Court name
Supreme Court
Case name
Southern Engineering and Another v Council of the Municipality of Windhoek
Media neutral citation
[2011] NASC 1












REPORTABLE





CASE
NO.: SA 14/2009








IN
THE SUPREME COURT OF NAMIBIA








In
the matter between
















SOUTHERN
ENGINEERING





JAN
JONKER INVESTMENTS EIGHT (PTY) LTD






First
Appellant





Second
Appellant






and
















COUNCIL FOR
THE MUNICIPALITY OF WINDHOEK



Respondent









CORAM:
Maritz JA, Strydom AJA et O’Regan AJA








Heard
on: 07/07/2010





Delivered
on: 07/04/2011













APPEAL
JUDGMENT












O’REGAN
AJA:










  1. The respondent, the Council for the
    Municipality of Windhoek, successfully approached the High Court for
    an order declaring that it had cancelled a lease agreement, and for
    an order of eviction against the first appellant, Southern
    Engineering. The two appellants now appeal to this Court to have the
    orders made by the High Court set aside.








Factual Background




  1. The case has a long history. In 2002,
    the Municipality of Windhoek and the Ministry of Trade and Industry
    approved a joint venture project with Ramatex Textiles Namibia (Pty)
    Ltd and its two subsidiaries Rhino Garments (Pty) Ltd and Thai Wah
    Garments (Pty) Ltd in terms of which textile and garment factories
    were to be established in Windhoek that would train and employ 4000
    Namibian citizens. For its part, the City of Windhoek provided 50%
    of the infrastructure costs (the other 50% was provided by the
    Ministry) and it also made land available for the factories. The
    land in question in this case, 7.6 hectares situated on the
    outskirts of Windhoek (“the leased property”), was made
    available at a nominal rental to Rhino Garments (Pty) Ltd through a
    99-year lease (“the lease agreement”) concluded on 13
    March 2002. The lease agreement was endorsed by a resolution of the
    Windhoek Municipal Council on 27 March 2002 but was never registered
    with the Registrar of Deeds.









  1. The terms of the lease agreement
    provided that Rhino Garments (Pty) Ltd would not, without the prior
    written consent of the Municipality, cede or assign any of its
    rights or obligations under the agreement or sublet or give up
    possession of the leased property to any third party. Moreover,
    Rhino Garments (Pty) Ltd undertook not to use the leased property or
    permit it to be used for any purpose other than garment
    manufacturing.









  1. The garment manufacturing enterprise
    was not a success and by March 2005, Rhino Garments had ceased
    operations on the leased property. According to the Municipality,
    Rhino Garments was in material breach of many of the provisions of
    the lease agreement.









  1. On 21 June 2005, Arthur Preuss, who
    was cited as seventh respondent in the High Court proceedings but
    who is not a party to this appeal, obtained a default judgment
    against Rhino Garments. On 18 July 2005, the Deputy Sheriff for the
    District of Windhoek (cited as sixth respondent in the High Court
    proceedings and again not a party to the appeal) purported to attach
    the right, title and interest of Rhino Garments in the lease
    agreement and thereafter published notice of an intended sale in
    execution of the right, title and interest in the lease agreement to
    take place on 8 December 2005. The sale in execution did not
    proceed. According to Mr Preuss, in the affidavit he lodged in the
    High Court, the sale was not held because he had been informed that
    the lease agreement had been cancelled.









  1. On 25 November 2005, the Chief
    Executive Officer of the Municipality wrote to Rhino Garments
    demanding that they rectify their material breach of the lease
    agreement within 30 days, which Rhino Garments failed to do. So on 3
    January 2006, the Chief Executive Officer wrote to Rhino Garments to
    the effect that “the lease agreement is cancelled with
    immediate effect”. The first letter was sent to the registered
    offices of Rhino Garments, but the second letter, the cancellation
    notice, was sent to the address where Rhino Garments’
    administrative office had been situated, but by the time the letter
    was sent Rhino Garments was no longer trading. There is thus a
    dispute as to whether the letter was ever received by Rhino
    Garments. On 16 January 2006, the management committee of the
    Council was informed of the cancellation of the lease and the
    cancellation was minuted and tabled in the full Council later that
    month.









