Steve Tshwete Local Municipality v Steve Tshwete Housing Association (A13 / 2021) [2021] ZAMPMHC 27 (6 October 2021)

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

THE HIGH COURT OF SOUTH AFRICA

MPUMALANGA DIVISION, MIDDELBURG LOCAL SEAT

CASE NO: A13 / 2021

REPORTABLE: YES

OF INTEREST TO OTHER JUDGES: NO

REVISED.

06 October 2021

In the matter between:

STEVE TSHWETE LOCAL MUNICIPALITY

APPELLANT

and

STEVE TSHWETE HOUSING ASSOCIATION

RESPONDENT

J U D G M E N T

RATSHIBVUMO J:

[1] Background.

This is an appeal against a High Court judgment ordering specific performance against the Appellant in favour of the Respondent based on a contract entered between the two in 2012. The appellant is Steve Tshwete Local Municipality established in terms of Local; Government: Municipal Systems Act, no. 32 of 2000 (the Act). The respondent is a housing association established by erstwhile Greater Middleburg Municipality (the appellant’s predecessor) in terms of section 86 of the Act. The High Court judgment was handed down by Barnardt AJ, of this Division on 02 February 2021. In terms of that judgment,

“1. The [Appellant] was directed sign the certificate of consolidation within 30 days of [the] order;

2. The [Appellant] was directed to sign all the necessary documents, including transfer documents and to take all the necessary steps, including but not limited to ensure that the property known as portion 9-18, 20-37, 39-47, 49 and 50 of Erf [....] Mhluzi Ext 4 (the property), is registered into the name of the [Respondent] within 30 days of this order, on condition that the [Respondent] has complied with all its obligations in respect of the consolidation of the properties;

3. In the event that the Appellant fails and/or neglects to, and/or refuses to timeously sign the certificate of consolidation and to cause transfer and registration of the property, the Sheriff of this Honourable Court be authorised to take all necessary steps to give effect to the registration and transfer of the property.

4. The [Appellant] is ordered to pay the costs of the application.”

[2] This appeal is with the leave of the court a quo.

[3] Applicable law:

Requirements for a successful claim in specific performance can be gleaned from Farmers’Co-operative Society (Reg) v Berry[1] as follows:

a) The plaintiff/applicant must prove the existence of a valid contract between him/her and the defendant/respondent, the terms of which should also be clear from its reading.

b) The plaintiff/applicant must have performed or be ready to carry out his or her own contractual obligations – that is, must tender performance in terms of the principle of reciprocity; and

c) Not only must the plaintiff/applicant prove that the defendant/respondent failed to perform his/her part of the agreement, but he/she must be in a position to perform – that is, performance must be objectively and subjectively possible.

[4] As Zondi JA held in Basson and Others v Hanna[2], there are many cases in which it was held that, if one party to the agreement repudiates the agreement, the other party at his election

may claim specific performance of the agreement or damages in lieu of specific performance and that his claim will in general be granted, subject to the court's discretion. The learned judge of appeal referred to a famous passage by Innes CJ from Farmers’Co-operative Society (Reg) v Berry[3] with approval in which the following was said,

“It is true that Courts will exercise a discretion in determining whether or not decrees of specific performance should be made. They will not, of course, be issued where it is impossible for the defendant to comply with them. And there are many cases in which justice between the parties can be fully and conveniently done by an award of damages.”

[5] The contract.

It is common cause that an application for social housing development by the respondent was approved by the appellant in 2010. The application was meant to address the need for rental housing. In January 2012[4], the two entered into a written sale agreement over the property, the material and relevant terms of which provided the following:[5]

a) The purchase price for the property was R650 000.00 plus R91 000.00 (VAT), which amount had already been paid at the time the contract was signed.[6]

b) Occupation of the property will be given to the purchaser (respondent) on the date of sale. The “date of sale shall be the date of signature by the last party to this agreement.”

c) Transfer of the property shall be registered in the purchaser’s name by the seller’s (appellant’s) attorney Messrs Johan Alberts Attorneys, as soon as the purchase price has been paid and or documentation has been duly signed.

d) Should the purchaser fail to comply to the stipulation contained in the agreement, and fail to rectify his default after having been notified by the seller, the seller will be entitled without prejudice of any of his other rights (i) to cancel the agreement, to take possession of the property and to retain all monies paid as pre-estimated damage and institute action for any damages suffered; (ii) to claim the full purchase price still due.

