(Pty) Ltd and Australian PowerBrands (Pty) Ltd (APB) con-cluded an agreement givingSportopia the exclusive right touse the trade mark ‘Bladeline’in South Africa, and conferringon it marketing and distribu-tion rights in respect of theroller skates with which themark was associated. Sportopiathen applied for the registra-tion of the mark ‘Bladeline’.‘Bladeline’ was the brand nameapplied to roller skates manu-factured by APB.

In the same year, PremierTrading Company (Pty) Ltdacquired the assets and good-will of Jokari (SA) (Pty) Ltdwhose stock included 312 pairsof Bladeline inline skates.These skates had been ob-tained from Ellen East Com-pany Ltd, a Taiwanese exporter.They resembled the rollerskates manufactured by APBbut included the name ‘Jokari’on them and depicted thename ‘Bladeline’ on theirwheels instead of on the sideof the heel. They were pack-aged in boxes which were exactcopies of the boxes in whichAPB packaged its roller skates.Ellen East applied for theregistration of the trade mark‘Bladeline’ in Taiwan in thesame year.

In the following years, Premiercontinued to import the skatesfrom Ellen East and took for-mal assignment of the Jokaritrade mark on 11 April 1995.

In 1993, Sportopia noticedthat the skates emanating fromEllen were being sold in retailoutlets. It objected to the saleof the Bladeline skates, andclaimed all rights to that trademark. It also objected to thesimilar packaging used byPremier. Premier claimed thatits use of the trade mark

predated Sportopia’s applica-tion for registration of themark, redesigned its packagingand the manner in which theword ‘Bladeline’ appeared onthe wheels of the skates.

In 1994, Sportopia beganmarketing its Bladeline skatesin the South African market.Premier alleged that Sportopiawas passing off its roller skatesas its own, and applied for aninterdict restraining Sportopiafrom dealing in roller skatesbearing the trade mark‘Bladeline’. It also applied foran interdict restrainingSportopia from interfering inits business by stating toPremier’s customers thatPremier was not entitled to usethe ‘Bladeline’ trade mark andthreatening legal proceedingsagainst such customers and/orPremier on the grounds that itheld the exclusive right to usethe trade mark ‘Bladeline’.

The application for an inter-dict restraining Sportopia fromdealing in roller skates bearingthe ‘Bladeline’ trade mark wasrefused. Premier appealed.

THE DECISIONIn showing that it is entitled

to an interdict to prevent thepassing off of its product forthat of another, an applicantmust prove its own reputationin relation to the product, andthat the public has been de-ceived or confused as to theorigin of the product or itstrade connection, and wouldprobably have been influencedin its decision to buy theproduct.

Premier had given evidence oflimited sales of its product bythe time Sportopia entered themarket, and of the advertisingand other methods of market-ing it had employed. This wasjust sufficient for it to haveestablished that it possessed

Competition

143

some reputation in relation tothe roller skates, but it leftopen the question what thatreputation consisted in, inwhat capacity it enjoyed thatreputation and with whom.

Premier did not manufacturethe roller skates. It was thedistributor of them. The manu-facturer from which it acquiredthe skates had established, as amanufacturer’s mark on theskates, the Bladeline trade

mark. This mark had not beenestablished by Premier whichhad established only the Jokarimark as the mark of the im-porter and distributor. In thatcapacity, Premier could estab-lish a reputation, but thiswould relate only to its ownmark and would not relate tothe Bladeline trade mark. Theevidence itself pointed to this,since the buyers of the rollerskates for retailers had re-

ferred to the ‘Jokari brand’.The dominant mark was theJokari trade mark and not theBladeline trade mark.

It was possible to conceive ofthe two marks as functioningtogether to provide the reputa-tion established by the rollerskates product, but in thiscase, the two marks did notoperate co-operatively in thisfashion.

The appeal was dismissed.

The notion of a conjoined or composite mark may be perfectly feasibleas a proposition of law; in this case, as a proposition of fact, it fails.The two marks simply did not function in that fashion. Nowhere, onthe boot or on the package, do they appear in the form “Jokari-Bladeline”. On the boot itself Jokari is affixed on the heel and Bladelineis printed on the wheels. Merely as a matter of physical appearancethe two words consequently are not linked or articulated. On the pack-age, in its redesigned form, Bladeline appears on the box, with theletters B, E and E in bright and the remaining letters in subdued col-ours, removed from a separate insert on which the words “Jokari:World of Sport” appear in much smaller print.