  1. On 27 November 2006, Rhino Garments
    was provisionally liquidated. In the application for provisional
    liquidation, the applicant (Mr Preuss) stated that the lease
    agreement had been cancelled. Provisional liquidators were appointed
    on 13 December 2006, and, on 1 June 2007, Rhino Garments was wound
    up. The liquidators were aware that the City had purported to cancel
    the lease. On 9 October 2007, the liquidators sent a notice to all
    creditors giving notice of its intention to consider offers for the
    purchase of “rights, title and interest in the buildings”
    erected on the land which is the subject of the lease agreement. On
    23 October 2007, the liquidators wrote to the City stating that they
    elected “to the extent possible” to exercise their right
    to continue the lease agreement.









  1. On 31 October 2007, the Chief
    Executive Officer of the Municipality of Windhoek replied to the
    letter of 9 October 2007 stating that the lease with Rhino Garments
    had been cancelled eighteen months before. The liquidators were also
    informed that neither the property nor the improvements on the land
    were assets in the estate of Rhino Garments and that any alienation
    of the land, the property or the improvements thereon, or of the
    lease agreement or rights or interests in the lease agreement would
    be null and void.









  1. On 5 November 2007, Mr Jacobs on
    behalf of Southern Engineering, the first appellant, wrote to the
    Municipality’s chief executive officer and stated that
    Southern Engineering was the successful tenderer in the liquidation
    process in regard to Rhino Garments’ rights and title in the
    lease agreement, and to the buildings on the leased property. He
    further stated that they had taken possession of the leased property
    on 30 October 2007 and had paid N$6,8 million to the liquidators. Mr
    Jacobs further stated that he was not aware of the cancellation of
    the lease agreement until 1 November 2007









  1. On 12 November 2007, the
    Municipality’s Chief Executive Officer wrote to the joint
    liquidators and copies of the letter were sent to, amongst others,
    Southern Engineering. In the letter, he stated that the Municipality
    had noted the presence of the first appellant on the leased property
    during a site inspection on 8 November 2007 and that the liquidators
    did not have the right to sell the buildings or the right and title
    in the lease. On 15 November, the first appellant wrote to the
    Municipality stating that it was in possession of the leased
    property that it had obtained lawfully and in good faith.









  1. On 1 February 2008, the Municipality
    wrote to the first appellant asking it to vacate the leased
    property, which they failed to do. On 14 April 2008, the Council of
    the Municipality by resolution ratified the cancellation of the
    lease that had been contained in the letter of the Chief Executive
    Officer dated 3 January 2006. After several further exchanges of
    correspondence, the Municipality launched proceedings in the High
    Court on 28 April 2008 seeking an order confirming that the lease
    contract with Rhino Garments had been cancelled, an eviction order
    against first and second appellants and an order granting the
    Municipality leave to institute legal proceedings against first
    appellant to recover a fair and reasonable amount for the duration
    of the first appellant’s unlawful occupation of the leased
    premises.









  1. The main issue before the High Court
    was whether the lease agreement had been cancelled by the
    Municipality or not. The High Court held that the Municipality had
    done everything it could to communicate the notice of cancellation
    to Rhino Garments and that in the circumstances it deemed the notice
    to have been brought to the attention of Rhino Garments. The High
    Court also held that although communication of cancellation is
    ordinarily desirable, it is not necessary to communicate a
    cancellation if the contracting party has made it impossible for the
    other party to communicate with it. In the view of the High Court,
    the conduct of Rhino Garments had made it impossible for the
    Municipality to communicate the cancellation. In regard to the
    question whether the Chief Executive Officer had had authority to
    cancel the lease, the High Court held, relying on Potchefstroomse
    Stadsraad v Kotzé,
    1960 (3) SA 616 (A) and Walvis Bay
    Municipality and Another v Occupiers of the Caravan Sites at Long
    Beach Caravan Park, Walvis Bay,
    2007 (2) NR 643 (SC), that the
    authorization could not be questioned. I return to this issue later.
    Accordingly, the High Court granted the relief sought by the
    Municipality. Its order read as follows:








1.
The cancellation of the lease agreement concluded between the
applicant and Rhino Garments Namibia (Pty) Ltd on 13 March 2000 is
confirmed;



2.
The third respondent (Southern Engineering) is evicted with immediate
effect from the portion of the land previously leased in terms of the
lease agreement concluded on 13 March 2000 between the applicant and
Rhino Garments Namibia (Pty) Ltd, presently in liquidation;



3.
The applicant (Council for the Municipality of Windhoek) is granted
leave to institute legal proceedings against third respondent to
recover a fair and reasonable amount from the third respondent for
the duration of third respondent’s unlawful occupation of the
leased premises on Farm 466.”