[6] Under Special Conditions’ clause, the contract further provided the following special and suspensive conditions:[7]

a) It is an express condition of this sale that the purchaser shall be obliged to erect and complete a building which will comply with and be permissible in terms of the Conditions of Establishment and Conditions of Title of the township, as well as the Town Planning Scheme and any applicable municipal by-laws within 24 months from the date of sale, with a business building of at least twice the purchase price of the erf or property, failing which the property, is to be transferred to the seller for then original purchase price at the cost of the purchaser.

b) The purchaser of the property may not dispose of it within the period of three years from the date of registration of the property unless it is developed.

c) The development and building plans are subject to the approval of the seller’s Department of Technical and Facilities Services.

d) The seller may, upon written application by the purchaser received within three months before the expiry of the 24 months’ period, grant an extension of a period by a maximum of a further one-year period.

[7] Events leading to litigation.

As of 2020 when the respondent approached the court, there had been no developments in as far as the registration of the property into the names of the respondent and the building in the property. The property was still in the names of the appellant while no building was erected. The respondent, through the affidavit by its Executive Director and Chief Executive Officer, pointed to several meetings he held with the appellant’s legal department in 2019, with a view to have the appellant sign the necessary documentation to give effect to the consolidation of the property in order to have the property transferred into the respondent’s name. Nothing materialised from these meetings. This culminated in the respondent dispatching a letter to the appellant in which the latter is urged to sign the papers within 14 days, failure of which, the respondent would approach the court for necessary relief.

[8] The appellant replied to the respondent’s letter declining to sign the relevant documents. The reason furnished was that the appellant had since passed a resolution in terms of which it

recognised the respondent as a municipal entity of which sale of property to them would be unlawful. They had since approached the courts seeking an order declaring the respondent as an entity of the appellant. The said application is pending before the court and was not an issue before the court a quo. The respondent interpreted this response as a repudiation of the contract. It then approached the court seeking an order that would force the appellant to sign the certificate as undertaken initially in the agreement.

[9] Before the court a quo.

The respondent argued that it has complied with its obligations of the contract and that the letter from the respondent declining to sign the necessary certificates constituted a repudiation or breach of the contract. It submitted that it elected to reject the repudiation or breach of the contract, seeking rather specific performance.

[10] The appellant argued that the respondent failed to comply with the terms of the agreement in that: (i) the property has not been transferred and registered under the name of the respondent not withstanding that the sale of the property was concluded in January 2012. (ii) [N]o building was erected and completed by the respondent within 24 months from the date the deed of sale was signed, and (iii) the respondent never applied for extension of a period of 24 months as stipulated in paragraph 17.4 of the agreement. It therefore submitted that in light of these failures on the part of the respondent, it resolved to cancel the agreement and refund the respondent the money paid for this sale transaction.

[11] The court a quo took cognisance of the fact that the respondent failed to register the property in its names as agreed in the contract. It however took a view that this could not be blamed on the respondent in that according to the agreement, transfer of the property shall be effected through the seller’s attorneys, Messrs Johan Alberts Attorneys as soon as the purchase price has been paid. In adopting this approach, the court found justification for the respondent’s non-compliance with the terms and conditions of the contract.

[12] The approach by the court a quo in this regard overlooks the fact that a provision directing the respondent to make use of a specific law firm to attend to the property registration did not shift the responsibility of registering the property from the respondent to the applicant or the law firm. This interpretation does not take into account that the agreement expressly made it the respondent’s duty to attend to all the documentation and payments that precede the registration of the property into its names. Clause 8 of the contract for example provides that the respondent shall pay all transfer costs incurred in respect of the registration of transfer of the property. There was nothing in the respondent’s application suggesting that the chosen firm of attorneys was approached with all the requirements and it refused to effect the registration within the stipulated time in the contract. On this point alone, I hold a view that the respondent could not have successfully claimed to be the innocent party that complied with its part of the contractual obligations.

