Current Commercial Cases

2004

ISBN 978-1-920569-32-7

A SURVEY OF THE CURRENT CASE LAW

written by

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

The Law Publisher CCCK92/26137/23

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Contents

Index......................................................................................................................................................... 4PREMIER, WESTERN CAPE v FAIRCAPE PROPERTY DEVELOPERS (PTY) LTD 8GIANT PROPERTIES (PTY) LTD v GOVENDER10HUDSON N.O. v WILKINS N.O. 11MINISTER OF JUSTICE v FIRSTRAND BANK LTD 12EX PARTE VAN DEN BERG N.O.: IN RE RIVIERA INTERNATIONAL (PTY) LTD 13KEVIN & LASIA PROPERTY INVESTMENTS CC v ROOS N.O. 14KLEIN N.O. v KOLOSUS HOLDINGS LTD.. 15MA VLEISAGENTSKAP CC v SHAW N.O. 16MICHAU v MAIZE BOARD 17EMPANGENI MILLING CC v CLAASEN.... 18WELIHOCKYJ v ADVTECH LTD ... 19DE VILLIERS N.O. v BOE BANK LIMITED . 20RANE INVESTMENTS TRUST v COMMISSIONER, S.A. REVENUE SERVICE 22B C PLANT HIRE CC v GRENCO (SA) (PTY) LTD 23POTOCNIK v MUTUAL AND FEDERAL24SCHOEMAN v CONSTANTIA INSURANCE CO LTD .. 25WARRICKER N.O. v LIBERTY LIFE ASSOCIATION OF AFRICA LTD 26CERTAIN UNDERWRITERS OF LLOYDS OF LONDON v HARRISON 27JANS v NEDCOR BANK LTD... 28GREEN AFRICA SHIPPING (PTY) LTD v HIFU ELECTRONIC TRADING CC 30HNR PROPERTIES CC v STANDARD BANK OF SOUTH AFRICA LTD 31DAVIS v CLUTCHCO (PTY) LTD . 33AFRIC OIL (PTY) LTD v RAMADAAN INVESTMENTS CC 34FIRSTRAND BANK LTD v DAVIS . 35SONNENBERG McLOUGHLIN INC v SPIRO .... 36EBN TRADING (PTY) LTD v PSC GUARANTEED GROWTH LTD 37BROWNE N.O. v PSC GUARANTEED GROWTH LTD . 37BURLEY APPLIANCES LTD v GROBBELAAR N.O.38STOCKDALE v STOCKDALE ..39BIERMAN v MUTUAL AND FEDERAL INSURANCE CO LTD 40MAN TRUCK & BUS (SA) (PTY) LTD v DUSBUS LEASING CC 41METRO PROJECTS CC v KLERKSDORP LOCAL MUNICIPALITY 43CONSOL LTD v TWEE JONGE GEZELLEN (PTY) LTD 44REDDY v DECRO INVESTMENTS CC . 46CLARK v FARADAY ... 47SHROSBREE N.O. v VAN ROOYEN N.O. .... 48THE ARGUN (NO 2) ..... 49THE ARGUN v THE MASTER AND CREW OF THE ARGUN 49THE MEGA S .. 50BRIDGE OIL LTD v THE FUND CONSTITUTING THE PROCEEDS THE SALE OF THE MEGA S 50THE ATLANTIC PRIDE 51SIYADOBA FISHING (PTY) LTD v MARINE RADIO ACOUSTIC DEVICES CC 51BOCK v DUBURORO INVESTMENTS (PTY) LTD .. 52HEATHFIELD v MAQELEPO ....54SHEIK v PILLAY .. 55CGU INSURANCE LTD v RUMDEL CONSTRUCTION (PTY) LTD 56BLAAUWBERG MEAT WHOLESALERS CC v ANGLO DUTCH MEATS (EXPORTS) LIMITED 57FARREN v SUN SERVICE SA PHOTO TRIP MANAGEMENT (PTY) LTD 58FTCK CONSULTANTS CC v SHOPRITE CHECKERS LTD 59GORE N.O. v SHELL SOUTH AFRICA (PTY) LTD . 60SANGIORGIO N.O. v DUYN61UKUBONA 2000 ELECTRICAL CC v CITY POWER JOHANNESBURG (PTY) LTD 62ALFA LAVAL AGRI (PTY) LTD v FERREIRA . 64ROSEBANK MALL (PTY) LTD v CRADOCK HEIGHTS (PTY) LTD 65JUGLAL NO v SHOPRITE CHECKERS (PTY) LTD 67ISLAND VIEW SHIPPING (PTY) LTD v CAMARGUE TRANSPORT SYSTEMS (PTY) LTD 68LAPPEMAN DIAMOND CUTTING WORKS (PTY) LTD v MIB GROUP (PTY) LTD 69LLOYDS OF LONDON UNDERWRITING SYNDICATE v SKILYA PROPERTY INVESTMENTS (PTY) LTD 70ABSA BANK LTD v MURRAY . 72BRIAN LACKEY TRUST v ANNANDALE ... 73FIRST RAND BANK LTD v BODY CORPORATE, GEOVY VILLA 74GEUE v VAN DER LITH75PLATINUM HOLDINGS (PTY) LIMITED v VICTORIA AND ALFRED WATERFRONT (PTY) LTD 76COMPETITION COMMISSION v UNILEVER PLC.. 78WALTER McNAUGHTAN (PTY) LTD v SCHWARTZ . 79HEYNEMAN v WATERFRONT MARINE CC 80FHP MANAGEMENT (PTY) LTD v THERON N.O. .. 81

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FRANCIS v SHARP82DE VILLIERS N.O. v BOE BANK LIMITED . 83MOONSAMY v NEDCOR LTD . 85NIEUWOUDT v VRYSTAAT MIELIES (EDMS) BPK 86NTSANWISI v MBOMBI ... 87MELAMED & HURWITZ INC v BLANK 88JASAT & JASAT v DEEDAT... 89GEYSER N.O. v TELKOM SA LTD 90LL MINING CORPORATION LTD v NAMCO (PTY) LTD 91LOVE v SANTAM LIFE INSURANCE LTD . 92NAPIER N.O. v VAN SCHALKWYK 93SMARTPHONE SP (PTY) LTD v ABSA BANK LTD94LTA CONSTRUCTION LTD v MEDITERRANEAN SHIPPING COMPANY DEPOTS (PTY) LTD 95DINERS CLUB SA (PTY) LTD v SINGH97REGISTRAR OF BANKS v REGAL TREASURY PRIVATE BANK LTD 99STANDARD BANK OF SOUTH AFRICA LTD v KOEKEMOER 100IIR SOUTH AFRICA BV v TARITA 102IIR SOUTH AFRICA BV v HALL.... 103D&H PIPING SYSTEMS (PTY) LTD v TRANS HEX GROUP LTD 104ESTERHUIZEN v SWANEPOEL* .... 106PIETERSE N.O. v THE MASTER .... 107SENTRAAL-SUID KOÖPERASIE BPK v BESSEMER STEEL CONSTRUCTION (PTY) LTD 108WELTEVREDE NURSERY v KEITH KIRSTEN’S (PTY) LTD 109WRIGHT v COCKIN..... 110AXZS INDUSTRIES v AF DREYER (PTY) LTD . 111ESTATE AGENCY AFFAIRS BOARD v AZEVEDO . 112DIE BESTUURSVERENIGING VAN DE RUST AFTREE-ORD v UTILITAS BELLVILLE ING 113LIEBENBERG N.O. v MOUNT EDGECOMBE COUNTRY CLUB ESTATE MANAGEMENT ASSOCIATION II 114CONCOR HOLDINGS (PTY) LTD v POTGIETER.... 115FAROCEAN MARINE (PTY) LTD v MALACCA HOLDINGS LTD 116FJS PAINTING CC v ABSA BANK LTD..... 117JOHANNESBURG COUNTRY CLUB v STOTT 118KHANYILE v MINISTER OF EDUCATION AND CULTURE, KZN 119TRAVELEX (PTY) LTD v JUMBO ZIPS CC .... 120NEW WORLD ENGINEERING AND CONSTRUCTION v SINGH 121METCASH TRADING LTD v CREDIT GUARANTEE INSURANCE CORPORATION OF AFRICA LTD 122SANTAM LTD v HOBBS .. 123SAMSUDIN v BERRANGE N.O. 124MEEG BANK LTD v WAYMARK N.O. . 125ABSA BANK LTD v BURMEISTER 126MNGADI v BEACON SWEETS & CHOCOLATES PROVIDENT FUND 127THE SAGE SCHACHAT PENSION FUND v THE PENSION FUNDS ADJUDICATOR 128PELLOW N.O. v CLUB REFRIGERATION CC.. 129NISSAN SOUTH AFRICA (PTY) LTD v MARNITZ N.O. 131

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IndexAcknowledgement of debt

when debt becomes due 39Agent

SARS appointing in terms of VAT Act 94Amendment

of pleadings, whether prescription has run 57Arbitration

agreement inapplicable in some circumstances 19bias by arbitrator 121gross irregularity and 121

Assignmentof rights 68

Attorneycontract with client, mandate 88reasonableness of fee charged 88

Bankaccount credited erroneously 131as agent of SARS 94cession of life policy in favour of 85collecting, negligent collection of cheque 117curator, actions by 99debiting account as agent of taxpayer 94holding company of bank, locus standi 99liquidation of 99loan made by to trust 100

Bill of costsas basis for provisional sentence 89

Body corporateclaim for levies and costs, ranking of 74

Cessionof life policy, tacit revocation of beneficiary 85of rights, persists after termination of original ag 68

Chequetrue owner, proof of 117

Close corporationdemand on, statutory demand 34deregistration, personal liability 35personal liability for debts of 16personal liability of member 38personal liability of members 35reckless trading 16

Companiessecurity for costs 108shareholders’ agreement, nature of 82

Companycreditor of in share capital reduction 15director, personal liability under s53(b) 36disposing of major asset 58dissolution, review of 107liquidation of, Master’s certificate 107liquidation proceedings, suspending proceeding ac-

tio 91private, shareholder’s right to information 33

reduction of share capital 15resolution not formally valid 20, 83Turquand Rule 58

Competitiondisclosure of confidential information 78dominant position of landlord 76franchise agreement, whether unfair business practic 59lease, whether rental excessive or not 76plant breeder’s rights and 109rental, excessive price and 76

Competition Commissiondisclosure of confidential information 78

Constitutionpublic official, duty of 8tender process 43

Constructionarbitration proceedings and 121standard contract incorporating terms of tender 129

Contra bonos moresdefinition of 67

Contractarbitration clause and 19breach, mora and 18credit card, terms of 97damages for breach, when determined 18exclusion of liability 44exemption clause 118exemption from liability 118illegality, void ab initio 75initial impossibility 65interpretation of 22interpretation of exemption clause 118interpretation of preamble clause 44remedy for breach, specific peformance 81repudiation, what amounts to 40restraint of trade 79, 87, 102restraint of trade agreement 103simulated 17sub-contractor, liability in delict 64supervening impossibility 65suspensive condition distinguished from resolutive 65tacit, not proved 114tacit term, when implied 44terms and conditions, recorded in small print 104terms contrary to public policy 97

Contractual termscontra bonos mores 67

Credit agreementpassing of risk and 23

Credit cardfraudulent use of 97terms and conditions applicable to 97

Creditormeaning of, unliquidated claim 15

Creditor and debtorpayment invalidly made revives creditor’s right 90

5

Damageslost profits, proof of 120

Delictsub-contractor’s liability to third party 64wrongfulness 8

Directorpersonal liability under s53(b) 36

Employeerestraint of trade 102

Employmentpublic service, conditions applicable 119

Enrichmentaction against bank 131money erroneously paid into bank account 131

Estate agentstealing money 112

Estoppelprevious judgment determining same matter 41public service, conditions applicable 119

Import and exportavoidance of customs duty 70

Insolvencyadvantage to creditors 61company in liquidation due to failure of franchise a 107creditor’s voluntary winding up 13

Companyliquidation proceedings, suspending proceeding ac-

tio 61Insolvency

assets available to creditors, action against franch 107disposition not in the ordinary course of business 60disposition without value 60, 90intention to prefer 60life insurance policy and 92life policy, insured sequestrated 48liquidator, appointment of by direction of Minister 12liquidator, provisional, powers of 13liquidator, removal from office 11of insured 26sale of business 14sequestration, costs of opposing 124spouse, life policy and 48suspension of proceedings 91trader, meaning of 14

Insurancebroker, duties of 69claim tainted by fraud 25death, benefits not payable to creditors 92exclusion of illegal purpose 70exclusion of liability 123financial difficulties of insured, disclosure of 24illegal purpose to which insured property put 70implied term, insurer entitled to repudiate fraudule 25incorporation of terms of other policy by reference 70life, nomination of beneficiary 92life policy, insolvency of insured 26

life policy, sequestration of insured 48limitation period for bringing claim 40misrepresentation by insured 25non-disclosure by insured 24notification to insurer, requirement of writing 93open backed truck, exclusion of liability 123period within which claim must be made 122repudiation of claim, misrepresentation 93repudiation on grounds of illegal purpose 70risk, material facts disclosure 27vague term 122war policy incorporating terms of hull policy 70warranty, failure to comply 93

Intercessiondistinguished from surety 55

Interdictanti-dissipation, applicable to maintenance obli-

gati 127neighbour causing nuisance 110

Jurisdictionattachment to found or confirm 116

Leaserenewal of, how proved 76sub-lessor not entitled to eject 46

Life insurancecession of, whether affecting nominated benefici-

ary 85insolvency of insured 26

Liquidationliquidator, removal from office 11of bank 99of close corporation, statutory demand as ground

for 34Liquidator

appointment of by direction of Minister 12provisional, powers of 13

Loanto trust, limiting on-lending 100

Locus standiof cessionary 68

Mandateremuneration for 88

Manufacturerwarranty against latent defects 104

Mortgage bondranking of vis-a-vis body corporate’s claim 74

Neighbour lawnuisance cause by neighbour 110

Notarial bondparate executie 67perfection of rights under 67

6

Ownershipaction to enforce rights based on 111estoppel raised against rights of owner 115reservation of ownership clause 129rights of owner against unlawful occupier 72

Partnershipagreement, as shareholders’ agreement 82

Passing offinflatable boat designed similarly to other boat 80requirements for 80

Pensionemployer’s right to deduct from 126maintenance obligations and 127

Pledgerealisation of shares pledged 52

Prescriptionamendment of pleadings 57amendment to claim 56date on which debt becomes due 39debt, meaning of 56mistaken description of defendant 57personal liability for debts of corporation 38suretyship debt 28

Propertyconstruction of building 47derogation in value by construction 47development of 65encroachment on neighbouring land 73Estate Agency Affairs Board 112estate agent, claim against 112eviction of unlawful occupier 72letting and hiring as trade 14neighbour law, encroachment 73occupation, right of 81property holding company 14removal of title deed restrictions 8restrictive conditions of title 114retirement resort, occupation rights 113sale agreement, interpretation of 54sale of fixed property, breach of 81subdivision of agricultural land 75suspensive condition, subdivision of agricultural la 75

Propetylease, sub-lessor’s right to eject 46

Provisional sentenceattorneys suing for, power of attorney 89bill of costs as liquid document 89

Restraint of tradecustomer connection, what constitutes 79protectable interest, patients of doctor 87trade secret, what constitutes 79

Riskinsurance, failure to disclose ulawful import 27passing of following sale 23

Salelatent defects, proof of 120manufacturer’s warranty 104passing of risk when credit arranged 23short delivery, damages, how calculated 18warranty against latent defects 104

Sale of businessassignment of rights under 68

Sale of fixed propertyagricultural land 75suretyship provision, interpretation of 54

Sectional Titlebody corporate’s claim, ranking of 74

Security for costsdiscretion - how exercised 37third party joined in action 108

Sequestrationadvantage to creditors 61friendly, basis for bringing 106spouse’s right to contribution to costs 124

Shareholderright to information of company affairs 33

Shippingattachment to found or confirm jurisdiction 116

Supply agreementdate of, when later sales take place 44

Suretycomes into existence only when principal debtor

does 54estoppel raised against creditor 31estoppel when previous judgment obtained 41intercession by third party 55prejudice to 52release of 31waiver of obligations 31

Suretyshipprescription follows that of principal debt 28undue hardship toward surety in prescrip-

tion 28

Tenderfairness in process of 43

Title deedremoval of restriction 8restrictive conditions of title 114

Trustdeed prohibiting transfer of money, effect

of 100separate persona 86trustee’s authority 86Turquand rule in relation to 86

Unlawful competitionconfidential information of competitor 103employing party subject to restraint of trade 103passing off as species of 80

7

Vindicationestoppel raised against rights of owner 115

Waiverin writing, strict requirement for 20, 83

Winding upsecurity for costs of applicant 37

Words and phrasesclaim 122illegal purpose 70purpose 70standard 44trader 14whilst 70without prior notice 67

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PREMIER, WESTERN CAPE v FAIRCAPE PROPERTYDEVELOPERS (PTY) LTD

A JUDGMENT BY LEWIS JA(HARMS JA, SCHUTZ JA,CAMERON JA and SHONGWEAJA concurring)SUPREME COURT OF APPEAL7 MAY 2003

2003 (6) SA 13 (A)

A public official is accountable tomembers of the public but theextent of his accountability willbe determined inter alia by thelegislation under which he acts.Should such an official actaccording to the provisions ofsuch legislation, the scope forascribing liability to the officialfor the consequences of his actionsis limited. A party applying tosuch official for the performanceof his duties thereunder remainsresponsible for ensuring that theapplication so brought is properlybrought.

THE FACTSMr E Diekmann owned erf 1483,

Vredehoek, in Cape Town. Theholding title contained therestrictive conditions that theproperty was not to be subdividedand that no more than onedwelling together withoutbuildings and appurtenanceswas to be erected on the erf andno more than half the area of theerf was to be built upon. Theserestrictions had been imposed onthe property in 1936 by theAdministrator of the CapeProvince under the TownshipsOrdinance (no 13 of 1927).

On 19 May 1995, Diekmannapplied for the removal of therestrictions. In the application, thepurpose of the removal was statedto be the erection of townhouses,and the reason for the removalthat this would bring the titledeed into line with the zoning (ofgeneral residential) by the localauthority. Objections to theapplication were lodged byinterested parties, after notice ofthe application had been given tothem. The City Planner, however,supported the application andsubmitted a report to the UrbanPlanning Committee of the localauthority expressing its reasonsfor supporting the application.The report contained inaccuraciesregarding the zoning of theproperty and those affected by it,as well as regarding the nature ofthe neighbouring properties. Theobjectors were not given sight ofthe report. The Urban PlanningCommittee was presented with adraft plan showing a two-storeydevelopment proposed for theproperty. The Urban PlanningCommittee supported thedevelopment proposal andadopted the recommendation ofthe City Planner. It resolved thatthe Premier of the Western Capebe advised that the Councilsupported the removal of the titledeed restrictions.

When the application wasbrought before the Minister ofAgriculture, Planning andTourism in the Western Cape,Faircape Property Developers(Pty) Ltd had purchased theproperty from Diekmann and theapplication proceeded in the nameof Faircape. The Director-Generalof the Ministry requested that hebe furnished with a developmentplan. Such a plan was submittedto him. It showed a buildingaccommodating a parking garageat floor level, three floors of flatsabove that and a fourth floor offlats with dormer windows in theroof of the building. In a report,the Administrative Head of theMinister’s departmentrecommended the approval of theplan. The report referred to theobjections which had beenbrought against the developmentand gave the answers to themwhich had been given by theapplicant in its responses beforethe Urban Planning Committee. Itrepeated the inaccuracies made bythe City Planner in its report tothe Urban Planning Committee.

On 29 March 1996, the restrictiveconditions were rescinded by anotice given in theProvincial Gazette, following adecision to that effect given by theMinister. This was donein terms of section 2(1) of theRemoval of Restrictions Act (no 84of 1967).

After building operations began,an interested party brought anapplication reviewing and settingaside the removal of the restrictiveconditions of title. Thisapplication was successfulbecause the original applicationhad been stated to be for thedevelopment of townhousesalthough the development plansubmitted was in respect of ablock of flats. Faircape reappliedfor the removal of the restrictions,and in May 1998 this applicationwas approved.

Property

9

Faircape alleged that because ofthe delay caused by the incorrectapproval of its first application,and the consequent necessity ofhaving to reapply for the removalof the restrictions, it had sufferedloss in the sum of R1 675 855,30. Itcontended that the Premier,Western Cape was responsible forthis loss and it claimed paymentof this amount from him.

THE DECISIONFaircape brought its claim in

delict, and was consequentlyrequired to show that the Premiercaused it loss through somewrongful and negligent act.

A public official is accountable tomembers of the public. This isexpressed in section 7 of theConstitution which affirms thatthe State must respect, protect,promote and fulfil the rights in theBill of Rights. Section 41(1)provides that all spheres ofgovernment and organs of Statemust provide effective,transparent, accountable andcoherent government.

This does not mean however,that the mere incorrect exercise ofa discretion will be wrongful.Furthermore, of relevance will bewhether or not the applicablelegislation precludes an action fordamages against an official.Whether or not the public officialacted wrongfully is determined bya value judgment as to whether ornot a plaintiff’s invaded interest isworthy of legal protection.

In the present case, the Premiercontended that he had done nowrong. What the Premier did wasto determine the desirability of theremoval of the title deedrestrictions and then exercise hisdiscretion in that regard. That initself was not wrongful and itcould not be said that it would bewrongful even if done negligently.Whether or not the Premiershould have foreseen that theapplication for the removal of thetitle deed restrictions would be setaside and as a result cause loss toFaircape was of relevance indetermining whether he actedwrongfully. However, the Premiercould not have foreseen this. ThePremier was entitled to assume

that Faircape would have checkedits application properly andensured that everything had beendone to ensure that it would notbe set aside in the future onaccount of irregularities.

Faircape was not entitled toattribute the ultimate failure of theapplication to the Premier merelybecause the Premier had initiallyapproved it. The Premier is notbound to protect the rights ofapplicants in such matters, incircumstances where the applicantitself is able to take steps toprotect its own rights. ThePremier had done what he wasbound to do under the legislationand had done nothing wrong inthat regard. The legislation in anyevent, is promulgated for theprotection of potential objectorsand not in the interests ofapplicants.

The Premier was also notnegligent in granting theapplication. It was not his duty tocheck that the application hadbeen brought correctly in everydetail, and certainly not his dutytoward Faircape to do so.

Faircape’s claim was dismissed.

Property

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GIANT PROPERTIES (PTY) LTD v GOVENDER

JUDGMENT BY GILDENHUYS JWITWATERSRAND LOCALDIVISION7 NOVEMBER 2003

2004 CLR 27 (W)

A landlord who has employed theautomatic rent interdictprocedures of the Magistrate’sCourt Act may not enforcecompliance with the interdict inthe High Court but should proceedin the magistrate’s court.

THE FACTSGiant Properties (Pty) Ltd

brought an action in themagistrate’s court againstGovender for payment of rentalsin respect of property which itleased to Govender. The summonsincorporated an automatic rentinterdict prohibiting Govenderfrom removing any furniture orother effects from the leasedpremises.

The summons was served onGovender and the sheriff made aninventory of the furniture andeffects at the premises. Giantobtained judgment againstGovender and then sought toattach and remove the goods atthe premises. The goods had beenremoved.

Giant then brought anapplication in the High Courtauthorising the sheriff to searchfor and remove Govender’s goodsfor the purpose of execution.

THE DECISIONThe interdict prohibiting the

removal of goods is not anattachment of goods. Since noattachment took place, thelandlord’s tacit hypothec came toan end. The High Court has theinherent jurisdiction to enforce aninterdict. The question waswhether this included the powerto order that the tenant complywith the interdict.

A landlord is however, cannotobtain such an order in the HighCourt when an automatic rentinterdict has been obtained in themagistrate’s court. TheMagistrate’s Court Act whichprovides for the automatic rentinterdict procedure, does notindicate that a remedy may beobtained in the High Court if theinterdict is defied. The Actprovides for attachment of goodsand accordingly, an attachmentcould be effected after theautomatic rent interdict isobtained. This could be done inthe magistrate’s court and therewould be no ground for doing itin the High Court.

The application was refused.

Property

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HUDSON N.O. v WILKINS N.O.

A JUDGMENT BY PATEL JTRANSVAAL PROVINCIALDIVISION28 AUGUST 2003

2003 (6) SA 234 (T)

A court will not lightly remove aliquidator from office and willonly do so when it is clearlyshown that it is against theinterests of the liquidation if theliquidator remains in office.

THE FACTSRanch International Pipelines

(Pty) Ltd was placed under a finalwinding-up order in April 1993.Wilkins and Bowman wereappointed joint liquidators andthey proceeded to wind up theaffairs of the company. In April1997, they had completed theirduties as liquidators and in July1997, they were released fromtheir responsibilities asliquidators.

In 1997, Bowman left the countryfor an extended period. He wroteto the Master of the High Courtinforming him of this and under apower of attorney, gave anotherperson power to exercise hisduties as liquidator during hisabsence. Bowman subsequentlyresigned as liquidator.

Hudson was a creditor andshareholder of RanchInternational. In 2001, herequested the Master to removeWilkins as liquidator. The Masterdeclined the request and Hudsonthen applied in the High Court forthe removal of Wilkins asliquidator. The grounds on whichHudson applied for the removalof Wilkins as liquidator were thatBowman no longer acted jointlywith him, that Wilkins hadbreached his fiduciary duty bycolluding with another creditor,that he had unnecessarily litigatedin the name of the company inliquidation and had failed torecognise undisputed claims andreflect them in the secondliquidation and distributionaccount.

Hudson brought his applicationin terms of section 379(2) of theCompanies Act (no 61 of 1973).

THE DECISIONA court will only remove a

liquidator from office afterevidence has been presentedshowing that it is against theinterests of the liquidation that theliquidator remains in office. Thismay be apparent if there issufficient suspicion of partiality ofconflict of interest.

No other creditors had objectedto the manner in which theliquidators had performed theirduties. The Master had rejected arequest for their removal. Theallegations made of collusion wereunsubstantiated and were deniedby the liquidators. This couldtherefore provide no basis for theremoval of the liquidators fromoffice.

As far as the allegation that theliquidators had involved thecompany in liquidation inunnecessary costs, this too wasunsubstantiated. The litigation inquestion had been initiated byHudson himself and otherlitigation had resulted in a costsorder against the liquidatorspersonally.

Of relevance to the question ofwhether the liquidators should beremoved was the length of time ithad taken Hudson to bring theapplication. Their appointmenthad been some ten years beforethe application was brought andthere would be considerableinconvenience to the company inliquidation and creditors werethey to be removed at this latestage.

The application was dismissed.

Insolvency

12

MINISTER OF JUSTICE v FIRSTRAND BANK LTD

A JUDGMENT BY HOWIE P(SCOTT JA, ZULMAN J, BRANDJA and CLOETE JA concurring)SUPREME COURT OF APPEAL25 SEPTEMBER 2003

2002 (6) SA 636 (A)

The Minister of Justice may notsimply direct the appointment ofa liquidator in terms of section371(3) of the Companies Act (no61 of 1973) but may do so only ifthe Master’s refusal of theappointment of a liquidator hasbeen set aside.

THE FACTSFirstrand Bank Ltd obtained an

order for the provisionalliquidation of the Retail ApparelGroup Ltd. In due course, theMaster of the High Courtappointed four provisionalliquidators.

The Minister of Justice, fearingthat the claim of the South AfricanRevenue Service would not beconsidered and treatedadequately by the provisionalliquidators, directed the Master toappoint a fifth provisionalliquidator, a Mr EM Motala. Herelied on section 371(3) of theCompanies Act (no 61 of 1973)which provides that the Ministermay confirm, uphold or set asidethe appointment or the refusal of aliquidator by the Master and, inthe event of the refusal by theMaster being set aside, direct theMaster to accept the nominationof the liquidator concerned andappoint him as liquidator of thecompany concerned.

Firstrand Bank Ltd obtained anorder setting aside theappointment of Motala asliquidator. The Minister of Justiceappealed.

THE DECISIONSection 371 of the Companies

Act deals with the remedy of aperson aggrieved by theappointment of a liquidator or therefusal of the Master to accept thenomination of a liquidator orappoint a person nominated asliquidator. The provisions may beapplied by a party wishing to setaside a nomination or compel anomination, but they do notprovide a basis for theappointment of a liquidator wherea party does not challenge theappointment made by the Masteror a refusal to make anappointment.

In the present case, the Ministerdid not make any such challenge.His concern was not with anyrefusal to accept a nomination butwith the failure to appoint aliquidator approved by him. Thiswas not a matter provided for bysection 371.

It was insufficient for theMinister to simply direct theappointment of a liquidator. TheMinister’s power to so direct waspredicated on a prior refusal bythe Master to appoint a nominatedliquidator. As Motala had notbeen nominated as a liquidator,nor his appointment refused, thesection provided no basis for theMinister to direct hisappointment.

The appeal was dismissed.

Insolvency

13

EX PARTE VAN DEN BERG N.O.: IN RE RIVIERAINTERNATIONAL (PTY) LTD

A JUDGMENT BY CLAASSEN JWITWATERSRAND LOCALDIVISION6 JUNE 2003

2003 (6) SA 727 (W)

A provisional liquidator of acompany in voluntary liquidationdoes not have the right to apply tocourt for the sale of the companyassets in circumstances where nomeetings of creditors has yet beenheld.

THE FACTSRiviera International Ltd was

placed in liquidation as a result ofa creditors’ voluntary winding upin terms of section 349 of theCompanies Act (no 61 of 1973). Interms of section 351(2), aliquidator of such a company mayexercise all the powers given to aliquidator subject to suchdirections as may be given by thecreditors.

Prior to its liquidation, thecompany traded as a hotel,timeshare retreat and golf courseon the banks of the Vaal river.When it was realised that thecompany was trading at a loss, thecompany was placed inliquidation and the liquidatorsobtained the approval of theMaster to continue trading. Theliquidators, Van den Berg andothers, were appointedprovisionally. No meeting ofcreditors subsequently took place.

The liquidators brought anurgent application for an orderauthorising them to sell the assetsof the company, including itsmovable and immovableproperty. The principal directorand shareholder of the company,who had proved two claimsagainst the company totalling R24252 044, opposed the applicationon the grounds that theliquidators lacked the locus standito bring the application.

THE DECISIONThe Companies Act

distinguishes between theappointment of provisionalliquidators and final liquidators.The appointment of theprovisional liquidators in thepresent case was restricted by thefact that their powers were subjectto such directions as were givenby the creditors. In terms of theAct, such powers are ‘subject tosuch directions as may be givenby the creditors’ and had to begiven at properly constitutedmeetings of creditors. No suchmeetings had been held.

Section 388(1) of the Act doesenable a court to confer the poweron a liquidator to do those thingsit could if the company werebeing wound up by the court.However, such an order wouldnot be just and beneficial to theliquidation process in the presentcase because it ran counter to thepurpose of the Act incircumstances where no meetingof creditors had taken place.Furthermore, there wereoutstanding reports concerningthe feasibility of continuing withthe business of the company, andthere was no indication as to whythe meetings of creditors had notbeen called.

The liquidators therefore lackedthe right to bring the application.The application was dismissed.

Insolvency

14

KEVIN & LASIA PROPERTY INVESTMENTS CC vROOS N.O.

JUDGMENT BY MTHIYANE JA(HOWIE P, NABSA JA, CLOETEJA and LEWIS JA concurring)SUPREME COURT OF APPEAL1 DECEMBER 1993

2004 CLR 32 (A)

A ‘trader’ as defined in theInsolvency Act (no 24 of 1936)does not include a party whichcarries on business in the lettingor hiring of immovable property.

THE FACTSIJ van der Lith Family Holdings

(Pty) Ltd sold certain fixedproperty to Kevin & LasiaProperty Investments CC forR7,7m. The property wastransferred to Kevin & Lasia and amortgage bond was passed overthe property in favour of AbsaBank Ltd. The sale and transferwere not preceded by thepublication of a notice in terms ofsection 34(1) of the Insolvency Act(no 24 of 1936).

The company was provisionallyliquidated and a final liquidationorder was given against it fivemonths after the transfer of theproperty.

The company had been aproperty holding companyowning properties to generate arental income from them. Theproperty sold was one suchproperty.

The liquidators of the companyclaimed that the transfer was nulland void because the provisionsof section 34(1) had not beencomplied with. The sectionprovides that if a trader transfersany business belonging to him orany goods or property formingpart thereof, except in theordinary course of business, andhas not published a notice of suchintended transfer in the period 30to 60 days prior to that transfer,the transfer shall be void asagainst the trader’s creditors for aperiod of six months after suchtransfer and shall be void againstthe trustees of his estate if hisestate is sequestrated within thattime period.

The company and the bankclaimed that the section was notapplicable because the transactionwas done in the ordinary courseof business. They also denied thatit was a ‘trader’ within themeaning of the term in theInsolvency Act.

THE DECISIONA ‘trader’ is defined as any

person who carries on any trade,business, industry or undertakingin which property is sold, or isbought, exchanged ormanufactured for purpose of saleor exchange, ... or who acts as abroker or agent of any person inthe sale or purchase of anyproperty or in the letting or hiringof immovable property.

The liquidators’ contention wasthat this definition includes as atrader, a person who carries onany business in the letting orhiring of immovable property.However, the definition could notbe read in that way. The referenceto the letting or hiring ofimmovable property was not areference to the trader referred toat the beginning of the definition.The clause in which it appearsshould be considered to beseparate and distinct andaccordingly a reference to aperson acting as a broker or agentin the letting or hiring ofimmovable property. Thedefinition does not include anyperson who carries on anybusiness in the letting or hiring ofimmovable property.

The company’s contentions werecorrect. The appeal was upheld.

Insolvency

15

KLEIN N.O. v KOLOSUS HOLDINGS LTD

JUDGMENT BY BERTELSMAN JTRANSVAAL PROVINCIALDIVISION7 FEBRUARY 2003

2003 (6) SA 198 (T)

For the purposes of section 83 and84 of the Companies Act (no 61 of1973) a creditor of a companyshould be considered to be anyparty with a claim admissible inproof in the event of theliquidation of the company andaccordingly includes a party withan unliquidated claim againstsuch a company.

THE FACTSIn September 1994, Silveroak

Industries (Pty) Ltd entered into ajoint venture agreement withSeton SA (Pty) Ltd, a wholly-owned subsidiary of an Americancorporation, Seton Company. Interms of this agreement, theparties were to manufactureupholstery whole hide leather andautomotive cut parts under thecontrol of two companies whichwere established for this purpose.The parties also agreed not tocompete with each other.

In September 1995, 94% of theissued share capital of Silveroakwas sold to Kolosus Holdings Ltdwithout prior notification toSeton. Because Kolosus controlleda subsidiary which competed withSilveroak, Seton regarded thetakeover as a breach of thecompetition agreement and filed arequest for arbitration with theInternational Court of Arbitrationof the International Chamber ofCommerce, as provided for in thejoint venture agreement.

Before completion of thearbitration proceedings, Kolosusacquired the entire shareholdingin Silveroak. In terms of section 83of the Companies Act (no 61 of1973), it then reduced the sharecapital of the company from someR91m to R2,6m and paid theproceeds thereof to Kolosus.Kolosus sold its entireshareholding in Silveroak to LEKHoldings (Pty) Ltd. The purposeof this was to enable Kolosus toavoid having to state the Setonclaim in the consolidated financialstatements of the Kolosus groupof companies.

Seton exercised a put and takeoption in terms of the jointventure agreement in respect ofthe two companies under whichthe upholstery manufacture wastaking place, and the option wasaccepted by Silveroak. Silveroakthen sold its entire shareholding

in these companies to KolosusIn 1998, the arbitration

proceedings ended in an award infavour of Seton for R49 549 876 indamages, interest and costs.Silveroak failed to pay the awardand Seton applied for theliquidation of the company.Silveroak was placed inliquidation. The liquidator, Klein,challenged the reduction of sharecapital and brought an applicationfor an order declaring the sharecapital reduction unlawful andvoid ab initio, and for an ordersetting aside the sale of theKolosus shareholding in Silveroakto LEK.

THE DECISIONThe liquidator contended that

Seton was a creditor of Silveroakat the time the reduction of sharecapital took place and thataccordingly, the proceduresprovided for in section 84 of theCompanies Act should have beenapplied, ie the confirmation of thecourt should have been obtained.Kolosus denied that Seton was acreditor of Silveroak.

At the time of the reduction ofcapital, Seton did not have aliquidated claim against Silveroak.However, it was a claim whichwould have been admissible inproof of a claim in terms of theInsolvency Act (no 24 of 1936).Although an illiquid claim in sucha case does not allow the creditorthe same rights as those withliquid claims, such a creditor willeventually share in the proceedsof the liquidated estate, followingits proof of claim. Because anunliquidated claim is admissiblein proof, the party holding theclaim may be considered acreditor of a company as referredto in section 83 and 84 of theCompanies Act.

Silveroak therefore adopted theincorrect procedure in effectingthe capital reduction and should

Companies

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have given Seton notice thereof atthe time.

As far as the claim for an ordersetting aside the sale of the sharesto LEK was concerned, given the

nature of the transactions whichpreceded it, this was contrary tosection 38 of the Companies Actand also should be set aside.

MA VLEISAGENTSKAP CC v SHAW N.O.

A JUDGMENT BY DAVIS JCAPE OF GOOD HOPEPROVINCIAL DIVISION15 OCTOBER 2003

2003 (6) SA 714 (C)

To show that a party should beconsidered personally liable forthe debts of a close corporation asprovided for in section 64(1) of theClose Corporations Act (no 69 of1984), it must be shown that areasonable business person in theposition of that party would nothave conducted the business of thecorporation in the manner inwhich it was conducted.

THE FACTSSacks and Sons CC carried on

business for a period of fortyyears prior to its liquidation inSeptember 2000. During thisperiod, it had experienced cashflow problems and would onoccasions, request a creditor tohold back a cheque already issuedto it, and had done so in respect ofcheques held by MAVleisagentskap CC.

At the time of liquidation, Sacksand Sons CC was owed R3 607145 and shortly thereafter, anamount of R1 232 666,64 wascollected from debtors.

A few days before the closecorporation was put intoliquidation, its representative,Sacks, placed an order for meatwith MA. On the morning of theday an urgent application toliquidate the close corporationwas brought, one of itsrepresentatives telephoned MA toimpress on it the urgency of theorder. The meat was delivered butshortly thereafter, MA regainedpossession of it after having heardof the impending application forliquidation.

MA claimed that the amountowing on meat it had supplied tothe close corporation in the monthprior to liquidation amounted tosome R650 000. It brought anaction to declare Sacks personallyliable for the debts of the close

corporation in terms of section64(1) of the Close CorporationsAct (no 69 of 1984).

THE DECISIONThe test to be applied in

determining whether a partycarried on the business of a closecorporation recklessly is whethera reasonable businessman placedin the position of the person inquestion would conduct thebusiness of the corporation in thatmanner.

In the present case, the businessof the close corporation had beenconducted over a long periodunder circumstances of cash flowproblems. This was known to thecreditors of the close corporationand had been so known over theperiod in question. The onlyquestion was whether thecircumstances of the final ordermade by the close corporationindicated reckless trading. In thisregard, the dates relevant to theorders which had brought aboutthe indebtedness of some R650000 were unclear and it could notbe said with any certainty that thisindebtedness had been incurredas a result of reckless trading.

It was also not clear whatdividend would be paid tocreditors, and accordinglyimpossible to tell the extent of anyloss allegedly suffered by them.

The action was dismissed.

Companies

17

MICHAU v MAIZE BOARD

A JUDGMENT BY SCOTT JA(HARMS JA and HEHER JAconcurring)SUPREME COURT OF APPEAL12 SEPTEMBER 2003

2003 (6) SA 459 (A)

Although parties are entitled toconclude agreements with theintention of avoiding the effects oflegislation, if the agreements aremere simulations and theirintention is other than what isprovided for in them, anagreement reflecting true intentionof the parties will be consideredto be the actual agreementconcluded between the parties.

THE FACTSMichau and Rainbow Chicken

Farms (Pty) Ltd entered into anagreement in terms of whichMichau was to hire a broiler sitefrom Rainbow situated inHarrismith, Kwazulu-Natal. Italso provided that at thebeginning of the 1994 season,Rainbow would sell its entirestock of day-old chickens at thebroiler site, and repurchase themat a higher price at the end of thatseason. The parties entered into asecond agreement in terms ofwhich Rainbow would managethe broiler operation, take care ofthe chickens during the growingcycle and procure the milling andprocessing of the maize necessaryto feed them. The maize was to besupplied by Michau.