  1. It is against this order that the
    appellants appeal.








Appellants’ submissions




  1. In this court, the appellants argued,
    amongst other things, that:




(a) the Municipality had not validly
cancelled the lease agreement because the Chief Executive Officer of
the Municipality had not been duly authorized to cancel the agreement
and the City’s purported ratification of the cancellation in
April 2008 was invalid as it would affect the rights of third
parties;



(b) even if the Chief Executive
Officer was authorized to cancel the lease agreement, the
cancellation of the lease agreement was never validly communicated to
Rhino Garments and therefore the lease agreement had never been
cancelled;



(c) that the assignment of the lease
by the liquidators to Southern Engineering was valid and that
Southern Engineering had purchased the property bona fide for
value from the liquidators and that its title to the property could
not thus be assailed by the Municipality.



Respondent’s submissions




  1. The respondent raised the following
    arguments, amongst others, on appeal:




(a) Rhino Garments had repudiated the
lease agreement, which was then cancelled once the repudiation was
accepted;



(b) the notice of cancellation was
sufficiently communicated to Rhino Garments in January 2006, and if
it was not, the cancellation took effect at the latest once the
liquidators, who stepped into the shoes of Rhino Garments, had
knowledge of the notice to cancel;



(c) the Municipality had validly
ratified the cancellation of the lease agreement in April 2008;



(d) the liquidators could not cede the
rights and interests in the lease to Southern Engineering without the
consent of the Municipality which was not given; and



(f) Southern Engineering was not using
the property for a purpose contemplated in the lease agreement and
therefore the liquidators could not validly cede the rights in the
lease to Southern Engineering.








  1. The respondent also raised a new
    point on appeal based on section 37(2) of the Insolvency Act, 24 of
    1936, which is rendered applicable to the liquidation of companies
    by section 339 of the Companies Act, 61 of 1973. Section 37(2)
    provides that if a trustee does not inform a lessor within three
    months of appointment that he or she intends to continue with the
    lease, the lease will be deemed to have terminated three months
    after the trustees were appointed. The respondent argued that, as
    “liquidator” is defined in the legislation to include
    “provisional liquidator”, the provisional liquidators
    had had three months from the date of their appointment on 13
    December 2005 within which to notify the City of their intention to
    persist with the lease. As they had failed to do so, the lease had
    automatically terminated on 12 March 2007 in terms of both section
    37(2) of the Insolvency Act and clause 23 of the lease, which
    contained a similar provision.
    1








Issues for determination in this
appeal




  1. Three issues arise for determination:




(a) Was the lease agreement cancelled
by the Municipality?



(b) Was the High Court correct in
ordering the eviction of the first appellant from the leased
premises?



(c) Was the High Court correct to make
an order granting the Municipality leave to sue Southern Engineering?



I shall deal with each in turn.







Cancellation of the lease




  1. Three issues arise in relation to
    determining whether the lease was validly cancelled: the first is
    whether the purported ratification of the Chief Executive Officer’s
    cancellation of the lease agreement by the City on 14 April 2008 was
    valid; the second is whether there was adequate notice of the
    cancellation to the lessee (Rhino Garments) and the third is
    whether, if the agreement was not cancelled by the Municipality, it
    terminated by effluxion of time in terms of the provisions of
    section 37(2) of the Insolvency Act.








