Croma Investments (Pty) Ltd v Baphalaborwa Municipality and Another (40683/2006) [2007] ZAGPHC 341 (14 June 2007)

IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)

In the matter between

CASE NO.: 40683/2006

CROMA INVESTMENTS (PTY) LTD.

Applicant

and

BA PHALABORW A MUNICIPALITY

First Respondent

REGISTRAR OF DEEDS

Second Respondent "

CORAM: EBERSOHN AJ

DATE HEARD: 16th MARCH 2007

JUDGMENT: 14th JUNE 2007

JUDGMENT

EBERSOHN AJ.

[1] In this matter the prayers contained in the notice of motion read as follows:

"1. Directing the first respondent to sign all documents necessary to effect transfer from the first respondent to the applicant of the Remainder of Township, Phalaborwa Extension 9, Registration Division LM, Measuring 214,3489 ha held by the first respondent in

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terms of Deed of Transfer T48868/90 (hereafter referred to as the "property") .

2.

In the event of the first respondent failing to give effect to prayer 1

supra, an order authorising the Sheriff (b sign all documentation in the first respondent's stead for purposes of giving effect to prayer 1 supra.

3.

An order directing the second respondent to transfer the property from the first respondent to the applicant.

4.

Costs of the application to be paid by the first respondent.

5.

Further and/or alternative relief."

[2] The applicant is a company and the first respondent is a local municipality. The second respondent was cited nominally.

[3] It is the applicant's contention that it is the purchaser of a certain fixed property of the first respondent in terms of an alleged deed of sale which came into being in consequence of a written offer by the first defendant and a written acceptance thereof by the applicant. Section 2 of the applicable legislation namely the Alienation of Land Act, No. 68 of 1981, reads as follows:

"2. (1) No alienation of land after the commencement of this 'section shall, subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.

(2) The provisions of subsection (1) relating to signature by the agent of a party acting on the written authority of the party, shall not derogate from the provisions of any law relating to the making of a

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contract in writing by a person professing to act as agent or trustee for a company not yet formed, incorporated or registered.

2A .. The deed of alienation shall contain the right of a purchaser or prospective purchaser to revoke the offer or terminate the deed of alienation in terms of section 29A."

[4] It is common cause that the first respondent's Director Technical Services, after some negotiations between some of first respondent's officials and a representative of the applicant, one Pienaar, addressed a letter (annexure "D" to the founding papers) dated the 19th May 2005 to Croma Investments (Pty) Ltd., the current applicant, which letter reads as follows (quoted verbatim):

"PURCHASING AND DEVELOPMENT OF EXTENSION 9, PHALABORWA.

Your letter of regarding this has reference.

A meeting was held with the Speaker (B. Dlamini), the Mayor, 2 councillors, the Municipal Manager and Senior Officials of the Municipality on 10 May 2005.

You are requested to provide time frame for the phases of your development and an indication when you can start with the development. You are also requested to indicate if you will use the existing lay-out and if not what densities will be applicable.

It was indicated that the Municipality is willing to sell the property and that a formal agreement and conditions will be discussed."

[5] On the 18th July 2005 the applicant, Croma Investments (Pty) Ltd., responded to annexure “D” by way of a letter (annexure "E" to the founding papers) which letter reads as follows (quoted verbatim):

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"R.E.: PURCHASING AND DEVELOPMENT OF EXTENTION 9, PHALABORWA.

we were requested in your last letter to provide the following information:

Timeframe for the phases

Indication when we can start the development Will we be using the existing lay-out

The letter was dated: 19 May 2005.

Croma investments did supply the Municipality with all necessary information, also our confirmation that we will contribute R5000,00 of each stand to various upliftment projects in the community.

I also had a telephone conversation with Mr. Hennie Jacobs, stating that a proper valuation needs to be done on extension 9. The valuation was done and received by the Municipality on Wednesday 13 July 2005.

I phoned Mr. Hennie Jacobs on Thursday 14 July 2005, and confirm the following:

-Extension 9 : 214 hectares

-Valuation Price: R15,200 000,00

After consultation with our investment group who will finance Croma Investments regarding extension 9 the following:

Croma Investments are prepared to pay the Municipality R15 200 000,00 for extension 9.

Will be able to start the project in four months time, from June 2005

- To complete the bulk services on extension 9 will take Croma Investments 12 months.

For Croma Investments to proceed lD this transaction we need the following:

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Letter of confirmation that the municipality will sell extension 9 to Croma Investments for R15 200 000,00

The final agreement and documentation regarding the purchasing of extension 9.

