The
plaintiff in this matter seeks an order requiring the defendant to
vacate Stands 322 and 324 in Beitbridge Township and pay holding over
damages from the 1st
of April 2006 to the date of vacation.
The
defendant avers that it is the lawful purchaser of both houses in
terms of written agreements of sale and counterclaims for the
transfer of the Stands.
The
plaintiff disputes the validity of the agreements of sale and pleads,
in any event, that the defendant's claim in reconvention has
prescribed.
At
the trial of this case, the first witness (Peter Lewis Bailey) was
called by the defendant. At the conclusion of this witness's
testimony, it was agreed by both counsel that there were no material
disputes of fact and that no further evidence would be adduced by
either party.
Background
Facts
In
February 1998, Peter Bailey was appointed as the plaintiff's
liquidator. Subsequently, in October 1999, a Deed of Compromise (the
Deed) was concluded with the creditors and Bubye Minerals (Pvt) Ltd,
and, thereafter, sanctioned by this Court in Case No. HC15191/99
[Exhibit 1].
Under
the Deed of Compromise, Bubye Minerals was to take transfer of all
claims of the creditors against the plaintiff. By virtue of the Court
order, Peter Bailey was appointed as agent of the parties; firstly,
to effect the transfer of claims in terms of the Deed, and, secondly,
in order to receive, administer, and make payments of all amounts
payable to the creditors in terms of the Deed. The Court order
operated to set aside the winding up of the plaintiff.
Peter
Bailey testified that he was approached by Bubye Minerals to sell the
two houses in Beitbridge to the defendant. Peter Bailey then
authorised both sales which took place in September 2002. At that
time, one of the houses was occupied by a third party who had been
given notice to vacate by the plaintiff, while the other house was
already occupied by the defendant as lessee.
Thereafter,
the defendant paid the purchase price in cash and this was
immediately transferred to Bubye Minerals. The money was to be used
to continue the running of the plaintiff's mines and thereby
generate more income for the benefit of all the creditors. Peter
Bailey's evidence was that the agreements of sale [Exhibits 2A and
2B] were entirely open and above board. Moreover, there was no
indication, at the time, that the parties did not intend the sale of
the houses or that the sales should be cancelled and the money paid
by the defendant be refunded. On the contrary, after the purchase
price was paid, the plaintiff gave vacant possession of both Stands
to the defendant who then duly took occupation of the houses.
Authority
to Sell
According
to Peter Bailey, clause 2.3 of the Deed of Compromise, as read with
clauses 4.1.1.3 and 4.2.1, empowered him to authorise Bubye Minerals
to effect the sales in
casu.
Moreover, the disposal of the houses did not require any resolution
of the plaintiff's Board of Directors whilst the Deed was in place.
By
virtue of clause 2.3 of the Deed of Compromise, for so long as any
amount payable to the preferred or concurrent creditors remained
unpaid, Bubye Minerals was prohibited from alienating any of the
plaintiff's assets “without
the prior written consent of the Liquidator having first been
obtained.”
In
terms of clause 4.2.1, “the Liquidator shall exercise sole and
absolute discretion in relation to the interpretation and
implementation of this Deed and in the event of a dispute arising
thereon, his decision shall be final and binding on all the parties
hereto.”
In
my view, although Article 2.3 is negatively couched in the form of a
prohibition against alienation, when read in conjunction with clause
4.2.1, its necessary implication is that the liquidator was empowered
to authorise the disposal of the plaintiff's assets if and when he
deemed it appropriate to do so in the execution or furtherance of his
general mandate.
In
the agreements of sale concluded in September 2002 [Exhibits 2A and
2B] the plaintiff, as the seller, was represented by Adele Farquhar
as “being
duly authorised thereto”.
At that time, Adele Farquhar was the Managing Director of Bubye
Minerals. As appears from certain correspondence between March 1998
and March 2006, Adele and Michael Farquhar and/or Bubye Minerals were
assumed to be the majority shareholders in the plaintiff [Exhibits 5,
6 and
7], while the Farquhars also evidently became directors of the
plaintiff [Exhibits 4A, 4B and
4C].