(a) Ratification of the
cancellation of the lease




  1. On 27 November 2005, the Chief
    Executive Officer of the Municipality wrote to Rhino Garments
    requiring it to rectify its material breaches of the lease agreement
    within 30 days and on 3 January 2006, the Chief Executive Officer
    wrote to Rhino Garments purporting to cancel the lease agreement
    because the material breaches had not been rectified. The
    Municipality’s Management Committee passed a resolution on 16
    January 2006 noting that the lease agreement had been cancelled from
    3 January 2006 and those minutes were approved in a resolution
    passed by the Municipal Council on 25 January 2006. It may well be
    that by approving the Municipal Committee minutes in this way, the
    Municipal Council tacitly ratified the cancellation of the lease
    agreement. It is not necessary for us to decide this question,
    however, because on 14 April 2008, the Council of Windhoek passed a
    resolution expressly ratifying and approving the cancellation of the
    lease agreement with Rhino Garments on 3 January 2006 with effect
    from that date.









  1. The appellants argue that the Chief
    Executive Officer was not duly authorized to cancel the lease on 3
    January 2006, and that the subsequent ratification of 14 April 2008
    is not valid for two reasons. First, they argue that the lease could
    not lawfully be cancelled on 3 January 2006 because Rhino Garments’
    right, title and interest in the lease agreement had been attached
    by that date with the consequence that any cancellation of the lease
    would be a nullity. As the cancellation was a nullity, it could not
    subsequently be ratified. They also argue that the ratification of
    the cancellation would constitute a fraud on creditors given that
    Rhino Garments was in liquidation and for that reason too would be a
    nullity. Secondly, they argue that a valid ratification may not
    interfere with the vested rights of third parties. Because Southern
    Engineering had been assigned Rhino Garments’ rights, title
    and interest in the lease agreement by the liquidators, any
    subsequent ratification of the purported cancellation of the lease
    agreement would be invalid.









  1. It is clear that the cancellation
    will not be valid despite subsequent ratification by the Council, if
    the circumstances are such that the cancellation would have been a
    nullity from the start even if it were to have been done by the
    Council at that time, for it is not possible to give legal effect to
    a nullity by ratification.
    2









  1. Was the cancellation on 3 January
    2006 a nullity from the outset because, as the appellants argue, the
    lease had been attached and therefore the Council was not permitted
    to cancel the lease without first setting aside the attachment? The
    appellants rely on the criminal prohibition contained in section
    36(c) of the High Court Act, 1990 for this submission. That section
    provides that:








Any
person who …



(c)
being aware that goods are under arrest, interdict or attachment by
order of the court, makes away with or disposes of those goods in a
manner not authorized by law, or knowingly permits those goods, if in
his or her possession or under his or her control, to be made away
with or disposed of in such a manner; …



shall
be guilty of an offence …”








  1. The first question is what had been
    attached. The return on the Writ of Execution stated that the Deputy
    Sheriff had “seized and laid under judicial attachment the
    Defendant’s right, title and interest in the lease agreement
    entered into between the City of Windhoek and the Defendant”.
    It is clear from the return that what had been attached was whatever
    right, title and interest the Defendant (Rhino Garments) had in the
    lease agreement as at the date of the attachment, 18 July 2005.









  1. Does the attachment of such right,
    title and interest affect the rights of the other party under the
    lease agreement? In particular, does the attachment prevent the
    other party to the lease agreement exercising its contractual rights
    in respect of the lease agreement? Counsel for the appellants argued
    that, given the provisions of section 36(c) of the High Court Act,
    the effect of the attachment was to deprive the Council of its right
    to cancel the agreement and that any purported cancellation would be
    a nullity.









  1. There is a flaw in this argument.
    Section 36(c) refers to “goods” not to “incorporeal
    property.” It is not clear if the use of the term “goods”
    in the subsection includes within its scope attached rights in a
    lease agreement as the term “goods” often denotes
    corporeal property only. However, assuming in favour of the
    appellants that the term “goods” does include
    incorporeal property, such as the attached rights in the lease
    agreement, section 36(c) only prohibits the disposition of attached
    goods in a manner “not authorized by law”.









  1. If Rhino Garments was in material
    breach of the lease (as is not disputed on the record before us),
    the Council would have been entitled to cancel the lease in terms of
    its contractual rights. If it elected to do so, that cancellation
    would be a cancellation “authorized by law” as
    contemplated by section 36(c).