Note: These documents are very important for Croma Investments to be able to release our funds towards the project."

This letter was signed by one A. Pienaar as managing director of the applicant.

[6] On the 26th August 2005 the Chief Financial Officer of the first respondent addressed a letter (annexure "F" to the founding papers) to Chroma Investments (Pty) Ltd., the applicant, which letter reads as follows (quoted verbatim):

"Sir,

Offer to Purchase Remaining Portion of Ext 9 Phalaborwa.

I am glad to inform you that the sale of the above land for development at the price stated in your letter dated 18 July 2005 has been approved under the conditions as per attached addendum.

Pleas~ note that these conditions are the minimum requirements approved by counsel, and not necessarily the only requirements that will constitute a legal agreement between the parties."

[7] The addendum attached to annexure "F" reads as follows (quoted verbatim):

"1. That the investor comply with the Black Empowerment Act.

THAT the developer BE RESPONSIBLE for all infrastructures as per plan.

THAT development ONLY STARTS once the property is registered

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·or on receipt of at least a 10% non-refundable deposit, which ever is first.

THAT the property BE DEVELOPED in four phases.

THAT each phase once started, BE COMPLETED within 12 months.

THA T the total development BE COMPLETED within 10 years from date of registration.

THAT the first phase BE COMPLETED within 12 months from date of registration.

THAT the infrastructure be IN ACCORDANCE with minimum standard required by the Municipality.

THAT the developer BE RESPONSIBLE for any additional cost in respect of bulk services required for the specific development.

THAT the land BE SOLD to the developer "voetstoots" and the Municipality will not be responsible for any cost for any action or changes in legislation or any other legal requirements of which he . was not aware of at the time of the sale.

THAT all infrastructures once completed BE TRANSFERRED free of charge to the Municipality."

[8] The applicant contended before this Court that annexures "E" and "F" read together constituted a valid deed of sale regarding the property. The difference between the description of the properties referred to in the two letters are highlighted.

[9] It is common cause that the first respondent addressed a letter, annexure G" to the founding papers on the 9th January 2005, to attorneys Joubert & May which letter reads as follows (quoted verbatim):

"SELLING OF EXT 9, PHALABORW A.

Your assistance as discussed telephonically is urgently required to compile a Sale Agreement for the above mentioned property taking into consideration the requirements of Council as well as any other town establishment condition that may apply to the above extension.

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Attached, please find copies of the proposal by the purchaser and Council resolution and other documentation relevant to the above.

Details of the Municipal Manager/ Accounting Officer are as follows:

Isaiah Nyathi Id 6610265530089

and the buyer

Mr. Anton Pienaar

can be contacted at cellular phone number 082 795 1055 for the details of his company etc ..

Your assistance in this matter is highly appreciated."

[10] It is common cause that a comprehensive written deed of sale was prepared (annexure "K" to the founding affidavit) in which the purchaser was described as follows:

"ANTON PIENAAR duly authorised hereto by a Resolution of the directors of ANTON PIENAAR PROPERTY DEVELOPMENT (EIENDOMS) BEPERK."

[11] It is also common cause that the deed of sale, annexure "K", was never signed.

[12] Mr. Labuschagne, who appeared for the applicant, argued that annexure "E" to which reference was made supra was a valid and legal offer and that the applicant duly accepted the offer by way of annexure "F". He conceded, though, in his written heads of argument "that it was apparent that the agreement in principle would be

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refined by further negotiations". What that is supposed to mean is not clear except that it is a clear concession that no deed of sale yet came into being.

[13] Mr. Louw, who appeared for the first respondent, pointed out in argument that the applicant alleged, and that it was its case, that the unsigned draft deed of sale reflected the full consensus between the parties and that the applicant tendered performance in terms of the unsigned draft deed of sale.

[14] Mr. Louw raised several defences to the applicant's claim for transfer.

[15] The first defence was that annexure "K" to the founding affidavit was not written animus contrahendi, but instead contemplated a later written legal agreement. Having studied the documentation I am of the opinion that he is correct. Support for this view is to be found in the following:

the wording of annexure "D" which was quoted supra and especially the last paragraph thereof shows clearly that the municipality displayed interest in a possible sale and nothing more;

annexure "E" which was also quoted supra was a letter from the applicant contai,ning some of the information the municipality required and regard must especially be had to the wording of the penultimate and ultimate paragraphs of the letter which two paragraphs read as follows:

"For Croma Investments to proceed in this transaction we need the following:

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Letter of confirmation that the municipality will sell extension 9 to Croma Investments for R15 200 000,00

The final agreement and documentation regarding the purchasing of extension 9.