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144

WATT v SEA PLANT PRODUCTS LTD

A JUDGMENT BY TRAVERSO JCAPE OF GOOD HOPE PROVIN-CIAL DIVISION15 MARCH 1999

1999 (4) SA 443 (C)

The fact that a person isobliged to pledge shares to acompany as security forpayment of the purchase priceof the shares indicates thatthat person owns the shares.An order of court undersection 97 of the CompaniesAct (no 61 of 1973)authorising an increase of theauthorised share capital of acompany may be given so asto have retrospective effectand may consequently affectcontractual relations alreadyentered into.

THE FACTSSea Plant Products Ltd ap-

pointed Watt as its generalmanager. In terms of theagreement, Watt was entitledto purchase 200 000 shares ofthe company at a price of 70cents per share, entitling himto a final dividend for thecurrent financial year to bedeclared towards the end of1989. The shares were to bepurchased from the SPP ShareTrust which served as a vehicleby which employees of thecompany could obtain sharesin the company.

Watt exercised the option toacquire the shares and a sharecertificate was issued to himupon transfer of the shares.Watt paid for the shares bysecuring a loan from the com-pany which was itself repaid bythe dividends declared inrespect of the shares. At thetime the shares were issued toWatt, trustees were appointedunder the trust deed, but theydid not enjoy the authorisationof the Master to act as such asrequired by section 6(1) of theTrust Property Control Act (no57 of 1988).

It subsequently appeared thatthe company did not havesufficient authorised sharecapital to have issued theshares to Watt. A meeting ofshareholders then resolved toincrease the share capital ofthe company in terms of sec-tion 97 of the Companies Act(no 61 of 1973). The companyapplied to court for an orderincreasing its share capital, andthis was done, the order vali-dating the increase retrospec-tively to a date prior to theagreement entered into be-tween the company and Watt.

The trustees of the SPP ShareTrust also resolved that allshares issued to employees

were authorised with retroac-tive effect.

In terms of clause 5 of thetrust deed, shares purchasedby a participant in the shareownership scheme were to bepledged as security for thepayment of the transfer priceand were to be held in pledgeby the trustees until release tothe participant. Clause 6 pro-vided that after payment of thetransfer price, a participantwas entitled to release of theshares, but not until after thelapse of defined periods rang-ing up to 12 years after pur-chase thereof, unless theboard, in its absolute discre-tion, determined otherwise.

Watt brought an action for anorder that he was the owner ofthe 200 000 shares in thecompany which had beenissued to him. The companyresisted the action on thegrounds that the trustees didnot have authority to issue theshares to Watt, and that thiscould not be retrospectivelyvalidated.

THE DECISIONThe retrospective validation

of the allotment of the sharesto the trust not only effectivelyincreased the number of sharesavailable for issue to employ-ees such as Watt, but alsoauthorised the trustees toissue the shares to him. Thetrust deed had been validlyamended to reflect this inten-tion. There was therefore nobasis upon which the effective-ness of the allotment of theshares to Watt could be chal-lenged. Even if it could be saidthat the order made undersection 97 interfered with thecontractual relationship be-tween the parties, the issue ofthe shares remained valid.

The company contended that

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in view of the restrictive provi-sions of clause 6, Watt couldnot claim that he was theowner of the shares. However,it was clear from the provisionsof clause 5 that Watt could bethe owner of the shares, as itwas impossible for him topledge the shares without

being the owner of them. Inany event, because payment forthe shares had taken placethrough the crediting of a loanaccount with the dividendspayable to the shareholder bythe company, and this hadtaken place with the participa-tion of the company, it could

be said that the board of thecompany had ‘in its absolutediscretion’ determined that therestrictive provisions of clause6 would not apply.

Watt was accordingly theowner of the shares and wasentitled to their transfer andregistration in his name.

SIMPEX (PTY) LTD v VAN DER MERWE

A JUDGMENT BY MALAN JWITWATERSRAND LOCALDIVISION25 SEPTEMBER 1998

1999 (4) SA 71 (W)

A trustee may be personallyliable for his actions incircumstances where propertyis placed under his possessionand control when acting astrustee.

