Nedbank Limited v Steyn NO and Others (28991/2018) [2020] ZAGPJHC 77 (21 February 2020)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA,

GAUTENG LOCAL DIVISION,

JOHANNESBURG

CASE NO: 28991/2018

IN THE MATTER BETWEEN

NEDBANK LIMITED

APPLICANT

and

WILLEM JOHANNES STEYN N.O.

FIRST RESPONDENT

(in his capacity as trustee of THE AMAROSA

PROTEA VILLAGE TRUST)

ALMINDA SOPHIA KRUGER N.O.

SECOND RESPONDENT

(in her capacity as trustee of THE AMOROSA

JARKIE TRUST ADMINISTRATORS (PTY)

THIRD RESPONDENT

LIMITED N.O.

(in its capacity as trustee as of THE AMOROSA

BILL ENGELBERG STEYN N.O

FOURTH RESPONDENT

(in his capacity as trustee of THE

MONOLINE INVESTMENTS 7 TRUST)

WILLEM JOHANNES STEYN N.O.

FIFTH RESPONDENT

(in his capacity as the trustee of THE

MONOLINES INVESTMENTS 7 TRUST)

JARKIE TRUST ADMINISTRATORS (PTY)

SIXTH RESPONDENT

(in its capacity as trustee of THE

MONOLINE INVESTMENTS 7 TRUST)

BILL ENGELBREG STEYN N.O.

SEVENTH RESPONDENT

MONOLINE INVESTMENTS 8 TRUST)

ALMINDA SOPHIA KRUGER N.).

EIGHTH RESPONDENT

(in her capacity as trustee of THE

JARKIE TRUST ADMINISTRATORS (PTY)

NINTH RESPONDENT

LIMITED

WILLEM JOHANNES STEYN N.O.

TENTH RESPONDENT

(in his capacity as trustee of the

MON ELMIE TRUST)

ALMINDA SOPHIA KRUGER N.O

ELEVENTH RESPONDENT

(in her capacity as trustee of the

JARKIE TRUST ADMINISTRATORS (PTY)

TWELFTH RESPONDENT

(in its capacity as trustee of the

THE REGISTRAR OF DEEDS

THIRTEENTH RESPONDENT

JUDGMENT IN THE APPLICATION FOR LEAVE TO APPEAL AND SECTION 18 APPLICATION

BENSON AJ

[1] The first to twelfth applicants, who were the first to twelfth respondents in the main application, apply for leave to appeal

against the judgment and order of this court, delivered on the 6th of December 2019 (“the Application for Leave to Appeal”)

[2] For convenience:

2.1. the parties are referred to as in the main application;

2.2. the first to twelfth respondents (being the first to twelfth applicants in the application for leave to appeal) are referred to as “the trustees”, and the trusts that they represent are referred to as “the Trusts”;

2.3. the applicant (being the respondent in the application for leave to appeal) is referred to as “Nedbank”).

[3] Simultaneously, Nedbank applies for an order in terms of section 18 of the Superior Courts Act 2013, that the order granted by this court (save for the costs order) is not suspended and immediately of full force and effect (“the Section 18 Application”).

[4] I shall accordingly deal with both such applications hereunder. To this end, argument was heard in respect of both applications on the same day, which, in essence, entailed the same principles and submissions.

The Application for Leave to Appeal:

[5] The trustees contend that this court erred in two “fundamental respects”, namely:

5.1. first, that the recordal in paragraph 18 of the judgment states that the “majority” of the life rights in question have been sold, whereas (as the Trusts contend), all of the life rights have been sold;

5.2. secondly, in concluding that a life right is reversionary, whereas (as the Trusts contend), the life rights in question are not reversionary and are not capable of being transferred from the developers (i.e. the Trusts) to a new occupier when there is a “re-sale” at the termination of the rights of the first holder of the life right.

