Els v Director General: The Department of Rural Development and Land Reform and Others (LCC225/2016) [2023] ZALCC 29 (11 September 2023)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE LAND CLAIMS COURT OF SOUTH AFRICA

HELD AT RANDBURG

Case no: LCC225/2016

(1) REPORTABLE: YES/NO

(2) OF INTEREST TO OTHER JUDGES: YES/NO

(3) REVISED: YES/NO

DATE: 11/09/2023

SIGNATURE

Before the Honourable Flatela J

In the matter between:

RAYMOND ELS

APPLICANT

And

THE DIRECTOR GENERAL:

1st RESPONDENT

THE DEPARTMENT OF RURAL

DEVELOPMENT AND LAND REFORM

THOSI SIPHO SHABANGU

2nd RESPONDENT

MBONGENI ELVIS MNISI

3RD RESPONDENT

ZODWA SINA MNISI 4TH RESPONDENT

JUDGMENT

-Interest- claim for mora interest on purchase price where there was unreasonable delay in the transfer of the property.

FLATELA J:

Introduction

[1] Central to this interlocutory application is whether the first respondent, a purchaser of the applicant’s immovable property is liable to pay mora interest on the purchase price of the immovable property where there were unreasonable delays in finalising the transfer of the property. The delays were caused by the internal administrative issues of the first respondent.

[2] The Applicant, a retired farmer sold to the first respondent, The Minister of Rural in Development and Land Reform his property fully described as Portion 7 of the Farm Wonderboom 500 Registration Division, HUD, Measuring 266, 4469 Hectares. The property was subject to a claim lodged by the second to the fourth respondents in terms of the Land Reform (Labour Tenants) Act No. 3 of 1996 (LTA). The second to fourth respondent instituted an action before this court against the Applicant as the first defendant and the first respondent as the second defendant for an order declaring them to be Labour tenants in the subject land and for an award of Land in LCC 225/2016 (the main action).

[3] After the parties exchanged the pleadings in the main application, the Applicant and the first respondent engaged in negotiations to resolve the matter. The Applicant availed the property to the first

respondent for purchase for full and final settlement of the matter, the first respondent agreed to acquire the land from the Applicant.

The Applicant, the first and second to the fourth respondent concluded a settlement agreement, the terms of which were negotiated

and agreed upon by the parties. On 3 November 2020, the settlement agreement was made an order of Court.

[4] The first respondent failed to comply with the terms of the settlement agreement which was made an order of Court.

[5] On 01 November 2022 the applicant approached this court in terms of Rule 37(1)(b) seeking inter-alia an order in the following terms:

3. An order directing the first respondent to pay the compensation to which the applicant is entitled as per the agreement reached, in the amount of R2 800 000.00 (TWO MILLION EIGHT HUNDRED THOUSAND RAND) plus interest on the set amount calculated in terms of the provisions of the Prescribed Interest Act Act 55 of 1975 from 27 June 2022 to the date of registration of transfer of Portion 7 of the Farm Wonderboom 500 Registration Division, HUD, .measuring. 266, 4469 hectares, in favour of the Communal Property Association to the trust account of Cox &Partners Conveyancers of Vryheid, to be held by the said conveyancers in trust until date of registration of transfer of the aforesaid property in favour of the aforesaid CPA, upon which date of registration they said amount plus interest calculated as aforesaid until the date of registration, will be due and payable to the applicant. The aforesaid Conveyancers shall, upon receipt of the set amount plus interest, deposit the funds into a special interest-bearing account investment on their trust account, the interest earned on such a deposit to be for the credit of the state; (my emphasis)

5. That the first respondent be directed to pay the cost of the Applicant for this interlocutory application on a scale between attorney and own client.’

[6] On 27 February 2023, the matter was enrolled on the unopposed roll before Cowen J, the first respondent’s legal representatives appeared and tendered to pay costs of the Applicant on a party and party scale. The court granted an order compelling the first respondent to pay the Applicant the compensation he is entitled to and the first respondent was further ordered to do whatever is

necessary to give effect to the order.

