Mr Property Developers (Pty) Ltd v North-West Housing Corporation (2465/2010) [2011] ZANWHC 73 (8 December 2011)

IN THE NORTH

WEST HIGH COURT

MAFIKENG

CASE NO.: 2465/2010

In the matter between:

MR PROPERTY DEVELOPERS (PTY) LTD

(REGISTRATION NO.: 2007/023473/07) …..............................APPLICANT

and

NORTH WEST HOUSING CORPORATION …..........................RESPONDENT

DATE OF HEARING: 17 MAY 2011

01 DECEMBER 2011

DATE OF JUDGMENT: 08 DECEMBER 2011

FOR THE APPLICANT: ADV J H F PISTOR SC WITH HIM ADV G V MAREE

FOR THE RESPONDENT : ADV M D SILVER

JUDGMENT

LANDMAN J:

[1] The applicant is MR Property Developer (Pty) Ltd. The respondent is the North West Housing Corporation (the Corporation).

[2] The applicant seeks an order that:

1. The cancellation, pledge and cession agreement be rectified by substituting the party referred to an MR Properties CC with MR Property Developers (Pty) Ltd;

2. The Corporation be ordered to pay the applicant the amount of R22 610 065.00;

3. The Corporation be ordered to pay interest on the abovementioned amount at a rate of 10% per annum calculated as from the 30th of November 2009; and

4. The Corporation be ordered to pay the costs of this application.

The applicant’s initial case

[3] The applicant’s case, in its founding affidavit, is that it bought three properties from the Corporation. A block of flats had been built on each property namely: Wimpy, Kagiso and Kamogelo Flats. Much later the applicant and the Corporation agreed to cancel the sales. The consequences of the cancellation of the sales were recorded in the three agreements which the applicant seeks to rectify.

[4] The Corporation filed an answering affidavit. The Corporation denies that the applicant bought the properties. The properties were sold by public auction. The Corporation does not allege that the sale by auction of the properties in question were not authorised by the Corporation. The Corporation contends that Ms Pheto bought the properties and seems also to contend that she remains the purchaser. The applicant or MR Property CC, it says, may have endeavoured to substitute itself for Ms Pheto as purchaser but it has not validly done so.

The applicant’s case in reply

[5] The applicant, in its replying affidavit, concedes that it did not purchase the properties. It confirms that Ms Pheto purchased the properties but alleges that she did so for the applicant (which was not in existence at the time).

[6] Mr Pistor J H F SC, with him Mr G V Maree, who appeared for the applicant, submitted that it was competent for the applicant to make its case in the replying affidavit. I was referred to Standard Bank of SA Ltd v Master of the High Court & Others [2006] JOL 18574 (E). It was held at paragraph 38:

“As a general rule all the necessary allegations upon which an applicant relies must be set out in the founding affidavit and an applicant will not be allowed to make out new grounds for the application in the replying affidavit. (Director of Hospital Services v Mistry 1979 (1) SA 626 (AD)). This rule, however, is not absolute and should be applied with a fair measure of common sense. (Smith & Kwanonqubela Town Council 1999 (4) SA 647 (SCA), 954G – H). It is further apparent from the aforementioned decision that where the new matter raised in the replying affidavit does not provide any material or substantial advantage to the applicant there is no necessity to disallow it. So, too, will the new matter not be disallowed if the respondent is not prejudiced by allowing it. (Baeck and Co SA (Pty) Ltd v Van Zummeren and Another 1982 (2) SA 112 (W); Merlin Gerin (Pty) Ltd v All Current and Drive Centre (Pty) Ltd and Another 1994 (1) SA 659 (C)).”

[7] The Corporation is prejudiced by the fact that the applicant has put up its case in reply. The Corporation does not have the benefit of canvassing those facts which the applicant says created the link between itself and the Corporation. The Corporation is not obliged to seek leave to file a further application. Nor is it obliged to apply for the striking out of the new material.