[13] Even if I could be wrong in reaching the conclusion above, there is more from which the respondent’s compliance should have been found wanting. The court a quo took note of the fact that the contract provided for the building structure by the respondent, which should have been completed within 24 months, which was not done. The respondent however submitted that it was not given a notice by the appellant to remedy this breach as provided for in the contract. The appellant averred in this regard that it did not have to give any notice to the respondent in that the agreement had lapsed and ceased to be of legal force.

[14] The court a quo rightly found that the appellant was under no obligation to give notice to the respondent. In reaching this position it relied on RH Christie’s Law of Contract in South Africa, where the learned author wrote, “When a time for performance is fixed, however, the debtor’s failure to perform by that time is a breach, and no demand is necessary to make it so. It then becomes necessary to decide whether time is of the essence of the contract because if it is, the breach is of sufficient magnitude to justify the creditor in cancelling, also without prior demand because the remedy of cancellation follows as of right from the serious breach. This has long been accepted law, and the inquiry in cases has been directed to whether it ought to be concluded from the nature of the contract and the surrounding circumstances that time was of the essence.”[8]

[15] Christie’s views above were also applied in Louw v Trust-Administrateurs Bpk[9] where the following was held,

“It seems to me that a purchaser who has not put the seller in mora will, nevertheless, be entitled to cancel for non-performance or late performance in any one of the following situations:

(a) If a time for performance was stipulated in the contract and it was expressly provided therein that time should be of the essence.

(b) If a time for performance was stipulated in the contract and from the nature of the performance or other relevant circumstances it is to be inferred that time was to be of the essence.”

[16] Interestingly, court a quo relied on these principles not only to find that there was no need for the appellant to give notice to the respondent, but it also found that in the contract between the appellant and the respondent, time was not of essence. Its reasoning for this conclusion was that if time was of essence, the appellant would have demanded compliance with the agreement at the expiry of the 24 month-period which it did not do. It further reasoned that instead of demanding compliance, the appellant entertained the respondent’s request for the signing of the certificate of consolidation as recently as in August 2019.

[17] I do not understand this reasoning in that the appellant made it clear that once the time frame set in the agreement had expired, it considered the contract to have lapsed. Demanding compliance after the expiry of the period set up in the agreements would revive the agreement that had lapsed. Equally, I do not see the conduct by the appellant in listening to the requests by the respondent as making time to be of no essence. When the appellant responded to a request for the certificate of consolidation, it made it clear that it was not going to do so. Any conclusion that the appellant was willing to entertain the request for the certificate by the respondent is therefore not based on facts.

[18] On appeal.

Before us, the appellant argued that the respondent did not have to be given notice when it comes to time-frame compliance. The clause that provides for the notice to be given was meant to remedy the breach such as when the building does not meet the minimum requirements agreed upon. It further argued that there was a separate clause to cater for failure to finish the project within 24 months which provided for a request by the respondent to have a further 12 months’ extension, which was not utilised.

[19] The respondent submitted that while the agreement provided that the building of structures should be complete in 24 months from the date of sale, that period should start running from the date the property is registered in the names of the respondent. The reasoning behind this is that sale is only complete upon delivery of the property. The only part of sale that took place was the payment of the purchase price but the property ownership was yet to be transferred to the respondent through its registration. In fact, the appellant should have known, so it was argued, that one cannot lawfully develop a property that is not registered in its names. It is now left to us to interpret the meaning of these contract clauses.

[20] The ultimate aim of interpretation of a contract is to give effect to the intentions of the parties, or the purpose of the contract. In Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun Transport (Edms) Bpk[10] the SCA held,

“[I]nterpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible each possibility must be weighed in the light of all these factors. The process is objective, not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document. Judges must be alert to, and guard against, the temptation to substitute what they regard as reasonable, sensible or businesslike for the words actually used.”