[7] The issue of interest payable on the purchase price and the disputed scale of the tendered costs was postponed.

[8] The costs issue has been resolved by the parties. The parties have since agreed on party and party scale.

[9] The only remaining issue for determination is whether the first respondent is liable for the payment of interest from the date of demand to the date of payment of the purchase price of the property.

Settlement Agreement

[10] The material terms of the settlement agreement were as follows:

“4. The Second Defendant will, within hundred and twenty (120) days from the date hereof formulate and present a written offer to the first defendant c/o the first Defendant’s Attorneys Messrs Cox and Partners, Vryheid, which written offer will reflect what amount the Second Defendant is prepared to pay the first defendant as just and equitable compensation for the property against registration of transfer.

5. The first defendant shall within fourteen (14) calendar days from the date upon which the second defendant will present the written offer to the first defendant, respond to the offer in writing and will deliver its response to the second defendant, c/o the head of the provincial offices of the Department of Rural Development and Land Reform dealing with the matter at 1[...] H[...] H[...] Street Pietermaritzburg.

11. As soon as the first defendant and the second defendant have agreed on the amount of compensation payable to the first defendant, or in absence of agreement, as soon as the amount of compensation has been determined by the court, the first defendant will be entitled to appoint its conveyancers Cox & Partners, Vryheid to attend to the transfer of the property to the CPA to be created for the benefit of the plaintiffs.

12. In order to ensure that registration of transfer of the property from the first defendant to the CPA shall be finalized as soon as reasonably possible, all the parties undertake to do whatever is necessary and to sign whatever documentation may be required of them to be signed, without any undue or unreasonable delay. As soon as such documentation will be submitted to them for signature.

13. Should the registration of transfer of the property and therefore the payment of the compensation payable to the first defendant be delayed unreasonably as a result of any act or omission on the part of the second defendant and not by any act or omissions of the first defendant, the first defendant will through the conveyancers, be entitled to demand in writing due and proper compliance from the second defendant within (fourteen) 14 days failing which, the second defendant will be liable to pay the first defendant interest calculated in terms of prescribed rates Act 55 of 1975 on the full outstanding amount of the compensation payable to the first defendant in terms here of, calculated from .the date of written demand to the date of payment of the full amount of compensation to the said first defendant. The written demand, aforesaid shall be forwarded to the Chief Director: by e-mail. T[...], alternatively by hand Delivery personally to him at 1[...] J[...] M[...] Street, Pretoria”

[11] On 14 June 2021, the applicant was provided with a Provisional Valuation Certificate (POV) received from the offices of Valuer General for consideration of the amount of R28 00 000.00 (Two million Eight Hundred Thousand Rand) as recommendation for the purchase price for the property.

[12] On 26 July 2021, an offer to purchase reflecting the amount of R2 800 000.00 was sent to the applicant’s legal representatives for his consideration. On 10 August 2021, the applicant accepted the offer against registration of transfer of the property in question and as agreed between the parties, the applicant appointed his attorneys Cox and Partners as Conveyancers to attend to the transfer of the property to a Communal Property Association (CPA).

[13] On 22 October 2021, the Applicant’s Conveyancer began the process of registration of property by engaging with one Ms. Pillay, the Deputy Director of Legal of the Department of Agriculture, Land Reform and Rural Development, Pietermaritzburg through correspondence by email wherein Miss Pillay was provided with copies of the offer to purchase dated 26 July 2021 and the acceptance by the applicant dated 10 August 2021.

[14] On 11 November 2021, Ms. Pillay responded to the Conveyancers advising them that the transaction was not yet approved by the National Land Acquisition and Allocation Control Committee (NLAAA) and would only be approved in the New Year.

[15] On 16 May 2022, the Conveyancers dispatched a follow-up e-mail to Miss Pillay requesting an update regarding this matter, Miss Pillay responded on the same day, stating that she still awaited approval for the project. On 16 May 2022, the Conveyancers sent another email requesting her to indicate when approval could be expected. No response was received.