  1. The attachment of Rhino Garments’
    interest in the lease agreement cannot increase the rights and title
    that Rhino Garments may have under the lease. Nor, in the absence of
    any express wording in the statute, may the attachment of Rhino
    Garments’ rights in the lease agreement deprive the Council of
    its rights under the lease agreement.









  1. The appellants argue that
    cancellation by the City after the liquidation of Rhino Garments
    would be a nullity because it would prejudice the creditors in the
    estate. However, it is clear that a lessor’s right to cancel a
    lease agreement survives the liquidation of the lessee. As Friedman
    J stated in Smith and Another v Parton NO, 1980 (3) SA 724
    (D) at 729 D – E:








Once
one accepts, therefore, that the only real basic principle is that
the contract survives the insolvency, then it seems to me to follow
inevitably that the accrued right to cancel survives. Where the
creditor decides after insolvency to exercise his right of
cancellation against the trustee; he elects to exercise a right which
he has and which has survived the insolvency.”








  1. The liquidation of the insolvent
    company thus does not deprive the lessor of an accrued right to
    cancel the lease agreement. Consequently, section 36(c) of the High
    Court Act did not preclude the cancellation of the lease and the
    cancellation when it took effect does not impermissibly prejudice
    creditors. Accordingly, the argument that the cancellation of the
    lease was a nullity because it would constitute a prejudice to
    creditors in the concursus cannot be accepted.









  1. In the circumstances, appellants’
    argument that the ratification of the cancellation of the lease
    agreement was a nullity must be rejected.









  1. Did the purported ratification on 14
    April 2008 interfere with the vested rights of third parties? The
    rule was succinctly stated by Harms JA in Smith v Kwanonqubela
    Town Council,
    1999 (4) SA 947 (SCA) at para 12:








“… ratification
cannot affect vested rights previously acquired by third parties…
and a person ratifying cannot by his unilateral act bridge the
interval so as to prejudice others, not parties to the transaction…”.








  1. What rights had Southern Engineering
    acquired in the lease agreement? There is a dispute of fact on the
    record as to whether Mr Jacobs and Southern Engineering were aware
    of the cancellation letter of 3 January 2006.









  1. But the deed of sale (furnished at a
    very late stage of the proceedings)
    3
    entered into between the liquidators
    and Mr Jacobs, the proprietor of Southern Engineering, casts light
    on the transaction. It provided that the purchaser purchased the
    “rights, title and interest,
    such
    as they may be
    , in the
    Agreement of Lease between the City of Windhoek and Rhino Garments
    Namibia (Pty) Ltd dated 13 March 2002, a copy of which is attached”
    (emphasis added). Clause 3 of the agreement provided that “the
    sellers give
    no guarantees
    as to the good standing or existence of the Lease Agreement

    and the Purchaser has undertaken the
    risk of cession of the Lease Agreement into his name, and will bear
    the costs thereof.” (emphasis added) The final clause in the
    agreement stated that “the sellers have undertaken not to deal
    with the purchase consideration for a period of 14 days … as
    completion of this Agreement may be prevented by an order of the
    High Court…”.









  1. The unusual terms of the deed of sale
    make clear firstly that the purchaser was provided with a copy of
    the original lease agreement; and secondly that the seller had
    specifically refused to warrant that the lease agreement remained in
    existence. Moreover, no doubt because of the uncertainty of the
    existence of the lease agreement, the parties considered that the
    deed of sale might be prevented by High Court order.









  1. It follows that the purchaser, Mr
    Jacobs of Southern Engineering, was aware at the time that he signed
    the deed of sale that what he was purchasing might, in the view of
    the seller, not exist. The terms of the deed of sale do not
    therefore support the claim that Southern Engineering or Mr Jacobs
    were unaware of any uncertainties concerning the existence of the
    lease. It is also clear that Mr Jacobs would have known from the
    terms of the lease agreement (which was annexed to the deed of
    sale), that the leased property had to be used for the specific
    purpose of garment manufacturing, a term of the lease with which it
    appears he could not comply.