[6] Further contentions are raised on behalf of the Trusts:

6.1. firstly, that this court erred in the nature of the remedy granted (in that it serves a public law interest and not a private law interest);

6.2. secondly that this court misinterpreted the purpose and intention of the provisions of the Act; more specifically in failing to properly interpret the definition of “developer” in the Housing Development Schemes for Retired Persons Act 65 of 1988 (“the Act”), as well as the provisions of 4C(1)(a) and 4C(1)(b). To this end it was contended that a “developer” ceases to be one after the disposal of the “first life right”, and that the provisions of the Act do not apply to further disposals of life rights thereafter and, accordingly, no endorsement is required for “onward disposals” (even assuming that the life rights are reversionary). This would then – it was argued – render “onward disposals” free of illegality;

6.3. thirdly, that this court erred in failing to take cognisance of the fact that the affected retired persons were not joined to the main application.

[7] It was further submitted on behalf of the Trusts in argument, that the provisions of the Act are deserving of a proper analysis and interpretation by the Supreme Court of Appeal or the Constitutional Court, and that this court is a mere step in this process, having “less experienced eyes” and a “post - Constitutional view”. Whilst recognising the authority and perspicacity which distinguishes our higher courts, I shall not deal with these submissions herein.

[8] Having regard to all of the contentions mentioned, the application for leave to appeal is predicated on the ground that there is a reasonable prospect of another court finding that this court has erred in one or all of the respects set out above.

[9] Counsel for both parties prepared extensive heads of argument and accompanying case law on which their oral submissions from the bar were founded. The court is indebted to them for their assistance in this regard.

[10] Section 17(1) of the Superior Courts Act, No. 10 of 2013, stipulates that:

“Leave to appeal may only be given where the judge or judges concerned are of the opinion that-

(a) (i) the appeal would have a reasonable prospect of success; or

(ii) there is some other compelling reason why the appeal should be heard, including conflicting judgments on the matter under consideration;

(b) the decision sought on appeal does not fall within the ambit of section 16(2)(a); and

(c) where the decision sought to be appealed does not dispose of all the issues in the case, the appeal would lead to a just and prompt resolution of the real issues between the parties.”

[11] It is now trite that the test that was previously applied in applications of this nature, was whether there were reasonable

prospects that another court may come to a different conclusion. This position has been altered. As stated by Hughes J in Nannen and Others v Momentum and Others [2017] ZAGPPHC 433, at par [5]:

“What emerges from section 17(1) is that the threshold to grant a party leave to appeal has been raised. It is now only granted on the circumstances set out and is deduced from the word “only” used in the said section. See The Mont Chevaux Trust v Tina Goosen & 18 Others 2014 JDR 2325 (LCC) at para [6], where Bertelsmann J held as follows:

“It is clear that the threshold for granting leave to appeal against a judgment of a High Court has been raised in the new Act. The former test whether leave to appeal should be granted was a reasonable prospect that another court might come to a different conclusion…The use of the word “would” in the new statute indicates a measure of certainty that another court will differ from the court whose judgment is sought to appealed against.”

[12] Thus, the threshold for granting leave to appeal has been raised in terms of the former section 17(1) of the Act. The usage of the word “would”, introduces a stricter test and a higher threshold. See in this regard Acting National Director of Public Prosecution v Democratic Alliance 2016 JDR 1211 (GP).

[13] Turning to the contentions raised by the Trusts in the application for leave to appeal, it must be emphasised at the outset that this court specifically raised the issue of the non-joinder of the retired persons at the initial hearing hereof. It was submitted on behalf of the Trusts at the time that this was not necessary.

[14] Be that as it may – and accepting the Trust’s version that it is the retired persons themselves that dispose of their life rights directly to the next holder (and that such rights are not reversionary as stated in my judgment) – the retired persons have not been interdicted from doing so by this court. In fact, no interdictory relief was granted against any other persons or entities other than the trustees and the Trusts.

[15] The notion that “the effect of the order is that the life right holder may not sell his or her life rights and it cannot be dealt with by the executor of the deceased estate of a life right holder” is fundamentally flawed and in direct contradiction to the Trust’s stance that such rights are not reversionary.

[16] On this point too however – the submissions made on behalf of the Trusts as to who is “selling” or “alienating”

the “onward disposal” of the life rights - vacillate wildly. In one breath the Trusts argue that they are no

longer “developers” within the meaning of the Act after the “first life” right is sold, and may accordingly

continue to sell “second” or “third” life rights without having to adhere to the provisions of the Act, and in the next they contend that the rights are not reversionary and remain part of the estate of the retired person for them to sell directly to the next holder.

