IN THE HIGH COURT OF SOUTH AFRICA (GAUTENG DIVISION, PRETORIA)

In the matter between:

RAU_LST_ONE PROPERTIES (PTY) LTD (Reg1strat1on No: 2002/008665107)

and

CLUBVIEW GARAGE CC (Registration No: 1991/025702/23)

Case No: 5493/2017

\ I hs\t '\

Applicant

Respondent

DELETE WHICHEVER IS NOT APPLICABLE

( 1) REPORT ABLE: YES,@ (2) OF INTEREST TO OTHER JUDGES: y (3) REVISED .

. 1.L~~ DATE

JUDGMENT

HF JACOBS, AJ:

INTRODUCTION:

[1] The applicant (Raulstone) and the respondent (Clubview Garage)

were parties to arbitration proceedings that ended on 19 May 2016 when they

concluded a written settlement agreement. The settlement agreement was by

Page l2

consent made an award by the arbitrator on 23 May 2016 and is a four page

document, the body of which reads as follows:

"WHEREAS the Claimant declared a dispute whether the existing

Lease Agreement between the parties expires on the 31st May 2016

and the parties agreed to refer the matter for arbitration:

AND WHEREAS the parties have settled the dispute:

NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:

1.

The existing lease agreement until between the parties (annexure

"SOC1 " to Claimant's particulars of claim) is hereby extended on the

same terms and conditions until 31 May 2017 subject to the following

conditions:

1.1 From the 151 June 2016 to the 31st May 2017 a rental of

R60 OOO. 00 per month value added tax excluded is payable.

1.2 All power and water consumption must be paid in full as per

Khwela Power account on C/ubview Garage CC. The previous

25175 split between Rau/stone Properties will therefore not be

applicable. 25% of the account made out to C/ubview Garage

and 75% to Rau/stone Properties will come to end at 31 May

2016 and from 1 June 2016 C/ubview Garage shall pay the full

account.

1.3 The Defendant must sign a Surrender Affidavit of the Site and

Retail licence (copy attached) simultaneously with the deed of

settlement and as part of the settlement and shall do all things

necessary to ensure smooth process of respective licence

applications. The Defendant or its members irrevocably

undertakes not to lodge any objection against the Claimant's

application for the site and retail licences and shall do all things

Page l3

necessary to assist the Claimant to apply for the site and retail

licence.

1.4 The Defendant must evacuate the premises before the 1st June

2017 and he must remove all movables that is fridges, fittings

and implements and only the fuel in the tanks will be taken over

at Shell Wholesale prices as applicable on date of takeover.

2.

Each party shall pay his own cost and one half of Arbitrator's fees.

3.

This is the full agreement between the parties and any amendment

thereof must be done in writing and signed by all the parties.

4.

This agreement will be made an award by the Arbitrator."

[2] The settlement agreement brought to an end the arbitration

proceedings instituted by Raulstone against Clubview Garage for the eviction of

the latter from premises leased by it in terms of a written lease (the lease). The

settlement agreement provided for the extension and termination of the written

lease on 31 May 2017 and for providing by Clubview Garage of an affidavit

confirming the surrender of the leased property and a retail licence applicable

thereto to Raulstone. The retail licence pertains to the business of Clubview

Garage on the leased premises under the Petroleum Products Act, 120 of 1977.

The lease, dated 24 August 2006, was for conducting the business of a fuel retail

facility, selling and display of motor vehicles, spares and consumables, the

business of a convenience store and a car wash facility under the banner of

Page l4

Shell Petroleum on the property. In terms of the Petroleum Products

Amendment Act ("Petroleum Products Act") 1 a lessee in the position of Clubview

Garage requires a "site licence" for the property as well as a "retail licence" to

conduct the business of a fuel retailer on the property. The two licences are

interlinked in that petroleum products may be retailed or sold from a particular

property only if the property is licensed as premises in terms of the Petroleum

Products Act. In this application Raulstone seeks an order to have the award of

the arbitrator made an order of Court in terms of section 31 of the Arbitration Act,

42 of 1965 ("the Arbitration Act") and for the eviction of Clubview Garage from

the leased property.