  1. In addition, Mr Jacobs and Southern
    Engineering would have been aware of the provision in the lease that
    the lease could not be assigned without the written consent of the
    Council. Section 37(5) of the Insolvency Act makes clear that such a
    clause binds the trustee of an insolvent estate. Southern
    Engineering would thus have been aware that they could not be
    assigned the rights, title and interest in the lease without the
    permission of the Municipality. It is no doubt for this reason that
    clause 3 of the deed of sale stated that “the purchaser has
    undertaken the risk of cession of the Lease Agreement into his name,
    and will bear the costs thereof”.









  1. Section 82(8) of the Insolvency Act
    provides protection to the
    bona
    fide
    purchaser of property
    from an insolvent estate where the sale is in contravention of the
    requirements of section 82.
    4
    Although section 82(8) probably has
    no direct application in this case, the jurisprudence developed
    under it as to what constitutes a purchase in “good faith”
    is helpful. In considering this question in
    Mookrey
    v Smith NO and Another,
    1989
    (2) SA 707 (C), a full bench of the Cape High Court held that:








I
do not consider that a purchase of estate assets can be said to be
bona
fide
unless
he believes that the trustee is acting within the scope of his
authority in selling the estate assets…. It is at least as
important to the proper administration of the Act and the estates of
solvent debtors that the trustee should not exceed his authority as
it is that creditors should not be prejudiced. Indeed, for a trustee
to exceed his authority will in most cases create the potential for
prejudice to creditors.”
5








  1. Given the terms of the deed of sale,
    appellants’ assertions and arguments that Southern Engineering
    purchased Rhino Garments’ right, title and interest in the
    lease agreement, in good faith and unaware of any uncertainty as to
    the ongoing validity of the lease by the Council, cannot be
    accepted. The clear terms of the agreement make plain that there was
    a large question mark over whether the lease was in existence (as
    the liquidators expressly refused to guarantee its existence).









  1. In all these circumstances, it cannot
    be said that Southern Engineering or Mr Jacobs, had vested rights in
    the lease agreement, sufficient to constitute a bar to the
    ratification of the cancellation of the lease agreement by the
    Council. As the purchaser, Mr Jacobs was aware that the existence of
    the lease agreement was not certain, and he was also aware that if
    the lease agreement still subsisted he required the consent of the
    Council to its cession.









  1. The appellants’ argument that
    the ratification was not competent because it would interfere with
    vested rights of a third party cannot for these reasons be accepted.
    In the circumstances, I conclude that the clear ratification of the
    cancellation of the lease agreement by the Council on 12 April 2008
    was lawful and valid and would have had the effect that the lease
    was cancelled if notice of cancellation came to the attention of the
    lessee, an issue to which I now turn.








(b) Notification of cancellation to
Rhino Garments




  1. The letter of 3 January 2006 was
    delivered to an address that had been the operational address of
    Rhino Garments, but not its registered address. In the
    circumstances, it cannot be said on this record that Rhino Garments
    obtained knowledge of the cancellation. The appellants argue that
    for the cancellation to be effective, notice of the cancellation
    must reach the lessee. It is not necessary to decide the question of
    whether a lease may be cancelled without notice reaching the lessee
    as it is clear in this case that the liquidators once they took
    office were aware of the contents of the letter of 3 January 2006.









  1. It is trite that liquidators step
    into the shoes of the insolvent company and that the contract
    survives insolvency.
    6
    Moreover, as noted above, a lessor,
    who has accrued a right to cancel a lease prior to insolvency, may
    still exercise the right to cancel once the liquidation has taken
    place.
    7
    Once the liquidators became aware of
    the notice of cancellation dated 3 January 2006, therefore, the
    cancellation had been communicated to the lessee.









  1. Given that I have concluded that the
    lease was validly cancelled once the liquidators became aware of the
    cancellation letter of 3 January 2006, it follows that the
    liquidators did not have an election either in terms of clause 23 of
    the lease agreement, or in terms of section 37(2) of the Insolvency
    Act, to continue with the lease agreement. Nothing further need be
    said about this issue.