[21] It is not what the court considers to be reasonable, sensible or legal, but what the contracting parties had in mind when entering into an agreement, that should be extracted from the contract clauses. It would appear that the dispute between the parties was narrowed to whether the condition to build within 24 months was meant to run immediately or to wait until after the property registration in the names of the respondent. The contract provided, “[I]t is an express condition of this sale that the purchaser shall be obliged to erect and complete a building which will comply with and be permissible in terms of the Conditions of Establishment and Conditions of Title of the township, as well as the Town Planning Scheme and any applicable municipal by-laws within 24 months from the date of sale…” [Own emphasis].

[22] The court’s duty in interpreting the date of sale has been truncated in that the contract defines such a date. From the contract where it provides for the occupation, “[T]he date of sale shall be the date of signature by the last party to this agreement.” It is common cause that the date of signature by the last party was

in February 2012. That means 24 months expired in February 2014. It is also common cause that the respondent sought no extension of this period when it expired. As a result, the contract lapsed in 2014. Attempts by the respondent to get consolidation certificate some five years later could not have revived a contract that had lapsed. The wording of the contract makes it clear that time was of the essence, and there is nothing from the conduct of the parties that suggests otherwise.

[23] I also need to deal succinctly with the contention that was raised by the respondent on the provisions the Alienation of Land Act, no. 68 of 1981, section 19(1) of which provides,

“19. Limitation of right of seller to take action

(1) No seller is, by reason of any breach of contract on the part of the purchaser, entitled -

(a) to enforce any provision of the contract for the acceleration of the payment of any instalment of the purchase price or any other penalty stipulation in the contract;

(b) to terminate the contract; or

c) to institute an action for damages,

unless he has by letter notified the purchaser of the breach of contract concerned and made demand to the purchaser to rectify the breach of contract in question, and the purchaser has failed to comply with such demand.”

[24] Before us, the respondent sought to rely on these provisions in their quest to demonstrate that the agreement is still of force. This contention cannot stand as this was not the respondent’s case before the court a quo. Moreover, as articulated in paragraph 14 above, the contract between the parties lapsed due to passage of time set by the parties themselves. Accordingly section 19 is not applicable in their case.

[25] For the reasons above, I am of the view that the court a quo erred when it found that time was not of essence and that granting an order for specific performance was justified. The respondent had failed to honour its contractual obligations which led to the lapse of the contract. It was as such not entitled to an order for specific performance.

[26] Consequently, the following order is made:

1.1 Appeal is upheld with costs, such costs to include the costs of two counsel employed.

1.2 The order of the court below is set aside and replaced with the following order:

“Application is dismissed with costs.”

TV RATSHIBVUMO

JUDGE OF THE HIGH COURT

I agree.

S.S. MPHAHLELE

DEPUTY JUDGE PRESIDENT

I agree

MT MANKGE

FOR THE APPELLANT : ADV AT NCONGWANE SC

ADV IP NGOBESE SC

INSTRUCTED BY

: MAPHANGA & ASSOCIATES INC

MIDDELBURG

FOR THE RESPONDENT : ADV SS MAAKANE SC

ADV D THUMBATI

INTRUSCTED BY

: TMN KGOMO & ASSOCIATES INC

DATE HEARD

: 10 SEPTEMBER 2021

JUDGMENT DELIVERED : 06 OCTOBER 2021

[1] 1912 AD 343 at 350-1.

[2] 2017 (3) SA 22 (SCA) at para 23.

[3] Supra, at page 350B-C

[4] See page 6 of Bundle 3A of 3 paragraph 3.5 of Mr. Ntuli’s affidavit.

[5] See clause 1-13 on pages 25-27 of bundle marked Volume 3A of 3

[6] Deposit was made on 12 January 2012 according to Mr. Ntuli’s affidavit on page 8 of Bundle 3A of 3 paragraph 5.1

[7] See clause 17 on page 20 of bundle marked Volume 3A of 3

[8][8] RH Christie’s Law of Contract in South Africa 5th Edition at p.505.

[9][9] 1971 (1) SA 896 (W) at p. 903 C-E.

[10] 2014 (2) SA 494 (SCA) at p. 498E-H.