[3] Clubview Garage raised three points in limine against Raulstone's

application and a further defence under the rubric "SPECIAL PLEA". The first

point in /imine is that the award Raulstone seeks to have made an order of court

is not an "award" as contemplated by the Arbitration Act and, therefore, not

capable of being made an order of court. The second point in limine is that the

notice of motion and, in particular prayer 2 thereof that provides for the order in

terms of section 31 of the Arbitration Act, is excipiable as it is not capable of

being made an order in terms of section 31 of the Arbitration Act. The grounds

relied on in support of the second point in limine are the following (and differ

somewhat from those alleged in support of the first point in limine ): Clause 1 .4

of the arbitration agreement appoints "retired Judge Johannes Claassen" as

arbitrator, while the award records the arbitrator to have been ''Advocate I P

Green SC". That discrepancy, so the allegations go, render the award invalid ex

Act 58 of 2003.

Page l5

facie clause 8. 7 of the arbitration agreement which provides that "No variation of

this agreement [the arbitration agreement] shall be of any force or effect unless

reduced to writing and signed by the parties or their attorneys." In the absence

of a signed written variation to remove or replace retired Judge Johannes

Claassen as arbitrator, so the argument goes, the relief sought in prayer 2 of the

notice of motion cannot be granted.

[4] The third point in limine is a challenge of prayer 3 of the notice of

motion in terms of which Raulstone claims ejectment of Clubview Garage from

the leased property. The complaint levelled by Clubview Garage against

prayer 3 of the notice of motion is that Rule 45(1) of the Uniform Rules of Court

provides that writs of the kind sought by Raulstone can only be issued to a

litigant "in whose favour any judgment of the court has been pronounced" and

that no 'Judgment" of any court has been ''pronounced" on any matter for the

"ejectment" of Clubview Garage.

[5] Clubview Garage's special plea is this: Mr Smith, the deponent to

Clubview Garage's affidavit, alleges that he now holds (and at the time of the

award held) 50% of the member's interest in Clubview Garage and that the other

50% is held by Petrus Hendrik du Plessis. Mr Smith states that the settlement

agreement signed by him which purports to surrender the site and retail licences

held by Clubview Garage under and in terms of the Petroleum Products Act is

null and void and unenforceable in that:

Page l6

[5.1] such a surrender constitutes "a disposal of the whole, or substantially

the whole, undertaking of the corporation" as envisaged by section

46(b )(ii) of the Close Corporations Act of 1984;

[5.2] alternatively that it is "a disposal of all, or the greater portion of, the

assets of the corporation" as envisaged by section 46(b)(iii) of that

Act; and

[5.3] in the absence of a resolution supported by 75% of the members of

Clubview Garage in writing, the settlement agreement is void.

[6] Clubview Garage instituted a counter-application for the setting aside

of the settlement agreement and the award of 19 and 23 May 2016; an order

declaring the surrender by Clubview Garage of the property and retail licences in

terms of the surrender affidavit invalid and revoked; and a declaratory order to

the effect that Clubview Garage has a lien over the leased property for the

goodwill value of the retail business currently conducted thereon as determined

by the universal formula applied by Shell South Africa (Pty) Ltd when petrol

stations are bought and sold as a going concern.

[7] Clubview Garage's answering affidavit and its annexures serve as its

founding papers of the counter-application to which Raulstone replied. Clubview

Garage did not file a further affidavit in reply to Raulstone's answer to the

counter-application. Clubview Garage, therefore, content itself with the affidavit

deposed to by Mr Smith in opposition of Raulstone's application and in support

of its counter-application . No affidavit was filed for Mr Du Plessis, the other

Page j7

member of Clubview Garage. Mr Smith's affidavit is met with an application by

Raulstone to strike out paragraphs 15 to 48 and 63 thereof and the annexures

thereto marked "AA1 " to "AA20" and "AA35". Counsel for Raulstone submitted

that the offending paragraphs (and annexures) are scandalous, vexatious and/or

irrelevant and are made to annoy those representing Raulstone and designed to

thwart enforcement of the settlement agreement and on authority of Gollach &

Gomperts,2 that a compromise (transactatio) whether extra judicial or embodied

in an order of court has the effect of res iudicata which raises an irrebuttable

presumption that a final judgment on a claim submitted to a competent court

(and arbitration tribunal), is correct. The presumption is founded on public policy

which requires that litigation should not be endless, and on the requirements of

good faith , which does not permit of the same thing being demanded more than

once.3 On authority of the mentioned case law, counsel for Raulstone further

submitted that the status of the arbitration proceedings as res iudicata renders

what is contained in paragraphs 15 to 48 and 63 and the annexures thereto

irrelevant and that those passages should, therefore, be struck from the record.

The attractiveness of the submission lies in its simplicity and it would in my view

be convenient to deal with the application to strike out first. To do so it is

necessary to refer to the general import of the offending paragraphs, its

contextual setting, the present dispute and the principles of law applicable

thereto.