[17] In contrast to such submissions, and if regard is had to the life right agreements concluded by the Trusts with the life right holders, a life right holder who has purchased such life rights from the Trusts, does not himself/herself sell or re-sell any life right. On the death of the life right holder or on termination of the life right agreement, the agreements are clear that the loan advanced by the life right holder to the relevant Trust is required to be repaid by the Trust to the life right holder. The life right agreement specifically prohibits the life right holder from transferring or ceding his/her rights in terms of the life right agreement.

[18] Accordingly, the relief which has been granted by this court, if anything, serves to protect further innocent purchasers of life rights from being exposed to the consequences of the illegal conduct of the Trusts and the trustees, whether such conduct is past or present. The life right holders or their deceased estates, retain a claim as against the Trusts for the value of their life rights. I agree with the submissions on behalf of Nedbank that the relevant clauses in the life right agreements providing for the repayment of the loan constitutes a time clause, and that the remedy provided for in the judgment appealed against, does not prohibit the retired persons from dealing with their life rights in any manner, whether vis-à-vis the trustees and the Trusts, otherwise.

[19] Whilst it was argued for the Trusts that the illegality complained of has occurred when the “first right” was disposed of, and is now a “thing of the past”, this cannot be so. Even assuming that the Act can be interpreted to mean that only the first life right must be alienated with the relevant endorsement, it cannot reasonably render subsequent transactions free of such illegality.

[20] Having specific regard to the second contention raised in the grounds for appeal, the trustees wish for an interpretation of the life right agreement which ignores the unequivocal terms of these agreements alluded to above. It is clear from a cursory glance of these agreements that:

20.1. the Trusts alienate rights of occupation to retired persons of the units in the retirement villages concerned (and seek at present that they be permitted to continue to do so if regard is had to the Section 18 Application launched by Nedbank and which was heard simultaneously with this application for leave to appeal);

20.2. the Trusts or their successors in title remain the owners and sole marketers of the development and the units;

20.3. in return for occupational rights of a unit, the life right holder lends a certain sum to the relevant Trust, as stipulated in the life right agreement;

20.4. in the event of the termination of a life right agreement (or upon the death of the occupant(s)), the Trust concerned markets the unit, and “on sells” it to a new holder. The Trust at that juncture must repay the loan amount to the previous holder.

[21] As correctly argued on behalf of Nedbank, and contrary to the interpretation which the trustees wish to now adopt in relation to the Act, every “re-sale” or “onward disposal” of a life right (and not only the “first life right”)

comprises a contravention by the relevant Trust of the Retired Persons Act, and obviously also impacts on the rights of Nedbank qua mortgagee, each time such “re-sale” occurs.

[22] The Trusts concede unequivocally that they have contravened the provisions of the Retired Persons Act. Whilst the remedy provided for in my judgment may be public or private in its effect is in my view academic. Similarly, and if even if the rationale adopted and the reasoning for this court’s judgment is incorrect, it is not apparent that a different court would come to a different conclusion, notwithstanding the perceived nescience of this court.

[23] Our higher courts will not condone the fact that the Trusts and the trustees wish to continue to flout a statutory provision, nor permit an illegality to continue.

[24] On the arguments set out above, I am not of the opinion that there is a reasonable prospect that another court will come to a different conclusion. I further see no compelling reason why leave to appeal should be granted.

The Application in terms of Section 18 of the Superior Courts Act

25.1. in the event that leave to appeal is refused and the Trusts and trustees applying in terms of Section 17(2)(b) of the Act for leave to appeal, and

25.2. in the event of leave to appeal being granted pursuant to such application, then pending the decision in such appeal.

[26] In this regard, and on the 12th of December 2020, and pursuant to the judgment of this court, the Trusts gave notice of their intention to apply for leave to appeal herein. In response thereto, Nedbank requested an undertaking that the Trusts would not sell, re-sell, alienate or otherwise dispose of any residential unit and/or any right to any residential unit in any of the developments of the respective trusts, pending the launching of the current Section 18(3) application, which was launched on an urgent basis.

[27] It was agreed between the parties that the urgency in terms of this application would not be disputed, and culminated in both

applications being argued before me on the 14th of February 2020.