Note: These documents are very important for Croma Investments to be able to release our funds towards the project."

annexure F, which was also quoted supra was clearly not, and also not intended, to be an offer to sell but was merely the response sought and asked for in the penultimate and ultimate paragraphs of annexure "E". The last paragraph of annexure "F" also clearly indicates that if there was to be a sale eventually the parties will have to negotiate and agree upon the further terms the sale would be subject to;

annexure "G" can also not be regarded as any proof that an agreement of sale did come into effect in view of the following:

the instructions to the attorney were not final instructions as the attorneys were called upon to make an input which clearly would have to be considered later by the first respondent and the potential purchaser;

ii) in the second paragraph of the letter the first respondent refer to annexure

"E" as the "proposal by the purchaser"; and

iii) the purchaser is indicated as one "Anton Pienaar";

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iv) the draft deed of sale, annexure "K", refers to the purchaser as

"ANTON PIENAAR duly authorised hereto by a Resolution ofthe directors of ANTON PIENAAR PROPERTY DEVELOPMENT (EIENDOMS) BEPERK."

this indicates that somewhere along the line the attorneys were informed that the applicant would not figure in the sale but another buyer. In the replying affidavit the deponent Kruger explained it in the following

manner:

" 8.2.2

After conclusion of the agreement in terms of annexures "E" and "F" referred to above, Mr. Pienaar, who was a director and controlling shareholder of the applicant at the time, was considering purchasing the property through another company which he was in the process of incorporating. That company became known as Anton Pienaar Developments (Pty) Ltd. and was eventually incorporated on 11 January 2006. That is a date after finalisation of the draft annexed as annexure "K". Mr. Pienaar discussed this issue with the first respondent's deponent to ascertain whether a change in the purchaser would make any difference. He was assured that it would'nt make any difference since it was just another entity of Mr. Anton Pienaar. The first respondent was happy to sign the purchase agreement prepared by Mr. van Aswegen in respect of whichever company Mr. Anton Pienaar nominated for that purpose.

It is therefore apparent that consensus had existed between the parties, but it was not a matter of great importance to the first respondent since it was merely a company of Mr. Anton Pienaar, who had represented the applicant all along. The

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insertion of Anton Pienaar Developers (Pty) Ltd. as the purchaser in the draft is therefore not destructive of the existence of consensus between the parties regarding the purchaser."

vi) the explanation casts further doubt on whether annexures "E" and "F" really were regarded by the applicant and Pienaar to be a valid deed of sale since it is nowhere alleged by the applicant that the deed of sale allegedly brought about by annexures "E" and "F" was ever cancelled but instead the applicant relies on a strange construction which is legally untenable and which does not tend to make the case of the applicant any stronger but instead serves to prove that no deed of sale ever came into being and after annexures "E" and "F" were written were also not regarded by the applicant as constituting a valid and binding deed of sale.

[16] The second defence of the first respondent was that section 14 of the Local Government: Municipal Finance Management Act, No. 56 of 2003 ("MF AA ") was not complied with prior to the alleged sale which section reads as follows:

"14. (1) A municipality may not transfer ownership as a result of a sale

or other transaction or otherwise permanently dispose of a capital asset needed to provide the minimum levels of basic municipal services.

(2) A municipality may transfer ownership or otherwise dispose of a capital asset other than one contemplated in subsection (1), but only after the municipal council, in a meeting open to the public -

(a) has decided on reasonable grounds that the asset is not

needed to provide the minimum level of basic municipal

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services; and

(b) has considered the fair market value of the asset and the economic and community value to be received in exchange for the asset.

(3) A decision by a municipal council that a specific capital asset

is not needed to provide the minimum level of basic municipal services may not be reversed by the municipality after the asset has been sold, transferred or otherwise disposed of.

(4) A municipal council may delegate to the accounting officer of

the municipality its power to make the determinations referred to in subsection (2)(a) and (b) in respect of movable assets below a value determined by the council.

(5) Any transfer of ownership of a capital asset in terms of

subsection (20 and (4) must be fair, equitable, transparent, competitive and consistent with the supply chain management policy which the municipality must have and maintain in terms of section 111.

(6) This section does not apply to the transfer of a capital asset to

another municipality or to a municipal entity or to an national or provincial organ of state in circumstances and in respect of a categories of assets approved by the National Treasury, provided that such transfers are in accordance with a prescribed framework. II

[1 7] The applicant responded thereto by alleging that the first respondent is a category B municipality with a collective executive system as mentioned in section 9(a) of the Local Government: Municipal Structures Act, No. 117 of1998 ("MSA") read with section 7(a) thereof. It was the applicant's contention that a collective system allows for the exercise of executive authority through an executive committee in which the executive leadership of the municipality is collectively vested and thus it did not

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require a decision of the Municipal Council itself as is required by the MF AA.