The purpose of the agreementswas to avoid the payment oflevies which would have beenpayable by Michau had he soldthe maize directly to Rainbow.

During the period in question,Michau delivered maize toRainbow and received theequivalent of R390 per ton for it.Michau was not at Harrismith butin the Free State where the maizewas produced.. Michau deliveredthe maize to a central co-operative. Rainbow made threepayments directly to it and thesepayments were applied inreduction of a debt owed byMichau to the co-operative. Itmade a third payment directly toMichau, the amount of which wasintended to ensure that Michaureceived precisely R390 per tonfor the maize he had supplied tothe broiler site for feeding thechickens. Rainbow’s accountshowever, showed its payments aspayments for the repurchase ofchickens at the end of the growingcycles as referred to in the parties’agreements. The prices on whichRainbow made its calculationswere given in rands to the seventhdecimal place, the end resultbeing that Michau received R390

per ton for the maize. Rainbowmade the payments by drawingcheques on a cheque accountopened in the name of Michau butunder the control of Rainbow.

The Maize Board contended thatthe agreements were simulatedagreements and that in fact a saleagreement had taken placebetween the parties, entitling it tothe levies which were payable onthe sale.

THE DECISIONIt is permissible for parties to

conclude agreements with a viewto minimising or avoiding theimpact of legislation. They areentitled to do this by ensuring thattheir arrangements stay beyondthe ambit of the otherwiseapplicable provisions of suchlegislation.

However, it was apparent fromthe way in which the partiesconducted their affairs that theprovisions of the agreements wereignored. The payments byRainbow were related to thedelivery of the maize not the priceof the chickens. The fact that abank account was speciallyopened to effect the payments andthat it was opened in the name ofMichau while being under thecontrol of Rainbow indicated onlythat the real intention was to payfor the maize delivered byMichau—there being no otherexplanation for this method ofeffecting payment. The finalpayment made by Rainbow wasmade at a time when insufficientinformation was available to it todetermine the repurchase price ofthe last growing cycle of chickens,and yet the payment wascalculated so as to ensure thatMichau received the equivalent ofR390 per ton of maize delivered toRainbow.

All of these factors indicated thatthe agreements were simulatedand that the true intention of theparties was to buy and sell maize.The Maize Board’s contentionswere upheld.

Contract

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EMPANGENI MILLING CC v CLAASEN

A JUDGMENT BY LEVINSOHN JNATAL PROVINCIAL DIVISION12 DECEMBER 2003

2004 CLR 1 (N)

Damages arising from the shortsupply of goods are to bedetermined by the differencebetween the price paid to analternative supplier less the pricewhich would have been payable interms of the contract for thesupply of the goods. The date onwhich the former price is to bedetermined is the date on whichthe supplier is in mora being areasonable time after demand hasbeen made on it.

THE FACTSClaasen agreed to sell 1000 tons

of maize to Empangeni MillingCC, to be supplied in fourdeliveries on the last days of Maythrough to August 2001. InSeptember 2001, EmpangeniMilling determined that Claasenshort-supplied the maize by some252 tons. In October 2001, itdemanded delivery of the fullamount contracted for andrequired full delivery by January2002.

Claasen failed to comply and inFebruary 2002, EmpangeniMilling purchased further maizefrom alternative sources to makeup the shortfall. EmpangeniMilling contended that because ofan increase in the maize price, ithad suffered damages. It broughtan action for damages based onthe price in paid for the maize inFebruary 2002.

Claasen contended that themeasure of damages should havebeen based on the price of maizeas at the date on which deliveryshould have been made, ie 31August 2001. At that date, theprice of maize was less than itbecame in February 2002.

THE DECISIONBecause the agreement between

the parties stipulated dates forperformance by Claasen, time wasof the essence of the contract, andno demand was necessary toentitle Empangeni Milling tocancel the contract, once it wasdiscovered that Claasen hadshort-delivered the maize.Empangeni Milling had however,not elected to cancel the contractbut abided by it. Its damages wereto be assessed as at the date onwhich it could reasonably haveexpected Claasen to abide by thecontract and supply the maize.

Demand was first made onClaasen in October. A reasonabletime after that was reached on 1November 2001 and it was on thatdate that Claasen was in breachand on that date that damagesshould be assessed.

Damages were to be calculatedby determining the actual amountpayable as at 1 November 2001less the amount that would havebeen payable to Claasen in termsof the contract.

Contract

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WELIHOCKYJ v ADVTECH LTD

A JUDGMENT BY RABIE JWITWATERSRAND LOCALDIVISION13 AUGUST 2002

2003 (6) SA 737 (W)

An arbitration agreement betweentwo parties may be cease to haveeffect between them where it is ongood cause shown that theagreement should not apply in theparticular dispute between theparties.

THE FACTSIn March 1998, Welihockyj and

others sold certain businesses toAdvtech Ltd for R178m, thepurchase price being payable bythe issue of shares in the Advtechgroup of companies and by cash.The agreement contained a clause20 which provided that shouldany dispute arise out of theagreement, any party would beentitled to require that the disputebe resolved by an independentperson acting as an expert whosedecision would be final andbinding.

Advtech refused to pay a balanceoutstanding of R5,5m, despitedemand being made on it byWelihockyj and the otherapplicants. Advtech applied fortheir removal as directors andemployees of related companiesbut this matter became settled.Thereafter, Welihockyj claimedpayment of the outstandingR5,5m. Advtech counterclaimed,alleging that the applicants hadcommitted financial irregularities.It sought damages in excess ofR130m.

Welihockyj applied for an orderthat the dispute resolutionprocedure provided for in clause20 should cease to have effect inthe dispute between the parties.He contended that the allegationsof fraud had been made byAdvtech only when thecounterclaim was brought, andthat section 3(2) of the ArbitrationAct (no 42 of 1965) applied. Thesection provides that a court may,on good cause shown, set aside anarbitration agreement, or orderthat any particular disputereferred to in an arbitrationagreement shall not be referred toarbitration or cease to have effectwith reference to any dispute.

THE DECISIONHaving regard to the full extent

of the matters in dispute betweenthe parties, it appeared that theirintention was to have themresolved judicially and withrecourse to all the procedures andremedies associated with thatavenue of adjudication. Thisincluded the full exchange ofpleadings between the parties,orders regarding the productionof documents and other evidenceand adducing expert evidence onrelevant matters. Both partiesintended to be represented byattorneys and counsel andexpected the expert appointed todetermine rights of access todocuments and determine thequestion of costs.

The parties therefore did notintend the nature of the procedureprovided for the arbitration to benothing more than a mere expertinvestigation. The only conclusionto be drawn was that the expertappointed in terms of clause 20was expected to base his findingson all the evidence to be placedbefore him. As such, he wouldexercise a judicial function.

The next question was whetherin terms of section 3(2) of theArbitration Act, clause 20 shouldcease to have effect. Theapplicants had shown good causefor so holding. Serious allegationsof fraud were being broughtagainst them. The disputebetween the parties had alreadybeen the subject of litigation in theHigh Court, and third partieswere involved in the matter. In allof these circumstances, thearbitration agreement shouldcease to have effect with referenceto the dispute between the parties.

The application was granted.

Contract

20

DE VILLIERS N.O. v BOE BANK LIMITED

A JUDGMENT BY NAVSA JA(HOWIE P, STREICHER JA ANDVAN HEERDEN AJACONCURRING, HEHER JADISSENTING)SUPREME COURT OF APPEAL26 SEPTEMBER 2003

2003 CLR 441 (A)

A provision that waiver of a rightmust be given in writing must bestrictly adhered to. Waiver whichis not given in writing isineffective. Directors whoacquiesce in the taking of a loanwhile failing to pass a formalresolution adopting the taking ofthe loan effectively take the loanon behalf of their company.

THE FACTSMacmed Health Care Ltd

decided to buy parts of thebusiness of SA Druggists Ltd aswell as SA Druggists’ shares andloan account in SA Fine Chemicals(Pty) Ltd. The price was R500m,which in terms of heads ofagreement signed by the parties,was payable by a rights offer,from Macmed’s cash resourcesand by way of a loan from B.O.E.Bank Ltd for R100m.

The businesses had beenconducted under the nameIntramed, and Macmed arrangedfor the continuation of the use ofthis name by arranging that thebusiness would be transferred to acompany to be named Intramed(Pty) Ltd which became asubsidiary of Macmed. The loanfrom BOE was to be one toMacmed or its nominatedsubsidiary which was Intramed.

In June 1999, BOE signed threeloan agreements agreeing toadvance a total of R100m toIntramed. A director of Macmedand Intramed, one Hiscock,signed the agreements on behalfof Intramed, as well as a cession ofbook debts on behalf of thatcompany and a suretyshipundertaking on behalf of Macmed.This was done after a resolution ofa meeting of Intramed directorsauthorised the borrowing and thesigning of documentationnecessary for that by Hiscockincluding documentationnecessary to give BOE security forthe loan in the form of a mortgagebond and a notarial bond. Theresolution was however, notformally executed as required bythe Articles of Intramed. Macmedhad three directors, all of whomsupported the taking of the loanand acquiesced in the resolutionconfirming it.

The agreements were madesubject to suspensive conditionsall but one of which were fulfilled.

The unfulfilled suspensivecondition was that the sale of thebusiness be finally concluded. Thesale was in fact brought about bythe conclusion of the heads ofagreement in terms of which thebusiness was transferred toIntramed.

The suspensive conditions wereincorporated in the agreement forthe benefit of BOE. The sameagreement provided that anywaiver of a party’s right had to bein writing. BOE in fact gaveextensions of time for thefulfilment of the conditions andwaived its right to requirefulfilment of that which was neverfulfilled. The waiver was notgiven in writing.

BOE advanced the loans toMacmed. Intramed made threerepayments then, in September1999, it was placed in provisionalliquidation. BOE claimedrepayment of its loans, withinterest in terms of theagreements.

The liquidators contended thatthe loan had been advancedwithout proper authority of theborrower, that it was not received,and that its suspensive conditionswere not fulfilled.

THE DECISIONIt was clear that the directors all

consented to the loans and all ofthem acquiesced in the taking ofthem. They knew about the loansand abided by them. Whether ornot their resolution was madeformally in terms of the Articles ofthe company was therefore noreason to conclude that the loanshad been taken without theproper authority of the company.

As far as the allegation of non-receipt was concerned, the loanswere made to Macmed, but thisdid not mean they were not madeto Intramed since Intramed wasproperly seen as havingnominated Macmed as the

Contract

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beneficiary to which payment hadto be made.

As far as the alleged failure ofthe suspensive conditions wasconcerned, it was true that thesewere incorporated for the benefitif BOE which was also thearchitect of the agreements.However, the requirement thatany waiver be in writing had to bestrictly adhered to. Macmed and

Intramed had an interest in thecertainty of a written waiver.Accordingly, BOE was not entitledto rely on the loan agreements toenforce repayment of its loan andhad to be content with recoverybased on restitution. This meantthat it was entitled to repaymentof the loan without interest asagreed but with mora interest.

The claim for repayment of theloan succeeded.

The same reasoning applies with equal force to the clauses in the loan agreements that stipulatein clear and emphatic terms that the entitlement to waive can only be exercised in writing. Thisis particularly so against the provisions of clauses 9.7 and 11.7 of the respective loan agreementsas set out in paragraph [62].[77] Whilst it is recorded in clause 2.2 that the suspensive conditions are for the benefit of thebank it can hardly be contended that Macmed and Intramed had no interest in the certainty of awritten waiver. The bank could, if it chose, after the conclusion of the loan agreements and thepayment of the R100 million, claim the return of the money based on the non-fulfilment ofcondition 2.1.1, particularly since it had repeatedly (as the evidence shows) called on the otherparties to the loan agreements to fulfil that condition.[78] It may appear odd that agreements which were ostensibly executed should now be held tohave lapsed. The proper approach, however, is to consider the terms of the agreement and to holdthe parties to such obligations and formalities as agreed to. In the present case all that wasrequired from the bank was a one-sentence letter in terms of which it waived compliance withthe requirements of clause 2.1.1 in order for the waiver to be effective. It is precisely to avoid thekind of disputes and uncertainties referred to in the highlighted parts of the dicta of the Brisleyjudgment referred to in paragraph [77] above that the validity and binding nature of clauses 2.2and 9.7 and 11.7 of the loan agreements should be observed and enforced. The dispute in thepresent case arose because waiver was not exercised as set out in the loan agreements.

Contract

22

RANE INVESTMENTS TRUST v COMMISSIONER,S.A. REVENUE SERVICE

A JUDGMENT BY LEWIS JA(HOWIE P, MARAIS JA,FARLAM JA and CLOETE JAconcurring)SUPREME COURT OF APPEAL30 MAY 2003

2003 (6) SA 332 (A)

An ambiguous agreement may beinterpreted in the light ofsurrounding circumstancesincluding the subsequent conductof the contracting parties.

THE FACTSOn 13 December 1988, an en

commandite partnership wasformed for the purpose ofinvesting in film ventures. Thispartnership was formed betweenCompass Films (Pty) Ltd(‘Filmco’) and Movie Ventures(Pty) Ltd (‘Movie Ventures’).Partners were obliged to pay aspecified contribution to thepartnership by February 1989 andfor any losses suffered in the taxyear in question.

On the same date, Filmco boughta film, Final Cut from Image Films(Pty) Ltd. Filmco concluded anagreement with Distant HorizonLtd (‘DHL’) in terms of whichDHL undertook to market FinalCut abroad in return for a fee. Italso concluded an agreement withNiche Investments Inc in terms ofwhich Niche undertook todistribute Final Cut and secureincome of at least R6,4m for thepartnership by no later than 28February 1989, alternativelyadvance that sum to thepartnership by that date. Nichewould be paid a commission onthe gross proceeds of sales of thefilm. From the proceeds of the saleof the film, Niche would subtractits own fee of 30% of the grossproceeds, pay DHL its marketingfee, pay the partners the capitalcontribution they had made, andto Image an amount of 50% of thegross proceeds of sales. Thebalance would be paid to Filmco.

On 27 February 1989, RaneInvestment Trust became apartner in the partnership,acquiring its interest from MovieVentures. It paid a contribution ofR900 000.

On 28 February 1989, Niche paidR6,4m into the bank account of

Filmco less 30% in respect of itsfee. Rane claimed as a deductionfor income tax purposes, itsproportionate liability in respectof the marketing fee paid byNiche on behalf of Filmco to DHL,and the distribution fee paid toNiche. The Commissioner, S.A.Revenue Service contended thatRane had not earned income inthat year and had also notincurred the expenditure inrespect of which it claimed adeduction.

THE DECISIONAll four agreements had to be

read and interpreted together.Because of the ambiguity createdin some of them, it waspermissible to have regard to theconduct of the parties and thesurrounding circumstances ininterpreting them.

It appeared from them that themarketing fee payable to DHLand the commission payable toNiche would only arise whenincome in excess of R6,4m wasmade. However, no such incomewas produced. Nevertheless,Niche subtracted its fee of 30%when it made the payment ofR6,4m into Filmco’s account. Thatfee and that payable to DHLrepresented unconditionalliabilities, even if the transactionswhich recorded them were nomore than book entries.

The conduct of the partiesindicated that all of themconsidered the R6,4m to be asurrogate for the gross proceeds ofsales, ie in lieu of actual earnings.Deductions, as claimed by Rane,were therefore permissible againstthis.

The appeal was upheld.

Contract

23

B C PLANT HIRE CC v GRENCO (SA) (PTY) LTD

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPEPROVINCIAL DIVISION12 DECEMBER 2003

2004 CLR 9 (C)

A sale agreement concludedbetween two parties will beconsidered to subsist despite thefact that one of the partiesconcludes a credit agreement witha third party, the intention ofwhich is to substitute the creditoras the owner of the item sold. Therisk of loss in the item sold passesto the purchaser upon conclusionof the sale agreement and willalso pass if there were asimultaneous agreement betweenthe parties that the seller installsthe item sold for the purchaser.

THE FACTSGrenco (SA) (Pty) Ltd sold to BC

Plant Hire CC a refrigeration unitand agreed to install it on one ofBC’s trailers. The price agreedbetween the parties for the supplyand installation of the unit wasR62 700.

Bankfin agreed to finance thepurchase, on the basis that itwould become the owner of theunit upon making payment for itto Grenco. It would sign a releasenote at that point, but would notdo so until it was satisfied that BChad obtained insurance for theunit. It required an invoice fromGrenco before it would pay theR62 700. Grenco issued an invoiceto Bankfin but supplied andinstalled the unit before theinvoice was paid. Before theinvoice was paid, the trailer wasinvolved in an accident and theunit was destroyed.

Because of the destruction of theunit, the credit agreement withBankfin was not concluded.Grenco claimed payment of thepurchase price from BC. BCrefused to pay on the grounds thatthe risk of loss of the unit wouldnot pass to it until the creditagreement between it and Bankfinhad been concluded.

BC appealed a judgment infavour of Grenco given in themagistrates’ court.

THE DECISIONThe supply of the unit to BC

before payment was effected wasnot the performance of a contractof deposit: a person taking adeposit is not entitled to use thething deposited and holds itgratuitously for the depositor. Norwas the supply of the unit theperformance of a loan agreement.The supply of the unit was theperformance of an agreement ofpurchase and sale.

The fact that Grenco also had tofit the unit to the trailer indicatedthat the contractual relationshipbetween the parties was that ofthe letting and hiring of work.This however, did not detractfrom the fact that a sale agreementhad been concluded and did notaffect the passing of the risk underthe sale agreement. This occurredwhen the sale was concluded.Under a contract for the lettingand hiring of work, the risk of lossin the item constructed passedupon completion of the work. Onthis basis too, the risk of loss wasBC’s at the time the accident tookplace.

BC was therefore obliged to payfor the unit. The appeal wasdismissed.

Contract

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POTOCNIK v MUTUAL AND FEDERAL

A JUDGMENT BY SANDI JSOUTH EASTERN CAPE LOCALDIVISION26 JULY 2002

2003 (6) SA 559 (SECLD)

Failure by an insured to disclosefinancial difficulties may beconsidered a reason by the insurerto repudiate liability as suchinformation may reasonably beconsidered material to theassessment of the risk.

THE FACTSPotocnik insured his vessel, the

Ross Craft, with Mutual andFederal for a sum of R1m. Prior toconcluding the insurance contract,Potocnik completed a proposalform. The proposal form statedthat failure to disclose all materialinformation likely to influence theacceptance of the risk and theterms applied could invalidate theinsurance. It also requested anyinformation likely to influence theinsurers in regard to the proposal.The form ended with a declarationthat the particulars and answersgiven were true and correct andthat Potocnik had not withheldany information likely to influencethe decision of the insurers inregard to the proposal.

In the four years prior tocompleting the proposal, Potocnikhad experienced financialdifficulties. The Standard Bankobtained default judgmentsagainst him, and Bankfin, whichhad financed the purchase of thehull and construction of thevessel, obtained judgment againsthim and attached the vessel. Afterthe sale of one of Potocnik’sproperties, Standard Bankremained his creditor in the sumof the unsatisfied judgments itheld against him.

Four months after the conclusionof the insurance contract, thevessel ran aground and wasdamaged beyond repair. Potocnikclaimed indemnity under thecontract but Mutual and Federal

Insurance

repudiated on the grounds that hehad failed to disclose factsmaterial to the contract, thoserelating to his financial position atthe time it was concluded.

Potocnik denied that he had readthe provisions recorded on theproposal form and even if he had,would not have considered hisfinancial position material to therisk. He brought an action toenforce payment of R1m.

THE DECISIONEven if Potocnik did not read the

relevant terms of the proposalform, and did not know whatmaterial information he wasobliged to disclose, Mutual andFederal entered into the contracton acceptance of the informationhe had disclosed. The questionwas whether the information notdisclosed was material to itsassessment of the risk.

Whether or not the informationwas material is assessed byreference to the standard of whata reasonable man would considerto be material. The financialposition of the insured was a factmaterial to the assessment of therisk, and would be considered soby a reasonable man. Theevidence of Mutual and Federalwas that it was so considered byitself, and no evidence to thecontrary was presented.

Mutual and Federal had beenentitled to repudiate the insurancepolicy on the grounds of this non-disclosure. The action wasdismissed.

25

SCHOEMAN v CONSTANTIA INSURANCE CO LTD

A JUDGMENT BY MARAIS JA(ZULMAN JA, STREICHER JA,CAMERON JA and LEWIS JAconcurring)SUPREME COURT OF APPEAL21 MAY 2003

2003 (6) SA 313 (A)

The mere fact that a party isfraudulent in respect of theperformance of a contract doesnot give rise to the implication ofa term to the effect that that partyforfeits all benefits available tohim or her under that contract.

THE FACTSConstantia Insurance Co Ltd

insured Schoeman against theft ofhis household goods. Clause 14 ofthe insurance agreement providedthat the truth of the statementsand answers in the proposal anddeclaration were conditionsprecedent to any liability of theunderwriters to make payment.While the insurance agreementwas in force, Schoeman sufferedtheft and in due course, Schoemansubmitted a claim to Constantia interms of the policy. The claimform concluded with thestatement that the deponentwarranted the truth of theanswers given and declared thatno information had been withheldand that the amount claimedrepresented her loss arising fromthe theft.

After investigation byConstantia, Schoeman wasrequired to undergo a polygraph/lie detector test. In view of theresults of the test, Constantiadecided not to pay Schoeman’sclaim. It contended that in view ofelements of fraud in the making ofher claim, it was absolved ofliability to pay any of the claim,and that a term to this effect couldbe implied in the insurancecontract subsisting between them.

Schoeman’s claim amounted toR107 230. After Constantiarefused to pay the claim,Schoeman admitted that thisamount had been slightly inflatedin anticipation of Constantialowering the settlement amount.She had not however, increasedthe claim with the deliberateintention of defraudingConstantia but did so in thecourse of rounding up figureswhich could not be determinedwith accuracy at the time shemade her claim.

Schoeman brought an action forpayment of his claim.

THE DECISIONA penal clause of the kind

contended for by Constantia wasknown to exist expressly ininsurance and other contracts.However, from this it could not beconsidered to be an implied termof a contract in which it does notexist expressly. Our common lawis in fact anti-penal, and does notsupport forfeiture provisionsmerely because of the presence offraud on the part of one party to acontract.

Policy considerations pointing tothe need to impose penalties forfraud might suggest that theimplied term suggested byConstantia should be seen to bepart of the insurance contract.However, such policyconsiderations need to bebalanced against the inequitywhich could also result shouldsuch a forfeiture provision beaccepted. Insurance companiesare usually able to dictate theterms of the insurance contractswhich they conclude. This,together with other sanctions,such as the refusal of furtherinsurance or criminal prosecution,would suggest that there is nooverriding need of policy to implya such a term.

The facts in any event, did notpoint unequivocally to afraudulent intent on the part ofSchoeman. When seen in thecontext of the whole claim whichshe had made, the mere fact thatSchoeman had admitted slightlyinflating her claim wasinsufficient to indicate that shehad been fraudulent.

Constantia was liable toindemnify Schoeman in respect ofthe claim.

Insurance

26

WARRICKER N.O. v LIBERTY LIFE ASSOCIATIONOF AFRICA LTD

JUDGMENT BY VAN OOSTEN JWITWATERSRAND LOCALDIVISION6 MARCH 2003

2003 (6) SA 272 (W)

Benefits to which a beneficiary isentitled under a life insurancepolicy which is subject to section63 of the Long-Term Insurance Act(no 52 of 1998) do not form part ofthe insolvent estate of the insuredand may be paid to the beneficiarywho has accepted the benefits.

THE FACTSMr M W Kates took out three life

insurance policies with LibertyLife Association of Africa Ltd in1984, 1986 and 1991. In terms ofclause 9 of each policy, a policycould be surrendered for a cashsum equal to the value of thepolicy. In terms of clause 12,settlement of claims would bemade to the owner or his estate ora beneficiary if the policy was notceded. In terms of clause 16,subject to the rights of acessionary, an owner’s rightscould be exercised without theconsent of a beneficiary. In termsof clause 17, an owner couldappoint or remove a beneficiary atany time but such appointmentwould not be binding on Libertyunless it was in writing andrecorded by Liberty.

In April 2002, the estate of Kateswas placed under provisionalsequestration and Warricker wasappointed his trustee. At thatpoint, Kates’ minor child was thebeneficiary under the policies.Three days later, Kates changedthe beneficiary to the WilliamKates Family Trust, of which theminor child was the beneficiary.Five days later, Kates committedsuicide. Liberty Life paid theproceeds of the policies to thetrust, an amount of R1 105 063,02.A final order of sequestration wasgiven.

Warricker wished to claim thebenefits of the policies paid out byLiberty. Because of proceduraldelays, no meeting of creditorscould be called. Warrickertherefore applied for an orderauthorising him to bring an actionto bring such a claim.

THE DECISIONSection 18(3) of the Insolvency

Act (no 24 of 1936) provides that aprovisional trustee shall have thepowers and duties of a trustee asprovided for in the Act, exceptthat without the authority of thecourt, he shall not bring or defend

any legal proceedings. Anapplicant seeking the authority ofthe court in terms of this section,must show a court that somedegree of urgency exists, that thecause of action is prima facieenforceable and that the interestsof creditors in the insolvent estatewill not be prejudiced by theearlier institution of proceedings.

There was insufficient evidenceto indicate whether or not the firstand third of the abovementionedcriteria had been met. Whether ornot the trustee had an enforceablecause of action was dependent onwhether or not the benefitspayable under the policy wereprotected policies or benefits asprovided for in section 63 of theLong-Term Insurance Act (no 52of 1998).

Section 20(1)(a) of the Actprovides that the effect ofsequestration of an insolventestate is to divest the estate of theinsolvent and vest it in the Masteruntil a trustee is appointed. TheLong-Term Insurance Acthowever, varies this by removingprotected policies and benefitsfrom the assets which wouldordinarily be included in theinsolvent estate. A provisionaltrustee obtains no greater rightsthan the insured himself had andaccordingly, those assets wouldnot form part of the insolventestate.

The appointment of a beneficiaryto the policy had the effect ofentitling the beneficiary to acceptthe benefits upon the death of theinsured. This right was notaffected by the insolvency ofKates, and the trust which wasappointed beneficiary had beenentitled to accept the benefits ofthe policies upon his death.

The rights of the beneficiarywere not affected by theinsolvency of the insured. Therewas therefore no enforceableaction that Warricker could bringagainst Liberty Life. Theapplication was dismissed.

Insurance

27

CERTAIN UNDERWRITERS OF LLOYDS OFLONDON v HARRISON

A JUDGMENT BY NUGENT JA(ZULMAN JA, MTHIYANE JA,LEWIS JA and MLAMBO AJAconcurring)SUPREME COURT OF APPEAL18 SEPTEMBER 2003

2004 CLR 39 (A)

An insured is obliged to disclosethe fact that the insured item hasbeen unlawfully imported as thismay affect the insurer’sassessment of the risk.

THE FACTSHarrison purchased a Toyota

Land Cruiser from themanufacturer of the vehicle inJapan. The vehicle was deliveredto premises in Swaziland andregistered in the vehicle registryof that country on behalf of J&HHoldings, a South African firmwhich arranged the sale of thevehicle.

The vehicle was first registeredin South Africa in June 1999 witha Butterworth, Transkei,numberplate. On the same day, itsregistration was transferred to theEastern Cape registry of vehicles,and in July 1999, transferred to theregistry of vehicles in Gauteng.

It is a requirement forregistration of an imported vehiclethat the import permit should beproduced. This requirementhowever, did not apply to thevehicle registration systemapplying in Butterworth at thetime the vehicle was registered.The Department of Trade andIndustry could not find anyimport permit issued in respect ofthe vehicle.

Harrison insured the vehiclewith the underwriters of Lloyds ofLondon. The vehicle was involvedin an accident. The insurersrefused to indemnify Harrison onthe grounds that the vehicle hadbeen imported into the countryunlawfully. They appealed ajudgment in favour of Harrisonwhich held that because thevehicle was registered in thecountry, there must have been animport permit for it.

THE DECISIONThe requirement that an import

permit is produced whenever avehicle is registered it notnecessarily adhered to. There wastherefore no reason to assume thatbecause the vehicle wasregistered, an import permit musthave been issued. The evidenceshowed that there was no recordof an import permit in respect ofthe vehicle. An import permit wastherefore probably not issued.

The result of an import permitnot being issued is that a vehiclemay be forfeited to the State. Thisaffects an insurer’s interests and isaccordingly relevant to itsassessment of the risk itundertakes. The insured is obligedto disclose to an insurer that theinsured goods have beenimported unlawfully.

The appeal was upheld.

Insurance

28

JANS v NEDCOR BANK LTD

A JUDGMENT BY SCOTT JA(VIVIER ADP, FARLAM JA,MTHIYANE JA and LEWIS JAconcurring)SUPREME COURT OF APPEAL24 MARCH 2003

2003 (6) SA 646 (A)

In the absence of undue hardship,the interruption or delay in therunning of prescription in respectof the principal debt has the sameeffect in respect of the suretyshipdebt.

THE FACTSJans signed a deed of suretyship

in favour of Nedcor Bank Ltd inrespect of the debts of RydayConstruction (Pty) Ltd. She signedas surety and co-principal debtor.

Some two years later, on 15 April1997, Ryday was placed in finalliquidation, and on 11 August ofthat year, the bank submitted tothe liquidator a claim for moneysadvanced on overdraft. On 10October 2000, the final liquidationand distribution account wasconfirmed by the Master.

In early October 2000, the bankbrought an action against Jans forpayment of R746 891,58 in termsof the deed of suretyship she hadsigned and the summons wasserved on her on 13 October 2000.

Jans defended the action on thegrounds that prescription inrespect of the debt began to runon 15 April 1997 and the runningof prescription against her wasunaffected by any delay in therunning of prescription againstRyday. She contended thatprescription in respect of thebank’s claim had accordinglybecome complete on 14 April2000, some six months beforesummons was issued against her.

The bank contended that therunning of prescription againstJans had been delayed because itsrunning had been delayed againstRyday by virtue of the operationof section 13(1)(g) of thePrescription Act (no 68 of 1969).

THE DECISIONSection 13(1)(g) of the Act

provides that if a debt is the objectof a claim filed against a companyin liquidation, the period ofprescription shall not becompleted before a year haselapsed after the date on whichprescription would have beencompleted in terms of sub-section(i) of that section. That date wasthe date of confirmation of the

liquidation and distributionaccount. The bank’s claim againstRyday would therefore haveprescribed a year after 10 October2000. The question was whetherthis period applied to Jans as well.

The contract of suretyship isseparate from the contract givingrise to the principal indebtedness.This is so even if the surety is alsoco-principal debtor, because theco-principal debtor does notbecome a party to the contractbetween the creditor and theprincipal debtor. By becoming aco-principal debtor, the suretythereby renounces the benefitsordinarily available to the suretyagainst the creditor and becomesjointly and severally liable withthe principal debtor. However,this does not mean that thesurety’s indebtedness is no longeraccessory to that of the principaldebtor, nor that periods ofprescription applicable to theprincipal debt should not apply tothe surety.

The judgment handed down inthe matter of Rand Bank Ltd v DeJager 1982 (3) SA 418 (C) held thatit would be unfair to make thesurety’s liability coincident withthat of the principal debtor incertain circumstances, specificallywhere the period of prescriptionin relation to the latter wasextended under circumstancesover which the surety had littlecontrol. This however, wascontrary to the accepted principlesof Roman Dutch law as stated byVoet in Commentarius adPandectas 46.1.36. There is noreason to reject these principleswhere it cannot be shown thattheir acceptance involves unduehardship on the surety.

Present circumstances showedhowever, that the interruption ordelay of prescription was notsomething that was automaticallyto be accepted as a hardship uponthe surety. The suretyship contract

Prescription

29

is in itself burdensome and thesurety itself is often to blame fornot remaining aware of theposition of the principalindebtedness. In many instances,the suretyship agreement isconcluded in order to further theinterests of the surety itself since

these are often identical or closelyconnected with those of theprincipal debtor. Provided thesurety exercises vigilance inprotecting its own interests, noundue prejudice arises.

The interruption or delay in therunning of prescription in respect

of the principal debt has the sameeffect in respect of the suretyshipdebt. In the present case, thismeant that prescription in respectof the claim against Jans wasdelayed in the same manner inwhich it was delayed againstRyday. The action against Janssucceeded.

The typical surety in modern society is one who binds him- or herself as co-principal debtor andguarantees the debts of a company or close corporation which has little in the way of sharecapital or assets but is dependent on credit in order to conduct its business. More often than notthe business is that of the surety or a spouse who for various reasons chooses to conduct itthrough the medium of a company or close corporation with limited liability. A creditor willordinarily refuse to afford credit to such a legal persona in the absence of a personal suretyshipand few businesses can operate successfully without credit. The very existence of the debt istherefore dependent upon the existence of the suretyship while the object and function of thelatter is, of course, to ensure proper payment of the former. To permit the claim against thesurety in these circumstances to prescribe before the claim against the principal debtor, in thewords of Wessels JP in Union Government v Van der Merwe, supra, at 320, would be‘almost subversive of the whole contract of suretyship’. Indeed, in the type of situation sketchedabove it is frequently the surety himself who brings about, or at least participates in, theinterruption or delay of prescription against the principal debtor, eg by acknowledging liabilityor accepting service of judicial process on behalf of the principal debtor, or by submitting adispute to arbitration, or by initiating proceedings to have the principal debtor placed inliquidation. The acceptance of Voet’s view would certainly not result in unfairness to a suretyhaving a commercial interest in the principal debtor’s liability. But even if the surety is adisinterested party, I have difficulty in appreciating the unfairness complained of. Admittedlythe period of prescription may be extended by reason of circumstances which relate solely to theclaim against the principal debtor, but that is not an unreasonable or illogical consequence ofassuming responsibility for the fulfilment of another’s obligation. Provided only that the suretyexercises some vigilance in relation to the fortunes of the claim against the principal debtor,there will be no prejudice.

Prescription

30

GREEN AFRICA SHIPPING (PTY) LTD v HIFUELECTRONIC TRADING CC

A JUDGMENT BY MAGID JDURBAN AND COAST LOCALDIVISION3 DECEMBER 2003

SCOSA B 251 (D)

An applicant for security mustshow that the value of theproperty to be arrested isreasonably substantial.

THE FACTSGreen African Shipping (Pty) Ltd

arrested Hifu Electronic TradingCC’s right title and interest in itsbusiness. It also effected an arrestagainst a similar interest ofBuffalo Freight Systems (Pty) Ltd.Both arrests were obtained interms of section 5(3)(a) of theAdmiralty Jurisdiction RegulationAct (no 105 of 1983).

The applications were broughton the grounds of allegations thatit had a claim against therespondents for damages in thesum of US$800 000 arising fromalleged fraudulentmisrepresentations ormisstatements made byrepresentatives of the parties.Green stated that it had nosubstantive information about thefinancial position of therespondents, that they owned noimmovable property and that theywere clearing and forwardingcompanies with a turnover, butunlikely to hold any substantialassets.

Buffalo applied to set aside thearrest.

THE DECISIONGreen had not shown that it had

a genuine and reasonable need forsecurity. The onus of proving thatit did have such a need rested on

it and the fact that therespondents had failed to disclosetheir assets or their financialposition did not assist it in thatregard.

‘Security’ obtained in arrest ofproperty for the purposes ofproviding security for a claim isdifferent from property attachedto found or confirm jurisdiction.In the former case, it must bereasonably substantial and have areasonably substantial value.However, in the present case, theinformation put forward by Greenregarding the value of therespondents’ property wasinsufficient to show that it didhave substantial value. Therespondents were under noobligation to state what the valueof their property was.

The application to set aside thearrest was granted.

Shipping

31

HNR PROPERTIES CC v STANDARD BANK OF SOUTHAFRICA LTD

A JUDGMENT BY SCOTT JA(NAVSA JA, NUGENT JA, LEWISJA and MOTATA AJAconcurring)SUPREME COURT OF APPEAL28 NOVEMBER 2003

2004 CLR 65 (A)

The release of a surety must begiven in clear terms. In theabsence of clarity and evidencesupporting the contention that norelease was intended, theprovisions of a suretyshipagreement preventing such releaseunless in writing will prevent anypurported release of the surety. Anon-variation clause in asuretyship agreement answers anycontention that waiver of acreditor’s right has taken placewhere no evidence exists toindicate that a waiver has takenplace. Such a clause is equallyapplicable to the defence ofestoppel or one based on thereliance theory of contract.

THE FACTSIn October 1993, HNR Properties

CC and a Mr R Hargey signeddeeds of suretyship in favour ofthe Standard Bank of South AfricaLtd in respect of the indebtednessof HNR Computers (Pty) Ltdtoward the bank. Clause 15provided that the surety wouldnot be released from any liabilityunless such release was in writingand signed on behalf of the bankby a duly authorised signatory.Clause 16 provided that nocancellation or variation of thesuretyship would be of any forceor effect unless it was recorded inwriting and signed by the bankand the surety.

The bank allowed HNRComputers certain bankingfacilities including a short termoverdraft of R3m, a facility of R7mfor forward exchange contracts,and a facility of R3m from thebank’s factoring division.

In 1997, the shareholders of HNRComputers including Hargey soldtheir entire shareholding to InfinitiTechnologies Ltd. Clause 6.3 ofthe agreement provided that thepurchaser would fully dischargeany sureties provided by thesellers in a personal capacity. Thisagreement was shown to a MrLinnell an employee of the bankwho had been appointed to dealwith HNR on behalf of the bank.

Linnell was not empowered toconclude loan agreements withthe bank’s customers. He enteredinto negotiations with Infinitiregarding that company’s bankingfacility requirements, and putcertain proposals to the bank’scredit division for this purpose.Infiniti’s representative informedLinnell that the company did notwish to conclude renewedsuretyship agreements but wouldaccept interlinking suretyshipagreements between itssubsidiaries and a downwardunlimited suretyship by Infiniti in

favour of the trading entities. InApril 1998, a renewed creditapplication put forward byLinnell was accepted by thebank’s credit division and it wasconfirmed in writing by Linnell toInfiniti.

The letter referred to the recentdiscussions between the partiesand confirmed facilities subject torecorded terms and conditions.The security proposed was theinterlinking suretyshipagreements and downwardunlimited suretyship by Infiniti.The letter was signed by Linnell aswell as representatives of Infiniti.

In 1999, Infiniti’s fortunesdeclined and it was placed inliquidation. The bank had in themeantime increased its advancesand this was done before the newsuretyships were all signed.

The bank brought an action toenforce payment under theexisting suretyship agreements.HNR and Hargey contended thatupon a proper interpretation ofthe letter of April 1998, they hadbeen released as sureties. Theyalso contended that the bank wasnot entitled to enforce thesuretyship agreements because ithad waived its rights, or wasestopped from doing so, or hadallowed the sureties to rely on arepresentation in its facility letterthat the existing suretyshipswould fall away as soon as thesecurity proposed in it was given.

THE DECISIONClause 15 of the suretyship

agreements was incorporated inthose agreements in order toprotect the bank. The facthowever, that a releasecontemplated in the clause had tobe in writing did not excludeinterpretation of the clause in thelight of the backgroundcircumstances of the case.

The letter of April 1998contained no reference to the

Suretyship

32

suretyship agreements. Thesuretyships referred to in it weresuretyships offered or proposed.Furthermore, the evidenceshowed that the bank did notintend to release the sureties. Thematter of release had been raisedin the negotiations between theparties, but no confirmation froma person authorised to do so in thecredit division had been given.The bank had advanced moneybefore the new suretyshipagreements were signed andwould not have done so had italready released the existingsureties.

As far as the defence of waiverwas concerned, even if there wasevidence to support it, clause 16applied. No waiver was reducedto writing and signed by bothparties. Accordingly, no waiverhad taken place. The same couldbe said of the defence of estoppel.This defence sought to sanctionnon-compliance with theprovisions of clauses 15 and 16and could not be supported.

As far as the reliance defencewas concerned, thereasonableness of the surety’sbelief upon which it relied wascrucial. The question was whether

a person in the position of thesureties would have believed thatupon acceptance of the offer, theexisting suretyships would fallaway. The sureties had acceptedthe provisions of clause 15 andwere therefore not entitled tosimply assume that the existingsuretyships would fall away. Inthe light of that provision, theyshould have obtainedconfirmation that their suretyshipobligations did fall away. Theycould not rely on anyrepresentation made by the bankin the facility letter.