Was there a valid sale and if so to whom were the flats sold?

[8] Clearly the Corporation must be certain that, if it cancels the sales and repays monies and pays damages, it does so to the purchaser of the properties; otherwise there is danger that it may be sued for the monies by the “true” purchaser. The three cancellations agreements were clearly premised on the supposition that Mr Properties CC was the lawful purchaser of the properties.

[9] The Corporation has put the validity of the sales in issue but at other times it is satisfied that the flats were sold to Ms Pheto. I shall however, consider the issue of the validity of the sales. The Corporation relying on section 22 of the North West Housing Corporation Act 24 of 1982 (the Act) alleges that it was necessary for the sales to be confirmed by two authorised signatories.

[10] Section 22 reads:

“Every contract, agreement, authority, cheque, bill, promissory note, document and any other instrument, executed for and on behalf of the Corporation, shall, if it complies with the provisions of this Act in all other aspects, be duly executed if signed by the General Manager or the chairperson of the Board, and any other member of the Board duly authorised thereto by the Board, or, if so authorised by the Board, by any two members of the Board authorised thereto by the Board or General Manager and any officer of the Corporation duly authorised thereto by the Board.”

[11] Each property was sold on auction subject to a reserve. The terms and conditions of the sales are incorporated in the three subsequent contracts of sale. See especially clause 5. Moreover, the auctioneer did not purport to represent the seller, i.e the Corporation, when he signed the contracts. A single unidentified person signed on behalf of the Corporation. The words “duly authorised” appear below this signature.

[12] Prima facie section 22 requires two authorised signatories in order for the Corporation to be bound by a contract. Mr Pistor accepted that section 22 must be construed to mean that if a contract is signed by two signatories, on behalf of the Corporation, the Corporation is bound by those signatories. But, he submitted, this does not prevent the Corporation being bound by one signatory who had been properly authorised to sign the contract. Assuming this to be a valid construction, it means that the purchaser or successor-in-title bears the onus of proving who signed the contracts and that the Board properly authorised this person to conclude these transactions.

[13] The applicant has not shown who the signatory on the agreements was nor that this signatory was authorised, by the Board, to confirm the three sales. The Corporation has not said that the auction of the properties was unauthorised. I am prepared to assume, for purpose of this application that Ms Pheto was or became the purchaser of the properties.

[14] As Mr Properties CC was not the purchaser of the properties it would follow that the three cancellation agreements were concluded on a wrong supposition. But I must explore whether the applicant has been substituted for Ms Pheto.

Vinculum juris between the applicant and the corporation

[15] I turn to consider whether a vinculum juris came into being between the Corporation and the applicant or MR Properties CC. In so far as the applicant relies on a stipulatio alteri, it is clear that the time for the substitution of Ms Pheto by another, permitted by clause 13 of the conditions of auction, expired without the applicant complying with the formalities for substitution. The applicant relies on a pre-incorporation contract which, it alleges, has been ratified in terms of the conditions of auction and section 35 of the Companies Act 61 of 1973. Section 35 of the Companies Act reads as follows:

“Power as to pre-incorporation contracts. - Any contract made in writing by a person professing to act as agent or trustee for a company not yet incorporated shall be capable of being ratified or adopted by or otherwise made binding upon and enforceable by such company after it has been duly incorporated as if it had been duly incorporated at the time when the contract was made and such contract had been made without its authority: Provided that the memorandum on its registration contains as an object of such company the ratification or adoption of or acquisition of rights and obligations in respect of such contract, and that such contract has been lodged with the Registrar together with the lodgement for registration of the memorandum and articles of the company.”

[16] However, the applicant faces insuperable difficulties. These are:

(a) The applicant’s memorandum and articles of association do not provide for the adoption of a pre-incorporation contract. Clause 7 of the applicant’s memorandum of association specifically records that there are no pre-incorporation contracts.

(b) There is no suggestion that the conditions of auction i.e. the contracts of sale, were lodged with the Registrar of Companies.