[18] In rebuttal of the applicant's contention Mr. Louw pointed out on behalf of the first respondent that:

a) the Municipal Council never decided to sell the property to the applicant;

the Executive Council of the first respondent only recommended (see annexures BAP 5 p.187 and "BAPI2" p.196-197 of the record) that the property be sold.

[19] In any case the Municipal Council specifically reserved the right to sell assets of the first respondent. In this regard clause 8 of the POWERS RESERVED BY COUNCIL (annexure "BAPI8" starting on page p.204 oftherecord) reads as follows:

"Hereunder follows other powers specifically reserved for Council:

1 .

2 ~ .

3 .

4 .

5 .

6 .

7 .

8. The alienation of land or any rights to land which is owned by the Council, controlled or situated within Council jurisdiction and the determination of the price thereof, including instances involving municipal

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housing schemes."

[20] The first time that the Municipal Council took a decision regarding the property in terms of section 14(2) of the MFAA was on the 22nd June 2006. The resolution itself is annexure "BAP17" to the answering affidavit. Most importantly upon an analysis of this resolution it is found:

paragraphs 1-3 of the resolution reflects that the Council applied its mind to the requirements listed in section 14(2)(a) and (b) and resolved to dispose of the property at a stated price ofR15,2M it being the market value;

paragraph 4 of the resolution reflects the requirements of section 14(5) namely that such transfer of property must be fair, equitable and transparent.

[21] The Council thereafter put the property to tender and at the time of this application being launched has not accepted any tender yet.

[22] The fact that the first respondent has a collective executive system does not mean that as a fact any particular power could not be reserved for only the Council to exercise as annexure "BAP18" clearly shows and proves.

[23] It therefore is the finding of this court that no valid sale agreement with regard to the particular property has come into being between the applicnt and the first respondent.

[24] Lastly, this Court must deal with the first respondent's application for striking out.

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During argument it was pointed out by the court to counsel that the modem practice was for the court merely to ignore the items objected to. The applicant, however, chose to rely in argument on some of the items objected to despite a warning from the Bench. This court is therefore now compelled to deal with the striking out application.

[25] The first document objected against is annexure "C" to the founding affidavit of Johannes Kruger (pp. 30-31) of the record on the basis that this document did not fornl part of the original founding affidavit as no annexure "C" was annexed thereto and the annexure "C" which has now been put in the record is dated only the 8th February 2007 and thus never even existed when the application was launched and never could form part of the founding papers and this very document was also attached to the replying affidavit on pages 242-244 of the record. In so far as the record was tampered with and this document was inserted as annexure "C" to the founding papers to support the applicant's case, it was not proper and clearly prejudices the first respondent if it stays in the record and it is struck out where it appears as annexure "C" to the founding affidavit.

[26] The second document is a "confirmatory affidavit by one M. Cronje" which is to be found on pages 215-217 of the record. This document did not form part of neither the applicant's founding affidavit nor of the replying affidavit and was not served on the first respondent and furthermore this document was not referred to in any of the applicant's affidavits. As such the affidavit is irrelevant matter and it will be struck out.

[27] The first respondent also applied that paragraphs 8.2, 8.3 and 8.4 ofthe founding affidavit by Kruger be struck out. The paragraphs objected to deal with privileged

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communications between the first respondent and its legal advisors regarding the obtaining oflegal advice and the fact that legal advice was given by the legal advisors to the first respondent. The first respondent also objected to annexure "N" being a copy of the letter the first respondent addressed to its attorneys and also objected to annexure "P!' it being a copy ofthe legal advice furnished by their attorney to the first respondent. The contents of the paragraphs objected to and the two annexures clearly exceeded the bounds of propriety and this Court fails to understand how it in the first instance could have landed up in the founding papers and in the second instance why the applicant relied upon it during argument. The paragraphs and the two annexures will be struck out.

[28] The following order is accordingly made:

1. The applicant's application is dismissed with costs.

The first respondent's application to strike out succeeds in its totality and the offending paragraphs and annexures are struck out with costs.

ACTING JUDGE OF THE HIGH COURT

Applicant's counsel

Adv. E.C. LABUSCHAGNE SC

Applicant's attorneys

First Respondent's counsel First Respondent's attorneys

17 JACO ROOS ATTORNEYS

Adv. A.A. LOUW SC

ROOTH & WESSELS