The appeal was dismissed.

Suretyship

The clause, of course, requires that the release ‘be in writing’. This does not mean that whenconstruing the writing it is impermissible to have regard to background circumstances or, inthe event of ambiguity, surrounding circumstances. Nonetheless, in every case the intentionto release must appear from the writing itself. It may be explicit or implicit. But if the latter,the intention to release must be apparent from the writing on an ordinary grammaticalconstruction of the words used or, stated differently, the release of the surety must be anecessary implication of the words used. It is therefore not permissible to import into thewriting, whether by reference to background or surrounding circumstances or any othersource, an intention to release which is otherwise not ascertainable from the actual languageof the document relied upon. If the position were otherwise the very object of the requirementof writing would be frustrated.

33

DAVIS v CLUTCHCO (PTY) LTD

A JUDGMENT BY MEER JCAPE OF GOOD HOPEPROVINCIAL DIVISION10 JUNE 2003

2004 (1) SA 75 (C)

A shareholder in a company isentitled to information regardingthe company which will assist theshareholder in determining thevalue of his shares and preservehis investment.

THE FACTSIn 1999, Davis bought 30% of the

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

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

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

THE DECISIONSection 50(1) of the Act provides

that a requester must be givenaccess to any record of a privatebody if (i) the record is requiredfor the exercise or protection ofany rights (ii) that personcomplies with the proceduralrequirements of the Act relating toa request for access to that record,and (iii) access to that record isnot refused on any ground forrefusal contemplated in the Act.

The first requirement of thesection entails that theinformation requested will be ofassistance to the requester, in thesense that it is reasonablyrequired. The fact that theCompanies Act provides for rightsof access to information in certaincircumstances does not limit thatright. A shareholder may requireinformation regarding hiscompany in order to safeguard hisinvestment in the company. Davisrequired such information inorder to do so: the records werereasonably required for theexercise and protection of hisrights as shareholder to value andsell his shares, to verify hisconcerns about financialmismanagement and take steps toprotect his investment.

The letter refusing Davis’srequest for information did notcomply with the requirements ofsection 56 of the Act regarding theprocedures to be followed once arequest for information isreceived. The refusal was notjustifiable in terms of any othersections of the Act. Accordingly,Davis was entitled to theinformation requested.

The application was granted.

Corporations

34

AFRIC OIL (PTY) LTD v RAMADAANINVESTMENTS CC

A JUDGMENT BY MOLEKO JNATAL PROVINCIAL DIVISION13 JANUARY 2003

2004 (1) SA 35 (N)

The provisions of section 69(1)(a)of the Close Corporations Act (no69 of 1984) are peremptory. Unlessdemand is made on thecorporation as provided for in thesection, no liquidation of acorporation based on the sectionmay follow.

THE FACTSAfric Oil (Pty) Ltd claimed

payment of R2 449 018,91 fromRamadaan Investments CC. Itaddressed a demand for paymentto Ramadaan by sending a fax to itand also to its attorneys. It did notsend the letter to the registeredaddress of the corporation, butotherwise complied with theprovisions of section 69(1)(a) ofthe Close Corporations Act (no 69of 1984). It had earlier attemptedto serve process on thecorporation through the sheriffbut the sheriff’s return of serviceindicated that the corporation wasno longer at the premises.

Ramadaan’s attorneysresponded to the demand byundertaking to pay the amountdemanded and requesting aschedule reflecting the amountowing to Afric Oil.

Afric Oil then brought anapplication for the liquidation of

Ramadaan, inter alia on thegrounds that Ramadaan was to bedeemed to be unable to pay itsdebts as provided for in section69(1) of the Act. Ramadaancontended that demand asprovided for in this section hadnot been made on it.

THE DECISIONThe provisions of section 69(1)

are peremptory. This means thatunless there is formal compliancewith these provisions, they willnot be considered to have beencomplied with.

In the present case, although thecorporation had received thedemand, there had be no serviceon the corporation as provided forin the section. Although Afric Oilhad shown on other evidence thatRamadaan was unable to pay itsdebts, it was not entitled to rely onthe section for the liquidation ofthe corporation.

Corporations

Upon consideration of the aforegoing cases and my interpretation of theprovisions of section 69(1)(a), I am of the view that its provisions areperemptory, requiring service of the demand by delivering it at the registeredoffice of the corporation. If the Legislature intended other forms of service itwould have provided for that. Strict compliance with the provisions requiringservice are a prerequisite for the deeming of the corporation as unable to payits debts.

35

FIRSTRAND BANK LTD v DAVIS

A JUDGMENT BY HURT JNATAL PROVINCIAL DIVISION25 NOVEMBER 2002

2004 (1) SA 31 (N)

Notification of deregistration of acorporation in terms of section 26of the Close Corporations Act (no69 of 1984) requires that themembers receive notice of theintention to deregister.

THE FACTSThe Registrar of Companies

wrote a letter to Milner GardensLiquor CC and its membersstating that he believed thecorporation was no longercarrying on business. He called onthem to liquidate the corporationor show cause why it should notbe registered. The Registrarreceived no response. A notice ofderegistration was then publishedin the Government Gazette.

Firstrand Bank Ltd was acreditor of the corporation in thesum of R990 604,29. It brought anapplication for an order declaringthat Davis and the other memberswere jointly and severally liablefor the corporation’s debt, interms of section 26(5) of the CloseCorporations Act (no 69 of 1984).This sub-section provides that if acorporation is deregistered whilehaving outstanding liabilities, themembers of such corporation shallbe jointly and severally liable forsuch liabilities.

Davis and the other membersopposed the application on thegrounds that the letters were sentby ordinary post and not bycertified post as required bysection 26(1) of the Act. Firstrandstated that the certified postservice was no longer offered bythe post office and it wasaccordingly impossible to complystrictly with the provisions of thatsection.

THE DECISIONRandbank argued that the

intention of the postingrequirements set out in the sectionwas to ensure that the noticeswere properly sent, not that theywere received by the addressee.This interpretation was nothowever, consistent with theprovisions of the section. Theyprovide that the drasticconsequence of personal liabilitywill follow from deregistration.Given that consequence, theimportance of the person affectedreceiving notification was clear.

This was also a conclusion thatcould be drawn from section 25 ofthe Act which provides for noticeshaving been deemed to have beenreceived when sent by certified orregistered post.

The application was dismissed.

Corporations

36

SONNENBERG McLOUGHLIN INC v SPIRO

JUDGMENT BY HJ ERASMUS AJCAPE OF GOOD HOPEPROVINCIAL DIVISION30 MAY 2003

2004 (1) SA 90 (C)

A company to which section 53(b)of the Companies Act (no 61 of1973) applies has no claim againsta director on the basis of theliability referred to in that sectionmerely because it has paid a debtdue to a creditor of the company.

THE FACTSSpiro was a director of

Sonnenberg McLoughlin Inc untilAugust 1999. During that period,the company incurred certainliabilities, including debts tocreditors amounting to R2 761 773.The company alleged that Spirohad accepted liability for 42,5% ofthese debts but Sprio denied thathe had done so.

The company alleged in thealternative that Spiro was liable toit on the basis of section 53(b) ofthe Companies Act (no 61 of1973). The section provides thatthe memorandum of a privatecompany may provide that thedirectors and past directors shallbe liable jointly and severally,together with the company, forsuch debts and liabilities of thecompany as are or werecontracted during their periods ofoffice, in which case the saiddirectors and past directors shallbe so liable.

Paragraph 6.1 of the company’smemorandum recorded that allpast and present directors of the

company would be liable jointlyand severally with the companyfor the debts and liabilities of thecompany contracted during theirperiod of office.

The company alleged that it hadpaid the creditors and that Spirowas accordingly liable to it in hisproportionate share.

THE DECISION Section 53(b) provides for the

liability of directors to creditors ofa company, effectively entitlingthe creditor to look to the directoras its debtor singuli et in solidumin respect of the particular debt.

The effect of the section is also toentitle a director who has paid adebt to have a right of recourseagainst fellow directors for theirproportionate share. The sectiondoes not provide a right ofrecourse to a company against itsdirectors when the company haspaid the debt.

The company was therefore notentitled to recover payment fromSpiro. Its claim for payment wasdismissed.

Corporations

37

EBN TRADING (PTY) LTD v PSC GUARANTEEDGROWTH LTDBROWNE N.O. v PSC GUARANTEED GROWTH LTD

A JUDGMENT BY LEVINSOHN JNATAL PROVINCIAL DIVISION20 AUGUST 2003

2004 CLR 117 (N)

In determining whether or notsecurity for costs should beordered, a court exercises itsdiscretion in the narrow sense ofexercising a value judgment. Indoing so, it is entitled to haveregard to the merits of the disputeunderlying the application forsecurity.

THE FACTSPSC Guaranteed Growth Ltd

brought an application for thewinding up of EBN Trading (Pty)Ltd. A provisional winding-uporder was given but EBNcontinued to oppose theapplication for a final order,contending that it was notindebted to PSC.

EBN brought an application foran order that PSC furnish securityfor its costs in the event of PSC’sapplication failing. PSC would notbe able to furnish such security,and an order that it should do sowould bring an end to itsapplication against EBN. PSCcontended however, that theapplication against EBN shouldproceed as a matter of publicinterest and that PSC’s financialdemise was caused by EBN itself.

EBN’s application for securityfailed. It appealed.

THE DECISIONA court considering an

application for security for costs isentitled to consider the basis uponwhich a provisional winding-uporder was given. While the courtshould normally not conduct adetailed inquiry into that basis, itwould have regard to factors suchas the nature of the claim andsalient features of the defence tothe claim.

Taking into account such factors,a court should determine thequestion of security for costs inthe exercise of its discretion, in thenarrow sense of exercising a valuejudgment. The fact that the judgein the court a quo took intoaccount the merits of theapplication for the winding up ofEBN was not an improper use ofhis discretion and there was noground for interfering with thatapplication of his discretion.

The appeal was dismissed.

Corporations

While it is true that in these proceedings it is most undesirable for theCourt to embark on a detailed inquiry to actually determine the meritsof the case which is in fact pending before another Court, this oughtnot to be stated to be an absolutely inflexible rule. Certainly the Courtought to have regard to factors such as the nature of the claim, and, asin this case, salient features of the defence to the claim.

38

BURLEY APPLIANCES LTD v GROBBELAAR N.O.

A JUDGMENT BY NEL J(POTGIETER AJ concurring)CAPE OF GOOD HOPEPROVINCIAL DIVISION14 JULY 2003

2004 (1) SA 602 (C)

When the circumstances referred toin sections 64 or 65 of the of theClose Corporations Act (no 69 of1984) arise, the right to apply tocourt in terms of those sectionsarises. Accordingly a debt arisesat that point and prescription inrespect of that debt will run fromthen onwards.

THE FACTSIn June 1995, Burley Appliances

Ltd brought an action againstFutek Electronics CC in which itclaimed payment of R206151 and£27 995,82. While the action waspending, Futek transferred itsbusiness to Futek Systems CC andpaid its sole member, Marshall,R140 855 in repayment of his loanaccount with Futek.

A year later, and while the actionwas still pending, Futek wasprovisionally liquidated. Theliquidation order was made finaland Grobbelaar was appointedthe liquidator.

In April 2001, Burley brought anaction claiming an order thatFutek Systems and Marshall werejointly and severally liable for thedebts of Futek, that Futek shouldbe deemed not to be a juristicperson and that the transfer of thebusiness should be set aside.These orders were claimed interms of sections 64 and 65 of theClose Corporations Act (no 69 of1984) and section 34 of theInsolvency Act (no 24 of 1936)respectively.

Futek Systems and Marshalldefended the action on thegrounds that the causes of actionhad arisen more than three yearsbefore action was brought andhad prescribed in terms of thePrescription Act (no 68 of 1969).Burley excepted to the defence onthe grounds that its claims werenot for the enforcement of a debtas defined in the Prescription Act.

THE DECISIONSection 64 of the Close

Corporations Act provides that acourt may declare that a person ispersonally liable for the debts of acorporation in the circumstanceswhere that person was knowinglya party to the carrying on of thebusiness of the corporation in areckless or grossly negligentmanner . Section 65 providessimilarly in differentcircumstances.

In terms of the Prescription Act,prescription begins runningagainst a debt from the time thatthe debt is due. A debt is not dueuntil the creditor has knowledgeof the identity of the debtor and ofthe facts from which the debtarises.

In the case of a claim arisingunder section 64 or 65 of the CloseCorporations Act, once thecircumstances provided for inthose sections is set out, a personmay apply to court for theappropriate declaration. Theremedy consists in the right tomake such an application. Thatright arises when the relevantcircumstances arise and theenforcement thereof would be theenforcement of a debt as definedin the Prescription Act.Accordingly, if no action is takenwithin the three year periodfollowing the arising of thosecircumstances, prescription willhave run in respect of that claim.

The exception was dismissed.

Prescription

39

STOCKDALE v STOCKDALE

JUDGMENT BY TRAVERSO AJP(FOXCROFT J concurring)CAPE OF GOOD HOPEPROVINCIAL DIVISION22 NOVEMBER 2002

2004 (1) SA 68 (C)

Prescription begins to run fromthe date on which notice to repaya sum of money is given, providedthat it is clear that the intentionof the parties was that this wouldbe the date on which the debtwould become due, taking intoaccount the contract concluded bythe parties and the circumstancesin which it was envisaged noticeto repay would be given.

THE FACTSThe defendant was the daughter-

in-law of the plaintiffs. She tooktransfer of the plaintiffs’ fixedproperty in order to gain theadvantage of favourable financingarrangements offered by SyfretsBank to home owners. When thedefendant’s husband resigned hisemployment, the advantage waswithdrawn and the defendant wasunable to obtain alternativefinancing arrangements.

The plaintiffs offered to lendmoney to settle the existing bondwith Syfrets. The offer wasaccepted and on 31 January 1991,the defendant signed twoacknowledgments of debt inrespect of the moneys advanced.Clause 2 provided that thedefendant undertook to pay thecapital amount outstanding andinterest within 30 days from thedate notice was given by thecreditor.

On 24 October 2002, theplaintiffs demanded repayment ofthe loan. The defendantcontended that prescription of thedebt began running when theacknowledgement of debt wassigned and had been completedbefore the date on which demandwas made. The plaintiffscontended that prescription of thedebt began running thirty daysafter demand was made on 24October 2002.

THE DECISIONThe inference to be drawn from

the evidence was that nobodyregarded the loan as immediatelyrepayable. Repayment wouldbecome necessary if there was achange of circumstances resultingin a notice to repay as providedfor in the acknowledgement ofdebt.

There is a difference betweenwhen a debt arises and when itbecomes due. The date on whichthe latter event takes place isrelevant for calculating the periodof prescription in terms of section12(1) of the Prescription Act (no68 of 1969). It is determined byreference to the intention of theparties as regards the ‘immediate’payment of the debt.

In the present case, theacknowledgement of debt did notprovide for a specific date fordemand. Although the generalrule is that where no specific dateis given, the debt is due forthwith,this is qualified by the particularcircumstances of a case. In thiscase, the acknowledgementprovided that payment would bedue within 30 days of notice beinggiven. Such notice would be givenif circumstances changed. Sincethey did, and the plaintiffs gavenotice of repayment inconsequence thereof, and notmerely because they unilaterallydetermined to do so, thecompletion of the notice periodsignified the date on which thedebt became due.

This date was the later date, iethirty days after 24 October 2002.Accordingly, the three-yearprescription period had not runby the time the plaintiffs issuedsummons.

Prescription

40

BIERMAN v MUTUAL AND FEDERAL INSURANCE CO LTD

A JUDGMENT BY CILLIÉORANGE FREE STATEPROVINCIAL DIVISION20 MARCH 2003

2004 (1) SA 205 (O)

A provision in an insurance policywhich limits the period withinwhich a claim may be broughtfollowing the occurrence of someloss may be applied following therejection of a claim which doesnot amount to a repudiation ofthe contract of insurance as awhole.

THE FACTSBierman insured his property

against damage with Mutual andFederal Insurance Co Ltd. Theinsurance policy provided that ifMutual and Federal repudiatedliability, summons claiming theamount repudiated was to beissued within ninety days of therepudiation.

Bierman’s property wasdamaged by a break-in and fire.He addressed a claim arising fromthis to Mutual and Federal. In aletter dated 25 February 1999,Mutual and Federal stated thataccording to information in theirpossession, the dwelling wasunoccupied at the time of thedamage and consequentlyBierman did not enjoy cover forthis loss. It stated that under thecircumstances it would notentertain the claim and made noacknowledgement of it. Anyaction which followed would bedefended. On 13 April 1999,Mutual & Federal sent a letter toBierman informing him that it wascancelling the policy with effectfrom 13 May 1999.

Bierman brought an action forpayment of his claim, thesummons being issued on 18August 1999. Mutual and Federaldefended the action on thegrounds that summons had beenissued more than ninety days afterit repudiated the claim.

THE DECISIONBierman contended that Mutual

and Federal had repudiated theinsurance contract and thereforelost the right to insist oncompliance with the ninety-daynotice period. The question waswhether by sending the letter of25 February 1999, Mutual andFederal did in fact repudiate thecontract by showing a deliberateand unequivocal intention nolonger to be bound by thecontract.

There is no clear authority to theeffect that in every case when aninsurer repudiates liability on aclaim it repudiates the insurancecontract. Mutual and Federal’srepudiation in the present casecould not be said to be arepudiation of the contract itself.Bierman himself did not treat it assuch. He continued to insist onpayment of his claim even afterMutual and Federal hadrepudiated. Mutual and Federaldid not contest the existence oreffectiveness of the insurancepolicy even though it rejected theclaim.

The terms of the policy thereforecontinued to apply after therepudiation of it by Mutual andFederal. The ninety-day periodprovided for in the policy applied.Bierman had not complied with it.Accordingly his claim in terms ofthe policy was ineffective. Thedefence raised by Mutual andFederal was upheld.

Insurance

41

MAN TRUCK & BUS (SA) (PTY) LTD v DUSBUS LEASING CC

A JUDGMENT BY RABIE AJWITWATERSRAND LOCALDIVISION16 FEBRUARY 2001

2004 (1) SA 454 (W)

A party will be precluded fromraising a defence to a claim whichhas already been considered anddetermined by a court on aprevious occasion.

THE FACTSAfrica Truck and Bus Company

(Pty) Ltd (ATB) entered into anagreement with Man Truck & Bus(SA) (Pty) Ltd termed a ‘blockdiscounting agreement’ in termsof which ATB would cede itsrights in all lease agreementsconcluded with third parties andwould transfer ownership of thegoods to Man Truck as well as allsecurities held in respect thereof.Then, ATB entered into a masterlease agreement with DusbusLeasing CC and leased twelvebuses to Dusbus. The second toninth defendants signedsuretyship agreements in favourof ATB. In terms of the blockdiscounting agreement, thismaster lease agreement and thesuretyships were ceded to ManTruck. Man Truck later ceded itsrights to Opfin (Pty) Ltd which inturn ceded its rights to Wesbank.

Dusbus defaulted in makingcertain rentals due under the leaseagreements. Wesbank cancelledthe lease agreements, repossessedthe buses and brought anapplication to affirm its rights inthe magistrates’ court. It thenentered into an agreement of re-cession in terms of which it cededback to Opfin the ownership, leaseand suretyship rights it held.Opfin in turn re-ceded these rightsto Man Truck. Wesbank deliveredthe buses to Man Truck andwithdrew its magistrates’ courtapplication.

Man Truck then brought anaction against Dusbus in which itclaimed an order declaring that itwas the owner of the buses anddamages in the sum of R3 189825,49. Because Dusbus raised noserious defence to the formerclaim, in a separate applicationMan Truck sought and obtainedan order (by default) againstDusbus and the secondrespondent declaring that it wasthe owner of the buses.

Dusbus defended the actionagainst it, raising a number ofdefences. Man Truck contendedthat as it had successfullyobtained an order declaring itselfto be the owner of the buses, theissues raised in the Dusbus’defences had already beendetermined and it wasaccordingly estopped from raisingthem again.

THE DECISIONA successful defence of res

judicata (or issue estoppel)depended on Man Truck showingthat the judgment obtained in theapplication proceedings wasgiven between the same parties,based on the same cause of actionand in respect of the same subjectmatter.

The relief claimed in theapplication was exactly the sameas the first form of relief claimedin the action. The allegationsmade by Man Truck to obtain thatrelief were the same in theapplication as they were in theaction. Dusbus did not oppose theapplication brought by ManTruck. The issues in thatapplication were therefore thesame as those raised in the actionand what the court would havehad to take into account inreaching its judgment in theapplication would have been thesame as what it would have totake into account in reaching itsjudgment in the action.

It followed that the court in theapplication proceedings decidedthe same issue of ownership andpossessory rights which was thesubject matter of the presentaction. It finally adjudicated theissues of the master leaseagreement, its breach by Dusbus,its valid cancellation and mattersancillary thereto. The subject-matter in both matters was thesame and the relief claimed wasalso the same.

Credit Transactions

42

The parties defending the actionincluded the members of Dusbusand the sureties. These were notthe same parties as those cited inthe application which wasbrought against Dusbus only.However, insofar as the membersof Dusbus were concerned, theyhad intimate knowledge of thematter and were the controllingminds of their close corporations.They were personally involved in

the litigation and should not bepermitted to avoid theconsequences of their undoubtedknowledge of the nature of ManTruck’s claim against Dusbus.

The other sureties were on adifferent footing however as therewas no evidence that they hadactual knowledge of the litigation.

Man Truck’s contentions wereupheld.

Credit Transactions

It is clear that the Court in the application proceedings decided the same issue ofownership and possessory rights which is the subject of this action and in the course ofdoing so, it necessarily, finally, adjudicated the existence of the master lease agreement,its breach by Dusbus, its valid cancellation and the matters ancillary thereto as set outabove. The subject-matter in both matters is the same and the relief claimed is also thesame. Furthermore, principles of fairness and public policy do not militate againstaffording the plaintiff the protection of the exceptio.Consequently, it is clear that Dusbus and the second defendant are precluded from

raising any of the defences raised in this action and that the exceptio rei iudicatae iswell founded against Dusbus and the second defendant and must be upheld.

43

METRO PROJECTS CC v KLERKSDORPLOCAL MUNICIPALITY

A JUDGMENT BY CONRADIE JA(ZULMAN JA, FARLAM JA,NUGENT JA and HEHER JAconcurring)SUPREME COURT OF APPEAL22 SEPTEMBER 2003

2004 (1) SA 16 (A)

A tender process which concealsfrom the decision-making bodythe true nature of a tender will beconsidered unfair. Any tenderawarded in such circumstanceswill accordingly be set aside.

THE FACTSMetro Projects CC and ten

others, including RemmogoProperty Developers, tendered forthe development of 1 333 standsin Jouberton extension 10, atownship lying within thejurisdiction of the KlerksdorpLocal Municipality.

Remmogo’s tender stated that itsproposed building structure was30,2m². This was less than thatproposed by other tenderersincluding Metro Projects, whosebuilding size was stated as 37m².

The city civil engineer tabulatedthe tenders. In the column for thestipulation of the floor area, forthat proposed by Remmogo, heinserted ‘the house size and layoutto be discussed wit thecommunity’. The tenders werereferred to the mayoralcommittee. That committeequeried the track record ofRemmogo and the floor area ofthe buildings it proposed toconstruct. The city engineerresponded with a report whichannexed a plan showing a largerfloor area although this plan wasnot that of Remmogo.

Remmogo’s tender was accepted.Metro Projects applied for anorder setting aside the acceptanceof this tender.

THE DECISIONUnder the provisions of the

Local Government Transition Act(no 209 of 1993) and theConstitution of the Republic ofSouth Africa Act (no 108 of 1996)as an organ of State theKlerksdorp Local Municipalitywas bound to act fairly. Theseprovisions required that such anorgan act in accordance with asystem which if fair, equitable,transparent, competitive and cost-effective.

The tender procedure is also anadministrative process. As such, itis required to be done with propercompliance with the provisions ofthe Promotion of AdministrativeJustice Act (no 3 of 2000) and wasto be lawful, procedurally fair andjustifiable.

In the present case, the cityengineer had allowed Remmogoto augment its initial tender inorder to give the tender a betterchance of acceptance by thedecision-making body. At first,the full terms of the tender wereconcealed from the mayoralcommittee, and then they werepresented in augmented form.This stripped the tender process ofan essential element of fairness, iethe equal evaluation of tenders.This was prejudicial to every oneof the competing tenderers.

The tender process had beenconducted unfairly. Accordingly,the decision to accept Remmogo’stender had to be set aside.

Contract

44

CONSOL LTD v TWEE JONGE GEZELLEN(PTY) LTD

A JUDGMENT BY BRAND JA(HOWIE P, CLOETE JA, HEHERJA and VAN HEERDEN AJAconcurring)SUPREME COURT OF APPEAL26 NOVEMBER 2003

2004 CLR 77 (A)

A preamble to a provisionexcluding a party’s liabilityimposes an obligation on thatparty to perform as stated in thepreamble unless the words aremerely introductory and state thegeneral intention of the parties.An exemption from liabilitythereafter provided for may bedepended upon for to avoidliability provided that theconditions for such exemptionexist.

THE FACTSConsol Ltd agreed to supply

glass bottles to Twee JongeGezellen (Pty) Ltd (‘TJG’). Theagreement was concluded in theform of a general supplyagreement in 1991.

Under the heading ‘Claims’ itprovided that all goods weremanufactured according toConsol’s standard manufacturingprocedures and techniques,utilising standard raw materials.It provided that no guarantee orwarranty regarding quality wasgiven or implied unlessspecifically stated in writing by anauthorised representative of thecompany. It further provided thatno claims would be recognised byConsol unless they were lodgedwithin 21 days after receipt of thegoods. It also provided that whereany warranty was given, Consol’sliability would be limited toreplacement of the defectivegoods on proven non-compliancewith the warranty.

Consol manufactured andsupplied bottles to TJG in terms ofthe agreement. In 1994, it beganproduction of the bottles usingFreon 134A gas, a productiontechnique that was intended toprevent the formation of ‘bloom’inside the bottle, an undesireablehaze that made the bottleunattractive to customers. At thistime, an alternative chemical,Freon 152A, was also availableand was used by Consol inexperimental production ofbottles, but was not used in theproduction of bottles for sale toTJG as it was not readily availableon the market.

Freon 134A did not successfullyprevent the formation of bloomand in 1998, its use wasdiscontinued.

When sued for payment of thepurchase price of some of thebottles delivered to it, TJGcounterclaimed for damages

arising from the supply of bottlesin 1996 not in accordance withConsol’s standard manufacturingprocedures and techniques. Itcontended that the bottlesmanufactured using Freon 134Ashould have been manufacturedusing Freon 152A.

The parties contended forvarious interpretations of thesupply agreement. The court thendetermined the issues betweenthem.

THE DECISION1. Whether in terms of the supplyagreement, Consol was obliged tomanufacture all bottles deliveredto TJG according to its standardmanufacturing procedures,utilising standard raw materials

This was to be determined upona proper interpretation of thepreamble to the claims clause, ‘Allgoods supplied are manufacturedaccording to the company’sstandard manufacturingprocedures and techniques,utilising standard raw materials’.Provisions of this nature may notcreate obligations but may beincorporated merely to introducethe subject matter of the contractor record good intentions. In thepresent case however, it waspossible to compare the provisionin question with others in thesame contract. In these cases, thepreamble, beginning with wordslike ‘while the company will useevery endeavour ...’ indicated amere statement of good intention.This was in contradistinction tothe words used in the clause inquestion which, in the absence ofany other apparent purpose,appeared to impose an obligationon Consol.2. Whether treatment of thebottles with Freon 134A was partof Consol’s standardmanufacturing procedures andtechniques and whether Freon134A could be considered one of

Contract

45

Consol’s standard raw materialsfor the manufacture of the bottles.

This issue was to be decidedwith reference to the time atwhich the defective bottles weremanufactured, not at the timewhen the supply agreement wasconcluded. The standardmanufacturing proceduresreferred to were the normal orusual ones used in Consol’sproduction of bottles. Although itsmanufacturing techniques wereconstantly being reviewed andchanged, including the change ofuse of gas, treatment with Freon134A was a part of Consol’sstandard procedure at this time.The standard raw material used atthe time was to be measured bythe standard adopted by Consol,not an external standard set up byan outside party. This meant thatif Freon 134A was a raw materialof a standard adopted by Consol,then Consol had complied withthe provisions of this clause.3. Whether, if the bottles were notmanufactured according to thestandard manufacturingprocedures and techniques,utilising standard raw materials,Consol was entitled to rely on the

indemnity provisions contained inthe claims clause.

There was no room forinterpreting the claims clause asintending to make the indemnityconditional on manufactureaccording to standard proceduresand techniques utilising standardraw materials. The introductoryobligations were not preceded bya phrase such as ‘provided that’ or‘on the understanding that’. Tointerpret the clause otherwisewould be to create inconsistenciesin regard to Consol’s obligations.It would be entitled to indemnityin some situations but not inothers.

Consol was entitled to reply onthe indemnity provisionscontained in the claims clause.4. Whether the obligation tosupply on the basis specified wasa warranty, and if breach thereofresulted in the limitation ofConsol’s liability as provided for.

The indemnity related to awarranty regarding quality andtherefore the indemnity could notbe relied on by Consol.5. Whether Consol was exemptedfrom liability if TJG did not lodge

its claim within 21 days ofdelivery of the bottles in question,whether or not the circumstancesgiving rise to any claim wereapparent to TJG within that time.

Were it be considered significantwhether or not TJG did becomeaware of the circumstances givingrise to a claim, this would have tobe considered a tacit term of thecontract concluded between theparties. However, there was nobasis for finding that such a tacitterm existed. Consol was thereforeexempted from liability in suchcircumstances, whether or not TJGwas aware of the circumstancesgiving rise to any claim at thetime.6. Whether Consol was exemptedfrom liability for TJG’s claimunless one of Consol’s authorisedrepresentatives specificallyguaranteed the quality of thebottles in writing.

What the parties meant, in theclaims clause, by a guarantee orwarranty included a guarantee orwarranty of all kinds, including animplied guarantee or warranty.This meant that the exemptionfrom liability applied in thecontext of this provision.

Contract

46

REDDY v DECRO INVESTMENTS CC

A JUDGMENT BY McCALL JDURBAN AND COAST LOCALDIVISION26 AUGUST 2003

2004 (1) SA 618 (D)

A party to whom premises aresub-let and who had not obtainedpossession of the premises has noright to eject from the premises aparty who is in occupation of thepremises.

THE FACTSVan der Merwe leased certain

premises from Transnet Ltd. Interms of clause 9.1 of the lease,Van der Merwe was precludedfrom disposing of his rights underthe lease. Van der Merwe sub-letthe premises to Decro InvestmentsCC.

Reddy claimed that Transnet hadapproved a cession of the lease toher, that Van der Merwe gave oralnotice to Decro to vacate thepremises and that she had alsogiven notice to vacate by letterfrom her attorneys.

Reddy had not been inpossession of the premises at anytime. She brought an applicationfor the ejectment of the closecorporation. Decro opposed theapplication on the grounds thatReddy had no right (locus standi)to bring the application. Van derMerwe then brought anapplication to be joined as a co-applicant. Decro opposed thisapplication on the grounds thatsuch an application wasincompetent while Reddy had noright to bring the application forejectment.

Property

THE DECISIONThe essential point of dispute

between the parties centred on thequestion of Reddy’s right to ejectDecro. If Van der Merwe had sucha right, Reddy - not being a partyto the lease - was in no position toassert that right. Van der Merwe’sjoinder application could notconfer that right on her becausethat application depended onReddy herself as applicant havingthat right in the first place.

The rule of law applicable in thepresent situation was that a lesseeto whom possession of a propertyhas not yet been given cannot suea trespasser for ejectment from theleased premises without a cessionof action from the lessor. Reddywas not in possession and did nothave a registered lease and wastherefore not entitled to ejectDecro from the leased premises.

Reddy also contended thatDecro’s continued occupation ofthe premises constituted anunlawful interference with thecontractual rights of Reddy.However, Reddy’s claim was nota claim for damages and the ruleof law remained applicable.

The application failed.

47

CLARK v FARADAY

A JUDGMENT BY VAN DERWESTHUIZEN AJCAPE OF GOOD HOPEPROVINCIAL DIVISION12 DECEMBER 2003

2004 CLR 102 (C)

The mere fact that a propertyowner obscures the view of hisneighbour when building aconstruction on such propertydoes not mean that there is aderogation in value of theneighbouring property as referredto in section 7(1)(b)(ii) of theNational Building Regulationsand Building Standards Act (no103 of 1977).

THE FACTSFaraday obtained the approval

of the City of Cape Town for thebuilding of a house on his land atHout Bay. The land adjoinedClark’s property, which enjoyedmagnificent views over the HoutBay valley, the harbour, the beachand the bay.

Construction work began. Clarkhad no objection to the buildingwork until it became clear that asecond storey was to be built.

Clark contended that thebuilding would substantiallyimpair and obstruct the view fromhis property and cause irreparableharm, including a derogation invalue of his own property. Hecontended that upon a properinterpretation of section 7 of theNational Building Regulationsand Building Standards Act (no103 of 1977) the ‘Act’), the localauthority should have refusedapproval of the building plans.

Clark brought an application foran interim interdict to prevent thecontinuation of the buildingoperation.

THE DECISIONClark’s application was based on

section 7(1)(b)(ii) of the Act andon the contention that Faraday’sbuilding would probably or in factderogate from the value ofadjoining or neighbouringproperties.

It was common cause thatFaraday’s building would blockout some of the views enjoyed atClark’s property. However, therewas no duty on Faraday, whethercreated under the Act orotherwise, to demonstrate thenature and extent to which theproposed dwelling might impacton the view of adjoiningproperties. A local authority is notobliged to establish the possibleeffect and consequences ofbuildings that would otherwisefully comply with thespecifications and technicalrequirements of the Act and otherrelevant legislation. Thedisfigurement and derogation invalue referred to in the sectionrelates only to the peculiarcharacteristics and qualities fo thebuilding itself, its nature orappearance.

The effect on the view from anadjoining property is notencompassed in this section. Wereit to be seen to be so, there wouldbe created new real rights in landin the nature of servitudes infavour of dominant propertieswhich enjoy a view. This wouldoverride the common law basisupon which servitudinal realrights are normally created.

The application was dismissed.

Property

48

SHROSBREE N.O. v VAN ROOYEN N.O.

A JUDGMENT BY PILLAY AJSOUTH EASTERN CAPE LOCALDIVISION4 FEBRUARY 2003

2004 (1) SA 226 (SECLD)

The nominated beneficiary under alife policy is not entitled to thebenefits of the policy followingthe death and subsequentsequestration of the insured as theasset of the policy falls into thesequestrated estate of the insured.

THE FACTSAmelia Pieterse took out three

life insurance policies on her ownlife. Her husband was thenominated beneficiary.

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

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

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

THE DECISIONSection 21 does not apply merely

because a spouse’s estate isfactually insolvent. It appliesupon the sequestration of thatestate. By the time of the

sequestration of Mrs Pieterse’sestate, the marriage between herand Mr Pieterse had ended, bydeath, so that the provisions ofsection 21 did not apply. Even if itdid apply, Mr Pieterse’s estate hadbeen sequestrated so that thepolicies would not vest in him butin his trustee.

Section 63 of the Long-termInsurance Act (no 52 of 1998)provides that the policy benefitsprovided to a person under a lifepolicy in force for at least threeyears in which that person is thelife assured shall upon his deathnot be available for the purpose ofpayment of his or her debts. Thesection limits the protection soprovided for to the sum of R50000.

This section provided no basisfor a claim to any of the proceedsof the policies by Mr Pieterse. Thepolicies were in force until herdeath and it was at that point thatthe benefits under them could beclaimed. The subsequentsequestration of her estate had theeffect of vesting these assets inthat estate, putting them beyondthe reach of her nominatedbeneficiary.

Pieterse’s contentions wererejected.

Insurance

49

THE ARGUN (NO 2)THE ARGUN v THE MASTER AND CREW OF THE ARGUN

A JUDGMENT BY FARLAM JA(MARAIS JA, NAVSA JA,CLOETE JA and JONES AJAconcurring)SUPREME COURT OF APPEAL19 SEPTEMBER 2003

SCOSA D 192 (A)

The lapsing of an arrest whichbegins an action in rem does nottake away the jurisdiction of thecourt determining the action inrem. A claimant under an actionin rem under such circumstances isaccordingly entitled to executeagainst the property so arrestedafter obtaining judgment againstthe defendant. Interest on a claimmay be ordered if the courtexercises its discretion to allowinterest on the claim. The sheriff’spreservation costs may beconsidered part of the costs ofenforcing a claim and may beclaimed as such.

THE FACTSIn three separate actions in rem,

the Master and crew of the Argunarrested the Argun for payment ofwages. In respect of the first twoactions, the arrests lapsed whenthe Master and crew failed toreimburse the sheriff fordisbursements incurred inpreserving and maintaining theship. An order was givenhowever, that the actionsinstituted with the arrests proceedto trial, along with the thirdaction.

Judgment in favour of the Masterand crew was then given. Anappeal was brought against thisjudgment and determined onconsideration of points of law.

THE DECISION1. Whether the first and secondactions lapsed when the arrests bywhich they were instituted lapsed

The applicable law was thatwhich would have been appliedby the colonial courts of admiraltyin 1890. These courts would haveapplied the law as stated in R vDe Jager 1903 TS 36. This was tothe effect that a court will retainjurisdiction in a matter with whichit is seized even if events takingplace before conclusion of thematter would have had the effectof taking away its jurisdiction. Thelapsing of the arrests therefore didnot take away the jurisdiction ofthe court to determine the actionsin rem brought before it.

2. Whether the Master and crewwere entitled to execute againstthe Argun on the judgments inrem obtained against her

The claim of the Master and crewdid not give rise to any personalliability on the part of the ownerof the ship but the court’sjurisdiction in respect of the claimbrought against the shipremained. Accordingly, they wereentitled to execute against theArgun on the judgments in remobtained against her.3. Whether the Master and crewwere entitled to interest on theamounts adjudged to be due tothem with effect from the end ofeach month for which they hadclaimed wages, and at a rate of15½% p.a.

Section 5(2)(f) of the Act underwhich the order for payment ofinterest was made, confers a widediscretion on the court in makingsuch an order. There was noindication that the court did notexercise a proper judicialdiscretion in this regard.4. Whether the sheriff’spreservation costs andremuneration in respect of thevessel during the period of herarrest should constitute part of therespondent’s costs of suit

Whereas there is a distinctionbetween preservation costs andthe costs of enforcing a claim, thelatter includes the costs ofexecution and the preservation ofthe property until that point isreached, as well as the costs of thesale.

Shipping

50

THE MEGA SBRIDGE OIL LTD v THE FUND CONSTITUTINGTHE PROCEEDS THE SALE OF THE MEGA S

CLEAVER JCAPE OF GOOD HOPEPROVINCIAL DIVISION12 JUNE 2003

SCOSA 204 (C)

Where it is shown that a foreigncourt has incorrectly conferred amaritime lien, the purportedholder of the lien cannot dependon it in asserting a preference overanother creditor in respect of afund created from the sale of theship to which the lien relates. Ajudicial sale of a ship gives cleantitle to the buyer. Competingclaims referred to in section10(1)(d) of the AdmiraltyJurisdiction Regulation Act (no105 of 1983) against a fundestablished from the sale inexecution of a ship are to bedetermined under the law of theflag of the ship.

THE FACTSIn January and February 2000,

Bridge Oil Ltd sold and deliveredbunkers to the Aksu in terms ofagreements entered into betweenit and the owners of the ship. InApril 2000, in enforcement of itsrights, it obtained a ‘pledge right’for US$298 000 over the Aksu froma court in Turkey where the shipwas first registered and the pledgewas registered in the vessels’registry in Turkey.

In September 2000,Hamburgische Landesbank-Girozentrale, a mortgagee,secured the arrest and sale of theship in Denmark. The ship wassold to Barrington Enterprises SAwhich sold it to Mega NavigationLtd, a company registered inMalta. The ship was thenregistered in the ship’s registry inMalta and was renamed the MegaS.

In 2002, the Mega S was arrestedin Cape Town by Hamburgische,then sold in execution. A fundwas established.