  1. One issue remains to be considered.
    In dismissing the argument raised by Southern Engineering
    challenging the authority of the Chief Executive Officer to cancel
    the lease, the High Court relied upon a principle established in the
    case of
    Potchefstroomse
    Stadsraad v Kotzé,
    1960
    (3) SA 616 (A) as endorsed by this Court in
    Walvis
    Bay Municipality and Another v Occupiers of the Caravan Sites at
    Long Beach Caravan Park, Walvis Bay,
    2007
    (2) NR 643 (SC). That principle is that a municipality may not deny
    that one of its officials acted on its behalf in circumstances where
    the official has written to a member of the public purportedly with
    the authority of the Council. The principle recognizes that it would
    be unduly burdensome and inconvenient to require members of the
    public to investigate whether an official has complied with the
    internal regulations and processes of the municipality before
    concluding that the official was indeed authorized by the
    municipality to act.
    8
    In both the cases mentioned, it was a
    municipality that sought to argue that its officials had acted
    without authority and in both cases the courts held that the
    municipality could not do so on the basis of the principle cited. In
    this case, it is not the municipality seeking to challenge the
    authority of its officials, but a member of the public and so the
    legal principle established in these two cases finds no application.
    Although this Court reaches the same conclusion as the High Court,
    it does so for different reasons.








Eviction of Southern Engineering




  1. The next question that arises is
    whether, given that the lease has been validly cancelled, the
    Council is entitled to an order evicting Southern Engineering from
    the leased premises. It is clear from the record that the Council is
    the owner of the land in question, and that Southern Engineering has
    not established that it has any valid title to be in occupation of
    the land, so the eviction order against Southern Engineering must
    stand.









  1. In oral argument, the respondent’s
    counsel requested that the terms of the eviction order be extended
    to include the second appellant, Jan Jonker Eight Investments (Pty)
    Ltd. The relief prayed for in the Notice of Motion and, therefore,
    the High Court order of eviction relates only to the first
    appellant, Southern Engineering. There is no cross appeal on the
    question whether the order of eviction should have extended to the
    second appellant and indeed that question has not been an issue in
    these proceedings. Accordingly, it is not open to the respondent at
    this stage of the proceedings to seek an extension of the court
    order to include the second appellant within its ambit.




Leave to Sue



The third paragraph of the High Court
order provides that the applicant (the Council) is granted leave to
institute legal proceedings against third respondent to recover a
fair and reasonable amount from the third respondent for the duration
of the third respondent’s unlawful occupation of the leased
premises on Farm 466. The first appellant argues that this order
should not have been made in motion proceedings of this sort and
argues that it should be set aside on appeal.








  1. It is not immediately clear what the
    purport of this order is. There can be no doubt that the respondent
    has the right to sue the first appellant for appropriate relief and
    did not need a declaratory order to clarify that such a right
    exists. Whether such a claim will succeed will be a matter to be
    determined by the court hearing that case. When making the order,
    the judge in the High Court stated: “In my opinion, the
    applicant will be entitled to institute such legal proceedings
    without the leave of the Court based on the decisions already made.
    … I am of the opinion that such an order is neither here nor
    there and that it follows from my order in respect of prayer 2.”
    The declaration, therefore, had no tangible effect, as the High
    Court itself acknowledged.









  1. The grant of declaratory relief is a
    discretionary matter. Ordinarily, a court will only grant
    declaratory relief when two conditions are met. First, the court
    must be satisfied that the person seeking declaratory relief is a
    person interested in an existing, future or contingent right or
    obligation and secondly the court must consider it appropriate to
    grant declaratory relief in the circumstances of the case.









  1. In particular, the relief sought must
    not be abstract, or of academic or hypothetical interest only and it
    must afford the litigant a tangible advantage. (Ex parte Nell,
    1963 (1) SA 745 (A) at 759 A – B; Reinecke v
    Incorporated General Insurances Ltd,
    1974 (2) SA 84 (A) at 93 B
    – E). Where an order does no more than restate general
    principles of law, and does not determine any existing, future or
    contingent right, it is not appropriate for a court to grant
    declaratory relief. Such a declaratory order would be an “exercise
    in futility”. (Reinecke v Incorporated General Insurances
    Ltd
    1974 (2) SA 84 (A) at 97 D – E).









  1. The respondent’s right to sue
    the first appellant for damages for the unlawful occupation of the
    leased premises is a matter which will arise for full determination
    only if and when the respondent institutes action against the first
    appellant. This Court does not know whether the respondent’s
    right to institute such an action will be challenged and, if so, on
    what basis. The Court cannot seek to predetermine these issues in
    these proceedings, as the High Court itself acknowledged.