2

3

Gollach & Comperts v Universal Laws and Produce Co 1978 (1) SA AD at 922B-C.

African Farms & Townships Ltd v Cape Town Municipality [1963] 3 All SA 20 (A); 1963 (2) SA 555 (A) at 564; Wright v Westelike Provinsie Kelders Bpki (2001] 4 All SA 581 (C); 2001 (4) SA 1165 (C); MEG for Economic Affairs, Environment and Tourism v Kruisenja 2008 (6) SA 264 (Ck).

Page l8

THE APPLICATION TO STRIKE OUT:

[8] In paragraphs 15 to 48 of the answering affidavit Mr Smith deals with

the history of the acquisition of his membership in Clubview Garage and that of

its other members and asserts that the history relates to ''Articles 22 and 25 of

the Bill of Rights as well as general public policy considerations". The history of

the acquisition is presented under the rubric "Factual Circumstances" and deals

with events starting in 1997 when Mr Smith retired from the South African

Defence Force as a colonel by taking a retirement package. Mr Smith then

bought his membership in Clubview Garage during 1998 which led to his

introduction to Shell Petroleum, Raulstone as landlord of the premises, the

lease, deliberations, negotiations and correspondence between the parties

between 1997 and 2015 when the arbitration proceedings came about. The

passage under discussion concludes with the assertion that the lease did not

terminate and that the legal representatives "who represented the respondent

(Clubview Garage) in the arbitration ... " were trusted and expected by Mr Smith

to draw the "pleadings properly and on a sound basis" and not in such a manner

to consent to termination of the lease as set out in the award of 23 May 2016.

[9] In paragraph 63 of the answering affidavit Mr Smith states that a

proposal of Shell Petroleum dated 4 August 2006 (a decade before the

settlement agreement) would justify the inference that, as the counter-application

of Clubview Garage states, there exists a term of the contract between the

parties that Clubview Garage enjoys a lien "over the site in and for the goodwill

value of the retailing business currently being conducted thereon such as is

demined (sic) by the universal formula applied by 'Shell' South Africa (Pty) Ltd

Page l9

when petrol stations are bought and sold as a going concern".4 Counsel for

Clubview Garage submitted that there exist two binding contracts between the

parties to wit the written lease and a written tripartite agreement concluded

between Shell Petroleum, Raulstone and Clubview Garage that the existence of

those agreements, notwithstanding the settlement agreement, affords Clubview

Garage its lien and renders the relief sought by Raulstone not appropriate.

[1 O] The application to strike out, therefore, turns on the issue whether the

content of paragraphs 15-48, 63 and the annexures can be said to be

scandalous, vexatious or irrelevant. Our Courts and courts in jurisdictions similar

to our own have over the years held that a pleading, affidavit or allegation which

is scandalous cannot be struck out if it is necessary or relevant to any issue in

the action.5 The same applies in determining whether an allegation is "irrelevant"

in this context. The fact that a defence is bad in law or not possible to prove at

trial or in application proceedings does not make the allegation irrelevant.

Herbstein & Van Winsen6 states that:

4

5

6

"When considering the motion to strike out the Court is not concerned

with the validity of the defence . .. The Court is concerned rather with

the question: are the passages sought to be expunged relevant to the

issues which can fairly be said to be raised on the pleadings?"

Record: p 53, Notice of Counter-application, par 3.

Vaatz v Law Society of Namibia 1991 (3) SA 563 (Nm) at 566.

Herbstein & Van Winsen, The Practice of High Courts of South Africa 5 th Ed, Vol 1, p 653.

Page l10

[11] In Meintjes7 Wessels J remarked in this context that:

"It appears to me that where the matter is or is not relevant is a

question of mixed fact and law. The Judge has to determine whether

the facts alleged are or are not relevant to the issue. If they are

relevant to the issue then they should stand, even though the plaintiff

may not succeed in proving them at the trial. But if the facts are

irrelevant, if they have nothing to do with the issue which has to be

tried by the Court, or if evidence cannot be led upon them because

they are too vague, then the Court will strike out the passages

complained of because they are irrelevant to the issue."

[12] The settlement agreement of 19 May 2016 is a compromise of the

disputes ventilated in the arbitration proceedings. Having regard to its context

the settlement agreement had as its objective the termination of the then

prevailing arbitration proceedings. In law its conclusion has the effect of res

iudicata and constitutes an absolute defence to any action based on the original

claim which was the subject of the arbitration.8

[13] Whether or not a settlement agreement is made an order of Court it

remains a contract (transactatio) and may be challenged on the basis of

contractual defences such as mistake, fraud, impossibility of performance,

illegality and the lack of authority to compromise.9 That has been the practice in

7

8

9

Meintjes v Wallachs Ltd 1913 TPD 278 at 285-6.