Bridge Oil contended that itsclaim ranked ahead of that ofHamburgische because the shipwas still registered in the registryin Turkey whose law wouldconfer a preference to its claimover that of Hamburgische. Inaccordance with section 11(5)(d)and 11(4)(d) of the AdmiraltyJurisdiction Regulation Act (no105 of 1983), the law of the flag ofthe ship, ie Turkey, woulddetermine that it held a preferenceover Hamburgische’s claim.

Hamburgische contended thatthe nature of Bridge Oil’s claimhad to be determined under SouthAfrican law, which did notrecognise a maritime lien based onthe supply of bunkers, and thataccordingly its claim did not rankover its own. It also contendedthat even under Turkish law,Bridge Oil did not obtain a lienbecause that law requires the

purchase agreement on whichsuch a right is based to have beenconcluded only with the Master ofthe ship and not with its owner.

THE DECISIONSince the agreements for the

supply of the bunkers wereconcluded directly with theowners of the Aksu, and not withthe Master, no maritime lienunder Turkish law could havebeen established. The fact that aTurkish court granted an orderconferring a pledge right did notestablish a maritime lien, andBridge Oil could therefore notdepend on any such lien for itsclaim.

It was in any event doubtfulwhether the pledge rightestablished a right in rem.

Even assuming that the pledgeright under Turkish law couldhave been establishednotwithstanding the conclusion ofthe sales with the owners, theranking of Bridge Oil’s claim wasto be determined under the law ofthe flag of the ship. This was notTurkey, despite the continuing,but obsolete, record of the ship’sregistration in the registry inTurkey, but Malta. Theregistration in Malta followed thejudicial sale of the ship inDenmark which gave a valid titleto the buyer, and was properlyand validly done. Article 9 of theInternational Convention for theUnification of Certain RulesRelating to Maritime Liens andMortgages of 1926 recognise thetermination of liens incircumstances such as these.Article 5(1) of the 1958 GenevaConvention on the High Seas alsoindicated that the ship’snationality was properlyconsidered that of Malta.

The contentions of Bridge Oilwere rejected.

Shipping

51

THE ATLANTIC PRIDESIYADOBA FISHING (PTY) LTD v MARINE RADIOACOUSTIC DEVICES CC

A JUDGMENT BY BLIGNAULT JCAPE OF GOOD HOPEPROVINCIAL DIVISION21 NOVEMBER 2003

SCOSA B 224 (C)

An owner of moveable propertymay only enforce a maritimeclaim by an arrest of suchproperty in rem if the provisionsof section 3(4) of the AdmiraltyJurisdiction Regulation Act (no105 of 1983) apply to it.

THE FACTSMarine Radio Acoustic Devices

CC sold a Simrad SD 570 sonar toSiyadoba Fishing (Pty) Ltd. Thepurchase price was payable inthirty six instalments and MarineRadio was to remain the owner ofthe sonar until the full purchaseprice had been paid.

Marine Radio arrested the sonarin rem, alleging that it was theowner of the item and thatSiyadoba was in possession of it.

Siyadoba brought an applicationfor the release of the sonar.Marine Radio opposed theapplication on the grounds thatjust as an owner is entitled toarrest its own ship, so an owner ofa piece of equipment on the ship isentitled to arrest that piece ofequipment.

THE DECISIONIn Great River Shipping Inc v

Sunnyface Marine Ltd 1994 (1) SA65 (C) it was held that an owner ofa ship can arrest the ship in rem.

Section 3(4) of the AdmiraltyJurisdiction Regulation Act (no105 of 1983) provides that withoutprejudice to any other remedy

that may be available to aclaimant, a maritime claim may beenforced by an action in rem if theclaimant has a maritime lien overthe property to be arrested or ifthe owner of the property to bearrested would be liable to theclaimant in an action in personamin respect of the cause of actionconcerned. Marine Radio’s claimwas neither based on a maritimelien nor an action in personam. Itsclaim would fall within the termsof this section only if it wascovered by the words ‘withoutprejudice to any other remedy’.

Marine Radio contended that‘any other remedy’ wasconstituted by the authority ofGreat River Shipping, applied to amoveable and not only to a ship.The judgment in Great RiverShipping however, applied therelevant English admiralty lawwhich did not recognise avindicatory action in rem for therecovery of a moveable, only thearrest of a claimant’s own ship.

No other section of the Actprovided a basis for the arrest of amoveable on a ship. The arrestwas set aside.

Shipping

52

BOCK v DUBURORO INVESTMENTS (PTY) LTD

A JUDGMENT BY HARMS JA(ZULMAN JA, FARLAM JA,NAVSA JA and VAN HEERDENAJA concurring)SUPREME COURT OF APPEAL26 SEPTEMBER 2003

2004 (2) SA 242 (A)

Actions taken in terms of a parateexecutie provision may becontested by a debtor or its suretybut the provision is notnecessarily invalid orunconstitutional.

THE FACTSIn December 1998, Bock and the

other respondents signed deeds ofsuretyship in favour of NedcorBank Ltd in respect of theindebtedness of Molope Holdings(Pty) Ltd toward the bank. Thisindebtedness had arisen from aloan of R60m given to thecompany by the bank. The loanthen fell due for repayment andextension of the loan was given oncondition that the suretyshipswere signed and that 25½ millionshares in Molope were pledged tothe bank.

In September 1999, Nedcordemanded repayment of the loanit had advanced to Molope.Molope failed to respond to thedemand. In December 1999, thebank took over the shares pledgedto it, their value then being someR40m, determined by the shareprice of 105 cents per share. Thistook place after the bank andMolope were unable to reachagreement on the price at whichthe shares should be taken over.The price at which they weretaken over was however, in excessof their market price as given onthe stock exchange at that time.This amount was set off againstthe amount then owing under theloan and interest, and Nedcorclaimed the balance from thesureties.

In the same period, two othercreditors of Molope Holdings,Mercantile Bank Ltd and TheBusiness Bank Ltd, granted loansto Molope and other companiesupon the security of the pledge ofshares in Molope and suretyshipagreements given by therespondents.

In December 1999, these twocreditors took over the sharespledged to them. The amountrealised was insufficient to coverthe amount of the loans and thecreditors claimed the balance fromthe sureties.

During the course of 1999, theprice of the shares in Molopedeclined to approximately 16% oftheir value at the beginning of theyear. The sureties contended thatthey were entitled to be releasedfrom their suretyship obligationsbecause Nedcor and the othercreditors had acted to theirprejudice when they took over thepledged shares at their valuesthen applicable.

Duburoro Investments (Pty) Ltdtook cession of the claims of thecreditors in February 2001 andbrought an action against thesureties for payment of theirclaims. It depended on certificatesissued by the creditors specifyingthe amount of the indebtedness asat September 2000.

THE DECISIONThree legal concepts were

relevant to the matter: (i) parateexecutie, ie the right to dispose ofa pledged asset without a courtorder, (ii) pactum commissorium,ie the right to take over an assetpledged to a creditor, and (iii) aquasi-conditional sale in which acreditor may take over a pledgeupon default by a debtor.

Parate executie is normallyapplied in the case of a mortgagebond entitling a creditor to sell themortgaged property without theintervention of a court. It has alsobeen applied in the case ofstatutory provisions entitling anorgan of State to sell agriculturalland in order to satisfy a debt, butthe constitutional considerationsrelevant in that case wereinapplicable in the case ofmovables lawfully in the hands ofa creditor. A debtor in thatsituation retains its right to showthat a creditor selling suchmovables has acted to itsprejudice and a creditor may notseize such property against thewill of the debtor.

Suretyship

53

In any event, in the present caseNedcor did not exercise parateexecutie. It took over the shares ata price which was alleged to befair. It contended that the pricewas fair because an agreementhad been reached between theparties. This contention was notseriously contested by Bockbecause his objection rested on afailure of authority by a directorof Molope Holdings.

The sureties had in fact confusedthe issue of prejudicial conduct bythe creditor with the issue of thequantum of the principal debt. Inreality, their complaint was aboutthe latter. The evidence showedhowever, that the bank hadrealised the shares to the best ofits ability in circumstances wheretheir value was dropping all thetime.

The action succeeded.

... one should begin with the terms of a deed of suretyship in order todetermine the rights and obligations of the respective parties. In the Nedcorcase, the deed granted the Bank a discretion to determine the nature andduration of the facilities; without prejudicing its rights, the Bank could givetime in respect of any security; additionally, the sureties renounced thebenefit of excussion. Similar, if not more stringent, provisions are containedin the other banks’ deeds. Further, if one has regard to the terms of thepledges, they make it clear that the banks were entitled, at their discretion, todecide when to realise the pledges.1 In other words, the reliance on the(supposed) rule cannot succeed in the light of the agreements to which thedebtor and the sureties had bound themselves.

Suretyship

54

HEATHFIELD v MAQELEPO

A JUDGMENT BYSOUTHWOOD AJA(SCOTT JA and MTHIYANE JAconcurring)SUPREME COURT OF APPEAL27 NOVEMBER 2003

2004 (2) SA 636 (A)

A provision that a party to anagreement will hold itself assurety and co-principal debtor forthe obligations of an entityintended to become a party to theagreement in future renders thatparty a surety only if that entityfails to become a party to theagreement.

THE FACTSMaqelepo signed an offer to

purchase certain fixed propertyfrom Heathfield for R1,3m. Thepurchase price was payable bymeans of a deposit of R120 000and the balance in cash upontransfer of the property. The offerwas subject to the condition thatMaqelepo obtain a bond over theproperty securing the balance ofthe purchase price.

The purchaser was described onthe Offer as Maqelepo ‘for and onbehalf of the above co’. The name‘New Heights (Pty) Ltd’ wasinserted above that of Maqelepo.

Clause 21 of the Offer providedthat should the ‘Pty Ltd NewHeights not be able to taketransfer or ratify this agreement ILijane Maqelepo hereby holdsmyself surety and co-principaldebtor for all the obligations ofthis offer towards the seller andirrevocably hereby undertake totake transfer in my own name.’

Maqelepo paid the deposit ofR120 000 and obtained a bondsecuring the balance of thepurchase price. When called uponto pass transfer, Heathfieldrepudiated the agreement. Whensued for an order compellingtransfer, Heathfield contendedthat as New Heights did not exist,the agreement was null and void.Maqelepo, being no more than asurety, had no right to enforce theagreement.

THE DECISIONThe question was whether the

parties intended that Maqelepowas to be the purchaser or asurety for the purchaser NewHeights.

The context of clause 21 wasimportant in determining itsmeaning. This context, the fullerterms of the Offer, showed thatMaqelepo was purporting to acton behalf of New Heights at atime when he did not have theauthority to so act. The partiesanticipated that New Heightsmight not ratify the agreementand so provided that in that event,Maqelepo would take transfer ofthe property in his own name. Inso doing he would act as suretyand co-principal debtor.

This was inconsistent with theposition of a surety in tworespects. Firstly, a surety cannotbe liable unless there is a principaldebtor which becomes liable.Secondly, a surety is liable for theobligations of another party whichin this case, would not arise wereNew Heights never to come intoexistence.

It was clear from clause 21 thatthe parties intended that if thecompany did not ratify theagreement and become bound aspurchaser, Maqelepo would bethe purchaser and perform thepurchaser’s obligations. This wasalso demonstrated by Maqelepo’sunqualified signature aspurchaser.

Maqelepo was entitled totransfer of the property.

Suretyship

55

SHEIK v PILLAY

A JUDGMENT BY LEVINSOHN JDURBAN AND COAST LOCALDIVISION18 FEBRUARY 2004

2004 CLR 150 (D)

A party who intervenes to pay adebt is not necessarily a surety forthat debt. Such will be the casewhen the party interveningintercedes to pay the debt as anadditional debtor without it beingunderstood that by so doing theoriginal debtor is released fromhis obligations.

THE FACTSSheik lent R70 000 to Pillay’s son.

He claimed repayment of this sumand brought an action claimingpayment. Provisional sentencewas given but thereafter, thejudgment remained unsatisfied.

Sheik then brought an action forpayment against Pillay. Healleged that Pillay had orallyundertaken to pay the R70 000owed by his son.

Pillay made certain payments inreduction of his son’sindebtedness but he denied thathe had assumed liability for itspayment and acted merely as amessenger in the delivery ofpayments to Sheik. Pillaycontended that the liability soughtto be established by Sheik was asuretyship liability and that nosuretyship agreement wasconcluded in writing as requiredby the General Law AmendmentAct.

THE DECISIONThe evidence pointed in the

direction of Pillay havinginterceded with an undertaking topay his son’s debt without havingaccepted the obligations of asurety. There was no evidencethat in consequence of this, it wasagreed that his son would bereleased from his obligations. Theintercession amounted to anintervention by way of adding anew debtor in favour of Sheik, butthere was no indication that theintervention also entailed therelease of Pillay’s son.

The obligations undertaken byPillay were therefore not that of asurety. The General LawAmendement Act did not apply.Sheik was entitled to judgmentagainst Pillay in terms of hisundertaking.

In the instant case the evidence points in the direction of the defendanthaving interceded and given an undertaking to pay his son’s debt. Thisundertaking was accepted and as indicated, partially performed by thedefendant. At no stage was it suggested or agreed that K. Pillay would inconsequence be released. What occurred in casu falls within the principlesset forth in Wessels, The Law of Contract in South Africa, Volume II,2nd Edition at page 968 and more particularly, paragraph 3780, andquoted with approval in Total South Africa v Bekker NO 1992 (1) SA 617

Suretyship

56

CGU INSURANCE LTD v RUMDELCONSTRUCTION (PTY) LTD

A JUDGMENT BY JONES AJA(MARAIS JA, SCOTT JA, CLOETEJA and SHONGWE AJAconcurring)SUPREME COURT OF APPEAL16 MAY 2003

2004 (2) SA 622 (A)

A ‘debt’ as defined in thePrescription Act (no 68 of 1969)has a wide meaning andaccordingly an amendment to aclaim made in respect of such adebt does not constitute a claim inrespect of a new debt even if thecause of action on which theclaimant relies is changed by theaddition of a further contractfrom which the debt arises.

THE FACTSCGU Insurance Ltd insured

Rumdel Construction (Pty) Ltd inrespect of storm damage tobuilding work undertaken byRumdel in Mozambique during1996 and 1997. The insurance wasgiven under two separatecontracts of insurance for eachyear. Storm damage took place inboth of those years.

In September 2000, Rumdelissued summons against CGU forpayment of R1 641 968 andR3 454 576,77 for loss arising fromthe storm damage. It alleged thatthese amounts were payable interms of a single contract ofinsurance identified as ‘contractworks policy CW 654262’.

In February 2001, Rumdel gavenotice of its intention to amend itsclaim by adding a reference to thesecond contract of insuranceapplicable in the first of the twoyears when storm damageoccurred.

CGU opposed the application onthe grounds that it introduced anew contract and hence a newcause of action which arose morethan three years prior to the noticeof intention to amend. This wasmore than the period provided forthe prescription of debts in thePrescription Act (no 68 of 1969).

Prescription

THE DECISIONAn amendment is permissible

provided that the debt claimed inthe amendment is the same as thedebt as originally claimed. A‘debt’ is given a wide meaning inthe Prescription Act. Its meaningis not confined to a particularcause of action and mayencompass a cause of action notmade express in a plaintiff’sparticulars of claim.

In the present case, the contracton which Rumdel really reliedwas not originally referred to inthe particulars of claim. Theamendment sought to refer to thiscontract but the ‘debt’ in respectof which it made its claim was thesame as that to which its claimhad been directed when summonswas first issued.

It was true that Rumdel soughtto introduce a new contract as thebasis for its claim but the debt isthe same debt both before andafter the amendment. Rumdel wastherefore entitled to amend itsparticulars of claim.

57

BLAAUWBERG MEAT WHOLESALERS CC vANGLO DUTCH MEATS (EXPORTS) LIMITED

A JUDGMENT BY HEHER JA(HARMS JA, FARLAM JA,BRAND JA AND MLAMBO AJAconcurring)SUPREME COURT OF APPEAL28 NOVEMBER 2003

2004 CLR 141 (A)

A creditor does not interrupt therunning of prescription by servingsummons on a debtor when thecreditor fails to identify itselfproperly as the creditor of thedebtor.

THE FACTSAnglo Dutch Meats (UK) Ltd

brought an action againstBlaauwberg Meat Wholesalers forpayment of the purchase price formeat sold and delivered toBlaauwberg. Blaauwbergdefended the action on thegrounds that the meat supplieddid not meet specificationspromised upon order and thatAnglo had breached its contract inother respects.

The meat had been delivered inMarch and April 1995 and theaction was brought in April 1996.Shortly before the commencementof trial in November 1998, Anglogave notice of its intention toamend its pleadings by describingitself as Anglo Dutch Meats(Exports) Ltd (ADM Exports). Thereason for this was that AngloDutch Meats (Exports) Ltd in factsupplied the meat to Blaauwberg,having purchased it initially fromAnglo Dutch Meats (UK) Ltd. Thelatter had been cited as plaintiff asa result of a mistake.

The application for amendmentwas granted. The action thenproceeded on a number of issues,one of which was whether or notthe claim against Blaauwberg hadprescribed. Judgment holding thatthe claim had in fact prescribedwas given against Anglo DutchMeats (Exports) on the groundsthat with the amendment, it had

been introduced as a new plaintiffso that the running of prescriptionagainst it was not interrupted bythe action brought against AngloDutch Meats (UK) Ltd.

ADM Exports appealed thisjudgment. This appeal wasupheld. Blaauwberg appealedagainst this decision.

THE DECISIONA distinction should be drawn

between an application foramendment of a pleading and thedetermination of whether therehas been compliance with astatutory provision such as section15(1) of the Prescription Act (no68 of 1969). The former case isdifferent from the latter andjudgments in respect of the formerare inapplicable to the latter.

In the present case, the questionwas whether or not a summonswas served on Blaauwberg beforeADM Exports claimed payment?There was no exact compliancewith the requirement thatsummons be served in thismanner because ADM Exportswas not the original plaintiff. Ittherefore failed to communicate toBlaauwberg its intention to claimpayment, notwithstanding the factthat its address details anddescription as a company withlimited liability were the same asthose pertaining to ADM.

The appeal was upheld.

Prescription

58

FARREN v SUN SERVICE SA PHOTO TRIPMANAGEMENT (PTY) LTD

A JUDGMENT BY CLEAVER JCAPE OF GOOD HOPEPROVINCIAL DIVISION16 APRIL 2003

2004 (2) SA 146 (C)

An agreement contrary to theterms of section 228 of theCompanies Act (no 61 of 1973) isnot enforceable. The TurquandRule does not provide a means bywhich a party contracting with acompany which acts contrary tothe provisions of this section mayenforce such an agreement.

THE FACTSSun Service SA Photo Trip

Management (Pty) Ltd soldcertain property situated in HoutBay to Farren for R1 450 000. Theproperty was Sun Service’s soleasset. In a written addendum tothe agreement, the partiesrecorded their intention thatFarren would purchase the sharesin Sun Service and that allrelevant documentation for thatpurpose would be furnished toFarren.

Approximately two weeks afterthe agreement was concluded,Sun Service stated that it nolonger considered itself to bebound by the agreement. Farrenconsidered this to be arepudiation of the agreement andshe brought an application tocompel specific performance ofthe agreement.

Sun Service opposed theapplication on the grounds thatthe addendum superseded andsubstituted the previousagreement, and on the groundsthat the sale of the property wascontrary to section 228 of theCompanies Act (no 61 of 1973).This section provides that thedirectors of a company shall nothave the power, save with theapproval of a general meeting ofthe company, to dispose of thewhole or substantially the wholeof the undertaking of thecompany, or the whole or thegreater part of the assets of thecompany.

Corporations

THE DECISIONThe mere fact that the agreement

was not authorised by a generalmeeting of shareholders did notmake it invalid. The questionhowever, was whether SunService should be ordered to givetransfer in the absence of such anauthorising resolution.

The effect of the Turquand Ruleis to entitle an innocent partycontracting with a company toenforce the provisions of such acontract even if the internal rulesof the company have not beenadhered to. The question waswhether this Rule applied wherethe provisions of section 228 hadnot been adhered to. If it did,Farren would be entitled to relyon it notwithstanding the failureto comply with these provisions.

The provisions of section 228were not however, merely internalrules of the company. They werethe embodiment of rulesconsidered by the Legislature tobe binding and enforceable as anyother provisions of statute were.The ordinary meaning of thewords used in section 228 pointedto the fact that a disposal of thekind referred to could not beenforced without the requisiteapproval having been obtained.The Turquand Rule cannotoverride these provisions.

The agreement was therefore notenforceable. The applicationfailed.

59

FTCK CONSULTANTS CC v SHOPRITECHECKERS LTD

A JUDGMENT BY VANROOYEN AJTRANSVAAL PROVINCIALDIVISION6 AUGUST 2003

2004 (2) SA 504 (T)

An application for the stay of anaction in terms of section 19(2) ofthe Consumer Affairs (UnfairBusiness Practices) Act (no 71 of1968) should be granted where itis clear that a stay would be inthe interests of justice.

THE FACTSFTCK Consultants CC entered

into a franchise agreement withShoprite Checkers Ltd in relationto a business known as 8 Till Late(Northcliff). The agreement wasnot successfully implemented andShoprite brought an action againstFTCK for payment of R1 426 006,its claim arising from the franchiseagreement. FTCK counterclaimed.

The franchise agreement was oneof a number concluded byShoprite with different parties.They alleged that the franchisemodel was based on an unfairbusiness practice and theyapproached the Consumer AffairsCommittee established under theConsumer Affairs (UnfairBusiness Practices) Act (no 71 of1968). That Committee decided tolaunch a preliminary inquiry intothe franchise model and thebusiness practice in terms ofsection 4(1)(c) of the Act.

The Committee determined thatthe franchise model was an unfairbusiness practice. Shoprite and theCommittee then concluded anarrangement under whichShoprite agreed to discontinuecertain practices and admitted noliability in respect of pastpractices. The arrangement wasreported to the Minister of Tradeand Industry in terms of section11(2) of the Act. The Minister hadnot confirmed or set aside thearrangement as at the date onwhich FTCK brought the presentapplication. The Committeedecided to investigate thebusiness activities of Shoprite interms of section 8(1)(a) of the Act.

FTCK applied in terms of section19(2) of the Act for an orderstaying Shoprite’s action forpayment. The section providesthat if any person seeks to rely on

an alleged unfair business practicein any civil proceedings, the courtconcerned may stay thoseproceedings in the interests ofjustice until such time as theMinister has made a decision inrespect of the alleged unfairbusiness practice.

THE DECISIONShoprite was undoubtedly

replying on the business practicewhich the Consumer AffairsCommittee had, in its preliminaryinvestigation, determined wasunfair. The question was whethera stay of its action based on thatpractice was ‘in the interests ofjustice’ as provided for in section19(2). This depended on whetherfairness and reasonablenesspointed to a stay.

The Act provides a means bywhich a business practice can beassessed and determined to be fairor unfair. The outcome of thatdetermination could impact on aclaim or counterclaim brought byany of the parties to that practice,possibly extinguishing suchclaims.

Taking these factors into account,and the fact that there were otherfranchisees who might have aninterest in the matter and whoserights might be determined underthe procedures underway in termsof the Act, it was in the interests ofjustice that Shoprite’s action bestayed for the time being. Thiswas also desirable as a means oflimiting the costs that would beincurred by all franchiseesbecause one consolidated andconsistent approach would bringabout a single and final result forall concerned.

The application for the stay ofShoprite’s action succeeded.

Competition

60

GORE N.O. v SHELL SOUTH AFRICA (PTY) LTD

A JUDGMENT BY GRIESEL JCAPE OF GOOD HOPEPROVINCIAL DIVISION2 SEPTEMBER 2003

2004 (2) SA 521 (C)

A disposition not made in theordinary course of business maybe indicated by the method bywhich the disposition is made,and whether it is made contraryto the rights of other creditors ofthe insolvent. An intention toprefer one creditor over anothermay be demonstrated where thedominant motive in makingpayment is to secure essentialsupplies albeit without thedeliberate intention to prefer.

THE FACTSCape Transport Co-ordinators

Linehaul (Pty) Ltd began businessas a long-distance haulier in July1998. It operated a fleet ofapproximately 127 heavy vehicles,most of which were financed byinstalment sale agreement. By July1999, partly because of the failureof its holding company tointroduce capital into thecompany, the company wasexperiencing severe cash flowproblems and its bank begandishonouring its cheques.

As at 17 February 2000, CapeTransport’s liabilities amounted toapproximately R11,5m. Its assetsamounted to R23,2m. On thisdate, the company paid R1 891210,59 to Shell South Africa (Pty)Ltd. Four days later, proceedingsfor the provisional liquidation ofthe company began and a finalorder for its liquidation was givenon 27 March 2000.

Cape Transport had entered intoa credit agreement with Shell, andthese had become subject toextended credit terms recorded inan acknowledgement of debtrequiring three payments inNovember and December 1999.Further extensions were grantedin respect of later purchasespayable at the end of January2000, and payment in respect ofone of these was the one effectedon 17 February 2000. Paymentwas effected through a bankaccount separate from the onenormally used by Cape Transport,after payment from one of thecompany’s debtors had beenmade to that account. CapeTransport’s bank held a cession ofdebtors from the company andwas of the opinion that thetransaction was effected in thismanner in order to defeat itsrights as cessionary. It brought theapplication for the liquidation ofCape Transport.

The liquidator, Gore, contendedthat the payment constituted avoidable preference as providedfor in section 29 of the InsolvencyAct (no 24 of 1936) and should beset aside under that section. Hebrought an action for repaymentof this amount. Shell contendedthat the disposition was made inthe ordinary course of businessand was not intended to prefer itover other creditors, and so fellwithin the exemption providedfor in section 29.

THE DECISIONCape Transport was aware of the

fact that its bank relied on thecession of debtors. It thereforeknew that the bank relied onreceipts from debtors as itssecurity, and this included thereceipt which enabled it to makethe payment to Shell. The methodof payment selected by CapeTransport was indicative ofdishonesty and fraud and couldnot be considered to have beenmade in the ordinary course ofbusiness.

As far as the intention to preferwas concerned, there was nodoubt that the directors of thecompany foresaw certainliquidation for the company. Itmay have been true that as asupplier of an essentialcommodity, ie one which wasrequired to keep the companyoperating, Shell was consideredimportant enough to be paid.However, this did not confer onShell the right to payment overother creditors. Cape Transport’smotive may have been to secureits supply of this essentialcommodity but this did notexclude its intention to preferShell as a creditor over othercreditors.

The liquidator was entitled torepayment of the amount paid toShell. The action succeeded.

Insolvency

61

SANGIORGIO N.O. v DUYN

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPEPROVINCIAL DIVISION27 FEBRUARY 2004

2004 CLR 158 (C)

A discrepancy between a writ andthe court order authorising a writmust be sufficiently serious towarrant setting aside the writ. Anadvantage to creditors will existwhen it is shown that a trusteewill be in a position to uncoverassets controlled by an insolventperson which could be used tosatisfy creditors.

THE FACTSDuyn unsuccessfully sued Shang

Ming International (Pty) Ltd andwas ordered to pay the costs ofthe action. When taxed, theseamounted to R49 002,76. Duynfailed to pay this amount and awrit of execution for R115 700,36which included certain storagecosts. Duyn failed to satisfy thewrit and a nulla bona return wasgiven.

Sangiorgio, the liquidator ofShang Ming, then brought anapplication for the sequestrationof Duyn. Duyn opposed theapplication on the grounds thatthe writ of execution wasdefective in that it failed toproperly reflect the order givenagainst him, the amount of thewrit not being in conformity withthe amount of the taxed costs.

THE DECISIONThe ‘storage costs’ in respect of

which the writ was issuedincluded additional charges whichDuyn objected to. However, therewas no reason to think of thesecharges as anything other thanstorage costs and could be soconsidered.

There were indications thatDuyn had disposed of, orattempted to dispose of,substantial assets to the prejudiceof creditors. There were alsoindications that he remained incontrol of assets. It wouldtherefore be to the advantage ofcreditors that the existence ofthese assets be investigated by atrustee.

A final order of sequestrationwas therefore granted.

I have no hesitation in finding that there is eminently good reason to believe thatsequestration of the respondent will indeed be to the advantage of creditors. Thereis no doubt that the respondent is still in control of or otherwise has access tosubstantial and considerable assets. The trustees of his estate should be given theopportunity to pierce the corporate veil surrounding his multifaceted interests ina large number of companies, close corporations and other entities, wherever theymay be situated or doing business. More particularly the role and function ofCarevest and Hawk Investments must be meticulously investigated for purposesof ascertaining whether these entities have simply been used as vehicles to spiritaway large sums of money and other assets belonging to the respondent. Afull-scale investigation and concomitant interrogation by the trustees inaccordance with their powers in terms of the Act will, in all likelihood, bringconsiderable assets to the fore.

Insolvency

62

UKUBONA 2000 ELECTRICAL CC v CITY POWERJOHANNESBURG (PTY) LTD

A JUDGMENT BY PATEL AJA(HOWIE P, CLOETE JA, LEWISJA and HEHER JA concurring)SUPREME COURT OF APPEAL31 MAY 2004

UNREPORTED

A non-owner is not entitled toclaim the protection provided forin section 84 of the Insolvency Act(no 24 of 1936).

THE FACTSDrivecor (Pty) Ltd entered into a

contract with City PowerJohannesburg (Pty) Ltd in terms ofwhich it undertook tomanufacture, supply, install andcommission control panels at twoelectrical substations. Drivecorepurchased from Ukubona 2000Electrical CC some of the electricaland electronic equipment requiredfor the manufacture of the controlpanels, the purchase price beingpayable in one lump sum on afuture date. Ukubona in turnpurchased the panels from thirdparties who reserved ownershipof them until payment waseffected. Payment had not beeneffected by the time Drivecorewas placed in liquidation.

Drivecore also subcontractedUkubona to perform part of thework required for themanufacture and commissioningof the panels. It delivered thecontrol panels to Ukubona withthe intention that Ukubonacomplete its part of the work andthen they were to be returned toDrivecore for completion andinstallation.

On 17 September 2002, Drivecorewas placed under finalliquidation. At this time, thecontrol panels were still beingassembled. Some of them werelocated at the premises ofUkubona and the componentssupplied by Ukubona and beenbuilt into them. City Power hadmade substantial payments toDrivecor in respect of the unitsand it claimed it had acquiredownership of the panels. It allegedthat transfer of the units to it hadtaken place by attornment.

Ukubona claimed that it had astatutory hypothec over thepanels in terms of section 84 of theInsolvency Act (no 24 of 1936). Italleged that the purchase of theunits by Drivecore was aninstalment sale transaction as

referred to in section 1 of theCredit Agreements Act (no 75 of1980). City Power contended thatas a non-owner, having sold thegoods in question on the termsthat the purchase price waspayable in one lump sum on afuture date, Ukubona was notentitled to claim the statutoryhypothec provided for in theInsolvency Act.

THE DECISIONSection 84(1) of the Insolvency

Act provides that is any propertyis delivered to a person under aninstalment sale transaction asdefined in the Credit AgreementsAct, such transaction will beregarded on the sequestration ofthe debtor’s estate as creating infavour of the other party to thetransaction, a hypothec over thatproperty whereby the amount stilldue to him under the transactionis secured. An instalment saletransaction is defined in the CreditAgreements Act as a transactionin which goods are sold againstpayment of a sum of money at astated or determinable future dateor in whole or in part ininstalments over a period in thefuture, and the purchaser does notbecome the owner of the goodsmerely by virtue of delivery to orthe use, possession or enjoymentof them.

A transaction for the sale ofgoods under which payment ismade in one lump sum at a futuredate is covered by the definitionof an instalment sale transaction.The transaction whereby thecontrol panels were purchased byDrivecore from Ukubona wassuch a transaction and it clearlyfell within this definition.

As far as the applicability ofsection 84 was concerned, it wasclear that the section applied to aparty selling goods owned byhim. The question was whether italso applied to a non-owner. The

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section as originally enactedapplied only to a creditor/owner.The Credit Agreement Act towhich this section refers, and itspredecessor the Hire-PurchaseAct, contemplate the passing ofownership from the seller to thebuyer. It is for the purpose ofsubstituting the security of

ownership with the security of thehypothec that section 84 directs itspurpose. It is accordinglynecessary that a party claimingprotection under this section bethe owner of the goods.

As Ukubona was not the ownerof the goods, it was not entitled toprotection under the section. Itsappeal failed.

Section 84 was amended by the Hire Purchase Act 36 of 1942 by the substitutionin subsection (1) for the words ‘provided for the passing of the ownership of thatproperty when certain payments prescribed in the agreements have been made’ ofthe words ‘ is a hire-purchase agreement in terms of section one of the Hire-Purchase Act, 1942’. Under the Insolvency Amendment Act 101 0f 1983 thesubsection was made to refer to ‘instalment sale transactions’ as defined in s 1 ofthe Credit Agreements Act. The creditor/ seller was not further defined. Bothforms of hire-purchase agreement defined in the Hire-Purchase Act, as well as aninstalment sale agreement as defined in the Credit Agreements Act, contemplatedthat when ownership passes to the buyer it passes from the seller. If the originalreason of the law is to be the life of the law then ‘creditor’ can have no meaning ins 84(1), other than the owner of the merx.

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ALFA LAVAL AGRI (PTY) LTD v FERREIRA

JUDGMENT BY VAN COLLER JORANGE FREE STATEPROVINCIAL DIVISION13 FEBRUARY 2003

2004 (2) SA 68 (O)

A sub-contractor is not liable indelict to a party which hascontracted with the party withwhich the sub-contractor hascontracted, unless it can be shownthat some legal duty rests on thesub-contractor in relation to thecomplainant.

THE FACTSFerreira and the second

defendant defended a claimbrought against them by AlfaLaval Agri (Pty) Ltd for paymentof the purchase price of a milkingmachine. Alfa had sold themachine to Ferreira and it wasinstalled by the second plaintiffunder a sub-contract concludedbetween Alfa and the secondplaintiff.

Ferreira raised a counterclaim inwhich he alleged that the machinehad been installed in anunprofessional and inexpertmanner and contrary to theinstructions of the manufacturers.The counterclaim alleged thatFerreira had suffered damages asa result and that the secondplaintiff as the installer was liableto compensate him.

The second plaintiff contendedthat the counterclaim could notsucceed against it because therehad been no contract between itand Ferreira. A sub-contractor, theclaim in delict for economic losscould therefore not be broughtagainst it.

THE DECISIONOn the strength of the judgment

given in the case of LillicrapWassenaar and Partners v PilkingtonBrothers (SA) (Pty) Ltd 1985 (1) SA475 (A) liability in delict could notbe established against the secondplaintiff. Liability for economicloss in these circumstancesdepends on demonstrating somecontractual link between theparties. This was absent asbetween the second plaintiff andFerreira.

Unlike in other circumstanceswhere it can be shown thatdespite the absence of acontractual relationship, a legalduty exists, in the present case, itcould not be said that the secondplaintiff owed any legal dutytoward Ferreira.

The counterclaim could not beamended to make the claimproposed by Ferreira.

Contract

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ROSEBANK MALL (PTY) LTD v CRADOCKHEIGHTS (PTY) LTD

A JUDGMENT BY CILLIERS AJ(GOLDSTEIN J and JOFFE Jconcurring)WITWATERSRAND LOCALDIVISION5 NOVEMBER 2003

2004 (2) SA 353 (W)

An agreement which does notincorporate specific obligationsbut which requires parties to donothing contrary to the objectivesof the agreement is not anagreement which is initially orsubsequently impossible offulfilment.

THE FACTSRosebank Mall (Pty) Ltd and

Cradock Heights (Pty) Ltd andthree other interested partiesentered into an agreement knownas ‘the co-operation agreement’.The purpose of the agreement wasto provide for the development ofthe parties’ properties and thesurrounding area.

The co-operation agreementprovided that its objective was toclose off a road, Cradock Avenue,with the consent of the localauthority and take transferthereof, then undertake thedevelopment of retailimprovements on the road portionand accommodate informaltraders in an adjoining area.Cradock Avenue was to be usedas a pedestrian mall. All partiesundertook to support each otherin the achievement of thisobjective.

Clause 6 of the agreementprovided that each party was toexhibit the utmost good faith tothe others as is required ofpartners and to co-operate andcompromise where necessary togive effect to the intent of theagreement. The clause furtherprovided that wherecircumstances arose which werenot within the contemplation ofthe parties, they would meet andnegotiate in good faith to achievea modus operandi for theattainment of the fundamentalpurpose of the agreement. If asituation arose which was beyondthe reasonable anticipation of theparties and which resulted in amaterial disadvantage to one ofthem, the parties wouldendeavour to renegotiate theterms in good faith.

Clause 8 of the agreementprovided that if the local authoritydeclined to approve the scheme,the agreement would lapse and beof no further force or effect.

When the agreement was

implemented, it was deviatedfrom materially. Instead ofbuilding fourteen shops, a craftmarket was established.Furthermore, Rosebank Mallconstructed a closed semi-circularstructure, known as ‘the bubble’,extending 11,9 metres intoCradock Avenue, as well as arestaurant known as the‘Clockwise Restaurant’ which alsoextended into Cradock Avenue.

Cradock Heights took the viewthat the construction of the bubbleand the Clockwise Restaurantconstituted a breach of the co-operation agreement. It broughtan application for an orderdeclaring that Rosebank Mall wasin breach of the agreement andcompelling it to demolish andremove the structures which didnot conform to the redevelopmentplan. Rosebank Mall opposed theapplication on a number ofgrounds.

THE DECISIONThe issue was whether or not by

constructing the bubble and theClockwise Restaurant, therebyaffecting the pedestrian accessarea, Rosebank Mall had actedagainst the provisions of the co-operation agreement requiringeach party to support the othersand not prejudice the others in theattainment of the objects of theagreement.Clause 6

Rosebank Mall contended thatclause 6 constituted an agreementnot to sue, a pactum de nonpetendo.

This clause purported to imposean obligation on the parties toderogate from their rights orincrease their obligations, and todo so to an extent notdeterminable from the agreement.The provision therefore had noexigible content and was void forvagueness. The provision wasaimed at an adjustment or the

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rights and obligations of theparties, however legallyineffective this might have been,but it did not constitute anagreement not to sue.Clause 8

Rosebank Mall contended thatthis provision was a suspensivecondition and since its effect wasto suspend the operation of theagreement pending the approvalof the local authority, CradockHeights could not enforce theagreement prior to that eventtaking place.

The clause was not however, asuspensive condition but aresolutive condition. It wasapparent that the partiesauthorised one of them to securethe approval of the local authorityand that the failure to do so waslinked to the happening of specificevents. This made it a resolutive

condition and accordingly not onewhose fulfilment was necessaryfor the coming into existence ofthe co-operation agreement.Enforceability

Rosebank Mall contended thatthe co-operation agreement wasincapable of performance becauseof initial and superveningimpossibility of performance. Thiswas because the implementationof the agreement involved theillegal encroachment onto theproperty of Old Mutual and theinability to relocate the informaltraders.

However, the obligations of theparties amounted to support theattainment of the objectives setout in it and the undertaking to donothing likely to prejudice theattainment of those objectives. Anundertaking to do nothing cannotbe nor become impossible to

perform. There was no duty toperform anything that wasreferred to in the agreement. Theextent of the parties’ obligationswas to support the attainment ofthe agreement’s objectives.Thereafter, the parties were left totheir own devices in attainingthose objectives. In suchcircumstances initial orsupervening impossibility ofperformance was inapplicable.Breach

The effect of the buildingsconstructed by Rosebank Mallwas to encroach on the pedestrianarea. This area had beendemarcated on the plansoriginally annexed to the co-operation agreement and it wasclear that the encroachment wascontrary to what was intendedtherein. This constituted a breachof the agreement.

The obligations of the respective parties to the co-operation agreement do notcomprise any obligation to procure or warrant the attainment of any objectives.Clause 5.1.1 obliges each party only to support the other parties in the attainmentof their objectives. The form which such 'support' was to assume is not spelt outin the agreement and it is unnecessary to attempt to define fully what theobligation may entail, because there is no suggestion that the appellants were inany way precluded from supporting or failing to support the respondent in itsachievement of the objective in clause 4.1.2. The case sought to be made relied on abreach of clause 5.1.2 which contains an undertaking by each party, in favour ofthe others, that it will 'do nothing which will or which is calculated or likely toprejudice or affect adversely the attainment of its objectives by any of them ...' Anundertaking to do nothing (which will or is calculated to or likely to have a certaineffect) cannot be nor become impossible to perform - unless some statutory orother legal obligation positively to perform an act having, or calculated or likely tohave the said effect, exists. There is no suggestion of such a positive legal dutyhaving arisen in the present case.