  1. Where a court has granted declaratory
    relief, the ordinary principle is that an appellate court will not
    interfere with the decision to grant relief unless the appellate
    court is satisfied that the discretion conferred upon the lower
    court was not judicially exercised. (Ex parte van Schalkwyk NO
    and Hay NO
    1952 (2) SA 407 (A) at 410 H; Lawson & Kirk
    (Pty) Ltd v Phil Morkel Ltd
    1953 (3) SA 324 (A) at 332 A - B).









  1. As mentioned above, paragraph 3 of
    the High Court order appears to have no tangible effect. Moreover,
    the High Court recognized that it had no such effect as is clear
    from the comment made by the judge that he considered the effect of
    the order “to be neither here nor there”. In the
    circumstances, the Court failed to act judicially in the exercise of
    its discretion for, as appears from the discussion in the preceding
    paragraphs, it is a clearly established legal principle that
    declaratory relief should not be awarded unless it affords, some
    tangible relief. The appeal against paragraph 3 of the order made by
    the High Court should thus succeed and that portion of the order be
    set aside.








Costs




  1. For the reasons given in this
    judgment, the appeal has been successful, but only in one small
    respect, that is, in relation to paragraph 3 of the High Court
    order. It is clear that the effect of paragraph 3 was of minimal
    importance to both parties and did not engage much discussion in
    argument. Accordingly, on all issues of substantial importance, the
    appeal has failed. Given that the appeal has been substantially
    unsuccessful, it is appropriate to order the appellants to pay the
    costs of the respondent in this Court, such costs to include the
    costs of one instructed and one instructing counsel.




Order




  1. The appeal succeeds to the extent
    that paragraph 3 of the High Court order is set aside.



  2. Save as set out in paragraph 1 of
    this order, the appeal is dismissed.



  3. The appellants are ordered to pay the
    costs of the respondent in this Court, such costs to include the
    costs of one instructed and one instructing counsel.















_____________


O’REGAN
AJA















I concur














_________________


MARITZ
JA














I
also concur.











__________________


STRYDOM
AJA







COUNSEL
ON BEHALF OF THE APPELLANTS: Mr. T.J. Frank SC



INSTRUCTED BY: Dr, Weder, Kauta &
Hoveka Inc








COUNSEL
OF BEHALF OF THE RESPONDENT: Ms. S. Vivier


INSTRUCTED
BY: LorentzAngula Inc.



1Clause
23 provides: “The insolvency of either the City or the Company
shall not terminate this agreement. However, the trustee of the
Company’s insolvent estate shall have the option to terminate
this agreement by notice in writing to the City. If the trustee does
not within three months of his appointment as trustee notify the
City that he/she desires to continue with the agreement on behalf of
the estate, he/she shall be deemed to have terminated the agreement
at the end of the three months.”




2AJ
Kerr
The
Law of Agency
3rd
ed (1991:
Butterworths) at 97.




3Despite
repeated requests by the City prior to the launch of the proceedings
in the High Court, the deed of sale was only disclosed as an
annexure to a supplementary affidavit lodged by Mr Jacobs in
response to the Replying Affidavits.




4Section
82(8) provides: “If any person other than a person mentioned
in subsection (7) has purchased in good faith from an insolvent
estate any property which was sold to him in contravention of this
section … the purchase of other acquisition shall
nevertheless be valid …”.




5At
714 C – D.




6See
Smith
and Another v Parton NO
1980
(3) SA 724 (D) at 729A. See also
Porteous
v Strydom NO
1984
(2) SA 489 (D) at 494 F.




7Id
at 729D-E citing with approval
Mitchell
v Sotiralis’ Trustee
1936
TPD 252.




8See
Potchefstroomse
Stadsraad v Kotzé
1960
(3) SA 616 (A) at 622 E – G, citing with approval
Mine
Workers’ Union v Prinsloo
1948
(3) SA 831 at 845. See also
National
and Overseas Distributors Coroporation (Pty) Ltd v Potato Board
1958
(2) SA 473 (A) at 480
.