Article
78 of the plaintiff's Articles of Association [Exhibit 9] provides
for the appointment of Board of Directors. It empowers the existing
directors to fill casual vacancies or appoint additional directors.
Every such appointment is “subject
to confirmation by the members at the next ordinary meeting.”
In
the instant case, a former Director (one Cowper) gave notification,
by letter dated the 30th
of August 2002, of his resignation as director of the plaintiff with
immediate effect and his replacement in that capacity by Adele
Farquhar. However, no evidence was placed before the Court as to
whether the existing directors had concurred in this appointment or
whether it was subsequently ratified at the next ordinary meeting of
members.
In
any event, the agreements of sale in casu were entered into by Adele
Farquhar on the 5th
of September 2002 - after her ostensible appointment as a Director of
the plaintiff. In this regard, according to Article 101 of the
Articles of Association, “all acts done…, by any person acting as
a Director shall, notwithstanding that it shall afterwards be
discovered that there was some defect in the appointment of the
Directors or persons acting as aforesaid, or that they or any of them
are disqualified, be as valid as if every person had been duly
appointed or was qualified.”
Under
the law of agency, it is trite that the agent's actions operate to
create a contractual or other legal tie between the principal and the
third party. The agent's authority to act may arise either by dint
of actual authority, whether express or implied, or by way of
ostensible or apparent authority or authority by estoppel.
According
to CHRISTIE:
Business Law in Zimbabwe
(1985)…,:
“In
the language of the law of agency, apparent and ostensible authority
are synonymous…, and ostensible authority is sometimes said to be
created by the principal holding out the agent as having authority…,
although sometimes a distinction seems to be drawn between apparent
authority (flowing from the capacity in which the agent is employed)
and holding out (by particular words or actions)…,.
Ostensible
authority may arise otherwise than from the capacity in which the
agent is employed, as exemplified by:…, from a course of
dealing;…., from the third party's knowledge that the agent had
authority to pay certain debts and presumption that he had authority
to pay others;…, where the presumption of continuity was applied
and the third party was entitled to assume that an agent to whom
(unknown to the third party) the principal had transferred his
business was still the principal's agent.
What
is not clear is whether apparent authority, ostensible authority and
authority by holding out are all synonymous with authority by
estoppel, which requires not only a representation by the principal
but that the third party has acted on it to his prejudice. No doubt,
in ninety-nine cases out of a hundred the third party will have no
difficulty in establishing prejudice, but it is suggested that it is
not necessary for him to do so, as the situation contains all the
elements of quasi-mutual assent, for which proof of prejudice is
unnecessary.”
As
regards the principal's right to vindicate property disposed of
without his authority, the learned author states as follows…,:
“A
principal whose agent has, without authority, disposed of property
entrusted to his care may recover that property from third parties
unless estopped from doing so, as by having given the agent
ostensible authority to deal with the property.”
Applying
these general principles of agency to the facts of this case, it
seems to me that Adele Farquhar was duly authorised to represent the
plaintiff as the seller of the two houses in September 2002.
Adele
Farquhar's authority to do so derives, firstly, from the sales
having been authorised by Peter Bailey in terms of clause 2.3 as read
with clause 4.2.1 of the Deed of Compromise, and, secondly, from her
ostensible appointment and subsequent acts as a Director of the
plaintiff under Article 78 as read with Article 101 of the
plaintiff's Articles of Association.
In
my view, the cumulative effect of these provisions, coupled with the
conduct of the parties before and after the disputed sales, affords
the requisite authority to sell the houses in question.
It
is to be noted in this regard that the first intimation of the sales
being challenged was only provided in a letter from the plaintiff's
lawyers addressed to the defendant on the 7th
of September 2004 [Exhibit 8] - over two years after the houses had
been sold. In the intervening period, the plaintiff did not question
the propriety of the sales and in fact gave vacant possession of the
houses to the defendant. The latter, on its part, paid the agreed
purchase price in full and took occupation of the houses. If the
sales were to be reversed at this juncture, the defendant would be
significantly prejudiced in terms of its monetary outlay for the
Stands in 2002.