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JUGLAL NO v SHOPRITE CHECKERS (PTY) LTD

A JUDGMENT BY HEHER JA(MPATI DP, MARAIS JA,CAMERON JA AND CONRADIEJA concurring)SUPREME COURT OF APPEAL31 MARCH 2004

2004 CLR 125 (A)

Provisions of an agreementalleged to be contrary to publicpolicy will only be considered sowhen it is clear that their effect isagainst public policy, not thatthey may be so if implemented ina manner which is against publicpolicy.

THE FACTSJuglal as trustee of the Jumbo

Trust, passed a continuingnotarial bond over its movableassets in order to secure paymentof amounts owing to ShopriteCheckers (Pty) Ltd from time totime. Amounts would becomeowing to Shoprite as a result ofthe supply of retail stock to besold to the trust under a franchiseagreement concluded between theparties.

The notarial bond provided thatif there was default in the timeousfulfilment of any obligationimposed on the trust, or Shopritehad at any time reason to believethat its interests were imperilledby any act or omission on the partof the trust, Shoprite would beentitled to take and retain in itspossession, the business of thetrust and the assets hypothecatedas security for amounts owing toit. Shoprite would also be entitledto conduct the business of thetrust and in so doing, purchasestock, recover money owed to thetrust, effect transactions on thebank account of the trust and sellthe business of the trust and itsassets.

Shoprite applied for an orderentitling it to enforce its rightsunder the notarial bond. Juglalappealed the grant of the order onthe grounds that the provisions ofthe bond were unconscionableand incompatible with the publicinterest in that they entitledShoprite to trade, taking under itscontrol the business of the trust,the power to operate on its bankaccount, the power to retain anysurplus for the conduct of thebusiness, such powers beingirrevocable and unconditional,incorporating an invalid pactumcommissorium, indemnifyingShoprite for loss or damage andentitling Shoprite to enforce itsrights under a parate executie.

THE DECISIONA court will conclude that

contractual terms are contrary topublic policy only when theirclear effect is that they arecontrary to public policy. If acontractual term may beimplemented in a manner that isagainst public policy but the termin itself is neutral, then it cannotbe considered to be contrary topublic policy.

In the present case, the notarialbond was part of a wider businessarrangement concluded betweenthe parties. This arrangementinvolved the conclusion of afranchise agreement and thesupply of goods to the trust oncredit. The parties concluded theiragreements on an equal footingand with a view to implementingpractically the conduct of thebusiness both envisaged. Thebond was complementary to this,its purpose being to maintain thecontinuation of the business as agoing concern in a single locationirrespective of the success offailure of the trust’s particularenterprise.

The fact that Shoprite wasentitled to act ‘without priornotice’ did not indicate that it wasentitled to proceed on the basis ofself-help. It was entitled to actonly upon the happening ofcertain specified conditions anddid not mean that Shoprite didnot have to proceed to court whennecessary. To obtain a legal rightover its security, Shoprite stillneeded to obtain possession of themovables either by consent or byprocuring judicial sanction. This iswhat it in fact did. Anydiscretionary power it did havewas subject to the exercise thereofin a reasonable manner.

The provisions of the bond weretherefore not to be consideredagainst public policy. The appealwas dismissed.

Contract

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ISLAND VIEW SHIPPING (PTY) LTD vCAMARGUE TRANSPORT SYSTEMS (PTY) LTD

JUDGMENT GIVEN IN THEDURBAN AND COAST LOCALDIVISION ON 3 FEBRUARY 2004BY LEVINSOHN J

2004 CLR 166 (D)

The transferee of rights under anassignment continues to hold suchrights despite the subsequenttermination of the agreementunder which those rights wereconferred.

THE FACTSOn 15 August 1994, Camargue

Transport Systems (Pty) Ltdagreed to manufacture anddeliver to Transequip Service Ltd,two thousand 20-foot steel drycargo containers. Camarguewarranted that the containerswould be manufactured inaccordance with certain approvedspecifications and drawings.Clause 19.2 of the agreemententitled Transequip to assign itsrights under the agreement to anythird party without obtainingCamargue’s consent. Clause 16.1provided that the agreementwould be governed by the laws ofEngland.

During August 1995 to March1996, Camargue manufacturedand delivered the containers andTransequip paid the agreed price.

Transequip leased the containersto Unicorn Lines Ltd and at thesame time, Transequip’s rights,including its rights under thewarranties, were ceded to UnicornLines under an agreement ofcession concluded on 2 October1995. In terms of clause 4.2,Transequip assigned all rights inrespect of claims againstCamargue arising under thepurchase contract including allwarranties contained therein. On30 June 2001, Transequip sold thecontainers to Unicorn. On 14January 2002, Unicorn’s rightswere ceded to Grincor Shipping(Pty) Ltd under a business saleagreement whose effect was thetransfer of the shipping businessof Unicorn to Grincor. Grincorsubsequently changed its name to

Island View Shipping (Pty) Ltd.Island View brought a claim

based on the warranty rights. Italleged that the warranties werebreached in certain respects.Camargue defended the claiminter alia on the grounds thatIsland View had failed to establishits title to sue.

THE DECISIONCamargue contended that with

the sale of the containers toUnicorn, its rights as lesseeincluding the rights ceded to itcame to an end, since the lesseehad thereby become the owner ofthe containers.

The warranties ceded to Unicornin terms of clause 4.2 were pre-eminently the warranties set outin the purchase agreement. Theparties intended to assign theserights which at that stage hadalready come into existence.

The rights held by Unicornunder the cession survived thetermination of the lease agreementwhich took place when it becamethe owner of the containers. Itfollowed that as at the date of saleof the shipping business fromUnicorn to Grincor, Unicorn wasable to transfer its rights toGrincor which it did under thatsale agreement. The partiesregarded these rights as beingpart of the assets of the business.Accordingly Grincor, as renamed,was entitled to enforce its rightsunder them and had title to sue.

Having also demonstrated thecause of its action under thewarranties, and proved itsdamages, the action succeeded.

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LAPPEMAN DIAMOND CUTTING WORKS (PTY) LTD vMIB GROUP (PTY) LTD

A JUDGMENT BY LEWIS JA(HOWIE P, BRAND JA, HEHERJA and VAN HEERDEN AJAconcurring)SUPREME COURT OF APPEAL29 SEPTEMBER 2003

2004 (2) SA 1 (A)

An insurance broker should bringto the attention of the insured theobligations imposed by theinsurance contract arranged bythe broker, but it is not obliged toensure that the insured complieswith its obligations thereunder.

THE FACTSLappeman Diamond Cutting

Works (Pty) Ltd carried on thebusiness of diamond cutting andpolishing. It insured against theloss of diamonds withunderwriters, the insurancecontract having been negotiatedand arranged by MIB Group (Pty)Ltd, Lappeman’s insurancebrokers.

The insurance contract includeda provision under clause (b) of itsSpecific conditions to the effectthat the insured would keepdetailed records of all sales,purchases and other transactionsand that such records would beavailable for inspection by theunderwriters or theirrepresentatives in case of a claimbeing made under the insurancecontract.

Lappeman experienced the lossof certain diamonds. It claimedpayment of a total of US$12603403. The underwriters rejectedthe claim on the grounds thatLappeman had failed to complywith clause (b). Lappemanbrought an action for paymentagainst the underwriters but theaction was dismissed.

Lappeman then brought anaction against MIB on the groundsthat it breached its contract withit, alternatively performed itsduties negligently. Lappemanalleged that when negotiationstook place preparatory to theconclusion of the insurancecontract, representatives of MIBhad not drawn its attention toclause (b) and had notfamiliarised themselves with itsbusiness practices. These involvedthe conclusion of deals notconcluded in writing, in keepingwith a tradition of confidentiality,which would necessarily have

been in conflict with theprovisions of clause (b).

The representatives of MIBdenied that they had failed tobring the provisions of this clauseto Lappeman’s attention.

THE DECISIONLappeman contended that the

MIB representatives should haveasked whether it did off-the-booktransactions and warned it of theconsequences of doing so.

There were two problems withthis contention. Firstly, it had notbeen shown that theserepresentatives were aware thatsuch a practice was conducted inthe diamond-cutting industry.Secondly, even if they had beenaware of this practice, it was notincumbent on them to askLappeman if it also conducted off-the-book transactions. OnceLappeman was informed of itsduty to keep records, it was notnecessary for the broker to gofurther and inquire whether it didin fact keep records.

A broker does not control thebusiness of the insured. Even aspecialist broker is not bound toensure that the insured complieswith its obligations. The broker’sduty is done as soon as it has doneeverything reasonably necessaryto draw the attention of theinsured to its obligations asimposed by the insurance policy.

Since the broker’srepresentatives did adviseLappeman of its obligations, itproperly complied with itsobligations and it was thenLappeman’s duty to ensure that itdid the same in respect of theinsurance contract thenconcluded.

Lappeman’s claim wasdismissed.

Insurance

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LLOYDS OF LONDON UNDERWRITING SYNDICATE vSKILYA PROPERTY INVESTMENTS (PTY) LTD

A JUDGMENT BY CONRADIE JA(SCOTT JA, ZULMAN JA,MTHIYANE JA and BRAND JAconcurring)SUPREME COURT OF APPEAL30 SEPTEMBER 2003

2004 (2) SA 276 (A)

An insurance policy whichprovides that it is subject to thewarranties, terms and conditionsas contained in another policywhich is also applicable to thesame insured may incorporate byreference terms and conditionsapplicable in the other policy.Exclusions contained in the otherpolicy will be understood to beincorporated by such a provisionwhere it is clear from the point ofview of commercial interest, thatthe parties wished to achieve theincorporation of such exclusions.

THE FACTSA Lloyds of London

underwriting syndicate (‘Lloyds’)insured Skilya PropertyInvestments (Pty) Ltd for the lossof or damage to an aircraft. Theinsurance given was a Hull AllRisks policy and a War and AlliedPerils policy. The latter gave coverin respect of events excluded bythe former.

In terms of section 1 of the warpolicy, Lloyds insured against lossof or damage to the aircraftarising from confiscation,nationalisation, seizure, restraint,detention and other relatedcauses. In terms of clause 3 ofendorsement no 1 of the warpolicy, cover was given forextortion and hijack expenses,including extra expensesnecessarily incurred by theassured in respect of the aircraftfollowing an incident involving aninsured peril to a limit of US$500000. In terms of clause 1 of section4 of this policy, it was subject tothe warranties, terms andconditions as contained in the hullpolicy.

Clause 1 of section 4 of the hullpolicy provided that the policydid not apply while the aircraftwas bing used for any illegalpurpose.

When the policies were in force,the operator of the aircraft agreedto allow the aircraft to be used toconvey a consignment ofcigarettes to Beira. The aircraftflew to Beira with 250 cases ofcigarettes but did not offloadthem. No offloading took placebecause by that time, thesmugglers were aware that theMozambiquan authorities hadbeen informed of the existence ofthe cargo and the smugglersdecided to continue thetransportation of the cigarettes tothe aircraft’s ultimate destinationin Nairobi. Before taking off fromBeira, the Mozambiquan

authorities detained the aircrafton suspicion that it was beingused to smuggle cigarettes intoMozambique without payingcustoms levies and taxes. Thecustoms authorities ordered thatthe aircraft was to remain at Beiraairport and all attempts to secureits release failed.

Skilya claimed under the warpolicy for the value of the aircraft,US$1,8m, and under theendorsement of the war policy forR215 000.

Lloyds contended that sinceclause 1 of section 4 of the warpolicy made the policy subject tothe exclusion of clause 1 of section4 of the hull policy, and since theaircraft was being used for anillegal purpose within themeaning of this clause, the coverprovided by the war policy didnot apply. It rejected Skilya’sclaim for indemnification.

THE DECISIONSemantic analysis of the meaning

of the clauses in question was notthe best way to understand whatthe parties meant to achieve. Abetter way was to look at what,from the point of view ofcommercial interest, they wishedto achieve by clause 1 of section 4of the war policy, theincorporation provision. It wasclear that without this provision,the war policy would have leftLloyds with potential liabilitiesthat they could not have intendedto assume and which Skilya couldnot have thought they wereassuming.

Considering the two policiestogether, as constituting a sensiblebusiness arrangement to providegreater cover for Skilya, there wasevery reason to give the warpolicy a meaning that wouldacknowledge that its underwriterwas not contractually prepared totake the risk of illegal use uponitself. On this basis, the exclusion

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of liability while the aircraft wasbeing used for any illegal purposeapplied under the war policy.

Skilya contended that thepurpose of the aircraft’s flight wasnot to smuggle but to reposition toNairobi for the distribution ofrelief supplies. However, it wasclear that the flight to Beira was aseparate leg on its journey toNairobi and had been undertakenunder a voyage charter in order toachieve the purposes of theexporter. The fact that thecigarettes were not taken off the

aircraft and an attempt made toclear them through customs didnot mean that the purpose of theuse of the aircraft remained anillegal purpose. The fact was thatthe aircraft flew to Beira for thepurpose of conveying thecigarettes to that destination. Thisbrought into operation theapplicability of the exclusionprovided for in the hull policy.

Skilya also contended that theplan to smuggle the cigarettes hadbeen abandoned when it was

known that the Mozambiquanauthorities were aware of theirpresence on the aircraft. Thishowever, meant only that thesmuggler’s plan had been foiled,not that the purpose neverexisted. Furthermore, the illegalpurpose was continued by thebreach of Mozambiquan customsregulations which require awritten declaration of cargo onboard an aircraft prior to itsdeparture.

Skilya’s claim was rejected.

Sophisticated semantic analysis is not the best way of arriving at anunderstanding of what the parties meant to achieve by paragraph 1 of sectionIV. A better way is to look at what, from the point of view of commercialinterest, they hoped to achieve by the incorporation provision. It is quite clearthat without the incorporation of exclusions from the hull policy, the warpolicy would have left the appellants which potential liabilities they could nothave intended to assume and which the respondent could not have thought theywere assuming. For one thing, no limit on the liability for loss or damage topassengers, crew or third persons is written into the war policy itself. These aretopics which in the hull policy are hedged about with limits and exclusions.

Insurance

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ABSA BANK LTD v MURRAY

JUDGMENT BY BINNS-WARD AJCAPE OF GOOD HOPEPROVINCIAL DIVISION18 SEPTEMBER 2003

2004 (2) SA 15 (C)

The eviction of an unlawfuloccupier may be ordered by acourt only after taking intoaccount all the circumstancesaffecting both occupier and ownerof the property, as well as thesocial and economic implicationsof such an order.

THE FACTSMurray and his wife passed a

mortgage bond in favour of AbsaBank Ltd over his residentialproperty. Murray and his wifewere sequestrated after MrMurray lost his employment. Thebank purchased his propertywhen it was sold in terms ofsection 8(3) of the Insolvency Act(no 24 of 1936). It later resold theproperty but could not givevacant possession thereof to thebuyer because the Murraysremained in occupation. Absabrought an application for theireviction from the property.

Absa’s application was broughtin accordance with the provisionsof section 4 of the Prevention ofIllegal Eviction from UnlawfulOccupation of Land Act (no 19 of1998). The Murrays contendedthat it would not be just andequitable for the court to grant anorder for his eviction because theyhad been living in the house foralmost twenty years, had notwilfully defaulted on mortgagebond repayments and continuedto use the property in conductinga business. They offered to payrent for living at the property andneeded time to raise sufficientfunds to pay the bank. Theyaccommodated two children atthe property and they had noalternative place to stay.

Section 4(7) of the Act providesthat if an unlawful occupier ofland has occupied the land formore than six months at the timeproceedings for eviction arebrought, a court may grant anorder for eviction if it is of theopinion that it is just andequitable to do so.

THE DECISIONThe purpose of section 4(7) is not

merely to determine if a period ofnotice should be afforded to theunlawful occupier prior to thegiving of an eviction order. Thesection provides for substantivematters, not merely proceduralmatters, and a court is required toconsider all such matters whenmaking a determination under thesection.

A court must also take intoaccount considerations beyondthose of immediate interest to theparties, taking into account thesocial and economic contextwithin which the parties arerequired to operate. A court’spowers encompass a widediscretion and in so doing, a courtmust take into account theproperty rights of the ownerwhich are also protected underthe Constitution.

Taking into account the fact thatMurray had offered to pay rentfor remaining in occupation at theproperty, was conducting afunctioning business and wassupporting his family anddependants, and that Murray hadbeen in occupation of the propertyfor over a year since the bank’sintention to evict, a period of sixweeks notice to vacate wasappropriate.

The order of eviction wasgranted, suspended for the periodof six weeks.

Property

73

BRIAN LACKEY TRUST v ANNANDALE

A JUDGMENT BY GRIESEL JCAPE OF GOOD HOPEPROVINCIAL DIVISION6 OCTOBER 2003

2004 (3) SA 281 (C)

A court has a discretion to awarddamages to an owner whoseproperty has been encroached onby a neighbour. In exercising itsdiscretion a court will take intoaccount the proportionality ofprejudice suffered by either partyand the principles of neighbourlaw.

THE FACTSThe Brian Lackey Trust owned

property adjoining owned byAnnandale. The parties boughttheir properties in 2000 for R140000 and R130 000 respectively.The trust built a substantial luxurydwelling on its property. By thetime the construction had reachedan advanced stage, it wasdiscovered that through someerror, the dwelling had beenconstructed on the property of thetrust as well as Annandale’sproperty. The building coveredapproximately 80% ofAnnandale’s property andapproximately R1,75m had beenspent on its construction.

After this discovery, in 2002, thetrust offered to buy Annandale’sproperty for R250 000. Annandalestated that he would be preparedto accept R750 000, otherwise hewould demand removal of thebuilding and ‘send in thebulldozers’.

The parties were unable to reachany agreement. The trust issued asummons against Annandale foran order declaring Annandale notentitled to the removal of theencroachment from his property,subject to the payment of suchdamages as the court mightdetermine.

THE DECISIONThe order sought was directed at

achieving an involuntarydeprivation of property. The firstquestion was whether the courthad a discretion to make such anorder. Section 25(1) of theConstitution states that no lawmay permit arbitrary deprivationof property. This includes thecommon law. The discretionaffected by this provision is thediscretion to order the payment ofdamages instead of demolition ofencroachment in certaincircumstances.

The court does have such adiscretion. It is a wide andequitable discretion and is notlimited to minor encroachments as

there is no reason on principle andauthority why it should be solimited. This discretion is howevernot completely unfettered.

In the circumstances of thepresent case, while Annandale asowner would ordinarily beentitled to removal of anencroachment, rigid enforcementof that primary remedy could giverise to an unjust result, and thiswas the main reason for theexercise of the court’s discretion.On the evidence, it was clear thatthe only realistic alternative to anaward of damages would thecomplete demolition of the trust’sdwelling. It would not berealistically possible to demolishjust that portion standing onAnnandale’s property.

If demolition was ordered, therewould be a strikingdisproportionality of prejudice.There would be costs ofdemolition and, because of therise in building costs, theconstruction of the same houseagain would cost the trust moreand there would be delay in thecompletion of the dwelling. Thecomparative prejudice toAnnandale was that he would losethe use of his property. However,this was not as great as theprejudice which would besuffered by the trust.Furthermore, Annandale could becompensated for his loss.

On the principles of neighbourlaw, the aim of achieving aharmonious relationship betweenneighbours on the basis ofreasonableness and fairness couldbe achieved by allowing the trustto retain its construction. It wasclear that Annandale had beenprepared to accept monetarycompensation for his propertyand his position was based on anincorrect concept of the owner’srights, ie absolute rightsnotwithstanding broaderconsiderations of social utility,economic waste andneighbourliness.

The action succeeded.

Property

74

FIRST RAND BANK LTD v BODYCORPORATE, GEOVY VILLA

A JUDGMENT BY NAVSA JA(HARMS JA, SCOTT JA, CLOETEJA and HEHER JA concurring)SUPREME COURT OF APPEAL28 NOVEMBER 2003

2004 (3) SA 362 (A)

When enforcing its rights inexecution proceedings, a bodycorporate may not sell thejudgment debtor’s propertywithout having to pay thebondholder the full amount of thebondholder’s claim.

THE FACTSThe Body Corporate, Geovy

Villa, obtained judgment againstthe registered owner of a sectionaltitle unit after she failed to paylevies and costs due to it in thesum of R8 600. The unit was soldin execution for R32 000.

First Rand Bank Ltd hadregistered a bond over theproperty for R108 000. It gavenotice in terms of section 66(2) ofthe Magistrates’ Court Act (no 32of 1944) that it did not accept theprice of R32 000. Section 66(2)provides that no immovableproperty which is subject to anyclaim preferent to that of thejudgment creditor shall be sold inexecution unless the sale isbrought to the notice of thepreferent creditor and unless theproceeds of the sale are sufficientto satisfy the claim of thepreferent creditor or the preferentcreditor confirms the sale inwriting.

The Body Corporate gave noticethat it did not accept that thebank’s claim was preferential toits own. It obtained a declaratoryorder that the bank’s bond did notrank higher in order of preferencethan its claim for levies and costs.

The bank appealed.

THE DECISIONSection 15B(3) of the Sectional

Titles Act (no 95 of 1986) providesthat the Registrar shall not registera transfer of a unit unless there isproduce to him a conveyancer’scertificate confirming that as atdate of registration, the bodycorporate has certified that allmoneys due to it by the transferorin respect of the unit have beenpaid.

This section has been interpretedby the courts as creating a rightranking in preference to that ofthe bondholder in the case ofinsolvency of the debtor. Theeffect of this is to create anembargo on transfer in favour ofthe body corporate in suchcircumstances. However, it doesnot elevate the right of the bodycorporate over that of thebondholder. If this had beenintended, this would have beenexpressly provided for in thestatute.

The practical effect is that,assuming the availability of funds,a body corporate must be paidbefore transfer of the property.This does not however, entitle it,when enforcing its rights inexecution proceedings, to sell theproperty without having to paythe bondholder the full amount ofthe bondholder’s claim.

The appeal succeeded.

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GEUE v VAN DER LITH

A JUDGMENT BY BRAND JA(MPATI JP, STREICHER JA,CONRADIE JA and HEHER JAconcurring)SUPREME COURT OF APPEAL20 NOVEMBER 2003

2004 (3) SA 333 (A)

An agreement for the sale ofagricultural land which includes asuspensive condition that theMinister of Agriculture’s consentto the subdivision of the land beobtained is affected by theprovisions of section 3(e)(i) of theSubdivision of Agricultural LandAct (no 70 of 1970) and will beconsidered void ab initio.

THE FACTSVan der Lith was the owner of

the farm Canterbury 254 in theLimpopo Province. On 19 June2001 he concluded an agreementfor the sale of portion of the farmto Geue and the second appellant.The sale was subject to thesuspensive condition that theMinister of Agriculture give hisconsent to the subdivision of thefarm.

The farm was agricultural landas defined in section 1 of theSubdivision of Agricultural LandAct (no 70 of 1970). Section 3(e)(i)of the Act provides that noportion of agricultural land,whether surveyed or not, andwhether there is any buildingthereon or not, shall be sold oradvertised for sale unless theMinister has consented thereto inwriting. The Act defines a ‘sale’ asincluding a sale subject to asuspensive condition, thisdefinition having been introducedby an amendment to the Act in1981.

Before transfer of the property,Geue brought an application foran order declaring the agreementnull and void by reason of theprovisions of section 3(e)(i). Vander Lith opposed the applicationand counter-applied for an orderdeclaring that the agreement hadbecome enforceable uponfulfilment of the suspensivecondition, the consent of theMinister having by then beenobtained.

Geue’s application wasdismissed. He appealed.

THE DECISIONThe essential purpose of the Act

is to prevent the fragmentation ofagricultural land. In the light ofthis, it is necessary to determinethe true reason for the extendeddefinition of ‘sale’ as introducedby the amendment of 1981. Thequestion was whether thedefinition would encompass a salesubject to the suspensivecondition that the Minister’sconsent be obtained.

There is no reason to consider asuspensive condition of this kind -the Minister’s consent - as not onecontemplated by the suspensivecondition referred to in thedefinition of ‘sale’. The Minister’sconsent is the very type ofsuspensive conditioncontemplated in this definition.

An agreement whichcontravenes a statutory provisionis not necessarily void. Thisdepends on whether or not thatresult is intended by thelegislature. An agreementcontaining a suspensive conditionof the kind included in the parties’agreement is contrary to theintention of the legislature, beingspecifically prohibited by section3(e)(i). It is therefore void.

The appeal was upheld.

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PLATINUM HOLDINGS (PTY) LIMITED v VICTORIAAND ALFRED WATERFRONT (PTY) LTD

A JUDGMENT BY CONRADIE JA(HOWIE P, SCOTT JA, NUGENTJA AND PONNAN AJAconcurring)SUPREME COURT OF APPEAL28 MAY 2004

2004 CLR 231 (A)

An agreement to continue a leasenot providing for automaticrenewal must be proved byevidence outside of the existinglease. The question whether aclaim based on the allegation ofanti-competitive conduct isfrivolous or vexatious may bedetermined by an ordinary courtbefore referral of the claim to theCompetition Tribunal.

THE FACTSThe second, third and fourth

respondents were tenants at theCape Town Victoria & AlfredWaterfront and were representedby their property managementcompany, Platinum Holdings Ltd.The landlord was represented byVictoria & Alfred Waterfront (Pty)Ltd.

The relevant leases were toexpire on 31 March 2003. InAugust 2002, the parties enteredinto negotiations for continuationof the tenancies thereafter.Negotiations continued in thefollowing months but the partieswere unable to reach agreementon new leases and none wasconcluded. Platinum however,took the view that the tenantswere entitled to remain inoccupation of the premises, andindicated that they would do soafter 31 March 2003.

Platinum alleged that during thecurrency of the existing leases, thelandlord had undertaken tocontribute to the costs ofrefurbishment of the premises andthat this indicated an agreementto continue the leases after 31March 2003. Platinum alsocontended that the landlord had aduty to negotiate in good faith therenewal of the leases; further, thatin view of the relative economicstrength of the landlord and itsmonopolistic position in theproperty rental market, itsconduct constituted anti-competitive conduct as defined inthe Competition Act (no 89 of1998).

Victoria & Alfred brought anurgent application for an orderdeclaring that the leaseagreements were to terminate on31 March 2003 and that thetenants had no right of continuedoccupation of the premises.

THE DECISIONThe correspondence entered into

between the parties indicated thateach was trying to persuade theother that it would beadvantageous to conclude newleases. The tenants represented byPlatinum were unhappy that theJuly proposals were no longeropen for acceptance and thelandlords represented by Victoria& Alfred were no longer willing toreturn to those proposals. Some ofthe language used in thecorrespondence indicated a deepunhappiness by Victoria & Alfredwith the position taken byPlatinum and this pointed not tothe renewal of leases but to afailure to agree.

It was also significant thatPlatinum had at no stage said thatthe existing leases had beenextended or new leasesconcluded. The failure to do sosuggested that the defence laterraised was manufactured merelyfor the purposes of meeting theapplication brought by Victoria &Alfred.

As far as the defence based onthe Competition Act wasconcerned, section 65(2) requires acourt to refer a matter based on acompetition dispute to theCompetition Tribunal. When acourt is required to determinewhether or not a matter should beso referred, it may inquire intowhether or not the issue has beenraised frivolously or vexatiously.

The first basis upon which thetenants alleged an anti-competitive practice was thatVictoria & Alfred was a dominantfirm practising pricediscrimination. However, theleases entered into with othertenants were leases with majorretailers and could not beconsidered equivalenttransactions. Even if they were soconsidered, there was no evidenceof what the equivalent per-square-

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metre rentals were in relation tosuch other tenants.

The second basis relied on by thetenants was that they were beingcharged an excessive price. TheAct requires that it be shown thatthe price charged bears no

reasonable relation to theeconomic value of what issupplied. There was however, noevidence of what the economicvalue of the premises let to thetenants was.

The case based on theCompetition Act was hopeless,indicating that the issue raisedwas frivolous or vexatious. Theappeal was dismissed.

Property

An action by a dominant firm cannot be price discrimination unless it relates to salesin what are called ‘equivalent transactions’, of goods or services of like grade andinvolves discriminating between purchasers in terms of price. There is no evidencesuggesting that the leases to major retailers at the Victoria Wharf are transactions thatcould in any relevant way be regarded as equivalent to the leases for the kind of smallshops occupied by the appellants.Moreover, the appellants, in the half-hearted comparison they sought to draw betweenthe rental levels for major tenants and for other, smaller, retailers only brought intothe comparison the basic monthly rent per square metre paid by each category of traderwithout any indication of what a major tenant’s turnover rental might be. Even ifleases with major stores were to be regarded as equivalent to leases with shopsoccupying one hundred square metres or so, there is no evidence of what total rentalincome per square metre the respondents derive from each and therefore no hope thaton these facts any kind of price discrimination might be demonstrated.The appellants also contend that the lessees were, in defiance of the provisions ofsection 8(a) of the Competition Act, charged an ‘excessive price’ to the detriment ofconsumers by the dominant respondent firms. Section 8(a) prohibits a dominant firmfrom charging an excessive price to the detriment of consumers.Assuming the respondents to be dominant firms within the meaning of theCompetition Act and assuming the expression ‘excessive price’ in the Act to includean excessive rental, there is no evidence that the rental suggested by the respondentsfor the new leases fell within the purview of the definition of this expression in the Act.An excessive price is a price for a ‘good or service’ that bears no reasonable relation toits economic value. There is no evidence of what the economic value of the lessees’premises was. It is thus completely unknown what relation the proposed rental bore tosuch value.The indications on the papers are that the appellants did very well out of their tenancyof premises in the Victoria Wharf. According to Joubert the Waterfront stores haveenjoyed ‘spectacular growth in trading results over the last six years in particular.’They were, again according to Joubert, ‘generating significant “turnover rental” forthe applicants over and above the considerable base rentals already paid.’ The increasein percentage rental proposed by the respondents over the previous lease period was2%, up from 8% to 10% of turnover, rising to 12% if turnover exceeds R4 500 persquare metre per month. There is no evidence on record that an increase of this orderwould have made the rental excessive in the sense that it failed to bear a reasonablerelation to the economic value of the premises.

78

COMPETITION COMMISSION v UNILEVER PLC

A JUDGMENT BY DAVIS JP(HUSSAIN J and JALI Jconcurring)COMPETITION APPEAL COURT31 JANUARY 2002

2004 (3) SA 23 (CAC)

Because section 45 of theCompetition Act (no 89 of 1998) issilent on what disclosure isrequired for the purpose of a claimfor disclosure, it is for theCompetition Commission todetermine on the basis of a rightto disclosure and the balancing ofthe rights of the parties, whetherthe party requesting disclosure isentitled to it.

THE FACTSOn 14 December 2001, the

Competition Commissionforwarded a recommendation tothe Competition Tribunalapproving a merger betweenUnilever plc and the otherrespondents. The Commissionrecommended approval of themerger, subject to certainconditions. One of the conditionswas that the second respondentdivest its whole product portfoliothen marketed under certainbrands. The recommendation wasalso forwarded to Unilever andthe other respondents with certainportions removed by blacking outcertain passages. The respondentswere also denied access to certaininformation on which theCommission relied in formulatingits recommendations.

Unilever requested that it befurnished with the forms whichhad been submitted claimingconfidentiality, that it be providedwith a list of persons who maderepresentations to theCommission, the nature of theinformation submitted and thecontents thereof, and any sourceddocuments used by theCommission in preparing itsreport.

The Commission did not accedeto this request. Unilever thenapplied to the CompetitionTribunal for an order directing theCommission to make available therequested information so that itslegal representatives couldconsider whether theconfidentiality claims which weremade were valid. The Tribunalordered that the Commissionprovide Unilever’s legalrepresentatives with access to theentire record in respect of themerger proceedings, access to belimited to inspection at the officesof the Commission, without theright of reproduction of theinspected record.

The Commission appealedagainst this order.

THE DECISIONSection 44 of the Competition

Act (no 89 of 1998) provides thatwhen submitting information tothe Commission or Tribunal, aperson may identify informationas confidential and the Tribunalmay make an appropriate orderconcerning access to informationfound to be confidential. Section45 provides that a person seekingaccess to information claimed tobe confidential may apply to theTribunal for a determination thatthe information is confidential andmake an appropriate orderconcerning access to thatconfidential information.

It is clear from the Act thatdisclosure of confidentialinformation is permissible for theproper administration of the Act.There is no absolute bar to thedisclosure of confidentialinformation. The Commissionhowever, opposed the disclosureof the confidential information onthe grounds that until a formalapplication is made indicatingthat Unilever was entitled todisclosure of the information inquestion, a proper basis fordisclosure of the information interms of section 45 had not beenestablished. This would mean thatsuch an application would have tobe brought without any indicationof the content of the veryinformation which is the subject ofthe application. Fairness requiresthat an applicant for thedisclosure of such information begiven a hearing as to whetherthere is any justification why itshould have access to the record.

Section 45 is silent on whatdisclosure is required for thepurpose of a challenge in terms ofit. It is therefore for the court todetermine on the basis of a rightto disclosure and the balancing ofthe rights of the parties, that theparty requesting disclosure isentitled to it. Having done so, theTribunal had been entitled tomake the order it did.

The appeal was dismissed.

Competition

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WALTER McNAUGHTAN (PTY) LTD v SCHWARTZ

JUDGMENT BY VAN REENEN JCAPE OF GOOD HOPEPROVINCIAL DIVISION8 JANUARY 2003

2004 (3) SA 381 (C)

Information which is commonlyknown in an industry or which isof little value to the personholding it does not constitute atrade secret worthy of protection.Trade connections made by asalesman which do not inducecustomer loyalty are not customerconnections which may beprotected by a restraint of tradeprovision.

THE FACTSSchwartz was appointed the

national sales manager of WalterMcNaughtan (Pty) Ltd as from 3October 2001. His contract ofemployment included a provisionthat within a period of twentyfour months after termination ofhis employment, he undertookthat he, and any company inwhich he was employed, wouldnot solicit orders from thecustomers of the company for thesupply of bus and truck parts andrelated products, would notcanvass business in respect of thesupply of such parts from thecustomers of the company, andwould not sell or supply any ofsuch parts to any of the customersof the company.

On 1 August 2002, Schwartzsubmitted his resignation witheffect from 14 August 2002. Hebegan employment with BulldogAbrasives Southern Africa (Pty)Ltd on 15 August 2002 and begansoliciting business from WalterMcNaughtan’s customers.

Walter McNaughtan assertedthat Schwartz was able to use hisknowledge of its pricing structureand costs of production to assistBulldog in competing unlawfullyagainst it. It demanded thatSchwartz desist. He refused.Walter McNaughtan then broughtan application claiming aninterdict preventing Schwartzfrom being employed by acompany competing with it, andpreventing him from solicitingorders and canvassing businessfrom any of its customers andsupplying parts to them.

Schwartz counter-applied for anorder declaring the restraintagreement void.

THE DECISIONA trade secret must be capable of

application in a trade or industry,ie must be useful informationwhich is not known to the generalpublic, and it must be of economicvalue to the person seeking toprotect it.

The information which Schwartzpossessed was generally known inthe industry, although technically,it might constitute confidentialinformation and deserveprotection at the termination ofthe employer/employeerelationship. Because it was sowell known, it had limitedusefulness and there was little tobe gained from it now in view ofthe fact that stocks used presentlywere drawn from suppliesordered almost a year before.Accordingly, insofar as therestraint sought to protect thelanded costs and prices of WalterMcNaughtan’s products, it wasunreasonable.

As far as its trade connectionswere concerned, a protectableinterest in this regard did notcome into being simply becauseSchwartz had made contact withWalter McNaughtan’s customers.Schwartz was a salesman and nota person who would not havesecured the confidence andloyalty of customers to himself.He would not have been able toinduce customers to follow him tohis new company and it couldtherefore not be said that therestraint provided for theprotection of customerconnections which were of valueto Walter McNaughtan.

The application was dismissed.

Competition

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HEYNEMAN v WATERFRONT MARINE CC

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPEPROVINCIAL DIVISION15 JUNE 2004

2004 CLR 181 (C)

A passing off action should notsucceed merely on the basis ofevidence that the product allegedis being passed off as that ofanother is superficially similar tothe other product. One productwill not be seen as being passedoff as another merely because itcopies design features of the otherproduct.

THE FACTSHeyneman designed an

inflatable boat which was namedthe ‘Falcon’. The second applicant,Quantum Leap Investments 203(Pty) Ltd, in which he was the soleshareholder and director,manufactured and distributed theboats.

In 1997, Waterfront Marine CCcommenced selling Falcon boatspurchased from Quantum. After anumber of years, Quantum gaveWaterfront the sole right todistribute and sell the boats inCape Town. Heyneman conveyedto it all technical aspectsconcerning the design andconstruction of the boats.

In 2002, Waterfront informedHeyneman that it intended todesign an inflatable boat of itsown and market and distributethis boat in Europe. It informedHeyneman that it hadcommissioned a marine architectto design a range of boats for itand it had built all the plugs forthe moulds from scratch.Waterfront instructed a marinearchitect to design an inflatableboat similar to the Falcon but animprovement on it. When this wascompleted, Waterfront beganmanufacturing an inflatable boatnamed the ‘Sovereign’. TheSovereign was superficiallysimilar to the Falcon but therewere differences in design andconfiguration.

Heyneman took the view that theSovereign was being passed off asthe Falcon. It brought interdictproceedings to prevent Waterfrontfrom continuing with suchconduct.

THE DECISIONPassing off as a species of

unlawful competition, requiresproof that there is a reasonableprobability that a person would bemisled into thinking that theproduct being sold is the productof another party. A plaintiff mustshow that its product has acquireda reputation which has becomedistinctive of the product inquestion.

In the present case, it was clearthat Heyneman had expendedmuch time, money and effort intodesigning and developing theFalcon range of inflatable boats.However, there was no indicationthat the product had acquired anyreputation relating to any aspectof the design, shape, form or get-up of the boats. The shape or formwas not unique. This was becauseall rigid inflatable boats aresubstantially similar in design,shape and form.

The Falcon and the Sovereignwere similar in many respects butthere were not almost identical.Even if the Sovereign design hadbeen a detailed copy of the Falcondesign, this would not haveconstituted unlawful competition.It would only be if Waterfront wasattempting to pass off theSovereign as being the Falcon thatit could be said they wereengaged in unlawful conduct.However, it was clear that areasonably cautious anddiscerning purchaser would notbe misled by the design, shape,form or get-up of the Sovereignand think he was purchasing aFalcon.

The application was dismissed.

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81

FHP MANAGEMENT (PTY) LTD v THERON N.O.

A JUDGMENT BY VANHEERDEN JCAPE OF GOOD HOPEPROVINCIAL DIVISION9 APRIL 2003

2004 (3) SA 392 (C)

A party choosing to sue forspecific performance in terms of acontract may later cancel thecontract should the repudiatingparty fail to comply with an orderfor specific performance.

THE FACTSTheron, acting as a trustee of

AS&R Children’s Family trust,signed an offer to purchase fromFHP Management (Pty) Ltd asectional title unit at HarbourIsland Two, Gordon’s Bay, forR680 000. FHP accepted the offer.Occupation of the property hadbeen given to the trust a fewweeks earlier. The trust paidcertain amounts to FHP in termsof the agreement, including adeposit of R34 000.

In terms of clause 4.1.2 of theagreement, the trust was requiredto furnish a suitable guarantee forpayment of the balance of thepurchase price, an amount of R646000, within forty five days ofconclusion of the agreement. Thetrust failed to furnish thisguarantee, and failed, from 1September 1998, to payoccupational interest at the rate ofR129,80 per day.

FHP brought an applicationagainst Theron claiming specificperformance of the agreement.Theron opposed the applicationon the grounds that when theoffer to purchase was signed, onlyone trustee was in office, Theronhimself then being anunrehabilitated insolvent, and thatTheron did not have delegatedauthority to represent the trust,the resolution authorising him toact having been signed only byhim. The defences were rejectedand judgment was given againstthe trust. The trust appealed butthe appeal was dismissed.

FHP commenced enforcementproceedings on the judgment itheld. The trust was unable tosatisfy the judgment. FHPconsidered this a repudiation ofthe agreement of sale and notifiedthe trust that it accepted therepudiation and terminated theagreement with immediate effect.It demanded that Theron vacatethe property. Theron failed to doso. FHP then applied for an order

evicting the trust and all thoseclaiming occupation through thetrust, as well as an order forpayment of R129,80 as damagesfor the unlawful holding over ofthe property by the trust followingcancellation.