[28] The trustees oppose the relief sought, arguing inter alia, that the sale of a life right, to a subsequent purchaser, marketed by the trusts is not an “alienation” by the developer for the purposes of the Retired Persons Act (thus linking the contention that this court erred in the proper interpretation of the provisions of the Retired Persons Act). They further argue that Nedbank laments past conduct, with no prospect of future infringement, and take issue with the fact that Nedbank has failed to deal eo nominee with the issue of prospects of success in its founding affidavit in support of the Section 18(3) application.

[29] Accordingly, and in essence, the trusts contend that there can be no possible future contravention of Section 4C of the Act, and as such, the Section 18 application must fail. They further deny that any “exceptional circumstances” exist, justifying the granting of the application. What is however unequivocally clear, is that the trustees remain desirous of being permitted, pending an application for leave to appeal to the Supreme Court of Appeal, to alienate and/or sell and/or dispose of and/or market the life rights in respect of the units situate at the relevant retirement villages.

[30] To this end, it is contended that the relief sought, if granted, for as long as the appeal procedures are pursued by the Trusts or Nedbank, would sterilise the income generating capacity of the Trusts.

[31] Thus, it is not disputed that the Trusts intend – in the absence of the relief in terms of Section 18 application being

granted – to continue to deal with these life rights, whether as “seller” or “marketer” or otherwise, in the absence of being prohibited from doing so.

[32] Nedbank contends that the conduct of the trustees reveals an egregious and intentional flouting of the peremptory provisions of the Retired Persons Act, which constitutes a criminal offence, and which is exacerbated by their continued contemptuous disregard of the Act itself, the doctrine of legality and the rule of law.

[33] Nedbank further argue that the trustees are “in effect…seeking for this Honourable Court not only to disregard their illegal conduct, but in effect to sanction a continuation

thereof” (pending an appeal process).

[34] Relying on the dictum contained at par 16 (dealing with the par delictum rule) in National Credit Regulator v Opperman and Others 2013 (2) SA 1 CC, Nedbank argues that the underlying principle is that the law (and so this court), must deter illegality and should not render assistance to those that defy it.

[35] The Trustees, in turn, contend that Nedbank has known of the absence of the peremptory endorsements required in terms of Section 4C of the Act for “about a decade”, and is attempting to pressurise the Trusts to pay their outstanding debts to Nedbank, who has no interest in the adverse effects for the life right holders.

[36] The crux of the opposition however, is to be found in the contention that Nedbank has not satisfied the threshold set by Section 18(3).

[37] Section 18 of the Superior Courts Act was introduced on the 23rd of August 2013, and is premised on the common law principle that the granting of relief contemplated thereunder constitutes an

extraordinary deviation from the norm that, pending an appeal, a judgment and its attendant orders are suspended. Any order implementing a judgment pending an appeal will in terms of Section 18(1), accordingly only be granted under exceptional circumstances. See Ntlemeza v Helen Suzman Foundation & Another 2017 (5) SA 402 SCA at 28.

[38] Section 18(3) provides, in addition to the requirement of “exceptional circumstances”, a further controlling measure, namely that a party seeking an order in terms of Section 18(1) is required, in addition to prove on a balance of probabilities that he or she will suffer irreparable harm if the court does not so order, and conversely, that the other party will not suffer such harm.

[39] Nedbank argues that “irreparable harm” does not mean the financial annihilation of a litigant, but rather refers to the irretrievable loss of what a litigant is entitled to in terms of the court order. Further, as stated in Ntlemeza supra, public interest is a factor which can appropriately be taken into account by the court in determining whether there are such exceptional circumstances.

[40] In Incubeta Holdings (Pty) Ltd v Ellis 2014 (3) SA 189 (GJ), Sutherland J considered the provisions of Section 18(3) and compared same with the former, repealed, Rule 49(11) of the Rules of Court, and held that the test involves a two-pronged approach: Firstly, the applicant must demonstrate the existence of exceptional circumstances, and secondly, it must prove on a balance of probabilities that it will suffer irreparable harm – and conversely that the respondent will not. Sutherland held that “Necessarily, in my view, exceptionality must be fact-specific. The circumstances which are or may be exceptional must be derived from the actual predicaments in which the litigants find themselves.” (at para 22).