Gollach & Gomperts (1967) (Pty) Ltd v Universal Mills & Produce Co (Pty) Ltd 1978 (1) SA 914 (A); Karson v Minister of Public Works 1996 (1) SA 887 (E) at 893; Georgias v Standard Chartered Finance Zimbabwe Ltd 2000 (1) SA 126 (ZS) at 138-9.

Hlobo v Multilateral Motor Vehicle Accident Fund 2001 (2) SA 59 (SCA); lvoral Properties (Pty) Ltd v Sheriff of Cape Town 2005 (6) SA 96 (C); MEG for Economic Affairs, Environment and Tourism v Kruizenga 2010 (4) SA 122 (SCA); Wilson Bayly Homes (Ply)

Page 111

our courts for many years. 10 Our courts accept that: "Voluntary acceptance by

parties to a compromise of an element of risk that their bargain might not be as

advantageous to them as litigation might have been is inherent in every concept

of compromise. This is a circumstance which the Court must bear in mind when

it considers a complaint bv a dissatisfied party that. had he not laboured under

an erroneous belief or been ignorant of certain facts, he would not have entered

into the settlement agreement". 11 The passage in Gollach v Comperts 12 relied

on by counsel for Raulstone that: '~ transactatio, whether extra-judicial or

embodied in an order of Court, has the effect of res iudicata" is qualified in the

same judgment as follows: "It is obvious that, like any other contract (and like

any order of Court), a transactatio may be set aside on the ground that it was

fraudulently obtained. There is authority to the effect that it may also be set

aside on the ground of mistake, where the error is iustus on the ground of

instrumentum noviter repertum". 13 On that well established principle it must be

determined whether the facts deposed to in the affidavits justify the challenge of

Clubview Garage to the settlement agreement and the relief sought in the

counter-application.

10

11

12

13

Ltd v Maeyane 1995 (4) SA 340 (T); Bloubul Boorkontrakteurs v Mclachlan 1991 (4) SA 283 (T); Standard Bank of SA Ltd v Essop 1997 ( 4) SA 569 (D); PL v YL 2013 (6) SA 28 (ECG) at [9].

Engelbrecht and Another N.O. v Senwes Ltd 2007 (3) SA 29 (SCA) at 32D.

Gol/ach & Comperts v Universal Mills and Produce Co 1978 (1) 914 AD at 923D. T he underlining is my own.

Gollach & Comperts v Universal Mills and Produce Co, supra at 922C.

Gollach & Comperts supra at 922F.

Page 112

[14] The settlement agreement expressly records that the existing lease

agreement (annexure "S0C1" to Raulstone's statement of claim in the

arbitration proceedings) is extended "on the same terms and conditions until

31 May 2017" subject to the conditions mentioned in subparagraphs 1.1 to

1.4 thereof. Incorporation by reference of the lease and its extension in terms

of the settlement agreement require for purposes of adjudication of the

dispute to determine whether the facts · deposed to in the paragraphs

complained of (and the annexures to the answering affidavit) constitute a

valid defence in law to Raulstone's application and a cause of action for the

relief sought in the counter-application. To strike those paragraphs and

annexures from the answering affidavit without considering them in that

context would make nugatory Clubview Garage's right to have the case it

advances in these proceedings heard. Under the circumstances the

application to strike out cannot succeed. The cost aspect thereof will be dealt

with later in this judgment.

FIRST POINT IN LIM/NE:

[15] Clubview Garage's first point in limine is this: the award of the

arbitrator is not an award in terms of the Arbitration Act for it was not the

result of an arbitration process but a transactatio. The contention is that an

"award" within the ambit of that term in the Arbitration Act "is strictly confined

to a process whereby the arbitrator in a res iudicata matter applies his/her

mind to the 'dispute' that is defined in the Arbitration Agreement." Clubview

Garage concludes on this point in limine that the "award" is a compromise

Page l13

and can, therefore, not be made an order of court in terms of section 31 of

the Arbitration Act.

(16] It is quite correct that the Arbitration Act does not expressly provide

for the making of a compromise an award. However, our common law

recognises the authority of an arbitrator to do so. This was the position long

before the advent of the Arbitration Act. Recording of settlement agreements

by arbitrators coupled with a consent by the parties to the arbitration to have

the agreement made an award is a regular occurrence. In Bidoli14 the

Supreme Court of Appeal held that "it does not appear to me to follow that in

the absence of a statutory provision the parties would not be free to elect to

regulate their relationship with each other as occurred here. "15 In my view the

arbitrator's award recording the settlement agreement by consent is valid and

capable of being made an order in terms of section 31 of the Arbitration Act.