Theron opposed this applicationon the grounds that as FHP hadinitially chosen to enforce theagreement, it was precluded fromcancelling the agreement andsuing for ejectment. Theron alsoalleged that it was attempting tosettle the dispute by negotiationand that the trust had incurredsubstantial expenditure inimproving the property andshould be reimbursed in respectthereof.

THE DECISIONThe fact that FHP had chosen to

sue for specific performance didnot preclude it from latercancelling the agreement andsuing for eviction. Where a partyfails to comply with an order forspecific performance, such failureamounts to a new breach ofcontract entitling the othercontracting party to cancel thecontract and bring an action forrecovery of damages. FHP wastherefore entitled to bring thepresent application for eviction.

It was clear that the trust hadrepudiated the agreement when itfailed to comply with the ordergiven against it. The trust’sproperty rights as provided for insection 26(3) of the Constitutionand its rights in terms of thePrevention of Illegal Eviction fromand Unlawful Occupation of LandAct (no 19 of 1998) had to bemeasured against the right of theproperty owner. Should that partyprove that it is the owner and thatanother party is in unlawfuloccupation of the property, it isincumbent on the occupier toshow why the owner should notbe granted an order for theeviction of the occupier. The trust

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had shown nothing to indicatewhy FHP should not be grantedsuch an order.

The fact that the trust was tryingto settle the matter was irrelevantto the issue in question between

the parties. The trust had alsofailed to show that it made anyuseful improvements to thepremises.

The application succeeded.

FRANCIS v SHARP

A JUDGMENT BY HJ ERASMUS J(VAN ZYL J concurring)CAPE OF GOOD HOPEPROVINCIAL DIVISION6 MARCH 2003

2004 (3) SA 230 (C)

An agreement in the nature of apartnership agreement maydisplay the characteristics of ashareholders’ agreement and makeprovision for matter of interestbetween parties who becomeshareholders in a company.

THE FACTSFrancis, Sharp and the third

defendant entered into anagreement which was not reducedto writing. At the time theagreement was concluded, Franciswas an unrehabilitated insolvent.

The terms of the agreement, asalleged by Francis, were that theparties would conduct a businessthrough a company and would beequal shareholders and/or equitypartners in that business whichwould be conducted as a jointventure. The business activities ofthe company would entail theproduction, marketing and sale ofits products. Its productsconsisted primarily in rotationallymoulded plastic bins for use in thefishing industry.

The parties would not be entitledto obtain funds generated withinthe company whether by way ofremuneration, distribution,dividends or payments in anymanner. The parties would jointlymanage the affairs of the companyand each would be directors,observing their statutory dutiesand obligations as directors, andwould act in good faith towardseach other. Because Francis wasan unrehabilitated insolvent,transfer of her shareholding andher appointment as director

would not take place until shewas rehabilitated.

Sharp and the second defendantwould hold the shareholding ofFrancis on her behalf as nomineesand would not deal with it in anymanner other than to retain it asnominees on her behalf. Theywere not entitled to encumber,transfer or otherwise deal withher claims against the company.

Francis alleged that Sharp andthe second defendant breachedthe agreement. She cancelled theagreement and claimed R342424,10 in damages. Thedefendants excepted to the claimon the grounds that the agreementon which Francis relied was apartnership agreement butcontained terms which could onlybe agreed between shareholdersof a company. They also exceptedto the claim on the grounds thatthe agreement provided for themanagement of the company andits funds by the parties theretoand not by the directors of thecompany who alone were entitledto do so. A second ground ofexception was that there was nobasis in law for the allegation thatas an unrehabilitated insolvent,Francis could not take transfer ofher shareholding in the company.A third ground of exception was

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that the claim was vague andembarrassing in that there wasunclear what was meant by ‘fundsgenerated in the company’.

THE DECISIONThe defendants assumed that

Francis was not a shareholder inthe company. However, Francisalleged that she was to be thebeneficial shareholder of shares inthe company to be held by thedefendants as nominees. Theagreement alleged by Francisdisplayed the characteristics of a

partnership agreement as well asa shareholders’ agreement. Assuch, it provided the basis for theclaim brought by Francis againstthe defendants. The exceptions onthis ground were dismissed.

As far as the second ground ofexception was concerned, Francishad not alleged that she could nottake transfer of her shareholdingbecause she was anunrehabilitated insolvent. She hadmerely referred to the fact of herstatus as an unrehabilitatedinsolvent as a reason why she

would not take such transfer.Whatever her motive in not takingtransfer, this was not relevant toher claim.

As far as the third exception wasconcerned, the agreement wasclearly entered into by businesspeople who intended theagreement to have commercialoperation. Read within the contextof the agreement as a whole, as abusiness document, the fundsgenerated in the company couldonly mean funds derived from thebusiness activities of the company.

DE VILLIERS N.O. v BOE BANK LIMITED

A JUDGMENT BY NAVSA JA(HOWIE P, STREICHER JA andVAN HEERDEN AJA concurring,HEHER JA dissenting)SUPREME COURT OF APPEAL26 SEPTEMBER 2003

2004 (3) SA 1 (A)

A provision that waiver of a rightmust be given in writing must bestrictly adhered to. Waiver whichis not given in writing isineffective. Directors whoacquiesce in the taking of a loanwhile failing to pass a formalresolution adopting the taking ofthe loan effectively take the loanon behalf of their company.

THE FACTSMacmed Health Care Ltd

decided to buy parts of thebusiness of SA Druggists Ltd aswell as SA Druggists’ shares andloan account in SA Fine Chemicals(Pty) Ltd. The price was R500m,which in terms of heads ofagreement signed by the parties,was payable by a rights offer,from Macmed’s cash resourcesand by way of a loan from B.O.E.Bank Ltd for R100m.

The businesses had beenconducted under the nameIntramed, and Macmed arrangedfor the continuation of the use ofthis name by arranging that thebusiness would be transferred to acompany to be named Intramed(Pty) Ltd which became asubsidiary of Macmed. The loanfrom BOE was to be one to

Macmed or its nominatedsubsidiary which was Intramed.

In June 1999, BOE signed threeloan agreements agreeing toadvance a total of R100m toIntramed. A director of Macmedand Intramed, one Hiscock,signed the agreements on behalfof Intramed, as well as a cession ofbook debts on behalf of thatcompany and a suretyshipundertaking on behalf of Macmed.This was done after a resolution ofa meeting of Intramed directorsauthorised the borrowing and thesigning of documentationnecessary for that by Hiscockincluding documentationnecessary to give BOE security forthe loan in the form of a mortgagebond and a notarial bond. Theresolution was however, notformally executed as required by

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the Articles of Intramed. Macmedhad three directors, all of whomsupported the taking of the loanand acquiesced in the resolutionconfirming it.

The agreements were madesubject to suspensive conditionsall but one of which were fulfilled.The unfulfilled suspensivecondition was that the sale of thebusiness be finally concluded. Thesale was in fact brought about bythe conclusion of the heads ofagreement in terms of which thebusiness was transferred toIntramed.

The suspensive conditions wereincorporated in the agreement forthe benefit of BOE. The sameagreement provided that anywaiver of a party’s right had to bein writing. BOE in fact gaveextensions of time for thefulfilment of the conditions andwaived its right to requirefulfilment of that which was neverfulfilled. The waiver was notgiven in writing.

BOE advanced the loans toMacmed. Intramed made threerepayments then, in September1999, it was placed in provisionalliquidation. BOE claimedrepayment of its loans, withinterest in terms of theagreements.

The liquidators contended thatthe loan had been advancedwithout proper authority of theborrower, that it was not received,and that its suspensive conditionswere not fulfilled.

THE DECISIONIt was clear that the directors all

consented to the loans and all ofthem acquiesced in the taking ofthem. They knew about the loansand abided by them. Whether ornot their resolution was madeformally in terms of the Articles ofthe company was therefore noreason to conclude that the loanshad been taken without theproper authority of the company.

As far as the allegation of non-

receipt was concerned, the loanswere made to Macmed, but thisdid not mean they were not madeto Intramed since Intramed wasproperly seen as havingnominated Macmed as thebeneficiary to which payment hadto be made.

As far as the alleged failure ofthe suspensive conditions wasconcerned, it was true that thesewere incorporated for the benefitif BOE which was also thearchitect of the agreements.However, the requirement thatany waiver be in writing had to bestrictly adhered to. Macmed andIntramed had an interest in thecertainty of a written waiver.Accordingly, BOE was not entitledto rely on the loan agreements toenforce repayment of its loan andhad to be content with recoverybased on restitution. This meantthat it was entitled to repaymentof the loan without interest asagreed but with mora interest.

The claim for repayment of theloan succeeded.

Contract

85

MOONSAMY v NEDCOR LTD

A JUDGMENT BY LEVINSOHN JDURBAN AND COAST LOCALDIVISION27 SEPTEMBER 2002

2004 (3) SA 513 (D)

The nomination of a beneficiaryunder a life insurance policy willnot be considered to be tacitlyrevoked where the policyprovisions for revocation of thenomination are not compliedwith.

THE FACTSMr SP Maharaj took out a life

insurance policy with Fedsure LifeAssurance Ltd, naming Mrs LMaharaj as the beneficiary. Thepolicy provided that cancellationof the existing beneficiary andnomination of a new one had to beeffected in writing by notice toFedsure. During his lifetime,Maharaj ceded the policy insecuritatem debiti to Nedcor Ltd.The cession provided that afterpayment to the bank of amountsowed to it, it was to account to thecedent if there was thereafter anysurplus. Upon his death, the bankobtained payment of the proceedsfrom Fedsure, applied part of thisin payment of the indebtedness ofMaharaj, and paid a balance ofR530 302,03 to L Maharaj.

The executors of the deceasedestate contended that uponexecution of the cession of thepolicy, the nomination of thebeneficiary was tacitly revokedand that payment of the balanceof the policy ought to have beenmade to them. They brought anaction against the bank forpayment of the balance of thepolicy.

THE DECISIONThough there was authority to

the contrary, the judgmenthanded down in the matter of ExParte Macintosh N.O.: In Re EstateBarton 1963 (3) SA 51 (N) appliedto the present case. The provisionsfor revocation in the policy werenot simply a protection for theinsurer but operated as part of thecontract between insured andinsurer. Accordingly, for allpurposes, they had to be compliedwith to effect a proper revocation.Since there had not beencompliance with the revocationprovisions of the policy in thepresent case, the executors’contention that a revocation hadtaken place could not be accepted.

The act of executing the cessionitself could not amount to arevocation of the nominatedbeneficiary as the beneficiaryalways retained the hope thatpayment under the policy wouldbe made to her, so long as thecession was one in securitatemdebiti. Furthermore, the fact thatthe cession agreement requiredthe bank to account to Maharaj forany surplus did not point to arevocation in circumstances wherethe bank did not do so.

The action was dismissed.

Contract

86

NIEUWOUDT v VRYSTAAT MIELIES (EDMS) BPK

A JUDGMENT BY VANFARLAM JA(HARMS JA, BRAND JA,CLOETE JA and VAN HEERDENAJA concurring)SUPREME COURT OF APPEAL28 NOVEMBER 2003

2004 (3) SA 486 (A)

A trust deed which provides thatthe trustees may empower one ormore of them to sign anydocument on behalf of all of themfor official purposes entitles anoutsider to assume that thetrustee signing a contract does sowith the authority of the othertrustee unless it can be shownthat the trustee signing thecontract was not so authorised.

THE FACTSNieuwoudt entered into an

agreement with C & WLandboudienste in terms of whichNieuwoudt undertook to deliver900 tons of mielies to C&W at aprice of R785 per ton. Nieuwoudtacted on behalf of the JJ BoerderyTrust in his capacity as trustee ofthat trust. He was however, notauthorised to act on behalf of thetrust.

The trust deed provided that thetrustees were given wide powersto achieve the objects of the trust,including the management offarming operations and thepurchase and sale of goods of anynature. It also provided thatdecisions were to be taken by thetrustees by majority vote wherethe number of trustees exceededtwo and by unanimous votewhere there were only twotrustees.

Clause 23.4 of the trust deedprovided that the trustees couldempower one or more of them tosign any document on behalf of allof them for official purposes inconnection with theadministration of the trust.

C&W ceded its rights in terms ofthe agreement to Vrystaat Mielies(Edms) Bpk. It was then informedby the trust that it did notconsider itself bound to theagreement of sale becauseNieuwoudt had not beenauthorised to act on behalf of thetrust in concluding the agreement.

Vrystaat brought an applicationfor an order declaring theagreement to be valid and bindingand to compel the trust to deliverthe mealies.

THE DECISIONThe trust deed was a public

document and open to inspectionby C&W. However, theapplicability of otherwise of RoyalBritish Bank v Turquand (1856) 119ER 886 (Ex Ch) was not relevant tothe matter because of the importof clause 23.4.

This clause clearly applied onlyto the signing of documents forofficial purposes and did notapply to the contract signed byNieuwoudt. It followed thatinternal formalities, andcompliance therewith, wasrelevant. In view of clause 23.4, anoutsider was entitled to assumethat the trustee who did sign thecontract was empowered to do so.

Although Nieuwoudt did notspecifically deny that he wasauthorised to sign the contract, thequestion whether he was soauthorised or not was to beappropriately decided in acontinuation of the trial action.

The appeal succeeded and thematter was referred for trial.

Contract

87

NTSANWISI v MBOMBI

A JUDGMENT BY BOTHA JTRANSVAAL PROVINCIALDIVISION18 NOVEMBER 2003

2004 (3) SA 58 (T)

A protectable interest worthy ofprotection under a restraint oftrade clause is demonstrated inthe following of clientsestablished as such by a party tothe restraint agreement.

THE FACTSNtsanwisi and Mbombi were

two doctors who entered into apartnership agreement. Theagreement was concluded inMarch 1999, some six months afterMbombi had also worked full-time in the practice. Clause 9 oftheir agreement provided thatshould the partnership beterminated at any time, for aperiod of three years from date oftermination, Mbombi would notbe entitled to practice as a medicalpractitioner within a fiftykilometre radius of their practice.

When the partnership agreementwas concluded, Ntsanwisi hadalready established the practiceand had a monthly turnover ofsome R400 000.

On 12 November 2002, thepartnership was terminated.Mbombi immediately set up anew practice of his own within afifty kilometre radius of theprevious practice.

Ntsanwisi brought anapplication to enforce the restraintof trade clause against Mbombi.Mbombi resisted the applicationon the grounds that Ntsanwisihad failed to show that he had anyprotectable interest which wouldwarrant the restraint of tradeprovided for in clause 9.

THE DECISIONWhen Mbombi started working

in the practice, he wasimmediately exposed to thepatients established as clients byNtsanwisi over the years. IfMbombi was able to establish arelationship with any of them tothe point that they would beprepared to follow him to a newpractice, then the goodwillestablished by Ntsanwisi wouldbe affected. This was the reasonwhy clause 9 was included in thepartnership agreement.

It was not necessary forNtsanwisi to prove that he hadactually lost any patients toMbombi, only that he hadestablished the goodwill in thepractice which was his protectableinterest. It was clear that he haddone so and he was entitled to theprotection of it.

As far as the extent and durationof the restraint were concerned,the period appeared to be toolong. The period need not be thatperiod over which the patientsMbombi had come to know wouldforget about him. A period oftwelve months was morereasonable. The extent of the areaof restraint was howeverreasonable, given the particularlocation in which the practice wassituated.

The application was granted.

Contract

88

MELAMED & HURWITZ INC v BLANK

A JUDGMENT BY VAN ZYL J(ALLIE J concurring)CAPE OF GOOD HOPEPROVINCIAL DIVISION28 MAY 2004

2004 CLR 217 (C)

An attorney’s fee for servicesrendered is proved to be payable byproving the mandate under which theservices were rendered, theperformance of those services andthat the fee was charged as agreedalternatively constituted reasonableor usual remuneration.

THE FACTSBlank instructed Melamed &

Hurwitz Inc to represent her indivorce proceedings. Sheconsulted with Melamed andobtained advice on a proposedsettlement forwarded to her byher husband’s attorney. Acounter-proposal was made andin due course, a final settlementagreement was concluded.

The final settlement agreementprovided that Blank’s husbandwould make a payment of R10 000as a contribution to Blank’s legalcosts. Melamed indicated to Blankthat his fee would be in excess ofthis and estimated that it wouldamount to R25 000.

Melamed rendered an account toBlank in this amount plus VATless the amount paid by Mr Blankas a contribution to legal costs.Blank refused to pay the balanceowing, claiming that there hadbeen no agreement on the amountof Melamed’s fee which sheclaimed was excessive in relationto the work actually done by him.

THE DECISIONTo prove its entitlement to

payment of the fee, Melamed hadto prove (i) the mandate given tohim to act for Blank, (ii) dueperformance of his obligationsthereunder by the rendering of therelevant services, and (iii) the feescharged were those agreed,alternatively constitutedreasonable or usual remuneration.

It was clear that Blank hadunderstood the payment of R10000 by her husband was acontribution to legal costs andtherefore that the balance wouldbe payable by herself. Herallegation that the expected feefrom Melamed would be less thanthis and that the contribution inexcess of that fee was intended tomake her feel comfortable to coverit was unacceptable.

Allegations of over-charging andexcessiveness in the fee were notraised in a special plea, and werenot properly proved.

The appeal succeeded.

Contract

89

JASAT & JASAT v DEEDAT

A JUDGMENT BY LEVINSOHN JNATAL PROVINCIAL DIVISION10 MAY 2004

2004 CLR 207 (N)

Provisional sentence may begranted on a bill of costs obtainedby attorneys acting for adefendant. The fact that theattorneys do not have a formalpower of attorney evidencing theirauthority to act is an insufficientto refuse provisional sentence,provided that their authority toact is demonstrated by othermeans.

THE FACTSDeedat was sued in the High

Court and instructed an attorneyto represent him in the matter.The attorney joined as a partner ofJasat & Jasat, at which time thepartnership took cession andtransfer of all assets and liabilitiesof the attorney.

Following a settlement of thematter, Jasat & Jasat submitted abill of costs for taxation with theRegistrar of the court. The bill wastaxed in the sum of R655 221,83.

Jasat & Jasat then brought anaction for provisional sentenceagainst Deedat based on the bill ofcosts. It alleged that Deedat hadgiven it a mandate to act for himand submitted in evidence variousdocuments including a notice ofappointment as attorneys ofrecord, a discovery affidavit and asettlement offer signed by Deedat.

The court raised the questionwhether the allegations made byJasat & Jasat in support of theaction were sufficient to supportthe granting of provisionalsentence against Deedat.

THE DECISIONPrevious judgments have held

that provisional sentence may begranted based on a bill of costs.This must be supported by apower of attorney given by thedefendant in favour of theattorney suing on the bill of costs.

In the present case, Deedat hadnot signed a power of attorney.However, the documentaryevidence showed that he hadgiven Jasat & Jasat the mandate toact for him. Having instructed theattorneys to act for him, apresumption arose that theattorneys would be paidremuneration at the customaryrate upon performance of theirmandate. Deedat had failed torebut this presumption and hisprevious statements wereinconsistent with the allegationthat he had understood theattorneys to be acted for him freeof charge.

Provisional sentence wasgranted.

Contract

90

GEYSER N.O. v TELKOM SA LTD

A JUDGMENT BY SITHOLE AJTRANSVAAL PROVINCIALDIVISION4 DECEMBER 2003

2004 (3) SA 535 (T)

A creditor does not lose rights byaccepting a payment which if setaside in terms of section 26(1)(b)of the Insolvency Act (no 24 of1936) it may claim again from itsdebtor.

THE FACTSMedilife Medical Scheme paid

Telkom SA Ltd R1 944 158,87 overa period of two years. Thepayments were made insettlement of a number ofaccounts rendered by Telkomagainst various persons andentities for telephone andtelecommunications servicesprovided by it.

Telkom’s accounting systemsoperated according to acomputerised system thatrecorded payments againstaccounts without identifying thepayor. It was not concerned withthe identity of the payor but onlywith whether or not the accounthad been paid. If payment for anaccount was not received, Telkomwould ultimately terminate theaccount-holder’s service.

Medilife was placed inliquidation. Its liquidator, Geyser,contended that the payment of R1944 158,87 constituted adisposition without value withinthe meaning of section 26(1)(b) ofthe Insolvency Act (no 24 of 1936)and should be set aside. It broughtan action against Telkom for anorder to that effect and reclaimedthe amount so paid.

Telkom contended that when thepayments were made, it lost theright to terminate the variousaccount holders’ services, and thataccordingly section 33(1) of theAct applied. This section providesthat a person who, in return forany disposition which is liable tobe set aside has parted with anyproperty or security which he heldor who has lost any right againstanother person, shall, if he actedin good faith, not be obliged torestore any property or otherbenefit received under suchdisposition, unless indemnified bythe trustee.

THE DECISIONThe question was whether or not

Telkom had lost any right when itreceived payment of the accounts.

If the disposition was set aside,Telkom would retain its right toclaim payment from the accountholder whose indebtedness wouldremain. In consequence, no rightswould have been lost and Telkomwould have become entitled toexercise its rights as against theaccount holders, ultimately byterminating their services ifnecessary. This right subsisted,notwithstanding the fact that itmight be of little value at thepresent time.

It was also the case that thepayments made to Telkom werenot valid because they wereimpeachable transactions undersection 26(1)(b) of the Act.

Even if it was accepted thatTelkom had given up the right toterminate a service upon receivingthe payments made by Medilife,the party making the payment didnot owe Telkom the money. Therewas therefore no reciprocitybetween the disposition made byMedilife and the alleged partingwith any property, theabandonment of the right toterminate the account. Section33(1) therefore did not applybecause Telkom did not part withany property or security in returnfor the disposition made byMedilife.

There was no reason whyTelkom could not amend itsaccounting and computer systemsto record the identity of the payor.It had therefore also not shownthat it acted in good faith inrespect of the dispositions theliquidator now sought to set aside.

The action succeeded.

Insolvency

91

LL MINING CORPORATION LTD v NAMCO (PTY) LTD

A JUDGMENT BY DAVIS JCAPE OF GOOD HOPEPROVINCIAL DIVISION22 APRIL 2003

2004 (3) SA 407 (C)

A court will suspend proceedingsin terms of section 359(1) of theCompanies Act (no 61 of 1973)when it is clear that an orderwinding up a company has beengiven following thecommencement of proceedingsagainst it.

THE FACTSLL Mining Corporation Ltd held

a special notarial bond over themovables of the secondrespondent as security for a loan.On 12 December 2002,proceedings to wind up Namco(Pty) Ltd commenced.

On 24 December 2002, LLobtained a provisional order interms of which a rule nisi wasmade calling upon Namco toshow cause why it should not bedeclared that LL was the owner ofthe movables and deeming theproperty to be pledged to it. Themovables were then on board theZacharias, a ship owned byNamco. The provisional order alsointerdicted the Zacharias fromleaving harbour until the removalof the property by LL.

On 7 January 2003 an orderwinding up Namco was givenagainst it. When LL’s applicationwas again heard, the provisionalliquidators of Namco applied foran order suspending theproceedings brought against it interms of section 359(1) of theCompanies Act (no 61 of 1973).

The section provides that when acourt has made an order for thewinding up of a company, all civilproceedings by or against thecompany shall be suspended untilthe appointment of a liquidatorand any attachment or executionput in force against the estateassets of the company aftercommencement of the winding upshall be void.

THE DECISIONThe fourth respondent

contended that since winding upproceedings began before theorder was granted on 24December 2002, the order thengranted was provided for insection 359(1) and could not beeffective as against Namco. Thiscontention rested on theunderstanding that theattachment of execution referredto in that section include eventssuch as the order granted on 24December 2002.

The only operative part of thatorder was the prevention of itsdeparture. Section 359(1)(a)however, also expressly refers to atime when it operates, ie when acourt has made an order for thewinding up of the company. Thistook place after the order of 24December 2002 was made. Itseffect was therefore to prevent thecontinuation of proceedings andpreserve the status quo.

An order suspendingproceedings was granted.

Insolvency

92

LOVE v SANTAM LIFE INSURANCE LTD

A JUDGMENT BY PLASKET JSOUTH EASTERN CAPE LOCALDIVISION29 JULY 2003

2004 (3) SA 445 (SECLD)

A beneficiary under a lifeinsurance policy is entitled topayment of the benefits of thepolicy upon the death of theinsured notwithstanding theinsolvency of the insured and suchbenefits are not payable in respectof a debt of the deceased.

THE FACTSIn April 1996, Mr RJ Love took

out a life insurance policy withSantam Life Insurance Ltdinsuring his own life. His motherand his wife, to whom he wasmarried out of community ofproperty, were the beneficiaries.

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

The trustee in Mr Love’sinsolvent estate took the view thatthe proceeds of the life policyshould be paid into the deceasedestate as the nomination of hiswife and mother as beneficiariesamounted to a voidablepreference.

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

THE DECISIONThe nomination of a beneficiary

in terms of a life insurance policydoes not constitute a transfer ofrights, is therefore not adisposition, and therefore cannotbe a voidable disposition asreferred to in section 29(1) of theInsolvency Act (no 24 of 1936).The essential question however,was whether section 63(1)(b) ofthe Long-Term Insurance Act (no52 of 1998) applied.

This section provides that thepolicy benefits provided for undera life insurance policy in force forat least three years shall not beavailable for payment of a debtupon death of the insured.

There was no reason to limit theoperation of this sub-sectionbecause of the provisions of thefollowing sub-section, section63(2) which provides for assetsacquired solely with the policybenefits, limiting the protectionapplicable in respect of them toR50 000. Sub-section 2 applies tothe deceased but not to a personsuch as a beneficiary under therelevant policy.

The policy benefits weretherefore fully payable to Loveand her mother as nominatedbeneficiaries. The applicationsucceeded.

Insolvency

93

NAPIER N.O. v VAN SCHALKWYK

A JUDGMENT BY FARBER AJ(BORUCHOWITZ J and JAJBHAYJ concurring)WITWATERSRAND LOCALDIVISION5 SEPTEMBER 2003

2004 (3) SA 425 (W)

If a condition in an insurancepolicy requiring writtennotification of an event giving riseto a claim within a specifiedperiod is not observed by theinsured, the insurer is entitled torepudiate a claim irrespective ofwhether the insured has sufferedprejudice and whether or not thecondition was incorporated forthe benefit of the insurer.

THE FACTSVan Schalkwyk insured his fleet

of heavy duty trucks against lossarising from damage, the insurerbeing certain underwriters atLloyds of London. The insurancewas arranged through the Lloydscorrespondent in South Africa, acompany trading as Transure. TheLloyds general representative inSouth Africa was Napier.

In terms of condition 3 of thepolicy, Van Schalkwyk warrantedthat all physical loss or damagewas to be advised to theunderwriters within 24 hours ofthe occurrence giving rise to theloss or damage but loss arisingfrom theft or hijacking was to beadvised to the underwritersimmediately the assured wasaware of the theft or hijackinghaving taken place. Failure tonotify the underwriters in writingwithin the specified periodswould result in anyindemnification for the loss beingforfeited by the assured.

During the late evening ofFriday16 March 2001, one of thetrucks in Van Schalkwyk’s fleetwas damaged in an accident. VanSchalkwyk’s sister was informedof the accident on that date. Sheinformed her brother and thentelephonically informed anemployee of Transure. Sheobtained a claim form, completedit and submitted it to Transure onMonday 19 March 2001. It waslater transmitted by Transure tothe underwriters.

The underwriters repudiated theclaim on the grounds thatcondition 3 had not been compliedwith. Van Schalkwyk sued forpayment of R281 500 being theamount of the loss suffered in theaccident. His action wassuccessful. The underwritersappealed.

THE DECISIONWhether viewed as a condition

precedent or a material obligatoryterm, condition 3 is clear andunequivocal in its meaning andeffect. The indemnification towhich the insured is otherwiseentitled is forfeited in the eventthat notification of the loss is notgiven in writing within 24 hours.

The fact that the condition wasimposed for the benefit of theinsured and that the insured wasnot prejudiced by the failure tonotify it of the accident within 24hours did not affect its right torefuse the claim. There was a clearbreach on the part of VanSchalkwyk and this entitled theinsurer to disavow liability underthe policy.

Van Schalkwyk had failed toestablish that in thecommunications taking place afterthe accident between his sisterand Transure, any waiver of theinsurer’s rights had taken place.Those communications did notconsider the effect of condition 3.Furthermore, the appointment ofan assessor after the claim formhad been submitted did notindicate any waiver on the part ofthe insurer.

The insurers had also shown thatVan Schalkwyk’s claim wasattended by a misrepresentationregarding the use of a tachographdevice at the time of the accidentand on this ground also, theywere entitled to repudiate theclaim.

The appeal succeeded.

Insurance

94

SMARTPHONE SP (PTY) LTD v ABSA BANK LTD

A JUDGMENT BY PONNAN JWITWATERSRAND LOCALDIVISION21 NOVEMBER 2003

2004 (3) SA 65 (W)

A bank is not obliged to satisfyitself that a notice issued in termsof section 47 of the Value-AddedTax Act (no 89 of 1991) is validlyissued before it acts according tothe instruction contained in suchnotice. A party aggrieved byaction taken in terms of thatsection should object to it orappeal against it prior toapplying for the reversal of suchaction.

THE FACTSThe South African Revenue

Service (SARS) issued a notice toAbsa Bank Ltd to pay an amountof R70 917 268,45 from the accountof Smartphone SP (Pty) Ltd. Itpurported to do so in terms ofsection 47 of the Value-Added TaxAct (no 89 of 1991). Prior toissuing the notice, it had notalleged that the amount was dueand had not issued an assessmentagainst Smartphone in terms ofsection 31 of the Act but had doneso against Smartphone’spredecessor, a company whosebusiness had been purchased bySmartphone.

Absa paid this amount to SARSby debiting Smartphone’s accountwith it and transferring theproceeds to SARS.

Section 47 of the Act providesthat the Commissioner maydeclare any person to be the agentof another person and the personso declared to be an agent shall besuch agent in respect of thepurpose of the payment of anyamount of tax payable under theAct and may be required to makepayment of such amount frommoney held by it.

Smartphone objected to thedebiting of its account. Itcontended that because SARS hadnot alleged this amount was dueor issued an assessment against it,Absa had not been entitled todebit its account. It brought anapplication against Absa declaring

that it had not been lawfullyappointed the agent of SARS interms of section 47 of the Act, hadnot been entitled to debit itsaccount, and was to credit itsaccount again with the amountearlier debited.

THE DECISIONAbsa was not obliged to satisfy

itself that the notice given bySARS was properly given. Section47 imposes on an agent theobligation to act as such from thetime that the notice is given and itprovides no means by which theagent so appointed may query thejurisdictional facts upon which thenotice is given. It was thereforenot possible to require of Absathat it should have so satisfieditself before debitingSmartphone’s account.

As far as the legitimacy of theactions taken under section 47were concerned, it was clear thatSARS had issued an assessment,albeit in respect of Smartphone’spredecessor whose business wasbeing continued by Smartphoneand whose bank accountremained active.

In terms of the Act, Smartphonewas able to object and appealagainst the assessment and theaction taken in terms of section 47.Smartphone could have pursuedany of these remedies and, since ithad not done so, its application inthis court was premature and ill-founded.

The application was dismissed.

Banking

95

LTA CONSTRUCTION LTD v MEDITERRANEANSHIPPING COMPANY DEPOTS (PTY) LTD

A JUDGMENT BY HURT JDURBAN AND COAST LOCALDIVISION21 APRIL 2004

SCOSA D 211 (D)

A Himalaya clause may beenforced in favour of a partywhich has given a Carrierauthority to conclude anagreement incorporating such aclause. Consideration thereforwill be constituted by theacceptance of the obligation toperform the obligations of theCarrier. The Carrier’s obligationwill continue after delivery ofgoods at the port of discharge if itis provided that the Carriershould also undertake the storageof goods pending delivery of thegoods.

THE FACTSClause 17 of a Bill of Lading

issued by Mediterranean ShippingCompany SA Geneva (‘MSC’)provided that the Carrier or hisagent would not be liable for lossor damage to goods during theperiod before loading and afterdischarge from the vessel. Goodsin the custody of the Carrier or hisservants before loading and afterdischarge were in such custody atthe sole risk of the Merchant andthe Carrier would not be liable forloss or damage arising from anycause whatsoever. Clause 18provided that no servant or agentof the Carrier including any sub-contractor employed by theCarrier, would be under anyliability whatsoever to theMerchant for any loss arising fromany act while acting the course ofhis employment, and everyexception and limitation thereincontained and applicable to theCarrier to which the Carrier wasentitled would also be availableand extend to protect everyservant and agent of the Carrier.

Clause 2 of the Bill of Ladingprovided that English law shouldbe applied in the adjudication ofclaims and disputes arising fromit.

Clause 5 provided that theCarrier or his agent would not beliable for loss to the goods afterdischarge from the vessel. Itfurther provided that if the goodswere not taken by the Merchant atthe time when the Carrier wasentitled to call upon him to takedelivery, the Carrier would be atliberty at the sole risk and expenseof the Merchant to put the goodsin safe custody.

The Carrier was defined as theowner of the vessel or the demisecharterer and provided that MSCwould act as agent for the owneror demise charterer in arrangingthe transport covered by the Billof Lading.

The MSC Izmir shipped a mobilecrane from Dakar to Durban interms of this Bill of Lading and thecrane was offloaded at Durban inDecember 2000. In January 2000,while it was in storage at thewarehouse of the MediterraneanShipping Company (Pty) Ltd,MSC’s subsidiary, the container inwhich it was, was dropped andthe crane sustained damage.

The owner of the crane, LTAConstruction Ltd, claimed R378269,39 and brought an action forpayment of this amount. thedefendant contended that byvirtue of clause 18, it was notliable to LTA for the loss it hadsuffered.

THE DECISIONThe requirements for

applicability of a Himalaya clausesuch as that provided for in theBill of Lading were, according toScruttons Ltd v Midlands SiliconesLtd [1962] 1 All ER 1, that the Billof Lading must indicate clearlythat the servant is intended for beprotected by the limitingprovisions, and that the Carriercontracts both for itself and itsagents, that the Carrier hadauthority to make suchstipulations, and thatconsideration is transferred fromthe agent to the Carrier.

LTA contended that it had notbeen shown that the Carrier hadthe defendant’s authority toconclude a contract on its behalf,nor that the defendant had givenany consideration in respect of thecontractual provision in respect ofwhich it claimed indemnity in thepresent case.

The evidence showed that MSCat all times had the authority of itssubsidiary to conclude contractson its behalf. As far as thequestion of consideration wasconcerned, the defendant hadagreed to effect the conveyance ofthe mobile crane to LTA. This

Shipping

96

indicated an agreement toperform an act which MSC wasobliged to perform and thisconstituted valid considerationbecause LTA was entitled to insiston performance thereof. In thiscase, when the damage to thecrane occurred, the defendant wasperforming part of the obligationsundertaken by the Carrier.

The defendant also contendedthat by the time the damageoccurred, the contract of carriagehad terminated. Clause 5 of theBill of Lading however, envisageda period during which the goodsmight be in the custody of theCarrier pending delivery to LTA.The evidence showed that it waswithin the contemplation of the

parties that a removal and storageservice would be rendered at theport of discharge. This meant thatthe damage was sustained by thecrane at a time when the contractrecorded in the Bill of Lading hadnot yet terminated.

MSC was therefore entitled torely on the Himalaya clause. Theaction was dismissed.

Shipping

97

DINERS CLUB SA (PTY) LTD v SINGH

A JUDGMENT BY LEVINSOHN JDURBAN AND COAST LOCALDIVISION30 JULY 2003

2004 (3) SA 630 (D)

A credit card user accepts theterms and conditions applicableto use of the credit card upon useof the credit card and the amendedterms and conditions will beapplicable to the user upon anyrenewal thereof. A term that thecredit card user will be liable forany transactions effected with thecard irrespective of who uses thecard and whether or not such usein fraudulent is binding on thecredit card user and not contraryto public policy.

THE FACTSIn 1997, Diners Club SA (Pty)

Ltd issued Singh with a creditcard. The card was issued subjectto the current general terms andconditions applying to the issue ofa Diners Club Card. The termsand conditions included theprovision that any issue of arenewal card after expiry wouldbe subject to the prevailing termsand conditions accompanying thecard, which the cardholder wouldbe deemed to be aware of and tohave accepted upon use of thecard.

A renewal card was issued toSingh. The terms and conditionsapplicable included the term thatupon presentation by Diners of abilling form, voucher or any otherdocument including computerprintouts, then the card would bedeemed to have been used inaccordance with those terms andconditions, the billing formvoucher or other document wouldbe deemed to have been signed bythe cardholder, and the paymentof the debits therein reflectedwould be deemed to have beenmade by Diners. A certificatesigned by any manager of Dinerswould, upon mere production byDiners, constitute prima facieproof of such indebtedness. Thecardholder was deemed to haveagreed to such amendment uponuse of the renewal or replacementcard. Clause 7.3 of the terms andconditions provided that Singhwould be liable to pay for anytransactions effected with the cardirrespective of who initiated thetransaction.

Diners issued Singh with aPersonal Identification Number(PIN) which enabled thewithdrawal of cash from anAutomated Teller Machine (ATM)using the card. On 4 and 5 March2000, approximately 190withdrawals were made inLondon by the use of the card in

an ATM. The proceeds of thewithdrawals amounted toapproximately £54 000.

Singh contended that at all times,his credit card was in hispossession, that he had not beenin London at the time thewithdrawals took place and thatthe withdrawals must have beeneffected by someone unknown tohim, either a person workinginside Diners or the StandardBank of South Africa.

Diners brought an action againstSingh for payment of the randequivalent of £54 000. It furnisheda certificate by one of its managersstating the amount due by Singhunder the card account. Singhdefended the action on thegrounds that the withdrawals hadnot been effected by him or withhis authority.

THE DECISIONDiners proved prima facie the

existence of the agreementbetween the parties, and with theissue of the certificate ofindebtedness, proved that Singhwas indebted to it in the amountclaimed. Singh did not and couldnot challenge this evidence anddepended only on showing thatthe certificate was produced basedon fraudulent transactions whichhad taken place without hisknowledge or consent.

The evidence presented by Singhto show that the withdrawalswere effected by fraudulentindividuals did not assist inshowing he was not liable inrespect of them. The evidence wasdirected at showing that themethods employed in verifyingtransactions effected with thecredit card could have beenvulnerable to fraudulent usageeither by persons within Diners orwith Standard Bank. However,whether the card was usedfraudulently by such individualsor by complete outsiders, in terms

Credit Transactions

98

of the agreement between theparties, Singh was liable for them.The evidence designed to showthat a third party could havefraudulently accessed the ATMsdid not disturb Diners’ primafacie case.

Singh also contended that clause7.3 was contrary to public policyand should not be enforced.However, Singh accepted this

term and was not under anycompulsion to do so. He alsoapplied for and received a PIN,not having been obliged to do so,and should have known that thisentailed liability in the event of athird party using his card.

The evidence, in any event, didnot support Singh’s version thatthe credit card was used bypersons unknown to him.

The action succeeded.

Credit Transactions

The defendants accepted their cards knowing that theywould be bound by contractual terms and conditions.They were not under any compulsion to do so. Nor werethey obliged to apply for PINs. When they did so theyought to have known, alternatively, apprised themselves,of the term/terms applicable to the use of PINs.In my view, there is no basis for holding that clause 7.3

is against public policy.

99

REGISTRAR OF BANKS v REGAL TREASURYPRIVATE BANK LTD

A JUDGMENT BY LOXTON AJWITWATERSRAND LOCALDIVISION20 JANUARY 2004

2004 (3) SA 560 (W)

An application to intervene in thewinding up of a bank must showthat the applicant has locusstandi to bring such anapplication and that there aregrounds to show that the decisionto liquidate the bank may bereviewed and set aside.

THE FACTSThe Registrar of Banks brought

an application for the liquidationof Regal Treasury Private BankLtd after a solvency review of thebank had been conducted byDeloitte & Touche. The reviewindicated that the bank had totalassets of R587,3m and totalliabilities of R590,02m. Theapplication was supported by anaffidavit from the curator of thebank who stated that there was noreasonable probability that thecontinuation of the curatorshipwould enable the bank to pay itsdebts or meet its obligations andbecome a successful concern. Thechief executive officer of the bankhad provided his written consentto the appointment of the curator.