In
the premises, I am satisfied that Adele Farquhar did possess the
requisite ostensible authority to represent the plaintiff in the
agreements of sale and that they were therefore validly concluded.
The plaintiff is accordingly bound by the agreements and thereby
estopped from recovering the Stands in question.
It
follows that the plaintiff's claim for the eviction of the
defendant cannot be sustained and it is accordingly dismissed with
costs.
It
also follows that the defendant is entitled to enforce the binding
agreements of sale and therefore succeeds in its counterclaim for the
transfer of the two Stands, subject to the determination of the
plaintiff's special plea of prescription of the counterclaim.
Prescription
of Counterclaim
In
terms of common clause 2 of both agreements of sale “transfer of
the property into the name of the Purchaser shall be effected…, as
soon as possible after the purchase price has been paid, and within
fourteen (14) days of the Seller's legal
practitioners requiring the Purchaser to do so.”
While
this clause is somewhat vague and not categorically clear as to when
transfer is to be effected, it accords in essence with the
established common law position, viz. that the seller is obliged to
transfer the immovable property sold upon payment of the purchaser
price, and, conversely, that the purchaser is entitled to demand
specific performance, i.e. transfer, as soon as the purchase price is
paid.
See
Lamprecht
v Lyttleton Township (Pty) Ltd
1948 (4) SA 526 (T)…,.; Chiwawa
v Mutzuris
HH07-09…,.
Section
14 of the Prescription Act [Chapter
8:11]
provides for the extinction of debts by prescription, while section
15 specifies the relevant periods of prescription in respect of
different debts. In terms of section 16 of the Prescription
Act:
“(1)
Subject to subsections (2) and (3), prescription shall commence to
run as soon as a debt is due.
(2)
If a debtor wilfully prevents his creditor from becoming aware of the
existence of a debt, prescription shall not commence to run until the
creditor becomes aware of the existence of the debt.
(3)
A debt shall not be deemed to be due until the creditor becomes aware
of the identity of the debtor and of the facts from which the debt
arises:
Provided
that a creditor shall be deemed to have become aware of such identity
and of such facts if he could have acquired knowledge thereof by
exercising reasonable care.”
Section
2 of the Prescription Act defines the word “debt” as follows:
“Without
limiting the meaning of the term, includes anything which may be sued
for or claimed by reason of an obligation arising from statute,
contract, delict or otherwise.”
It
is abundantly clear from this definition that in a contract for the
sale of land the purchaser's right to sue for transfer or demand
specific performance by the seller is a “debt” which may be sued
for or claimed by reason of an obligation arising from contract. See
Desai
N.O. v Desai & Others
1996 (1) SA 141 (A) – apropos the equivalent definition in the
South African Prescription Act (No.68 of 1969).
As
a rule, unless prescription is delayed or interrupted, as envisaged
in sections 17, 18 and 19 of the Prescription Act, and provided that
the creditor is aware of the identity of the debtor and of the facts
from which the debt arises, prescription commences to run as soon as
the debt is due.
In
the present context, the seller's obligation to transfer and the
purchaser's reciprocal right to claim transfer or specific
performance arise from the date when performance is due, viz. as soon
as the purchase price is paid. As of that moment, the debt becomes
due and extinctive prescription begins to run against the purchaser.
See Lamprecht
v Lyttleton Township (Pty) Ltd
1948 (4) SA 526 (T)…,.;
see also Norman's
Law of Purchase and Sale
(4th
ed.)…,.
Section
17 of the Prescription Act provides for instances where the running
of prescription is delayed. In terms of section 17(2):
“A
debt which arises from a contract and which would, but for this
subsection, become prescribed before a reciprocal debt which arises
from the same contract becomes prescribed, shall not become
prescribed before the reciprocal debt becomes prescribed.”