Counsel for Clubview Garage correctly conceded the point during argument.

SECOND POINT IN LIM/NE:

[17] The second point in limine was, correctly so, conceded by counsel

for Clubview Garage during argument. The substitution of Advocate Green

SC as arbitrator took place by consent on the evidence to which I will refer in

more detail below and application of sections 3(1) and 10 of the Arbitration

Act thereto.

14

15

Bidoli v Bidoli & Another 2011 (5) SA 247 (SCA).

Bidoli supra at [15].

Page 114

THIRD POINT IN LIM/NE:

[18] The third point in limine is that a warrant of ejectment cannot be

issued in the circumstances. Reliance is placed on the provisions of

Rule 45(1) of the Uniform Rules of Court which governs writs and reads as

follows:

"(1) The party in whose favour any judgment of the Court has

been pronounced may, at his own risk, issue out of the

office of the Registrar one or more writs for execution

thereof as made in accordance with Form 18 of the First

Schedule: ... "

[19] Clubview Garage states that "no judgment of any Court has been

pronounced on any matter of ejectment" and that the relief sought in that

context is ill-conceived and lacks legal or factual foundation . The third point

in limine was raised by Clubview Garage in its answering affidavit deposed to

on 28 February 2017. On 8 March 2017 Raulstone served an amended

notice of motion. Clubview Garage objects to the amendment. The amended

notice of motion is in all respects identical to the initial one, save paragraph 3

which in the amended notice of motion reads as follows:

"The Respondent is ordered to vacate Erf 732, Clubview Extension

24 by no later than 31 May 2017, failing which the Sheriff is

authorised to evict the Respondent, and all persons holding

Page j15

occupation through the Respondent from the said immovable

property;" 16

[20] The objection made in limine against the initial prayer 3 of the

original notice of motion is now moot. The objection is still made to the

amended notice on the basis that the relevant paragraph of the amended

notice of motion should not be granted. The basic rules of interpretation of a

judgment or order of a Court are no different from those applicable to the

construction of written instruments. 17 Interpretation of a document should

take place by having regard to the context provided by the reading of the

provisions of the document in the light of the document as a whole and the

circumstances attendant upon its coming into existence. The context of the

document is fundamenta l and the apparent purpose to which the document is

directed determines its context. A sensible meaning is to be preferred to one

that leads to an insensible result or one that undermines the apparent

purpose of the document.18

[21 ] The order with which a judgment of a court concludes is the

executive part of the judgment that defines what the Court requires has to be

done, or not done, so that the parties to the suit (and others) may know. It

16

17

18

Paragraph 3 of the original notice of motion reads as follows: "That the Registrar of the High Court of South Africa, Gauteng Division, Pretoria, be authorised to issue a Warrant of Ejectment against the Respondent and all other persons holding occupation through the Respondent, from the property known as Erf 732, Clubview X 48, City of Tshwane Metropolitan Municipality, Gauteng. "

Herbstein & Van Winsen: The Civil Practice of High Courts of South Africa 51h Ed, Vol 1

p 936.

Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA).

Page j16

may be said that the order must undoubtedly be read as part of the entire

judgment and not as a separate document. The Court's directions must be

found in the order and not elsewhere. If the meaning of an order is clear and

unambiguous, it is decisive, and cannot be restricted or extended by anything

else stated in the judgment.19

[22] Central to the dispute in the arbitration proceed ings and in this

application is Raulstone's right to claim eviction of Clubview Garage from the

leased premises. Clubview Garage's counter-application is a challenge of

Raulstone's right to claim its eviction. Making of the award of the arbitrator

(the settlement agreement), an order of court would be meaningless as the

award would be, and remain, a contract which is the subject of a dispute for

the reasons mentioned in this judgment. Orders of Courts are to be effective.

Raulstone is entitled to claim an order as it does for the eviction of Clubview

Garage in this application. Prayer 3 of the notice of motion is aimed at

securing an effective order against Clubview Garage for its eviction, the

granting of which depends on whether or not Raulstone has discharged the

onus imposed by law in that regard . The objection thereto in limine is without

merit and must fall to be dismissed.