The bank’s holding company,Regal Treasury Bank HoldingsLtd, brought an application forleave to intervene in theapplication for liquidation. It wasthe sole shareholder in the bankand contended that it was owedapproximately R13,4m in respectof a dividend declared in 2001,that the curator had wrongfullyinstructed the Standard Bank todishonour cheques issued by itselfand refused to appoint anindependent auditor to determinethe solvency of the bank. RegalHoldings wished to investigatethe procedure by which theRegistrar brought about theliquidation proceedings andwhether he and the curatortreated it on a fair and equalfooting with other creditors. Italso wished to apply for a stay ofthe liquidation proceedingspending an investigation into theconduct of the Registrar andpending review proceedingsbrought against the Registrar’sdecision to apply for theliquidation of the bank.

THE DECISIONSection 9(1) of the Banks Act (no

94 of 1990) provides that anyperson aggrieved by a decisiontaken by the Registrar under aprovision of that Act may applyfor a review of that decision by theboard of review established bysub-section 2. The board of reviewis confined to establishingwhether or not in the taking of thedecision, the Registrar exercisedhis discretion properly and ingood faith.

The decision of the Registrar toapply for a winding-up orderagainst the bank was not adecision for the purposes ofsection 9(1). The Registrar’sdecision to apply for the windingup of the bank did not adverselyaffect the rights of Regal Holdingsand had no direct external legaleffect. It would be the decision ofthe court which would have suchan effect. Accordingly, section 9(1)provided no basis for RegalHoldings to attack the decision ofthe Registrar to apply for theliquidation of the bank.

Regal Holdings contended thatthe liquidation order should notbe granted because it might beshown that the bank was in factsolvent. It alleged that the curatormade certain payments tocreditors but not to others andthat the payments made wereunlawful. However, any unlawfulaction by the curator on thegrounds that he acted in a mannerprejudicial to Regal Holdingscould give rise to proceedingsbrought against the curator. Itcould not form the basis of adefence against an application towind up the bank.

The fact that the curator hadrefused to furnish information toRegal Holdings regarding theaffairs of the bank was no reasonto allow Regal Holdings tointervene in the application. Therewas no realistic prospect of Regal

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Holdings showing that any suchinformation would warrant itsintervention in the liquidationproceedings. There was also no

evidence to show that the bankcould be restored as a goingconcern.

The application for interventionfailed.

STANDARD BANK OF SOUTH AFRICA LTD v KOEKEMOER

A JUDGMENT BY BY MPATI DP(MARAIS JA, MTHIYANE JA,CLOETE JA AND JONES AJAconcurring)SUPREME COURT OF APPEAL27 MAY 2004

2004 CLR 340 (A)

A loan in terms of which advancesof money are made to a trustwhose trust deed prohibits thetransfer of money to certain thirdparties is enforceable as againstthe trust even if the creditor isaware that the money willthereafter be transferred to such athird party.

THE FACTSThe Standard Bank of South

Africa Ltd lent the Supedre TrustR600 000 in 1992 and R700 000 in1996. The money was advancedby crediting the trust’s bankaccount. The first amount wasthereafter transferred to theaccount of Mr HJ Koekemoer,extinguishing an overdraft ofR321 745, and it was thentransferred partly to the trust’scurrent account and partly toRoodhuis (Pty) Ltd, a company inwhich Koekemoer had a 50%interest. The second amount wasthereafter transferred to the trust’scurrent account and a cheque wasthen drawn on the account, in thefull amount of the loan, in favourof Modderfontein SteenmakeryCC. HJ Koekemoer was the solemember of this corporation.

The bank knew that the moneyadvanced to the trust would beused for the payments which weremade subsequent to the advancesand it was in possession of thetrust deed of the trust. In terms ofthe trust deed, the trustees wereempowered to borrow money andencumber the assets of the trust,but could not use or dispose ofany capital or income to their own

advantage or for the benefit oftheir estates unless they werebeneficiaries of the trust, in whichcase the consent of all othertrustees had to be obtained.Koekemoer was not a beneficiaryof the trust but was one of thethree trustees of the trust.

The bank brought an actionagainst the trustees of the trust, intheir capacity as such, forrepayment of the loans, andsought an order that propertyover which bonds had beenpassed securing the loans bedeclared executable. The trusteesdefended the action on thegrounds that the loans were ultravires the trust deed andunenforceable.

THE DECISIONThe bank did not intend to lend

money to Koekemoer butintended to lend money to thetrust, the party with which itcontracted. The bank advancedmoney to the trust and wasthereafter not entitled to controlthe further transfer of the moneyto third parties. Therefore,whatever was said in the trustdeed restricting the transfer ofmoney from the trust could not

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affect the enforcability of the loanmade to it.

Even assuming that if the bankhad known that in terms of thetrust deed, the trust wasprohibited from lending money toKoekemoer, there was no

evidence that the bank was awareof the prohibition to this effectcontained in the trust deed. Thebank could accordingly, not beseen to have made a loan under acontract which was unenforceable.

The action succeeded.

Counsel for the appellant submitted that Craythorne was merely a nuntius (messenger)and that her intention was therefore irrelevant. There is, of course, a clear distinctionbetween a messenger who is no more than a conduit on the one hand and, on the other,a person who represents another in the sense of having a mandate to perform some orother juridical act binding on the person he or she represents. In the present case theevidence did not establish that Craythorne had been given such a mandate and it isunnecessary to consider what the position would have been had she had such amandate. Nor do I wish to be understood as accepting that such a mandate would havesurvived the death of the sole member of the appellant. No argument was addressed tous on the point. The difficulty with counsel’s submission that Craythorne acted as amessenger is that until an executor was appointed (who in terms of the will wasentitled ‘om … enige besigheid voort te sit’) the appellant would have had nocontrolling mind and therefore would have been incapable of forming the necessaryintention. Once an executor was appointed only he (or she) would have been capable offorming an intention on behalf of the appellant to acquire ownership of the cheques. Itwas not established when the executor was appointed, but what is clear is that he (orshe) had no knowledge of what Craythorne was doing. It follows that on the premisethat the factual inference in question is correct, the appellant would have failed toestablish that ownership of the cheques passed to the appellant.

Banking

102

IIR SOUTH AFRICA BV v TARITA

A JUDGMENT BY MARAIS JAWITWATERSRAND LOCALDIVISION3 MARCH 2003

2004 (4) SA 156 (W)

In interpreting a restraint of tradeprovision, it is possible to takeinto account the memorandum ofthe company in which theemployee is employed and thescope of activities in which thatcompany is engaged.

THE FACTSIIR South Africa BV employed

Tarita as a conference producer asfrom 4 November 1996. Theemployment contract concludedbetween the parties recorded thatin the course of her employment,Tarita would acquire knowledgeof IIR’s trade secrets and would begiven access to IIR’s database andother confidential information.

In terms of a restraint clausecontained in the agreement, Taritaundertook, for the duration of heremployment and for a period ofone year thereafter, not to beinterested, engaged, concerned,associated with or employed inany company, firm, businessundertaking, concern or otherassociation which carried on thebusiness of planning, organisingand managing seminars andconferences in the fields offinance, commerce, economics,law, industrial relations, humanresource management, tax,international businessdevelopment, industrialmanufacturing, real estate andconstruction.

On 29 July 2002, Tarita resignedfrom her employment with IIR.She then took up employmentwith the third respondent, acompany then engaged in thebusiness of producingconferences.

IIR contended that Tarita’semployment with the thirdrespondent constituted a breach ofthe restraint clause. It applied foran interdict to enforce theagreement.

THE DECISIONTarita contended that she was

not in breach of the restraintclause because the memorandumof the third respondent did notrefer to the business of managingconferences in the stipulated fieldsof interest.

In determining whether aconference is one in the field offinance, commerce, economics,law etc, the question must beasked ‘What is the object of theconference? What is the area ofthe conference to be covered? andWhat is the subject with which theconference is to deal?’

Taking the example of the fielddescribed as ‘commerce’, thiswould encompass the activity ofbuying and selling, even if areasbeyond this subject matter areincluded. The memorandum ofthe third respondent included theplanning of conferences in thefield of marketing. This could beconsidered as a form of commerceand would therefore be clearlyaffected by the restraint provision.The conferences actually plannedby the third respondent had astheir subject-matter the conduct ofbusiness seminars and strategiesfor effective affirmativeprocurement. This indicated thatTarita was to be employed in acompany referred to in therestraint clause and wasappropriately interdicted fromcontinuing to do so.

The application was granted.

Contract

103

IIR SOUTH AFRICA BV v HALL

A JUDGMENT BYSCHWARTZMANN J,GILDENHUYS J and BROWDE AJWITWATERSRAND LOCALDIVISION26 JUNE 2003

2004 (4) SA 174 (W)

The mere fact that a partyemploys a person in violation of arestraint of trade agreement doesnot entitle the ex-employer to aninterdict preventing the partyfrom carrying on its business. Tosuccessfully interdict a newemployer from carrying on itsbusiness, it must be shown that itintends to use the ex-employer’sconfidential information inexecuting that business.

THE FACTSIIR South Africa BV employed

Hall as a conference produceruntil her resignation from thecompany on 20 January 2003.From that date, Hall took upemployment with the secondrespondent. This was done inbreach of a restraint of tradeagreement which operated for aperiod of one year from the dateof termination of her employmentwith IIR.

In May 2003, IIR learnt that Hallhad taken up employment withthe second respondent. Itinformed the second respondentof the restraint and broughtinterdict proceedings to preventcontinuation of her employmentfor the one-year period of therestraint. It also applied for aninterdict to prevent the secondrespondent from holding fourteennamed conferences on listedtopics that it had organised overthe period June to August 2003.

The second respondent had notknown of the restraint of tradeagreement between Hall and IIR.It held a disciplinary enquiry andthen dismissed Hall from itsemploy.

IIR persisted in its application. Itsucceeded in its interdict againstHall but failed to obtain aninterdict against the secondrespondent. IIR appealed.

THE DECISIONIIR had no contract with the

second respondent. Accordingly,its claim against the second

respondent was brought in delict.To succeed against the secondrespondent, IIR therefore had toshow that the second respondenthad confidential information ortrade secrets, that it was using orlikely to use such information,that IIR had a right not to be facedwith unfair competition, and IIRhad no other remedy it couldpursue against the secondrespondent.

In the present case, the possibledamages that could be suffered byIIR were infinitesimal whencompared to the secondrespondent’s position. This wasthat it would be put out ofbusiness if the interdict wasgranted against it.

A competitor’s employment ofan ex-employee subject to arestraint of trade agreement, withor without knowledge of therestraint, does not of itself amountto the delict of unlawfulcompetition. Unlawfulcompetition would result only ifthe new employer uses theconfidential information of the ex-employer. The mere employmentof an ex-employee who wassubject to a restraint of tradeagreement does not constitute theuse of confidential information ofthe ex-employer.

To interdict the secondrespondent from holdings itsconferences would be to punish itfor unwittingly employing Hall.No public policy or legalrequirements would justify suchan order.

The appeal was dismissed.

Contract

104

D&H PIPING SYSTEMS (PTY) LTD v TRANS HEXGROUP LTD

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPEPROVINCIAL DIVISION27 JULY 2004

2004 CLR 245 (C)

Materials supplied without theintention that they will be used inthe manufacture of other goodsare not supplied with a warrantyagainst latent defects in relationto the goods which are somanufactured. A party will not beconsidered to be a manufactureror expert seller of materials if itsupplies goods which are by-products of the principalcommodity which it produces.

THE FACTSOver a period of some thirty

years, Trans Hex Mining Ltdsupplied D&H Piping Systems(Pty) Ltd with aggregate andsand. D&H used these materialsfor the manufacture of pipes andmanholes.

On each occasion when thematerials were supplied to D&H,clerical staff at D&H issued ordersto Trans Hex based on pricesagreed at a higher level withintheir respective companies and onbulk orders previouslydetermined by an authorisedrepresentative of D&H. Standardterms and conditions of supplywere also recorded on deliverynotes and invoices.

The materials supplied by TransHex were obtained in the processof mining operations involvingthe extraction of lime products.These were rock and sand knownas dolomitic aggregate anddolomitic sand which were ineffect by-products which itstockpiled at its quarry wheremining operations took place.

During July to December 1998,Trans Hex supplied aggregate andsand to D&H for use in themanufacture of concrete piping.D&H alleged that these materialscontained latent defects and werenot fit for the purpose for whichthey were intended. D&H allegedthat in the course of installation ofthe piping, hard-burnt dolomiticlimestone nodules in theaggregate and sand used tomanufacture the sacrificial layerhydrated, causing a sacrificiallayer to fracture and spall, andfail.

D&H contended that the termsof the contract between it andTrans Hex incorporated awarranty that the materials wouldbe free from latent defects andwould be fit for the purpose forwhich they were intended, andthat Trans Hex had breached

these terms. It contended in thealternative, that Trans Hex hadpublicly held itself out to be amanufacturer or expert seller ofthe materials for use in itsconcrete products.

D&H claimed consequentialdamages caused by the latentdefects.

THE DECISIONThere was no evidence that

Trans Hex had supplied thematerials for use in themanufacture of concrete piping. Itfollowed that there was no basisfor holding that Trans Hex hadmade any of the warrantiesalleged by D&H nor that it hadbreached them by supplyingmaterials containing latentdefects.

The bulk order placed by D&Hdid not constitute the contractbetween the parties. This wasbecause the quantity required wasnot then specified, nor was theprice. The contract between theparties was in fact a multiplicity ofcontracts concluded on eachoccasion when orders were placedfor the supply of more of thedolomitic materials. On theseoccasions, the terms andconditions applicable were thoserecorded on the delivery notesand invoices which in thecircumstances, should have beenread and understood by thosewho received these documents onbehalf of D&H.

As far as the second alternativeclaim put forward by D&H wasconcerned, it had to beremembered that the materials itobtained from Trans Hex were by-products and were not theproducts actually manufacturedand produced by it. They were thesame raw material as initiallyextracted from the quarry and,though changed in size, were notessentially different from thatmaterial. They were however,

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105

quite different from Trans Hex’sprimary product, slaked lime.

Since they were not productsmanufactured by Trans Hex, it

could not be said that it hadpublicly held itself out to be amanufacturer or expert seller ofthe materials.

In the light of these facts and circumstances I am satisfied that the defendant indeedtook reasonable steps to bring its standard terms to the attention of the plaintiff.There was no reason why either Mr Gordon or Ms Rust could not have brought atleast the reference thereto to the attention of Mr Lombard or some other senioremployee of the plaintiff. Ms Rust was in all probability perfectly aware of themeaning and import of the reference to standard terms. She doubtless knew, from herown knowledge and experience, that they were usual in contracts of this nature. Herfailure to bring it to anyone’s attention, however, might have been attributable to herjustifiable acceptance that it was already common knowledge, rather than to anyimprudence or negligent oversight on her part.It must hence be held that the plaintiff’s standard terms and conditions were at allrelevant times duly incorporated in the contractual provisions of the variouscontracts between the parties. The plaintiff has failed to prove the contrary.

Contract

106

ESTERHUIZEN v SWANEPOEL*

JUDGMENT BY SATCHWELL JWITWATERSRAND LOCALDIVISION12 DECEMBER 2002

2004 (4) SA 89 (W)

An application for thesequestration of an individualbrought on a ‘friendly’ basis mustestablish a case for sequestration.A court will not be convinced thatthe application should be grantedwhere the allegations made aresuch as to raise doubts as to thematters alleged in the application.

*16 other applications were alsoconsidered in this judgment

THE FACTSApplications for provisional and

final sequestration of variousindividuals were brought on a‘friendly’ basis. The features ofthese applications were that theywere all based on largely similarfacts, including:• the debtor owes money,frequently in significant amounts,and cannot pay the debt• the debtor seeks the assistanceof a third party who agrees toinitiate sequestration proceedings• a friend or relative acts as acreditor and alleges that a non-existent debt is owed by thedebtor; the creditor avers that thedebtor has failed or refused to paythe debt and has confirmed inwriting that he is unable to pay• an act of insolvency has beencommitted in terms of section 8(g)of the Insolvency Act (no 24 of1936)• the application procures anorder declaring the respondentinsolvent• no explanation is given of thebackground to or reason for theloan• the loan is said to have beengiven for reasons of friendship orfamily relationship• the ability of the debtor torepay the loan is not mentioned• friendship and consanguinityare claimed to have encouraged

Insolvency

the loan• it is frequently stated that suchloans have been granted on prioroccasions• no security of any sort isrequired by the lender• the terms and conditions of theloan are not recorded in writingand are not disclosed to the court• the actual transfer of the fundsto the debtor cannot be traced• the borrower finds himself indire financial straits within a veryshort time; the debtor is given avery short time within which torepay the loan• the borrower writes a letterconfirming his inability to repaythe loan• the entire course of action hasbeen conceived and taken withoutthe benefit of legal assistance• the dissatisfied lender choosesthe most drastic remedy torecover his money• the sequestrating lender isoblivious of the fact that he or sheis unlikely to recover very muchof the purported debt

THE DECISIONGiven the similarity of facts in

many of the applications, and thedoubts raised by the inherentimprobabilities posited by them,there was no reason to grant thesequestration orders applied for.

In all but one of the matters, theapplication was refused.

107

PIETERSE N.O. v THE MASTER

A JUDGMENT BY WAGLAY AJCAPE OF GOOD HOPEPROVINCIAL DIVISION5 MARCH 2004

2004 (3) SA 593 (C)

A certificate erroneously issued bythe Master in terms of section385(1) of the Companies Act (no61 of 1973) may be reviewed andset aside where it can be shownthat the Master did not apply hismind to the matter or consider therelevant information at hisdisposal.

THE FACTSEric van der Berg (Pty) Ltd

brought an action for damages forwrongful cancellation of afranchise agreement. Before theaction was concluded, thecompany was placed inliquidation.

The primary cause of thecompany’s liquidation was thefailure of the franchise agreementand the appointed liquidator,Pieterse, continued the action inan attempt to secure someadvantage for creditors. Pieterseinformed the Master of the HighCourt of the action.

The Master issued a letter andcertificate of completion of dutiesby the liquidator in terms ofsection 385(1) of the CompaniesAct (no 61 of 1973). This was donewithout application therefor byPieterse. The effect of it was tobring about the deregistration anddissolution of the company by theRegistrar of Companies. The effectof this was that the action couldnot be proceeded with.

Pieterse then applied for anorder reviewing and setting asidethe certificate given by the Master,reviewing and setting aside thedissolution of the company by theRegistrar of Companies anddeclaring the dissolution of thecompany to be void.

THE DECISIONAs an administrative act, the

issue of the certificate issomething that a court can reviewand set aside if it is shown that theMaster did not apply his mind tothe matter or consider the relevantinformation at his disposal.

When issuing the certificate, theMaster did not take into accountthe information at its disposal.The certificate could therefore bereviewed and set aside and thequestion was whether or not thedissolution of the company couldbe declared void in terms ofsection 420 of the Companies Act.

Given that the certificate wouldbe set aside, the dissolution of thecompany would follow from thiswithout a court order to this effectbeing necessary. However,because of the importance of theaction and the effect its successfulconclusion might have, it wasappropriate to order that thedissolution was void.

The action taken by the companycould continue, but steps taken inthe action at those times when thecompany was dissolved should beretaken.

Insolvency

108

SENTRAAL-SUID KOÖPERASIE BPK vBESSEMER STEEL CONSTRUCTION (PTY) LTD

A JUDGMENT BY JAJBHAY JWITWATERSRAND LOCALDIVISION23 JULY 2003

2004 (3) SA 562 (W)

A third party joined in an actionby a defendant may be entitled tosecurity for costs in terms ofsection 13 of the Companies Act(no 61 of 1973) and an order forthe provision of security against adefendant joining such thirdparties may be given against it.

THE FACTSAfricon International (Pty) Ltd

brought an action againstBessemer Steel Construction (Pty)Ltd for damages arising from thestructural failure of certain silosconstructed by Bessemer.Bessemer defended the action onthe grounds that the structuralfailure of the silos was caused bymismanagement and/or improperuse of the silos.

Bessemer also issued third partynotices against Sentraal-SuidKoöperasie Bpk which designedthe silos. It alleged that the designwas defective and this ultimatelycaused the failure of the silos.Sentraal denied the allegation anddefended the action.

Sentraal then applied for securityfor costs against Bessemer interms of section 13 of theCompanies Act (no 61 of 1973).The section provides that where acompany is plaintiff or applicantin any legal action, and if itappears that there is reason tobelieve the company will beunable to pay the costs of thedefendant in any action, the courtmay require sufficient security tobe given for those costs.

THE DECISIONThe primary question was

whether a defendant joining athird party in an action is obligedto furnish security for costs interms of this section.

The reference to a ‘plaintiff orapplicant’ in section 13 may beconstrued as a reference to adefendant when the defendantbrings a counterclaim. When adefendant joins third parties, itmay be considered a plaintiff forthese purposes and the third partythe defendant. A third party isentitled to the benefits of section13 unless special circumstancesexist. A court will lean towardordering the provision of security.

In the present case, Bessemerhad admitted that it wasfinancially unable to furnishsecurity. Sentraal had set out itsdefence in the action and haddenied liability. Sentraal had notbecome a joint defendant in theaction but was faced with its ownplaintiff in the form of Bessemer.Weighing these considerationsagainst each other, a court had toexercise its discretion in favour ofSentraal. Sentraal was entitled toan order that Bessemer furnishsecurity for costs.

The application was granted andBessemer was ordered to furnishsecurity in the sum of R350 000.

Companies

109

WELTEVREDE NURSERY v KEITH KIRSTEN’S (PTY) LTD

A JUDGMENT BY HARMS JA(STREICHER JA, MTHIYANE JA,CONRADIE JA andSOUTHWOOD AJA concurring)SUPREME COURT OF APPEAL28 NOVEMBER 2003

2004 (4) SA 110 (A)

Formalities in respect of anapplication for registration of aplant breeder’s right under thePlant Breeders’ Rights Act (no 15of 1976) must be complied with ifthe plant variety is to beeffectively registered andprotected.

THE FACTSKeith Kirsten’s (Pty) Ltd held a

plant breeder’s right certificate fora variety of Canna, described as‘Phasion’. The certificate wasobtained after application for itwas made by Morgenzon Estates.Morgenzon Estates stated in theapplication that the discoverer ofthe plant was Keith Kirsten’s andthat the variety had beentransferred to Morgenzon bymeans of a contract. No suchcontract was in fact concluded.The basis upon which Morgenzonmade this allegation was a letterwritten by Keith Kirsten’sconfirming that it was the ownerof the plant variety and hadauthorised Morgenzon to applyfor registration of a plantbreeder’s right.

The application did not contain atrade description of Phasion. Itstated that Keith Kirsten’s was thediscoverer of the plant variety butthe company later confirmed ithad become aware of the varietyafter seeing it at another party’sproperty.

Keith Kirsten’s alleged thatWeltevrede Nursery hadpurchased the plant variety forexport and that it had infringed itsplant breeder’s rights. It broughtan action to prevent thecommercial exploitation of thevariety by Weltevrede Nursery.

Competition

THE DECISIONThe question was not whether or

not the plant variety was novel,but whether the registrationprocedures had been followedsufficiently to confer on KeithKirsten’s the rights in the plantvariety.

Because the application failed todescribe the plant variety, anymember of the public could nothave know what rights were beingregistered in terms of the PlantBreeders’ Rights Act (no 15 of1976). The procedures followingthe application were defective inthat the registration of rights wasconferred on Keith Kirsten’s inspite of the fact that Morgenzonmade the application and wascited as the applicant in theGovernment Gazette whichadvertised the application.

Accordingly, no plant breeder’srights vested in Keith Kirsten’sfollowing the application made byMorgenzon. Its action should havebeen dismissed.

110

WRIGHT v COCKIN

A JUDGMENT BY PICKERING JEASTERN CAPE DIVISION13 DECEMBER 2002

2004 (4) SA 207 (E)

A person is entitled to prevent hisneighbour from causing anuisance where it can be shownthat there has been anunjustifiable interference in therights of that person by theneighbour.

THE FACTSWright owned a farm

neighbouring on a farm owned byCockin. Wright had cattle on hisfarm and, after the introduction ofblue wildebeest on the farm ofCockin, some of them developedsymptoms of Bovine MalignantCatarrhal Fever. The result of thiswas that some of Wright’s cattledied.

Wright conducted investigationsand instructed experts todetermine the cause of death ofhis cattle. He concluded that thesickness which affected his cattlecausing them to die originatedwith the blue wildebeest in theform of ‘snotsiekte’. This diseasecould be transmitted from oneanimal to another with theassistance of the humid weatherand winds. The transmission ratewould however, be reduced to0,1% if the animals wereseparated by at least one thousandmetres. There was no vaccine forthe immunisation of the cattle.

Wright contended that he wasentitled to an interdict to preventthe continuation of thetransmission of snotsiekte fromthe blue wildebeest. He broughtan application for an order thatCockin remove all blue wildebeestwithin a border of one thousandmetres of the boundary of theirfarms.

THE DECISIONA person is entitled to live

without nuisance emanating fromhis neighbour’s property. Toprevent the continuation of suchnuisance, it is not necessary toprove that the neighbour is atfault, merely that the occurrenceemanates from the neighbour. It isnecessary to determine whetherthe alleged interference waswrongful and, if so, whetherWright had a reasonableapprehension of harm arisingtherefrom.

A landowner has an intrinsicright to the reasonable enjoymentof his land. If a neighbour throughhis positive actions unjustifiablyinterferes with that right therebycausing him physical orpatrimonial harm, then his actionsare wrongful.

In the present case, Wright hadshown that he had a reasonableapprehension of harm resultingfrom the introduction of the bluewildebeest. These animals carriedthe disease which they readilyshed from time to time. The viruscould be transmitted to cattle withfatal results and could be carriedthrough the air over a distance ofone kilometre.

Since there was no alternativeremedy available to Wright, hewas entitled to the interdict hesought.

Competition

111

AXZS INDUSTRIES v AF DREYER (PTY) LTD

A JUDGMENT BY WILLIS JWITWATERSRAND LOCALDIVISION11 FEBRUARY 2004

2004 (4) SA 186 (W)

An action to enforce rights ofownership is not based oncontractual rights but on rightsobtained upon fulfilling theprerequisites of ownership.

THE FACTSRepresentatives of AXZS

Industries attended an auction atwhich they purchased certainmovables. The auction was heldby the provisional liquidator ofAF Dreyer and Co (Pty) Ltd andwas preceded by an oralagreement between the parties tothe effect that the successfulbidder would purchase all of thegoods at the auction excludingcertain identified assets.

Immediately after the auction,AXZS signed a written agreementof sale which provided thatownership in the assets wouldpass to the buyer on confirmationof the sale by the liquidators whenthe purchase price was paid in fulland all other conditions met.AXZS paid the purchase price ofR3,4m.

AXZS took possession of theitems referred to in the agreementof sale, as well as others. Thegoods were left at the premises ofthe auction and thereafter, theshareholder in AF Dreyer refusedto give AXZS delivery of them.

AXZS brought an action fordelivery of the goods, basing itsclaim on its rights as owner.

THE DECISIONThe fact that AXZS took

possession of the goods at thepremises of the company inliquidation after confirmation ofthe auction and with the fullknowledge and approval of theliquidator showed that deliverytook place in accordance with aprior agreement. This agreementneed not have been in writing andneed not have been the agreementwhich was concluded after theauction had taken place.

The action brought by AXZS wasnot based on contract but on itsrights of ownership. These wereabsolute rights, enforceable notonly against AF Dreyer but alsoagainst anyone alleged to beviolating them. AXZS wastherefore entitled to delivery ofthe goods in which it hadownership.

The action succeeded.

Competition

112

ESTATE AGENCY AFFAIRS BOARD v AZEVEDO

A JUDGMENT BY HORN J(SCHWARTZMANN J andBASHALL AJ concurring)WITWATERSRAND LOCALDIVISION10 JUNE 1004

2004 CLR 269 (W)

A claimant against the EstateAgency Affairs Board bringing aclaim in terms of section 18(1) ofthe Estate Agency Affairs Act (no112 of 1976) is obliged to takereasonable steps to bring legalaction against an errant estateagent before bringing actionagainst the Board.

THE FACTSAzevedo paid R490 000 to an

estate agent who absconded withthe money. Azevedo took steps tolocate the estate agent but couldnot find him. He did not instituteany action for recovery of themoney.

Azevedo then brought anapplication against the EstateAgency Affairs Board for paymentof the R490 000. He did so interms of section 18(1) of the EstateAgency Affairs Act (no 112 of1976) which provides that aperson who has lost money byvirtue of theft of funds entrustedto an estate agent may claim theloss from the Board.

The application was granted. TheBoard appealed.

THE DECISIONSection 19(1) of the Act provides

that the Board may settle a claimprovided that no person shallwithout the permission of theBoard, commence any actionagainst the Board until theclaimant has exhausted allrelevant rights of action and otherlegal remedies available againstthe estate agent in respect ofwhom the claim arose.

The Board alleged that Azevedohad not exhausted all relevantrights of action and other legalremedies against the estate agent.

The wording of section 19(1) isperemptory. An aggrieved partyis obliged to take reasonable stepsto pursue his claim as providedfor in the section, including takinglegal action. These provisions donot fall away merely because athief has absconded or is unable topay the debt.

Since Azavedo did not take thesteps provided for in section 19(1)his claim against the Board shouldfail. The appeal was upheld.

Property

The wording of the proviso is peremptory. An aggrieved plaintiff is obliged to takereasonable steps to exhaust his rights of action and person other legal remediesagainst the person responsible for the theft. This includes instituting legal actionagainst the estate agent and bringing such action to a conclusion, by obtainingjudgment, followed by execution against the judgment and all other steps which willcomplete the relevant remedies, including if need be, applying to the sequestration orliquidation of the estate agent.

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DIE BESTUURSVERENIGING VAN DE RUSTAFTREE-ORD v UTILITAS BELLVILLE ING

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPEPROVINCIAL DIVISION27 JULY 2004

2004 CLR 285 (C)

A member of a housingdevelopment to which theHousing Development Schemesfor Retired Persons Act (no 65 of1988) applies holds a right ofoccupation akin to those of anowner of property. Such a memberis obliged to pay property tax andregional services levies.

THE FACTSThe Management Association of

the De Rust Retirement Resortbrought an action against UtilitasBellville and Osro BK forrepayment of property tax andregional services levieserroneously paid to them.

The payments in question hadbeen made to Utilitas and thesecond defendant at a time whenthe Management Association hadbeen collecting such amountsfrom residents of the retirementresort in the mistaken belief thatthey were payable by residents interms of regulations promulgatedunder the Housing DevelopmentSchemes for Retired Persons Act(no 65 of 1988). The thirddefendant, a resident, had earliersued for and obtained adeclaratory order to the effect thatthese amounts were not payableby residents and were to be repaidto them.

The parties approached the courton a stated case, with thequestion: Was the collection ofamounts in respect of property taxand regional services levies frommembers in conflict with theprovisions of regulation 9(1) of theregulations read with section 4 ofthe Act?

THE DECISIONAlthough a life-long right of

occupation is not a property rightas such, it is nevertheless acorporeal right and obtains apreference over other rightswhether registered or not. For allpurposes, a person possessingsuch rights is similar to an ownerin the sense that he occupies theproperty in terms of a servitudinalright or analogous right.

The costs of control,management and administrationof a retirement scheme include thelevies payable to a local authority.These liabilities are notcomponents in determining theManagement Association’s estatebut could be recovered ultimatelyfrom the resident membersthemselves. This was also evidentin the agreement concludedbetween the third defendant andUtilitas and it was supported by aproper interpretation of the Actand regulations.

It followed that the collection ofamounts of property tax andregional services levies frommembers was not in conflict withthe provisions of the regulations.

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LIEBENBERG N.O. v MOUNT EDGECOMBE COUNTRYCLUB ESTATE MANAGEMENT ASSOCIATION II

A JUDGMENT BY LEVINSOHN JDURBAN AND COAST LOCALDIVISION28 JULY 2004

2004 CLR 273 (D)

Restrictive conditions of title mayconfer a right on a third party.Proof of a tacit contract requiresmore than proof that a party hasbeen listed as an approved partyfor future contracts.

THE FACTSThe Stella Grove Trust carried on

business under the name of TriadProjects at Mount EdgecombeCountry Club Estate, Liebenbergbeing its trustee. It and JimmyVelissariou Architectural DesignsCC were involved in the erectionof residential homes at the estatefor a number of years.

The trust and the architects wereauthorised to conduct this workby the Mount EdgecombeCountry Club Estate ManagementAssociation II, a company whosepurpose was the management ofthe estate and to which all ownersin the estate were obliged tobelong.

The title deeds under whichowners of property on the estateheld their property provided thatno dwelling or other structure wasto be erected on the propertyotherwise than in accordance withbuilding plans approved by thecompany. Any building other thanone so approved was not to beconstructed by a contractor otherthan one selected from a panel ofcontractors nominated by thecompany. This condition wasstated to be in favour of MorelandDevelopments (Pty) Ltd.

On 23 April 2004, the trustreceived a fax from the company’sresident architect. It alleged thatTriad was not the principalbuilding contractor at a lot atwhich construction was takingplace, that Brannigan WestDevelopment Ltd was acting asthe principal building contractorand that Triad was being used asa front for this company. The faxstated that this allegation hadbeen found to be fact and that as aresult, Triad had been removedfrom the panel of accreditedbuilding contractors withimmediate effect. The architectsreceived a similar fax makingsimilar allegations regarding theprincipal agent at the lot and

stating that they had beenremoved from the panel ofaccredited architects withimmediate effect.

The trust contended that thecompany did not have the powerto prevent it from performingbuilding work on the estate, nordid it have the power to regulatewith whom its members mightcontract. In consequence, it wascontended, the panels or lists ofaccredited contractors and otherswas unlawful as contrary to thefundamental constitutional rightto trade and practise anoccupation freely. Its removalfrom the panel of accreditedcontractors would have the effectof limiting its freedom to contractwith owners of the property at theestate. It brought an applicationinterdicting the company frompreventing it from performingconstruction work at the estate orfrom interfering with its businessrelationships, and compelling it toconsider applications by it for theapproval of building plans orwork.

THE DECISIONThe restrictive condition in the

title deed was made in favour ofMoreland not the company.However, the essential point wasthat it conferred on the companythe right to accredit only certainbuilding contractors. Therestrictive condition wouldultimately enure to the benefit ofall the members of the companyand in consequence, the companywould then represent themembers and have the right toenforce the condition.

The trust alleged that a tacitcontract between it and thecompany existed entitling it tocompliance with the rules ofnatural justice whenever theremoval of a contractor from thepanel of approved contractors wasintended. However, placing a

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contractor on a list of approvedcontractors did not confer on thecontractor any rights. It merelyindicated the parties with whichthe company would conductdealings in the future. Contracts

concluded after that would be adhoc and dependent, inter alia, onthe particularities of theconstruction requirements of theowner.

The application failed.

CONCOR HOLDINGS (PTY) LTD v POTGIETER

A JUDGMENT BY CLOETE JA(SCOTT JA, ZULMAN JA,CONRADIE JA and FARLAM JAconcurring)SUPREME COURT OF APPEAL28 MAY 2004

2004 CLR 311 (A)

An owner of property whorepresents that a third party isentitled to transfer ownership ofits property to another may beestopped from asserting its rightsof ownership against the othereven if the representation it makesis not precise and unambiguous.

THE FACTSConcor Holdings (Pty) Ltd sold

paving bricks to PolokwaneHomes, in terms of Concor’sstandard credit terms andconditions. These included theterm that ownership in the goodssupplied would remain vested inConcor until date of payment.

Concor knew that the pavingbricks were going to be used forthe parking area in front of abuilding owned by Potgieter.Potgieter was not aware of theterms and conditions under whichthe parties had contracted.Potgieter chose the colour of thepaving bricks to match the colourof his building. The paving brickswere then laid, and this involvedsome cutting of them and a certainamount of wastage.

Potgieter paid PolokwaneHomes for the bricks. Polokwanefailed to pay Concor and theestate of Polokwane’s owner wassequestrated. Concor sued forreturn of the paving bricks,alleging that as owner it wasentitled to their return. Potgieterdefended the action on thegrounds that Concor wasestopped from asserting its rightsas owner because it hadrepresented to Potgieter that ondelivery and installation of thepaving bricks, it was no longerentitled to assert its rights asowner.

THE DECISIONIt has been held that to succeed

in proving an estoppel, it must beshown that the representationmade by the owner was preciseand unambiguous. However, thisincorrectly formulates the test fora representation, although theparty to whom a representation ismade would not be actingreasonably if he chose to rely onone possible meaning withoutmaking further enquiries to clarifythe position.

In the present case, Concor hadrepresented not that Polokwanewas the owner of the pavingbricks but that Polokwane wasentitled to transfer ownership ofthem to Potgieter. This wasevident from the fact that Concorhad known that the paving brickswere going to be used in theconstruction of the buildingowned by Potgieter, the colourwas chosen to match the buildingand they had been cut to fit thearea where they were laid.

The conduct of Concor couldreasonably have been expected tomislead Potgieter into believingthat Polokwane had been entitledto transfer ownership of thepaving bricks to him. Concor wastherefore estopped from assertingits rights of ownership.

The appeal was dismissed.

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FAROCEAN MARINE (PTY) LTD v MALACCAHOLDINGS LTD

A JUDGMENT BY SCOTT JA(MARAIS JA, FARLAM JA,CLOETE JA AND PATEL AJAconcurring)SUPREME COURT OF APPEAL28 MAY 2004

2004 CLR 319 (A)

For the purposes of an attachmentto found or confirm jurisdiction aprima facie case may beestablished against a respondentwhose ownership of the propertyto be attached is open to doubt.Joinder of an alternative partywho may own the property mayalso be permitted.

THE FACTSFarocean Marine (Pty) Ltd began

rebuilding and refitting theSummit One in terms of aninformal agreement recorded in aletter addressed by Farocean tothe sole shareholder of MalaccaHoldings Ltd, a certain Mr EarlRomans.

Upon completion of some of thework, Farocean invoiced Romansfor R700 000, and when he failedto pay, arrested the Summit One.After receiving payment, Faroceanwithdrew the arrest andcontinued work, then arrested theyacht again when Romans failedto pay on a subsequent occasion.In its plea in this action, it wasalleged that the yacht was ownedby Malacca Holdings Ltd whichhad been represented by Romans.Farocean was unsure who theowner of the yacht was because atall times it had dealt with Romansand not Malacca, but it hadreceived documentary evidence ofthe sale of the yacht from Romansto Malacca.

Farocean withdrew the secondarrest and then applied ex partefor an order that the yacht beattached to found or confirm thejurisdiction of the court and thatMalacca and Romans be joined asdefendants in an action to bebrought against them. Theapplication was dismissed.Farocean appealed.

THE DECISIONIn terms of section 3(2) of the

Admiralty Jurisdiction RegulationAct (no 105 of 1983) an action inpersonam may be institutedagainst a peregrine who has notconsented to the jurisdiction of thecourt only if his property withinthe court’s area of jurisdiction hasbeen attached to found or confirmjurisdiction. Such an attachmentrequires that the applicantdemonstrate a prima facie caseagainst the respondent and thatthe respondent is the owner of theproperty to be attached.

In the face of doubt as to whowas the owner of the Summit One,Farocean had joined the Malaccaand Romans as defendants. It haddone so in terms of section 5(1) ofthe Act. Though it had initiallycontended that Romans was theowner of the yacht, it later becameevident that on a balance ofprobabilities, Malacca was theowner. Farocean’s application toattach therefore fell short of therequirement that it show a primafacie case against the party whoseproperty sought to be attached.However, in the presentcircumstances, where Faroceanhad been unsure who the ownerof the yacht was, where it hadalready been stated in a plea inthe earlier litigation that Malaccawas the owner, a prima facie caseagainst Malacca as one of twodefendants had been made out.

As far as the joinder of Romanswas concerned, once a prima faciecase had been shown againstMalacca on the basis that it wasthe owner of the yacht, no primafacie case against Romans couldalso be established. However thelanguage of section 5(1) is wideenough to allow the joinder of aparty such as Romans whoseposition as principal or agent wasstill in doubt.

The appeal was upheld.