[16] On 27 June 2022, a letter of demand was sent to the first respondent by the Applicant’s Conveyancers, calling upon the first respondent to pay the purchase price due to the applicant to his Conveyancers, Cox and Partners in the amount of R2 800 000.00 (Two Million Eight Hundred Thousand Rand only) and further to provide them with the details of the Communal Property Association (CPA) to which the property should be transferred to within 14 days from the date of receipt failing which the first respondent would be held liable to pay interest Calculated in terms of Act 55 of 1975 on the full outstanding amount of the compensation, calculated from that date of demand to the date of payment of the full amount of compensation due.

[17] The only response that the Applicant’s attorneys received regarding the demand was that the first respondent awaited approval for the transfer from the National Land Acquisition and Allocation Control Committee.

[18] On 1 November 2022, the Applicant launched this application seeking inter -alia the payment of interest from the date of demand to the date of payment.

[19] On 8 November 2022, after the launch of these proceedings, Ms. Pillay provided the Applicant's attorneys with the details of the CPA and draft sale agreement for consideration. She informed the attorneys that the department has now received approval from the National Land Allocation Committee to proceed with the transfer.

[20] Upon perusal and consideration of the draft sale agreement the Applicant’s attorneys discovered that the CPA mentioned in the draft sale agreement was incorrect. On 6th December 2022, the Applicant’s conveyancers were provided with an amended sale agreement and a further amended sale agreement was received from the first respondent on Friday 27th January 2023.

[21] The Applicant’s Conveyancers have since received the guarantee on 18 April 2023.

[22] The Applicant contends that he is suffering and continues to suffer severe financial damages and prejudice due to the unreasonable delays caused by the first respondent in the finalization of the transaction.

[23] He has two bonds registered against the property which he is liable to pay until the bonds are cancelled upon registration of transfer. The Conveyancers have informed the bondholders that they will be paid from the transaction but due to the delays in finalisation of the transaction, the bondholders are threatening to sue him.

[24] One of the bondholders First National Bank, offered to cancel about R600 000 of interest on the amount owed if the bond owing was settled before January 2022, failing which the whole amount owing plus interest would become due and payable. The Applicant failed to settle the bond before the end of January 2022 and the Applicant avers that the Department’s delay is causing him serious financial hardships.

[25] The Applicant contends that there has been an unreasonable delay in the registration of the property and no acceptable reasons have been provided for undue delays therefore payment of compensation to him as a result of the act and omission of the second defendant therefore, the plaintiff is entitled to payment of interest from the date of the letter of demand until the date of final payment of the compensation.

[26] Mr B E Ntuli, the Director in Tenure Reform Implementation Department filed an answering affidavit opposing the relief sought by the application for the payment of interest from the date of demand to the date of payment. It is contended on behalf of the First Respondent that the Respondent’s officials including the deponent have always communicated with the Applicant’s Conveyancers regarding the compliance with the court order and have always been informed of the progress thereof.

[27] It is contended further on behalf of the first respondent that an offer could only be made after the property concerned have been valued and a CPA could not be established without the property having been valued. It is also stated on behalf of the first respondent that the CPA could not be established without an offer being made and accepted.

[28] The first respondent avers that the Provisional Communal Property Association had been established in compliance with Paragraph 9 and 10 of the Settlement Agreement and it was impossible for the first respondent to establish and register a Communal Property Association before a valuation has been done and an offer made and accepted. The period of sixty days mentioned in the settlement agreement was not reasonable because the offer had to be made within a period of 120 days from the date of settlement.

[29] The first respondent alleges that it was awaiting approval from the National Land Acquisition and Allocation Control Committee and the amendments had to be made for the approval to accord with their standard and the applicants were informed of these procedures.

[30] In his reply, the applicant avers that the CPA was only registered on 1 December 2022 a year and four months after the valuation was completed, the offer to purchase was accepted on 10 August 2021 but the request for funding was only made on 18 October 2022, a year and approximately two months after the offer was accepted and the applicant was not provided with reasons for the delay and the demand was ignored.