THE SPECIAL PLEA:

19 Administrator, Cape & Another v Ntshwaqela & Others 1990 (SA) 705 AD at 716.

Page j17

[23] Clubview Garage's special plea and the declaratory order sought in

prayer 2 of its notice of counter-application is in essence this:20 the

settlement agreement that was made an award by the arbitrator amounts to

"a disposal of the whole, or substantially the whole, undertaking of' Clubview

Garage as close corporation or "the greater portion of its assets". Section

46(b )(ii) and (ii i) of the Close Corporations Act21 require that a resolution

supported by 75% of the close corporation's members is required for the

validity of such a disposal. Mr Smith, the deponent of Clubview Garage's

affidavit asserts that: "the resolution required by Law for such a disposal was

not done and now, will not be done, and there is no prospect of the

membership of the Respondent CC ratifying the agreement" and the

"circumstances which surround this 'settlement agreement' .. . " show that it

"ought to be set aside alternatively rescinded" and "it will be seen that it was

the Applicant or Applicant's lawyers who were careless, alternatively remiss,

at their own peril, at the time, in failing to determine what was required for a

valid decision or valid resolution by the Respondent on so serious a matter"

and that Mr Smith himself "was not at the time conscious of or attuned to

such legal refinements and was not aware of this legal aspect until it was

raised by Counsel in consultation for the preparation of' Clubview Garage's

affidavit in these proceedings.

20

21

Prayer 2 of the notice of motion reads as follows: "Declaring that the surrender by Respondent of the Site and Retail Licences held by the Respondent for the site known as Clubview Motors or Erf 732 Clubview Extension 24 has validly been revoked".

Act 69 of 1984.

Page l18

[24] Before I deal with the provisions of section 46 of the Close

Corporations Act it is necessary to refer to the incidence of onus in this

context. Onus in this sense is a matter of substantive law. Onus, in its "true

and original sense ... namely the duty which is cast on a particular litigant, in

order to be successful, of finally satisfying the Court that he is entitled to

succeed on his claim, or defence, as the case may be ... " is determined by

substantive law.22

[25] Section 46(b) of the Close Corporations Act provides a statutory

protection to a close corporation and its members in circumstances listed by

section 46(b )(i), (ii) and (iii) by requiring consent in writing of a member or of

members holding together a member's interest of at least 75%. To succeed

with its defence premised on section 46(b )(ii) and (iii) Clubview Garage bears

the onus to show on a balance of probability that the settlement agreement

(and the award) constitutes a disposal of the whole or substantially the whole

undertaking of Clubview Garage or a disposal of all, or the greater portion of,

the assets of the close corporation .

[26] Section 46 of the Close Corporations Act appears in PART V of

that Act under the heading "Internal Relations". That part of the Close

Corporations Act provides that every member of a close corporation stands in

22 Pi/lay v Krishna & Another, 1946 AD 946 at 952-3; Neethling v Ou Preez & Others, Neethling v The Weekly Mail & Others 1994 (1) SA 708 (A) at 761 C; Eskom v First National Bank of Southern Africa Ltd 1995 (2) SA 386 (AD) at 390F-G.

Page j19

a fiduciary relationship to the corporation ;23 every member is liable to the

close corporation for loss caused by him or her in certain circumstances;24 an

association agreement may be concluded betwe~n the members of the close

corporation and that the member shall have exclusive access thereto;25

persons are disqualified regarding the management of a corporation in

certain circumstances;26 that meetings of members shall take place and the

manner of the meetings;27 remedies are available in the event of unfair and

prejudicial conduct of members;28 that a member or former member would be

liable to the corporation or any other member in a court of law in certain

circumstances;29 under certain conditions the close corporation may make

23

24

25

26

27

28

29

Section 42; Amalgamated Banks of South Africa Bpk v De Goede & Ander 1997 (4) SA 66

(SCA).

Section 43.

Section 44 and 45.

The relevant part of section 46 of the Close Corporations Act reads as follows: "46. Variable rules regarding internal relations:-The following rules in respect of internal relations in a corporation shall apply insofar as this Act or an association agreement in respect of the corporation does not provide otherwise: (a) every member shall be entitled to participate in the carrying on of the business of the corporation; (b) subject to the provision of section 47, members shall have equal rights in regard to the

management of the business of the corporation and in regard to the power to represent the corporation in the carrying on of its business: Provided that a consent in writing of a member holding a member's interest of at least 75%, or of members holding together at least that percentage of the members' interest, in the corporation, shall be required for -(i) a change in the principal business carried on by the corporation; (ii) a disposal of the whole or substantially the whole undertaking of the corporation; (iii) a disposal of all, or the greater portion of, the assets of the corporation; and (iv) any acquisition or disposal of immovable property by the corporation.