Reciprocity
of debts, as envisaged in this provision, requires some close and
immediate correlation between the debts concerned. See Minister
of Public Works and Land Affairs v Group Five Building Ltd
1996 (4) SA 280 (A)…,.
Where
the sale of immovable property is involved, the purchaser's
obligation to pay the purchase price is ordinarily reciprocated by
the seller's obligations to give occupation and effect transfer.
See Pasha
v Southern Metropolitan Local Council of the Greater Johannesburg
Metropolitan Council
2000 (2) SA 455 (WLD)…,.
The
parties' obligations are reciprocal because they arise from what is
essentially a bilateral or synallagmatic contract. See CHRISTIE: The
Law of Contract in South Africa
(3rd
ed.)…,.
In
the instant case, the plaintiff seeks to vindicate the two Stands in
dispute. Its claim is not founded on an obligation in contract or
delict. It is essentially a proprietary claim and the defendant's
potential right to claim ownership after 30 years of open, adverse
and uninterrupted possession, by virtue of section 4 of the
Prescription Act, does not constitute a reciprocal contractual right.
It follows that the plaintiff's claim for eviction is not a
reciprocal debt arising from the same contract and that the
prescriptive period of 30 years applicable to that claim does not
operate in terms of section 17(2) to delay the running of
prescription as against the defendant's right to claim transfer of
the Stands.
Section
18 of the Prescription Act deals with the interruption of
prescription by acknowledgement of liability, as follows:
“(1)
The running of prescription shall be interrupted by an express or
tacit acknowledgment of liability by the debtor.
(2)
If the running of prescription is interrupted in terms of subsection
(1), prescription shall commence to run afresh –
(a)
From the date on which the interruption takes place; or
(b)
If, at the time of the interruption, or at any time thereafter the
parties postpone the due date of the debt, from the date upon which
the debt again becomes due.”
In
paragraph 1 of its further particulars (filed on the 3rd
of June 2008), the plaintiff avers that it “became aware of the
illegality of the sales towards the end of 2004.” Furthermore, the
correspondence between the defendant, its lawyers and the
conveyancing lawyers shows that until 2004 they were mutually
pursuing the question of transfer. This is confirmed in the letter of
the 7th
of September 2004 which I have already referred to [Exhibit 8], from
the plaintiff's current lawyers to the defendant, in which they
indicate their request to the conveyancing lawyers “to desist from
proceeding with the request of transfer until such time that our
clients' application has been determined by the High Court.”
All
of this, in my view, demonstrates a tacit admission by the plaintiff,
for a period of approximately two years, of its obligation to
transfer the Stands to the defendant pursuant to the agreements of
sale concluded in September 2002. In short, the plaintiff tacitly
acknowledged its liability to effect transfer to the plaintiff until
September 2004, as contemplated in section 18 of the Prescription
Act, and prescription only began to run as against the plaintiff
thereafter.
The
defendant filed its counterclaim on the 5th
of June 2006, well within the 3 year prescriptive period, and its
claim for transfer has therefore not prescribed in terms of sections
14 and 15 of the Prescription Act [Chapter 8:11].
Apart
from the foregoing, I think that there is an entirely different basis
on which the plaintiff's plea of prescription cannot be sustained.
I
have already found that the agreements of sale in
casu
were validly concluded and that they are binding on the plaintiff.
The judgment herein, in itself, constitutes a fresh cause of action
which the defendant will become entitled to enforce within the
prescriptive period of 30 years specified for judgment debts. It
would therefore be quite absurd and pointless, at this juncture, to
decline the defendant's counter claim for transfer founded on the
agreements of sale, simply to await the institution of a further
claim for transfer predicated on this judgment.
For
the above reasons, the plaintiff's special plea of prescription
must fail and it is hereby dismissed.
Order
In
the result, judgment is entered in favour of the defendant as against
the plaintiff, as follows:
(i)
The plaintiff be and is hereby ordered to transfer the two properties
known as Stand 322 Beitbridge Township and Stand 324 Beitbridge
Township into the name of the defendant.
(ii)
The plaintiff shall pay the costs of suit.