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FJS PAINTING CC v ABSA BANK LTD

A JUDGMENT BY SCOTT JA(HARMS JA, NUGENT JA,CLOETE JA AND HEHER JAconcurring)SUPREME COURT OF APPEAL28 MAY 2004

2004 CLR 332 (A)

In an action against a bank basedon the allegation that the banknegligently collected cheques, it isnecessary to prove that theplaintiff was the true owner of thecheques. If the inference to bedrawn from the evidence is that aparty took delivery of the chequeswithout the intention of takingdelivery on behalf of the plaintiff,then the plaintiff’s ownership ofthe cheques is not proved.

THE FACTSFJS Painting CC held a current

account at a branch of Absa BankLtd. Its sole member, oneFrederick Beytell, concludedcontracts on behalf of FJS withSappi Manufacturing (Pty) Ltd forthe execution of painting work FJSraised invoices against Sappi andwas paid in respect thereof bymeans of cheques payable to FJSPainting Sheeting & Labour HireContractor CC, the name given inthe invoices so raised.

Eighteen months after theformation of FJS, Beytell died.Some ten days after his death, hiscommon-law wife, NickyCraythorne, opened an account atthe bank in the name of The SoleOwner FJS Painting Sheeting.Craythorne advised Sappi of thedeath of Beytell and informed itthat she and Beytell had beenpartners in the business of FJS andthat she would be continuing thebusiness.

Sappi drew four chequespayable to FJS Painting Sheeting& Labour Hire Contractor CC. Allfour cheques were marked ‘nottransferable’. Craythorne receivedthese cheques and deposited theminto the account she had openedat the bank. Craythornesubsequently died, at which timethere was no credit balance in theaccount.

FJS brought an action againstAbsa claiming that it was the trueowner of the cheques and that thebank had negligently collectedthem for another person.

THE DECISIONFor FJS to have become the true

owner of the cheques, it wouldhave had to take delivery of them.It was known that Craythorne infact took delivery of the cheques.The question then was whethershe took delivery of them onbehalf of FJS.

Craythorne had deliberatelyrepresented to Sappi that she wasa member of FJS and wasauthorised to continue itsbusiness. Knowing that this wasuntrue, and that she would not beable to drawn on the FJS bankaccount, the inference to be drawnwas that she had arranged for thedelivery of the cheques to herselfin order to acquire them forherself.

FJS contended that Craythorneacted merely as a conduit betweenSappi and itself. However, at therelevant time, Beytell was dead.Accordingly FJS could not haveformed any intention to acquireownership of the cheques inrespect of which she did so act.The evidence also failed to showthat Craythorne assumed acaretaker position in respect of FJSfollowing Beytell’s death.

FJS had failed to show it becamethe owner of the cheques. Theaction failed.

Cheques

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JOHANNESBURG COUNTRY CLUB v STOTT

A JUDGMENT BY HARMS JA(MARAIS JA and CAMERON JAconcurring)SUPREME COURT OF APPEAL18 MARCH 2004

2004 (5) SA 511 (A)

A provision exempting a partyfrom liability from injury causedwhile on the premises of thatparty may be interpreted to referonly to injury sustained at thepremises by that party and not toa claim by a dependant arisingfrom that injury.

THE FACTSStott and her husband were

members of the JohannesburgCountry Club. As members, theyagreed to be bound by the rulesand bye-laws of the club whichwere sent to them upon theiracceptance as members. Stotthowever, alleged that she neverread the rules.

The rules contained a provision,incorporated in Rule 42, that theclub would in no circumstances beliable for any loss or damage tothe property of any member, norin any way be liable for personalinjury or harm however caused tomembers on the club premises orgrounds. A notice displayed in theclub stated that the club wouldnot be liable in any manner forany claim or damage made by anyperson entering the club’sproperty.

While on the golf course and in ashelter constructed on it, Stott’shusband was injured by alightning strike and died as aresult. Stott brought an action fordamages, alleging that the clubwas negligent in failing to takesteps to ensure the shelter wasresistant to lightning.

The club raised a special plea tothe action in which it contendedthat by virtue of the exemptionsfrom liability contained in Rule 42,it could not be liable to Stott asalleged.

THE DECISIONThe question was whether or not

the plain meaning of the Ruleexempted the Club from liabilityfor a dependant’s claim fordamages. The second part of theRule was relevant to this question.

The question was whether words‘personal injury or harm howevercaused to members ... on theclub’s premises’ applied to amember’s claim for lost support.This provision would haveapplied to any claim brought byStott himself, had he survived theincident, but it did not apply tothe claim of a surviving spouse,whether such a spouse was amember of the Club or not.

The word ‘harm’ was qualifiedby the word ‘personal’. Adependant’s claim would not beclassified as a claim arising frompersonal harm. It would be bettercategorised as a claim for financialloss. This was an indication thatthe provision did not encompass adependant’s claim for loss. On thisground, Stott’s claim should beallowed and the special pleadismissed.

It would also be against publicpolicy to allow an exemption ofthe nature provided for in thisclause to prevent the claim of adependant. Though this was notdeterminative of the issue in thepresent case, it was aconsideration that might berelevant in similar cases in thefuture.

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KHANYILE v MINISTER OF EDUCATION ANDCULTURE, KZN

A JUDGMENT BY LEVINSOHN JNATAL PROVINCIAL DIVISION13 SEPTEMBER 2004

2004 CLR 383 (N)

Appointments made under thePublic Service Act, 1994, must bemade in accordance with theprovisions of that Act and will beconsidered invalid if effectedwithout regard to such provisionsas the need to advertise the postfor which the appointment ismade.

THE FACTSKhanyile was appointed as a

public relations officer of theMinistry of Education and Cultureby the Minister of thatdepartment, the first respondent.The applicable salary was that ofthe senior management service, anamount of R348 987 per annum.This took place by the Ministersigning a form which had beencompleted by Khanyile. Advicegiven to the Minister at that stagewas that it was not necessary toadvertise or interview candidatesfor the position and that Khanyilewas a suitable person forappointment to the position. TheMinister was assured thatKhanyile held a Bachelor’s degreein communications and that thePublic Service Act had been fullycomplied with.

The following month, theMinister was instructed by thePremier of the Province of KZN toremove Khanyile from office.Reports were made that Khanyiledid not hold the academic degreehe said he did. When inquirieswere made, Khanyile could not belocated.

Khanyile’s salary wasdiscontinued. Khanyile thenbrought an application for anorder directing the Minister togive effect to an alleged directivetransferring Khanyile from Ulundito Pietermaritzburg and to pay hissalary, alternatively to givereasons for his failure to do either.

THE DECISIONThe essential question was

whether Khanyile had beenvalidly appointed to the positionof public relations officer. Section9 of the Public Service Act, 1994,provides that the appointment ofany person shall be made by therelevant executing authority, the

Minister in the present case.Section 11 provides that theevaluation of a person forappointment, must be based onthe person’s training, skills,competence and knowledge andthe need to redress imbalances ofthe past.

Regulations governing theprocedure for appointment ofpersons include the requirementthat an employee is provided witha written contract of employmentand that a selection committeemake recommendations onappointments to posts. They alsorequire that in respect of thesenior management service, onlythe finest candidates should beappointed. Subject to a number ofexceptions, vacant posts must beadvertised nationwide.

The post to which Khanyile wasappointed was not advertised.The exceptions did not apply tohis case. Advertising of the postwas a necessary requirementbefore the appointment could bemade. Furthermore, the properselection procedures were notadhered to, and no contract ofservice or performance agreementwas concluded. The appointmentof Khanyile was therefore not avalid appointment and was of noforce and effect.

The fact that Khanyile was givena form which appeared to confirmhis appointment did not give riseto an estoppel, by which theMinister could be prevented fromdenying Khanyile’s appointment.An estoppel could not rendervalid that which was done ultravires the statutory provisionsgoverning the appointment andnothing in the Constitutionchanged this position in which apublic official performed an actionin the public interest.

The application was dismissed.

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TRAVELEX (PTY) LTD v JUMBO ZIPS CC

A JUDGMENT BY VAN ZYL J(DAVIS J conurring)CAPE OF GOOD HOPEPROVINCIAL DIVISION22 OCTOBER 2004

2004 CLR 398 (C)

A claim for damages for lostprofits requires proof that thedefendant was aware of thepurpose for which materialsupplied to the plaintiff wasrequired.

THE FACTSJumbo Zips CC sold zip chains

and sliders to Travelex (Pty) Ltdfor use as zips on sports bags to bemanufactured by Travelex. Thezips proved to be defective andunsuitable for the purpose forwhich they were bought. Thesports bags were all returned toTravelex by its customer.

Travelex brought an actionagainst Jumbo claiming that thematerials supplied to it werelatently defective and that it hadsuffered lost profits on the sale toits customer. Jumbocounterclaimed for payment of thepurchase price.

THE DECISIONTravelex failed to give any

evidence that the zip material waslatently defective. It might havebeen unsuitable for the purposefor which it was bought, but thiswas not evidence that the materialwas defective.

As far as the claim for lost profitswas concerned, there was noevidence that Jumbo had beenaware of the purpose for whichthe material was required. A partyclaiming damages must show thatsuch damages flow naturally andgenerally from breach by thedefaulting party in the sense thatthey constitute foreseeable losswithin the contemplation of theparties at the time of conclusion ofthe contract. This Travelex had notdone.

The claim brought by Travelexwas dismissed and thecounterclaim granted.

It was not, in my view, proved that the material furnished to the appellant by therespondent was defective in any way. At worst it was unsuitable for the purpose for whichit was purchased. If I understand Mr Clarke’s evidence correctly, the zip chain and sliderswere neither patently nor latently defective. His close visual examination revealed noobstructive ‘foreign matter’ or inconsistency which could account for the inclination of thezips to stick at certain points. He in fact attributed it to ‘the shape or the spacing of theteeth of the zips at the points where the sticking occurred’ and conceded that this mightrelate to the mounting of the zips at an angle or on a curve or bend. The sticking might infact have been the result of the incorrect procedure followed in mounting the zips, orsimply from having used the wrong kind of zip (chunky instead of spiral) for the purposefor which the zips were required. This is supported by the evidence of Mr Roeloffze, MsSchroeder and Ms Martin. In short, none of the testimony tendered by either party wasindicative of any defect in the material supplied by the respondent to the appellant.

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NEW WORLD ENGINEERING ANDCONSTRUCTION v SINGH

A JUDGMENT BY LEVINSOHN JDURBAN AND COAST LODCALDIVISION23 SEPTEMBER 2004

2004 CLR 410 (D)

An arbitration award may only beset aside on the grounds of grossirregularity in the conduct of thearbitration when it is clear thatthis has taken place. Evidence ofinformal arrangements made forthe conduct of the arbitrationdoes not necessarily show thatgross irregularity has taken place.

THE FACTSNew World Engineering and

Construction built a dwellinghouse for Singh. Singh had certaincomplaints with the work thatwas done and arbitrationproceedings were instituted todeal with this. An arbitration wasconducted and an award infavour of New World was handeddown by the arbitrator.

Singh contended that thearbitrator committed a grossirregularity by ignoring evidenceof certain defects, and overlookedthe fact that New World had notcompleted work set out in a ‘snaglist’. The arbitrator denied that hehad failed to inspect the propertyand insofar as the snag list wasconcerned, stated that he hadmade allowances for work still tobe done.

Singh applied for an ordersetting aside the arbitrationaward.

THE DECISIONThe two bases on which Singh

wished to set aside the awardwere that the arbitrator hadcommitted a gross irregularity inthe conduct of the arbitrationproceedings and that he displayedbias during the conduct of thearbitration proceedings.

The arbitration was conductedinformally. The parties themselvesacceded to the recording ofevidence in an informal mannerand this was done in such a waythat the hearing was fair. Singhhad failed to demonstrate that anygross irregularity took place.

As far as the alleged bias wasconcerned, the fact that thearbitrator might have expressedhis views during the course of thearbitration hearing wasinsufficient evidence to who bias.A judicial officer may expressprima facie views during thecourse of a case without showingbias merely because of havingdone so.

The application was dismissed.

There is no doubt in my mind that the parties accepted that there was no need for theArbitrator to record or cause to be recorded verbatim the evidence of witnesses that werecalled at the arbitration and that seems to me to be consistent with the informal approachwhich was followed by the Arbitrator. It is clear from the affidavits that a number ofwitnesses were called to testify and the parties had every opportunity of ventilating theissues. To my mind there is no substance whatsoever in the complaint that the Owner wasnot afforded a fair hearing. I am satisfied that the Owner has failed to prove on a balance ofprobabilities that a gross irregularity in the proceedings occurred. The Owner has also inthese proceedings levelled an attack on the three crucial findings of fact made by theArbitrator namely (1) that the Owner was partially responsible for the rectification of thework set out in the snag list; (2) that the Owner had unlawfully prevented the Builder fromrectifying defects; and (3) that he had accepted the evidence of Ashton and placed no weighton J Singh’s earlier report. I gained the distinct impression that the Owner made an attemptto re¡visit the disputed issues in the arbitration. He chose his judge and he must live withthese findings whether they are right or wrong.

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METCASH TRADING LTD v CREDIT GUARANTEEINSURANCE CORPORATION OF AFRICA LTD

A JUDGMENT BYSOUTHWOOD AJA(HOWIE P, BRANC JA, LEWIS JAand JONES AJA concurring)SUPREME COURT OF APPEAL25 MARCH 2004

2004 (5) SA 520 (A)

A provision will not be consideredvoid for vagueness if a meaningfulinterpretation can be placed onthe provision. A claim referred toin an insurance policy involves ademand for payment, not merely anotification of loss.

THE FACTSCredit Guarantee Insurance

Corporation of Africa Ltd insuredMetcash Trading Ltd for monetaryloss in respect of an undertakingowned by it and carrying onbusiness in Zaire. The indemnityincluded cover for loss arisingfrom expropriation, war andtransfer restrictions.

Condition 8 of the policyprovided that upon theoccurrence of a loss, Metcashwould be entitled to make a claimand Credit Guarantee would beobliged to pay the claim withinthirty days of Metcash acceptingthe basis of settlement proposedby Credit Guarantee. Condition12.2 of the policy provided thatCredit Guarantee would not beliable for any claim not lodgedwithin a period of one year afterdate on which a claim was lodged.In respect of loss due to war, thisdate was one year after theoccurrence of the loss.

While the insurance cover was inforce, the undertaking sufferedloss in that one of its stores wasburned down and looted incircumstances falling with thepolicy definition of war. On 23September 1991, Credit Guaranteewas informed of this incident.Thereafter, the parties exchangedcorrespondence and heldmeetings regarding the claim andthe extent thereof. At this time,Credit Guarantee remindedMetcash of the time limitsimposed on it in terms of theinsurance policy. On 28September 1993, Metcash claimedR72 000 for loss of share capitaland R3 467 492,25 for a long-termloan. In October 1994, CreditGuarantee repudiated liability onthe grounds that prescription hadrun in respect of the claim.

In March 1995, Metcash issuedsummons claiming a declarationthat Credit Guarantee was liableto indemnify it in respect of itsclaim. Credit Guarantee defendedthe action on the grounds that theclaim had prescribed in terms ofCondition 12.2.

THE DECISIONMetcash contended that these

Conditions were void forvagueness. However, it was clearthat the Conditions containing therelevant dates referred to datesfrom which a claim would beconsidered for settlement byCredit Guarantee. The Conditionsprovide for a timetable for thelodging of claims, and the timelimits within which the lodging ofclaims must be made. When thetwo Conditions were readtogether, the relevant date was thedate from which a claim would beconsidered for settlement byCredit Guarantee. Any claimmade by Metcash could beconsidered after it was lodged.Depending on the category ofclaim, the time period withinwhich such consideration was totake place would vary, but thisdid not mean that the Conditionswere vague.

Metcash also contended that ithad submitted its claim in timebecause it had informed CreditGuarantee of its loss in September1991. However, the claim referredto in the Conditions was to beinterpreted in the same way ineach of them and, as such, a claimwas, properly understood, not amere notification but a demandfor an indemnity. Such a demandwas first made in September 1993,which was beyond the time limitprovided for in the Conditions.

The appeal was dismissed.

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SANTAM LTD v HOBBS

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPEPROVINCIAL DIVISION2 AUGUST 2004

2004 CLR 348 (C)

An insurance policy providingcover in respect of a truck butexcluding liability in the case ofan open backed truck should beinterpreted so as to include coverin the case of a truck with a fibreglass canopy, where it is clear onthe wording of the policy termsthat cover in such a case isintended.

THE FACTSSantam Ltd insured a light truck

in respect of damages caused toany person injured as a result ofthe use of the vehicle by theinsured or anyone else driving thetruck with the insured’spermission. Clause (m) of thepolicy provided that liabilitywould be excluded in the case ofpersons being transported in an‘open backed vehicle’.

The back of the light truck wasenclosed by a fibre-glass canopy.

While the insurance cover was inforce, the truck was involved in acollision. A certain Mr Hanauer,who was in the cab portion of thetruck at the time, suffered injuriesand brought an action againstHobbs, the driver, for payment ofdamages in the sum of R1,2m.Hobbs joined Santam Ltd as athird party in the action. Hobbshad been driving the truck withthe permission of the insured, hisfather.

Santam denied liability on thegrounds that the truck was anopen backed vehicle and clause(m) of the policy applied.

THE DECISIONClause (m) made it clear that

passengers on the open backsection of the truck as opposed toin its cabin were not indemnified.The reason for this was that suchpassengers were exposed togreater risk of injury in that theydid not have the benefit of safetydevices which other parts of thevehicle had. The purpose of clause(m) was clearly to exclude liabilityin such cases.

The question was whether atruck with a rear section enclosedby a fibre glass canopy could beregarded as an open backedvehicle. The truck and its rearsection were considered togetherfor insurance purposes, thuscreating the incontrovertibleimpression that the insuredvehicle was fitted with a canopyat the time the cover was takenout, and remained so up to thetime of the collision. It followedthat the vehicle was an enclosedor covered vehicle and could notbe appropriately described as anopen backed vehicle.

Santam was therefore liable interms of the policy.

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SAMSUDIN v BERRANGE N.O.

A JUDGMENT BY LEVINSOHN JNATAL PROVINCIAL DIVISION19 AUGUST 2004

2004 CLR 360 (N)

A party married in community ofproperty whose estate has beensequestrated is entitled to acontribution towards the costs oflitigating in connection with thesequestration proceedingsbrought.

THE FACTSThe liquidator of NRB Holdings

Ltd, Berrange, applied urgentlyand ex parte for the sequestrationof the joint estate of Samsudin andHassan. The joint estate arose inconsequence of their marriage toeach other in community ofproperty.

A rule nisi was issued callingupon Hassan to show cause whythe joint estate should not befinally sequestrated and aprovisional order was issued.Hassan and Samsudin opposedthe application. Before the matterwas determined, Samsudinapplied for the release of moneyin the joint estate in order toenable her to effectively opposethe application for sequestration.

Berrange and the secondrespondent opposed theapplication on the grounds thatthe court did not have the powerto order the release of such funds.

THE DECISIONAt this stage in the proceedings,

it had to be assumed that theprovisional order was properlygranted. It could also be assumedthat there was a bona fide disputeon reasonable grounds betweenthe parties. If the trustees did notrelease the funds to Samsudin, shewould be likely to suffer prejudicein that she would be precludedfrom properly ventilating hercase.

The question was whether thecourt had the power to come toSamsudin’s assistance in thesecircumstances. There was no basisfor doing so on the grounds of her

Insolvency

constitutional rights. There beingno precedent for the order appliedfor, it was necessary to applyprinciples based on the commonlaw and existing statutoryprovisions.

The Matrimonial Property Act(no 88 of 1984) provides for theright of both spouses married incommunity of property to litigate.The right of a wife married incommunity of property to claim acontribution towards the costs inmatrimonial proceedings is well-established and is based on theduty of support owed by onespouse to another. The implicationof this is that such spouses wouldbe entitled to have access to theassets of the joint estate forpurposes of funding suchlitigation.

The sequestration proceedingsbrought about a concursuscreditorum. However, theInsolvency Act (no 24 of 1936)recognises the obligation of atrustee to allow the insolvent suchsums as are necessary for thesupport of the insolvent. Anincident of the duty of support isthe duty to provide a contributiontowards costs.

The issues involved concern theproprietary status of the marriageand Samsudin’s rights to theassets. These would normally beissues in respect of which shewould be entitled to acontribution towards costs. It wastherefore in the interests of justicethat she should obtain some suchcontribution in the present case.

Samsudin was entitled to a fairand reasonable contributiontowards costs.

125

MEEG BANK LTD v WAYMARK N.O.

A JUDGMENT BY MPATI DP(FARLAM JA, CAMERON JA,MTHIYANE JA andSOUTHWOOD AJA concurring)SUPREME COURT OF APPEAL26 MARCH 2004

2004 (5) SA 529 (A)

A proclamation dissolving acorporation is validly issued andis of full force and effect eventhough it omits provisionscustomarily used to state thepowers of the liquidators in thewinding up of the corporation,when the proclamationincorporates such powers byreference.

THE FACTSOn 10 July 1997, the Premier of

the Eastern Cape Province issueda proclamation dissolving theMagwa Tea Corporation andappointing Waymark and othersas liquidators of that corporation.The proclamation incorporatedterms empowering the liquidatorsto act with the powers referred toin section 386 of the CompaniesAct (no 61 of 1973) and theInsolvency Act (no 24 of 1936).

The proclamation was issued interms of section 19 of theCorporation TransitionalProvisions Act (no 12 of 1995)(Eastern Cape) which authorisesthe Premier to dissolve certaincorporations by proclamation.Section 19(2) provides that in suchproclamation, the Premier shallregulate all matters resulting fromsuch dissolution, and may in sodoing prescribe that provisions ofthe Companies Act and theInsolvency Act shall apply to thedissolution, and may assign thepowers exercised by officials andappointees under those Acts toany other person consideredappropriate.

The proclamation did notinclude general provisionsauthorising the liquidators toperform a variety of actions inrelation to the dissolution. In otherproclamations, these actions wereusually provided for in seven sub-paragraphs (2.1 - 2.7) reciting thevarious activities the liquidatorsmight perform.

On 1 December 1997, thePremier issued anotherproclamation also dissolving theMagwa Tea Corporation, nowincluding the omitted sub-paragraphs.

Between 10 July 1997 and 1December 1997, Magwa’s creditbalance at Meeg Bank Ltdincreased by some R4.5m beingdeposits made in favour of thecorporation into its bank account.

The liquidators contended thatthey were entitled to be paid overthis amount being amountsreceived after the dissolution ofthe corporation. The bankcontended that they were not soentitled, the corporation havingbeen dissolved on the later dateand the liquidators havingobtained their authority to actonly from that later date.

THE DECISIONThe Premier acted in terms of

section 13 of the Corporations Act(no 10 of 1985) (Transkei). Thissection provides that the Premiermay, by proclamation in theProvincial Gazette, dissolve acorporation, and shall in suchproclamation regulate all mattersresulting from such dissolutionand may prescribe that certainprovisions of the Companies Actand the Insolvency Act apply tosuch dissolution, and may assignpowers and functions exercised byofficials and appointees underthose Acts.

The section requires that acorporation be dissolved byproclamation. It cannot thereforebe dissolved by a later GeneralNotice, such as was issued in thepresent case. The later correctionof the previous proclamation in noway invalidated the proclamationbut amplified it by incorporatingthose aspects not included in theinitial proclamation. Were it to beotherwise, the actions undertakenby the liquidator pursuant to theinitial proclamation would haveto be considered null and void.

The purpose of section 13 is toensure a proper and efficientwinding up of a corporation. Anunsubstantial deviation from itsprovisions should not render theapplication of its provisionsdevoid of legal effect. This shouldbe so whether the provisions areconsidered peremptory or not.

The appeal was dismissed.

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ABSA BANK LTD v BURMEISTER

A JUDGMENT BY SCOTT JA(MPATI DP, CAMERON JA,NUGENT JA and CLOETE JAconcurring)SUPREME COURT OF APPEAL26 MARCH 2004

2004 (5) SA 595 (A)

An employer may not exercise theright to deduct amounts from itsemployee’s pension fundentitlements in terms of section37D(1) of the Pension Funds Act(no 24 of 1956) if the employee’sbenefits have been transferred toanother pension fund followingtermination of employment.

THE FACTSBurmeister was employed by

Absa Bank Ltd as a manager at itsbranch in Springs. In April 1997,he resigned. Pension fund benefitsaccruing to him were paid byAbsa’s pension fund to theProtector Pension Fund, asubsidiary of Old Mutual, andwere subsequently used topurchase a compulsory linked lifeannuity with Sanlam LifeAssurance Ltd.

In February 1998, Absa broughtan action against Burmeisterclaiming damages in the sum ofR1 765 269,05, being loss allegedlysuffered as a result of Burmeister’sdishonest and fraudulent conductwhile employed at Absa. Defaultjudgment was granted againstBurmeister in the sum of R721420,56. In execution proceedings,the sheriff attached the lifeannuity with Sanlam to the extentof R300 000.

Burmeister applied for an ordersetting aside the attachment. Absaopposed the application andcounter-applied for an orderdeclaring that it was entitled toattach the annuity upon thejudgment it held against him. Theapplication was granted and thecounter-application dismissed.

Absa appealed.

THE DECISIONSection 37A(1) of the Pension

Funds Act (no 24 of 1956)provides that no benefit providedfor in the rules of a registeredfund shall be liable to be attachedor subjected to any form ofexecution under a judgment ororder of court. Section 37D(1)

provides that a registered fundmay deduct from any benefitpayable to a member, any amountdue by a member to his employeron the date of his retirement or onwhich he ceases to be a member ofthe fund in respect ofcompensation in respect of anydamage caused to the employerby reason of any dishonesty andin respect of which a judgmenthas been obtained against themember.

A member of a fund as referredto in the latter section is one whois a member of the fund makingthe deduction referred to in thesection. The section entitles thefund to make the deduction untilsuch time as the person inquestion ceases to be a member ofthe fund.

Absa contended that the right todeduct extended to a fund ofwhich the ex-employer became amember subsequent to thetermination of his membership ofthe original fund.. However, theobject of the section was to protectpension fund benefits fromattachment. The exceptionprovided for in sub-section Dapplied in the case of an employerin view of the fact that theemployer also participated in thepension fund. The inference to bedrawn was that the pension fundagainst which the deduction couldbe made was the employer’spension fund established for thepurpose of providing the pensionfund benefits of the member’semployment. A subsequentpension fund was notencompassed by the section.

The appeal was dismissed.

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MNGADI v BEACON SWEETS & CHOCOLATESPROVIDENT FUND

A JUDGMENT BY NICHOLSON JDURBAN AND COAST LOCALDIVISION8 APRIL 2003

2004 (5) SA 388 (D)

A provident fund may be orderedto retain withdrawal benefits inorder to satisfy the futuremaintenance obligations of itsmember.

THE FACTSMngadi’s husband was a

member of the Beacon Sweets andChocolates Provident Fund, aprovident fund established interms of the Pension Funds Act(no 24 of 1956). She obtained amaintenance order against himunder the Maintenance Act (no 99of 1998), requiring him to payR200 per month per child born oftheir marriage.

Mngadi’s husband resigned hisemployment in order to avoidpaying maintenance. Mngadisecured a warrant of executionagainst the benefits held by theFund in order to obtain therequired maintenance. The Fundrefused to set aside funds toprovide for future maintenance.

Mngadi applied for an orderagainst the Fund requiring it to setaside funds for this purpose.

THE DECISIONSection 26(4) of the Maintenance

Act provides that notwithstandinganything to the contrary containedin any law, any pension benefit

shall be liable to be attached orsubjected to execution under anywarrant of execution or ordermade to satisfy a maintenanceorder.

An party entitled to maintenanceis not obliged to follow the routeof a criminal prosecution in theevent of default in payingmaintenance. The rightsestablished in terms of theMaintenance Act are additional tothe common law rights held bythose entitled to maintenance andis a partial codification of parents’obligations to maintain theirchildren. In the past, the courtshave come to the assistance of aperson whose spouse isdissipating the assets of the jointestate, and have interdicteddebtors from dissipating theirassets in order to thwart theclaims of creditors. It is thereforeappropriate for a court to extendthese principles to cover the caseof a payout of benefits held by aprovident fund where the partyhas future maintenanceobligations.

The order was granted.

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THE SAGE SCHACHAT PENSION FUND vTHE PENSION FUNDS ADJUDICATOR

A JUDGMENT BY VAN ZYL JCAPE OF GOOD HOPEPROVINCIAL DIVISION17 OCTOBER 2003

2004 (5) SA 609 (C)

A determination made by anAdjudicator under the PensionFunds Act (no 24 of 1956) cannotbe overturned by any decision ofthe Registrar of Pension Funds.An approval given by the lattercannot operate retrospectively soas to affect the validity of such adetermination.

THE FACTSIn August 1998, three pension

funds related to variouscompanies in the Sage group ofcompanies resolved toamalgamate by transferring theassets and liabilities of two ofthem to the third in accordancewith the provisions of section 14of the Pension Funds Act (no 24 of1956). The amalgamated fund wasto be known as the ‘Sage GroupPension Fund’. The amalgamationwas approved by the trustees ofthe various funds.

The trustees of the Sage SchachatPension Fund did not obtain theapproval of the Registrar ofPension Funds before or at thetime of the merger butsubsequently did so. The approvalwas given after the Pension FundsAdjudicator made a ruling in thematter and was made withretrospective effect.

Two members of one of theamalgamating funds, the SageSchachat Pension Fund, lodged acomplaint with the Pension FundsAdjudicator, alleging that themerger of the funds prejudicedthem. The Pension FundsAdjudicator considered the matterand made an order directed atrestoring the financial position ofthe Sage Schachat Pension Fund toits pre-merger status.

The trustees of the Sage SchachatPension Fund took the view thatthe rationale for the Adjudicator’sorder had fallen away when theRegistrar of Pension Fundsapproved the merger and theycontested the cogency of theorder. They applied for an ordersetting aside his order anddeclaring that they were notobliged to give effect to it.

THE DECISIONThe major issue was whether or

not the approval of the merger bythe Registrar of Pension Fundsand the Financial Services Boardjustified setting aside theAdjudicator’s determination.Related to this was the questionwhether or not the Adjudicatorshould have taken into accountthe fact that an application interms of section 14 of the Act waspending.

The Act is largely concernedwith protecting the interests ofpension fund members andpensioners. The trustees of apension are required to act ingood faith toward these partiesand owe a fiduciary duty to them.The Adjudicator’s determinationwas to be assessed in the light ofthese considerations.

At the time the Adjudicatormade his determination, the threefunds were separate legal entitiesand the Adjudicator was bound tomake his determination on theassumption that they were. Thefact that the trustees of thepension funds neverthelesseffected the amalgamation of thefunds showed that they wereresorting to legal self-help. Thiswas inconsistent with the positiontaken by the Adjudicator and thedetermination made by him. Assuch it could not overturn thatdetermination nor affect itslegitimacy.

No subsequent approval in termsof section 14 could override theAdjudicator’s determination. Thedetermination had the force of acourt order and could not benullified by the action of theRegistrar. It could be rescindedonly by another court order, interms of section 30P(2) of the Act.

The application was dismissed.

Pensions

129

PELLOW N.O. v CLUB REFRIGERATION CC

A JUDGMENT BY CLOETE JA(SCOTT JA, MTHIYANE JA,ERASMUS AJA and JAFTA JAconcurring)SUPREME COURT OF APPEAL29 SEPTEMBER 2004

UNREPORTED

A construction contractcontaining references to the termsof the tender under which theconstruction contract wasconcluded may be understood toinclude the terms of tender withinits provisions. A reservation ofownership clause contained insuch terms of tender will beentitle the contractor to claim asowner in respect of goods suppliedin terms of the constructioncontract.

THE FACTSFisher Foods SA (Pty) Ltd called

for tenders for the construction ofa factory in Kempton Park. ClubRefrigeration CC submitted atender for the construction of thefactory and the supply of certainmovable items. The tenderprovided that all items ofequipment remain the property ofClub Refrigeration until paid forin full. Fisher Foods accepted thetender and Club Refrigerationsubmitted a signed standardprincipal building agreementrecording the terms of theconstruction contract.

The Industrial DevelopmentCorporation financed theconstruction works and registereda general notarial bond over themovables of Fisher Foods. ClubRefrigeration completed the workand supplied the movables. Beforeit was paid the balance of theamount due to it, Fisher Foodswas placed in liquidation. Shortlybefore its liquidation, the IDCperfected its security.

Club Refrigeration and the IDCmade competing claims againstthe movables. They and theliquidators then entered into atripartite agreement in terms ofwhich the movables were sold toAfgri Operations Ltd and thedetermination as to which of thetwo competing parties wasentitled to the whole of or portionof the purchase price was to bemade by a court of competentjurisdiction. The equipment wasthen sold to Afgri for R1,28m.

Club Refrigeration then appliedfor an order that it was the ownerof the equipment and entitled tothe proceeds of the sale to Afgri.The liquidators contended thatClub Refrigeration was not theowner of the equipment as noreservation of ownership clauseexisted, alternatively that section84 of the Insolvency Act (no 24 of1936) applied, conferring on Club

Refrigeration a hypothec inrespect of the equipment.

THE DECISIONThe liquidators contended that

the agreement in terms of whichthe equipment was supplied wasnot contained in the terms oftender submitted by ClubRefrigeration but in the standardprincipal building agreement,which did not provide for thereservation of ownership in theequipment. It was however, clearfrom the standard principalbuilding agreement that its termsincluded those of other relatedcontract documents. In thecircumstances, this would includethe tender document whichincluded the reservation ofownership clause.

The liquidators also contendedthat since the constructioncontract was a lump sum contract,it was impossible to determinewhether payment for individualitems, such as the equipment, hadbeen made. However, theprovisions of the building contractprovided for payments in terms ofinterim certificates which were toseparately specify reasonableestimates of amounts due forwork done and for goodssupplied. Goods paid for wouldbecome the property of FisherFoods. The liquidators did notcontend that Club Refrigerationhad been paid. Accordingly, ClubRefrigeration could properlydepend on the reservation ofownership clause and assert itsownership in equipment forwhich it had not been paid.

The liquidators also contendedthat since the value of theequipment was not specified inany of the payment certificates, itwas impossible to determine theamount due to Club Refrigeration.However, Club Refrigeration didnot make its claim in terms of theconstruction agreement under

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which such certificates wereproduced, but in terms of itsrights as owner, as stated in thetripartite agreement. Havingproved it was the owner of the

equipment, Club Refrigerationwas entitled to payment in termsof the tripartite agreement.

The appeal failed.

Counsel representing the liquidators, in submitting that the tripartite agreement shouldnot be given its plain meaning, pointed out that when liquidation supervened thecontract between Club Refrigeration and Fisher Foods was executory or incomplete; andsubmitted that it cannot be established whether the liquidators decided not to carry onwith the execution of the contract, and thereby repudiated it, much less whether ClubRefrigeration accepted any such repudiation and cancelled the contract. But all of this isirrelevant. Club Refrigeration’s claim to the proceeds of the sale of the goods is based onthe fact that it owned them. It has made no claim in these proceedings to participate inthe proceeds of the liquidation of Fisher Foods. In entering into the tripartite agreementthe liquidators correctly recognised that if Club Refrigeration was the owner of thegoods, the proceeds of the sale of the goods could never form part of the assets of FisherFoods and would have to be paid over to Club Refrigeration.To sum up: Club Refrigeration reserved ownership in the goods supplied by it to FisherFoods until it was paid. The agreement between Club Refrigeration and Fisher Foodswas a lump sum agreement but because of the interim certificate provisions itcontained, it can be determined that Club Refrigeration was not paid for certainmovable goods supplied by it. Club Refrigeration agreed with the liquidators of FisherFoods that these goods could be sold to a third party and the liquidators undertook thatif Club Refrigeration proved in a court of law that it had been the owner of the goods,they would pay the proceeds of the sale to Club Refrigeration. Club Refrigeration hasproved this and is accordingly entitled to payment.

Construction

131

NISSAN SOUTH AFRICA (PTY) LTD v MARNITZ N.O.

A JUDGMENT BY STREICHERJA(NUGENT JA, CONRADIE JA,PATEL AJD and PONNAN AJAconcurring)SUPREME COURT OF APPEAL1 OCTOBER 2004

2004 CLR 371 (A)

A bank holding money in acustomer’s account which hasbeen erroneously paid into thataccount is obliged to repay themoney to the party claiming suchmoney, where the claimant has anenrichment action against thebank.

THE FACTSOn 31 December 2002, Nissan

South Africa (Pty) Ltd instructedFirstrand Bank Ltd to transfer R12767 468,22 to an account held atthe Standard Bank. The accountwas identified with an accountnumber but, due to a clericalerror, the wrong account numberwas given and Maple Freight CCwas credited with the moneyinstead of TSW Manufacturing forwhich the payment was intended.

On 2 January 2003, Mapletransferred R12 700 000 from itsStandard Bank account to anotheraccount which it held at Firstrand.The sole member of Maple theninstructed Firstrand to open a callaccount with the intention oftransferring the money to thataccount, but the money was nevertransferred to that account andMaple used the funds depositedto its account in the day-to-dayrunning of the business of thecorporation.

On 20 January 2003, TSWenquired with Nissan regardingthe money expected to paid intoits account. After it became clearthat the money had beentransferred into Maple’s account,Nissan demanded repayment ofthe money from Maple. Maplestated it would comply with thedemand provided it received anadministration fee of 4% on themoney, and retain interest on themoney.

Nissan obtained an ordersuspending the operation ofMaple’s bank accounts. The solemember asserted that thisrendered it impossible for Mapleto repay Nissan and placed thecorporation under financial strain.He resolved to wind up thecorporation voluntarily. Marnitzand the second respondent wereappointed liquidators.

Nissan contended that themoney still in Maple’s account didnot form part of the assets of

Maple’s insolvent estate andshould be repaid to it. Theliquidators contended that thismoney was part of Maple’sinsolvent estate and should beincluded in it for the purposes ofwinding up the insolvent estate.Nissan brought an application foran order declaring that theidentifiable amounts transferredto Maple’s accounts, andsubsequently transferred to theliquidators’ accounts of thecorporation in liquidation, did notform part of the assets of thecorporation in liquidation andshould be paid to it or Firstrand.

THE DECISIONIt is not true to say that once

money has been deposited into abank account, the bank isunconditionally obliged to payany money so deposited to itscustomer upon demand, whetheror not the money has been stolen.Ownership of money given to theaccount holder is not transferredto a party which knows it is notentitled to the money.Accordingly money depositedinto the bank account of such aparty, whether this be cash or acredit entry, is not an asset whichthat party may claim as againstthe bank.

In the present case, when thetransfer was effected, Firstrandintended to pay TSW andStandard Bank intended to receiveon behalf of Maple. There wastherefore no meeting of mindsbetween the parties and Mapledid not become entitled to themoney so paid into its account. Tothe extent that Mapleappropriated such funds, thiswould constitute theft of them.The bank was therefore notentitled to retain the funds asagainst the liquidators.

The bank was obliged to pay themoney to the party with anenrichment claim against it. This

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132

obligation rests on the principlesof enrichment which assume thatthe bank has not paid over themoney to another party notknowing that the money wasincorrectly deposited in the firstplace.

Firstrand was therefore obligedto pay over to Nissan thoseidentifiable amounts paid intoMaple’s account. The appealsucceeded.

The position can be no different where A, instead of paying by cheque, deposits theamount into the bank account of B. Just as B is not entitled to claim entitlement to becredited with the proceeds of a cheque mistakenly handed to him, he is not entitled toclaim entitlement to a credit because of an amount mistakenly transferred to his bankaccount. Should he appropriate the amount so transferred, ie should he withdraw theamount so credited, not to repay it to the transferor but to use it for his ownpurposes, well knowing that it is not due to him, he is equally guilty of theft.[26] In this case FNB, as agent of the appellant, intended to effect payment to TSW,and Standard Bank, as agent of Maple, intended to receive payment on behalf ofMaple. There was no meeting of the minds. In these circumstances, Maple, did notbecome entitled to the funds credited to its account. Any appropriation of the fundsby Maple, with knowledge that it was not entitled to deal with the funds, would haveconstituted theft. The transfer of the funds to the receipts account and thereafter tothe payments account of Maple did not change Maple’s position concerning thosefunds. Just like Standard Bank, FNB received funds to which Maple was not entitled.An appropriation of these funds by Maple, with knowledge that it was not entitled tothe funds, would likewise have constituted theft thereof. The first and secondrespondents, consequently, have no claim against FNB in respect of the funds.

Banking