(c) There is no written company resolution ratifying or adopting the agreements.

(d) There is no proof that the Corporation was notified in terms of clause 11 of the conditions of sale that the agreements had been ratified.

(e) Neither is there any proof that the agreements were ratified or adopted within the period permitted by the clause.

(f) Even if the agreements were ratified or adopted there is no proof that the Corporation was notified of this timeously in terms of clause 11 or 12 or 13. There are allegations in the replying affidavit concerning this but which do not show that the notification, if there was notification, was timeous. And in any event because the allegations appear in the replying affidavit, the Corporation was not obliged to deal with them.

[17] Moreover the alienation of the land or cession, acceptance, ratification, and notifications to the Corporation was required to be in writing. See Christie’s The Law of Contract 4th ed, at page 128. There are no written documents to this effect. As a matter of law the applicant has not shown that it was lawfully substituted for Ms Pheto as purchaser of the properties.

Acceptance, waiver or estoppel

[18] Is it possible that the Corporation may have accepted (i.e. by waiving some requirements) that the applicant was so substituted notwithstanding the defects I have mentioned? The only allegations of which I can properly take notice are those in the founding affidavit. But these do not assist the applicant as they are refuted by the Corporation and this refutation is accepted by the applicant in reply.

Authorization of cancellation of sales

[19] I again arrive at a point where it is strictly unnecessary for me to deal with the other points but I shall do so briefly.

[20] If the applicant were properly substituted as purchaser, the fact that the cancellation of the sale and consequential agreements were signed by only one person on behalf of the Corporation may not present an insoluble problem. If the cancellation was authorised by the Board of the Corporation, the Corporation could be ordered to have the agreements properly signed.

[21] What did the Board resolve to do as regards the issue covered by the three agreements? The Corporation has produced an extract from minutes of the meeting of 18 March 2009 which it says does not authorise the conclusion of the three agreements in question. See pages 148 and 149 of the papers. In reply, the applicant has produced another, similar but not identical, minute regarding the same resolution which it contends authorised the transactions. See pages 215 and 216 of the papers.

[22] During the adjournment I sought to break this deadlock by having my secretary write to the attorney for the Corporation to produce a minute complying with its statute (which I incorrectly described as its constitution). This letter was copied to the attorney of the applicant. What I wanted was a minute which complied with section 14 of the Act. This section reads:

“An officer of the Corporation appointed in terms of section 18, shall prepare and keep the minutes of the proceedings of every meeting of the Board and cause copies thereof to be circulated to all members of the Board.”

[23] My request had not been complied with by the time the hearing resumed. And the applicant was seeking to withdraw its concession that a resolution authorising the opposition to the application was in order. The result was that I completed the hearing and then made the following order:

1. The application is postponed sine die.

2. The respondent is to file, within 21 days, a certified copy, as contemplated by section 14 of the North West Housing Corporation Act 24 of 1982, of the minutes of the meeting held as regards the resolution appearing on pages 148-149 of the papers.

3. The applicant is to file, should it desire to do so, an application within 21 days for the retraction of an admission and disclosure of a minute of a meeting of the Board concerning the authority of the deponent to the answering affidavit to oppose this application.

[24] Subsequently an affidavit, to which is attached the minutes of the meeting of 18 March 2009, was delivered. The resolution is unsigned. It does not comply with section 14 of the Act. The chairperson of the Board explains that the minutes of the meeting of 18 March were approved. However, the corrections were not effected by the secretary and as such were not signed. This leaves me in no better position that I was previously.

[25] On the basis of Plascon-Evans Paitns Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A). I should rely on the Corporation’s version of the minutes. There is, however, little to choose from them. Both versions state that the Corporation would cancel the agreements with MR Property subject to certain conditions (which differ according to the version being studied). Both versions state: “Chairperson and the Acting CEO to handle the matter if the Government can’t commit.” I accept that these two persons, acting jointly, would have authority to cancel the agreements. This authorisation is in accordance with section 14 of the Act. The cancellation agreements are signed by one official. Clearly the contracts, upon which the applicant relies, are not valid cancellations etc.