(c) differences between members as to matters connected with the corporation 's business shall be decided by a majority vote at a meeting of members of the corporation. ·

Section 48.

Section 49.

Section 50.

Page l20

payments to its members and the prohibition of loans and furnishing of

security by close corporation to its members."30

[27] Mr Smith bought his membership in Clubview Garage during April

1998 from one Mr De Bruyn. The effective date of his ownership was 1 June

1998. At the time Mr Smith " ... a/so knew and accepted that [he] was doing

this with the expectation that the goodwill in that business could be likewise,

in tum, held and sold as a going concern". From this evidence of Mr Smith

his conduct subsequent to 1998 must be interpreted as that of a person

mindful of the expectation recorded above. When Mr Smith acquired his

membership in Clubview Garage there existed a written lease (the first lease)

between Clubview Garage and Raulstone Eiendomme CC. That lease was

for a five year period ending 14 September 1998. A new written lease was

concluded between Raulstone and Clubview Garage on 24 August 2006.

That occurred following the advent of the Petroleum Products Amendment

Act which imposed the requirement of licensing of premises and retailers as

recorded in paragraph 2 above. Mr Smith refers to events between the 14th

September 1998 and 24 August 2006 (the termination date of the first lease

and the lease) in Clubview Garage's affidavit. I do not intend recording all the

facts set out by Mr Smith in that affidavit in detail. Many of those factual

averments are also found in Clubview Garage's "statement of defence"

delivered in the arbitration proceedings. However, in those proceedings

those facts were pleaded to conclude, as Clubview Garage did in paragraph

30 Sections 51 and 52.

Page l21

16 of its statement of defence, that the parties concluded a month to month

lease which was to expire on 31 December 2018. What is absent from the

[28] The lease (from 2006) afforded Clubview Garage an option to

renew the lease to be exercised not less than three months before the expiry

date of the initial period as defined therein for its extension for a further term

of four years and eleven months.31 Clubview Garage did not exercise the

option.

[29] Clubview Garage is the holder of a site licence and a retail licence

to conduct the business on the leased premises. In Louistef2 the Supreme

Court of Appeal held " ... a site licence constitutes a merchantable merx". 33

On 3 August 2016, two days after this application was heard, the

Constitutional Court confirmed the judgment of the Supreme Court of Appeal

in Louistef and added that "Existing owners may, in the absence of a lessee

holding the site licence under the transitional provisions, in their own right

apply for site licences. . .. The lessee's entitlement to transfer the site licence

is indeed an asset with commercial value, but it is subject to two constraints:

(i) it is transferable only to new lessees or new owners and (ii) it cannot

31

32

33

See clauses 2.1 - 4 thereof.

Louistef (Pty) Ltd v CWA Snyders NO as trustee of: Louis Snyders Familietrust & Others (2016] ZACSA 182 (29 November 2016).

See Louistef supra at (21 J.

Page j22

survive the termination of the lease period". 34 Under the circumstances the

asset value of the licences for purposes of ascertaining its asset value are

subject to the same constraints as those mentioned by the Constitutional

Court in Louistef. In its answering affidavit (its only affidavit) no evidence of

the value of Clubview Garage's assets, the nature of its assets or what

portion of the assets are made up by the licences under consideration is

offered.

[30] In my view Clubview Garage failed to prove on the balance of

probability the jurisdictional facts or elements necessary for its reliance on the

provisions of section 46 of the Close Corporations Act.

CLUBVIEW GARAGE'S SECOND DECLARATORY ORDER: THE

ENRICHMENT LIEN:

[31] Counsel for the respondent submitted with reference to a number

of authorities that our law recognises the existence of an enrichment lien of a

lessee.35

[32] The lien (or ius retentionis as alleged by Clubview Garage) is in law

a real right to the leased premises in the form of an enrichment lien.

34

35

C WA Snyders NO as trustee of: The Louis Snyders Familietrust v Louistef (Ply) Ltd & Another [2017] ZACC 28 (3 August 2017) at [13].

Reference was made to McCarthy Retail Ltd v Short Distance Carriers CC [2001] 3 All SA 236A; Pheiffer v Van Wyk & Others 2015 (5) SA 464 (SCA); Business Aviation Corporation (Pfy) Ltd & Another v Rand Airport Holdings (Pty) Ltd [2007] 1 All SA 421 (SCA); Singh v Santam Insurance Company Ltd 1997 (1) SA 291 (SCA); Goudini Chrome (Ply) Ltd v MCC Contracts (Ply} Ltd 1993 (1) SA 77 AD.