THE FACTSSimpex (Pty) Ltd sold fixed

property to Van der Merwe andthe other defendants acting astrustees for the G&H Trust. Thesale was declared invalid byorder of court on the groundsthat it was concluded beforethe trustees were authorised toconclude it. The trustees thenvacated the property.

Simpex then brought anaction for damages against Vander Merwe and the other trus-tees, claiming that the propertyhad been damaged, or suffereda diminution in its value whileit was under their control. Italleged that the loss had beenoccasioned by the negligenceof the trustees in failing toensure that the property wasprotected against third partyaccess.

The trustees defended theaction on various grounds,including a special plea thatthey could not be held person-ally liable for actions done intheir capacities as trustees.Simpex excepted to the specialplea on the grounds that a

trustee which holds property inhis capacity as trustee andcauses damage to the propertyis personally liable for suchdamage provided the elementsof delictual liability are satis-fied.

THE DECISIONThe personal liability of

directors and trustees whenacting in their representativecapacities was a matter ofsome obscurity in legal discus-sion of the question. Whateverthe exact position, it could notbe said that a trustee wasnever personally liable for hisactions when acting in hiscapacity as trustee.

A trustee may be personallyliable for his actions in circum-stances where property isplaced under his possessionand control when acting astrustee. To exclude that possi-bility would be going too far asthe trustee’s duty of care mightextend to such facts and cir-cumstances.

The exception was upheld.

Trusts

146

SHERIFF, DISTRICT OF THE CAPE v SOUTHSEAS DRILLER

A JUDGMENT BY DONEN AJCAPE OF GOOD HOPE PROVIN-CIAL DIVISION15 MARCH 1999

1999 (4) SA 221 (C)

A sheriff who has arrested aship in terms of a court orderauthorising him to do so is notentitled as of right, nor interms of the Admiralty Rules,to institute a claim against aparty which causes damage tothe ship where it is not clearthat his claim as well as thatof creditors of the ship willnot be met from the proceedsof the sale of the ship. Thesheriff may proceed forsatisfaction of his claim orthat of creditors on whosebehalf he arrested the ship,against the proceeds of thesale of the ship.

THE FACTSThe sheriff for the magisterial

district of the Cape arrestedthe Limb in terms of a courtorder authorising him to do soand retained the ship in hiscustody in terms of Rule 21 ofthe Admiralty Rules. The orderauthorised the sheriff to ad-minister and manage thecontinued operation of the shipand act in any manner whichbest preserved the value of theship.

While the ship was under thecustody of the sheriff, an oilrig, the South Seas Driller,broke its moorings and col-lided with a number of shipsincluding the Limb. The Limbsustained damage. The cost ofrepairing the damage wasapproximately US$140 000.

The sheriff then brought anapplication for an order that hewas entitled, and had locusstandi, to pursue any claim fordamages in respect of thecollision on behalf of thecreditors of the Limb and topay over the proceeds of sucha claim to the Registrar to formpart of a fund to be dealt within terms of the order authoris-ing the arrest.

THE DECISIONThe sheriff was the only party

apparently entitled to proceedagainst the South Seas Driller.There was nothing to suggestthat his claim, including hisclaim for his own costs andexpenses incurred in the pres-ervation of the ship, would notbe met from the proceeds ofthe sale of the ship. If hesuffered damages as a result ofthe collision, he would beentitled to exercise his cause ofaction against the party re-sponsible. There was no appar-ent reason why he could not doso.

There was therefore no reasonfor an order as applied for bythe sheriff. Such an orderwould also require that thecourt make some finding onhow the collision ocurred andwho was responsible for it.Without evidence relevant tothat question before the court,there was no basis for such anorder to be made.

As far as the question oflocus standi was concerned,there was no reason to conferlocus standi on the sheriffwhere the creditors claimingagainst the ship might them-selves have a claim against theSouth Seas Driller. The sheriffassumes the role of custodianin respect of a ship which hehas arrested, and becomesduty-bound to preserve theship in terms of the AdmiraltyRules, but this confers on himthe right to take measuresnecessary to prevent damagebeing caused to a ship, nottake those measures necessaryto remedy damage which hasalready taken place.

The application was dis-missed.

Shipping