[26] It follows that it is unnecessary to consider whether the agreements in question should be rectified. The main application cannot succeed but must be dismissed with costs.

The interlocutory application

[27] On 16 June 2011 the applicant launched an interlocutory application for relief in terms of part A and B of the notice of notice of motion. If the Corporation complied with an order in terms of part A, the applicant would seek relief in terms of part B at a later date. If the Corporation did not comply with the order sought in part A the applicant stated that it would seek an order dismissing the Corporation’s opposition to the main application.

[28] The order sought in part A was to compel the Corporation to furnish the minutes of the board meeting at which the resolution of 19 April 2011 (authorising the deponent to the opposing affidavit to oppose the application) was passed together with a list of all the Board members present at that meeting. The Corporation opposed the interlocutory application and the applicant filed a replying affidavit.

[29] At the commencement of the hearing of the interlocutory application, Mr Pistor announced that the applicant would not seek an order on the merits but would seek its costs on an attorney and client scale. The reason for this was that the applicant now accepted that the resolution of 5 July 2011, attached to the Corporation’s answering affidavit, which ratified all the steps taken until that date, was sufficient proof of authority to oppose the relief sought by the applicant.

[30] Mr Pistor sought a punitive cost order on the grounds that the respondent had filed misleading documents. The first being the resolution of the Board of 19 April – no meeting was held on that date. The resolution of 25 January – no meeting was held on this date either. No explanation was provided by the Corporation as to why it supplied incorrect information to this court.

[31 Mr Silver, in turn, also sought costs on an attorney and client scale. He did so because:

The applicant conceded the merits at this hearing without advising the other side that it would do so.

A proper resolution ratifying the opposition to the application, dated 5 July 2011, was attached to the answering affidavit filed on 16 July 2011.

The applicant had taken the view, in its replying affidavit, that the resolution of 5 July 2011 was not an answer to its application and had clearly erred as to the applicable law.

The applicant wanted to take an order on the main application by default.

The applicant alleged that the Corporation had falsified the resolutions.

Although not intended to be vexatious, the effect of the application was vexatious. See Phase Electric Co (Pty) Ltd v Zinman’s Electrical Sales (Pty) Ltd 1973 (3) SA 914 (W) at 918D-919B.

The Rule 7 notice was so defective and out of time and no action nor inaction by the respondent, could breathe life into it.

[32] The application to compel the deponent to the answering affidavit to produce his authority to act on behalf of the Corporation was misconceived. Only the authority of the attorney or counsel acting for a party could be challenged. See Ganes and Another v Telecom Namibia Ltd 2004 (3) SA 615 (SCA) at para 19 and Unlawful Occupiers, School Site v City of Johannesburg 2005 (4) SA 199 (SCA) at paras 13 to 16. This was not the purpose of the interlocutory application. I would be inclined to order the applicant

to pay all the costs and on an attorney and client basis. But, although the application was stillborn I, nevertheless, cannot overlook the fact that the Corporation placed erroneous if not fictitious resolutions before this court. This would have the effect

of misleading this court, even if this was not intended.

[33] Justice will be done by ordering the applicant to pay the Corporation’s costs of the interlocutory application on an attorney and client scale but only as from 16 July 2011 when the correct resolution, ratifying the opposition to the main application, was delivered.

[34] In the premises I make the following order;

The main application is dismissed with costs.

The applicant is to pay the respondent’s costs of the interlocutory application on an attorney and client scale but only as from 16 July 2011.

A A LANDMAN

JUDGE OF THE

HIGH COURT

ATTORNEYS:

FOR THE APPLICANT : GERHARD MAREE ATTORNEYS

FOR THE RESPONDENT: D C KRUGER ATTORNEYS Attorney