Page l23

Clubview Garage contends that it has kept the business on the leased

premises well maintained for almost two decades and the inequity of it having

to surrender the business to its landlord, Raulstone, who intends continuing

with the enterprise, at no charge, justifies the declaration of the existence of

the lien sought in its notice of motion. Counsel for Clubview Garage

submitted that the decision in Mighty Solutions36 was the result of absence of

any evidence in support of a claim for declaring the leased property in that

case subject to an enrichment lien and that the present application should be

distinguished from Mighty Solutions as the evidence in this instance shows

enrichment. I do not agree with what has been submitted for a number of

reasons. The lease afforded Clubview Garage the right to extend it with

another term. It failed to exercise the option. Had he done so the lease

would have expired on the date Clubview Garage alleged in paragraph 16 of

its statement of defence in the arbitration proceedings. Had it exercised the

option it would have been in a position to recoup of what it alleges it stands to

lose now. Secondly, on Mr Smith's own affidavit it is clear that he has as

early as 1998 contemplated a goodwill component to exist as part of his

investment at the expiry date of the lease. Despite Mr Smith's knowledge no

such right was negotiated and recognised by any of the subsequent leases.

Thirdly, no lien was claimed on behalf of Clubview Garage in the arbitration

proceedings. The lien (or the idea about its existence) was only raised by

Clubview Garage in this application, or at least after the arbitration

proceedings. To recognise such lien would allow Clubview Garage to remain

36 Mighty Solutions v Engen Petroleum 2016 (1) SA 621 (CC).

Page j24

in occupation of the leased premises beyond the contractually agreed date.

That situation would be " ... unjust and commercially reckless and might well

have far-reaching and unnecessary implications for the law of lease and of

contract in general", as stated by Van der Westhuizen J in Mighty Solutions. 37

(33] In my view no ius retentionis claimed by Clubview Garage in this

application exists on the facts or is recognised in law.

COSTS:

(34] Each of the grounds advanced by Clubview Garage, in its

challenge of the settlement agreement and the award and those which its

counter-application are founded upon, are without merit. Clubview Garage

was during the arbitration proceedings represented by an attorney and

counsel. Those practitioners are now accused by Clubview Garage of not

having advanced its case properly in accordance with the points in law raised

in this application. At the time of the award (23 May 2016) the judgment of

the Supreme Court of Appeal in Louistef was not yet delivered. It was only

delivered on 29 November 2016, six months later. Clubview Garage's

affidavit was deposed to on 28 February 2017 and its papers filed soon

thereafter. By that time the law stated by the Supreme Court of Appeal in

Louistef was known. The judgment of the Supreme Court of Appeal in

Louistef was, so it was submitted during argument by counsel acting on

37 Mighty Solutions supra at [57].

Page l25

behalf of Clubview Garage, wrong. As mentioned earlier in this judgment

Louistef was confirmed by the Constitutional Court and the latter Court's

dictum at [11] to [15] of that judgment added.

(35] Clubview Garage persisted with its points in limine until its counsel

was driven by circumstances at the hearing to concede and abandon the first

and second points in limine. Clubview Garage's reliance on the existence of

a lien is at variance with the judgment in Mighty Solutions38, a judgment that

must have been known to Clubview Garage's present attorneys of record

who also represented the applicant in the Mighty Solutions matter before the

Constitutional Court.

[36] In my view Clubview Garage's opposition of Raulstone's application

on the grounds mentioned is unreasonable and contrived and a punitive cost

order should be granted against Clubview Garage.

THE ORDER:

(1) The application for the amendment of paragraph 3 of the applicant's

notice of motion is upheld and amended as per its amended notice of

motion;

(2) The applicant's application is upheld with costs including the costs of

two counsel.

38 Mighty Solutions v Engen Petroleum 2016 (1) SA 621 (CC).

Page l26

(3) The respondent's counter-application is dismissed including the cost

of two counsel;

(4) The written award of arbitrator, Advocate I P Green SC, dated 23 May

2016 is made an order of court;

(5) The respondent, Clubview Garage CC, is ordered to vacate Erf 732,

Clubview Extension 24 within five days from date of this order failing

which the Sheriff is authorised to evict the respondent and all persons

holding occupation through the respondent from the said property;

(6) The costs payable in terms of paragraphs (2) and (3) shall be taxable

on a scale as between attorney and client.

Raulstone Properties (Pty) Ltd v Clubv.ew Garace CC_Judgment HF Jacobs AJ