[31] The Applicant submits that it had placed the first respondent on mora on 27 June 2022, the first respondent was in mora and its failure to comply with demand within the time frames entitles the applicant payment of the interest on the purchase price from the day. For this proposition, the applicant refers to Crookes Brothers Ltd v Regional Land Claims Commission for the Province of Mpumalanga and Others[1] where the court held:

[17] The term mora simply means delay or default. When the contract fixes the time for performance, mora (mora ex re) arises from the contract itself and no demand (interpellatio) is necessary to place the debtor in mora. In contrast, where the contract does not contain an express or tacit stipulation in regard to the date when performance is due, a demand (interpellatio) becomes necessary to put the debtor in mora. This is referred to as mora ex persona

[12] In contrast where the contract does not contain an express or tacit stipulation in regard to the date when performance is due, a demand (interpellatio) becomes necessary to put the debtor in mora. This is referred to as mora ex persona. The debtor does not necessarily fall into mora if he or she does not perform immediately or within a reasonable time. In this situation mora arises only upon failure by the debtor to comply with a valid demand by the creditor. Mora ex persona is so referred as it requires an act of a person (the creditor) to bring it into existence.[2]

…… The purpose of mora interest is therefore to place the creditor in the position that he or she would have been in had the debtor performed in terms of the undertaking. Here a demand (interpellatio) was necessary to place the respondents in mora.

[32] The applicants further referred to Mokala Beleggings & Another v Minister of Rural Development and Land Reform & others[3], where the court stated that:

‘. . . In Linton v Corser supra the court held the purchaser liable for mora interest (it was a case of mora ex persona) for delaying the signing of the transfer documents and the delivery of the necessary guarantees. Mora in the present matter concerned a delay in the payment of the purchase price as a result of the department's delay in having the registration of transfer effected by its conveyancers. As stated, the fact of and the reason for the delay were common cause. The delay was deliberate, due to the department's financial constraints and resultant inability to pay the purchase price. Of course, our law does not require fault on the part of a debtor for contractual damages claim. All that is required is proof that the debtor is in mora.'

[33] The liability to pay interest is because of the failure to pay on demand. It is common cause that the first respondent was placed on mora on 27 June 2022. When it comes to the State obligations in terms of performance for rights which are derived directly from the constitution, in Mokala Beleggings (supra) Majiedt JA said, albeit in the context of land restitution, but however applicable here to, that

‘It may well be that the department is under severe strain to meet the financial (and, it seems, the administrative) demands imposed by the land reform process. The restitution of land under the Restitution of Land Rights Act 22 of 1994, is not only a constitutional imperative but a highly emotive issue as well. Considerable circumspection, diligence and sensitivity are required on the part of all concerned, including departmental officials. Agreements to purchase land for restoration to dispossessed communities should be honoured in accordance with the terms agreed upon, lest the already demanding challenges of the process are further exacerbated.’

[34] It cannot be gainsaid that there has been delay in performance. The respondent’s submissions stand to be rejected.

[35] In the results the following order is granted:

1. The First Respondent is liable to pay interest on the sum of R2 800 000.00 (TWO MILLION EIGHT HUNDRED THOUSAND RAND) tempora morae at the Prescribed Rate of Interest Act from 27 June 2022 to the date of payment.

2. The First Respondent shall pay the applicant’s costs inclusive of the costs of 27 February 2023 on party and party scale.

This Judgment was handed down electronically by circulation to the parties and/or their representatives by email. The date and time for the hand down is deemed to be 10H00 on this 11 September 2023.

L FLATELA

JUDGE

LAND CLAIMS COURT

Appearances

For the Applicant Ms Fritze Instructed by Cox and Partners For the Respondent Adv Nqala CM Instructed by State Attorneys, Kwa-Zulu Natal Date of Hearing: 08 June 2023 Date of Judgement: 11 September 2023

[1] 2013 (2) SA 259 (SCA) at paragraph 17.

[2] 5(1) LAWSA para 222 at 301.

[3] 2012 (4) SA 22 (SCA) para 8.