[41] In the University of the Free State v Afriforum 2018 (3) SA 428 (SCA), and in approving the test expressed Incubeta supra with one caveat, it was held further that the prospects on appeal is a further relevant factor which must be taken into account. I have already expressed my view on this aspect in the application for leave to appeal.

[42] In S v Liesching and Others 2019 (4) SA 219 CC (at par 132), the Constitutional Court, dealing with the meaning of “exceptional circumstances” (in the context of Section 17(2)(f)), held as follows:

“[132] The meaning of the phrase “exceptional circumstances” has been considered by the courts on numerous occasions.

The courts have been reluctant to lay down a general definition, as each case is to be considered on its own facts. It has been held that it is neither desirable nor possible to lay down a precise rule or definition as to what constitutes exceptional circumstances. The meaning and interpretation given by the courts to the phrase has been wide-ranging. Circumstances which may be regarded as “ordinary” in one matter may be considered “exceptional” in another. Ultimately, it is the function of the presiding officers to determine whether, on a case-by-case basis, the circumstances can be found to be exceptional.”

[43] Having regard, in the present matter, to the fact that the Trusts concede that non-compliance with the provisions of the Retired

Persons Act constituted an illegality worthy of sanction (albeit only upon the disposal of the “first life right”), it is this court’s view that this is exactly the scenario which Section 18(1) is designed to address, pending the appeal process.

[44] To permit such conduct to continue unabated, is offensive to public policy and cannot be countenanced – even assuming another court would come to a different decision to this court. To do so, as correctly argued on behalf of Nedbank, would disregard the clear statutory prohibitions contained in the Retired Persons Act, and permit the Trusts in the interim, to act in contravention thereof, especially if this court is correct in its views.

[45] The Retired Persons Act – irrespective of the interpretation of the sections relied upon by the Trusts – clearly recognises and respects the real rights enjoyed by a mortgagee, as well as the rights of retired persons. It must be emphasised that the life right agreements in casu, specifically provide that the requisite endorsements in terms of the Retired Persons Act will or have been obtained, when – as is common cause – was not the factual position.

[46] It is patently obvious that in the event that the Trusts are permitted to continue to act in contravention of the Retired Persons

Act, by being permitted to alienate and/or dispose and/or sell the life rights in respect of the retirement village units, that its protection qua mortgagee will be repeatedly eroded in respect of each “onward sale”.

[47] Similarly, and as the Trusts have been at pains to point out, the rights of future holders of these life rights will (if the Trust’s version is to be accepted), be adversely affected if ultimately the Trusts’ appeal process is unsuccessful.

[48] Accepting for the moment that the Trusts’ contention that they are not the “developers” or “sellers” or holders of such life rights after the first right has been disposed of is correct, then and in that event they will suffer no harm. Financial loss as a result of the prohibition of conduct tainted with illegality can never constitute “irreparable harm” as defined by our courts.

[49] I am persuaded on the facts of this matter that a case has indeed been made out for “exceptional circumstances” envisaged in Section 18(1) read with Section 18(3), for the reasons set out above. Accordingly , the operation and execution of the judgment and order by this court on 6 December 2019 will continue to be operational and executed in full whether or not there is any petition for leave to appeal against the judgment and order.

[50] In the result I make the following order:

In the application for leave to appeal:

1. The application for leave to appeal is dismissed.

2. The applicants are ordered to pay the costs of the respondent, on the attorney and client scale, including the costs of senior counsel.

In the application in terms of Section 18:

1. The judgment and order of this court issued and delivered on the 6th of December 2020, shall operate and be executed in full, pending the outcome of any further application for leave to appeal, and including the finalisation of any appeals, to be noted by either party.

2. The applicant is exempted from furnishing security in terms of Rule 49(12) of the Uniform Rules of Court;

3. The respondent is ordered to pay the costs of the application.

__________________________

G.Y. BENSON

ACTING JUDGE OF THE HIGH COURT OF SOUTH AFRICA,

Appearances:

Date of hearing: 14 February 2020

Date of Judgment: 21 February 2020

For the Applicant: Adv. P T Rood S.C.

Instructed by: Lowndes Dlamini Attorneys

For First to Twelfth Respondents: Adv. P. L. Louw S.C.

Instructed by: Mark Anthony Beyl Attorneys

For Thirteenth Respondent: No appearance