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IN THE NORTH WEST HIGH COURT

MAHIKENG

CASE NO.: 1754/2012

In the matter between:

KORINGFONTEIN MINING AND FARMING CO PTY LTD      Plaintiff

and

COMONAGE INVESTMENT 28 (PTY) LTD                              Defendant

CIVIL MATTER

KGOELE J

DATE OF HEARING                     :           11 FEBRUARY 2015

DATE OF JUDGMENT                  :           24 APRIL 2015

FOR THE PLAINTIFF:                  Adv. K. Loulianou

FOR THE RESPONDENT :           Mr N.J. Esterhuyse

JUDGMENT

KGOELE J:

[1]        On 2 March 2006 and at Rustenburg, the plaintiff duly represented by Mr Shahini and the defendant by Mr Viljoen, executed a Deed of Sale incorporating a Lease Agreement regarding an undivided share of an Agricultural property.  In terms of clause 6.4.1 thereof and 6.4.2 the defendant let a portion of Portion 8 (Second Portion) to the defendant for a period not exceeding 10 years from the date of registration and transfer of portion 8 and 9 into the defendant’s name.  Pursuant to the agreement, portion 8 and 9 were transferred to and registered in the defendant’s name on 23 May 2006.  The plaintiff remained and is in de facto occupation of the second portion.  The plaintiff paid the defendant the agreed rental which payments the defendant accepted.

[2]      When the plaintiff started defaulting with the rental payment, this relationship became steadily sour up until they both realised that the agreement they signed had some problems.  As a result they exchanged communications through their respective legal representatives.  These communications revealed that their agreement is against the provisions of Section 3(d) of the Sub-division of Agricultural Land Act 70 of 1970 (The Act) in that the lease agreement they entered into was for a period of 10 (ten) years and longer which requires the consent of the Minister of Agriculture (the Minister) and furthermore, that the option to purchase the said undivided portion is also null and void because it also lacks the consent of the Minister.  The said communications culminated into this action being brought before this Court.

[3]        Aggrieved by this, the plaintiff instituted an action against the defendant for an order rectifying clause 6.4.1 and 6.4.2 of the said agreement.  The relevant clauses read as follows:-

“6.4.1 The Purchaser will, subject to clause 6.4.2, let the Second Portion (including all improvements thereon) to the Seller or its nominee for a period not exceeding 10 years as from date of registration of transfer.

6.4.2 If the Seller obtains the written permission of the Minister of Agriculture in terms of the Sub-Division of Agricultural Land Act, No 70 of 1970, to let the Second Portion for a period exceeding 10 years, the Purchaser will let the Second Portion to the Seller for such longer period, however not to exceed 25 years, as from date of registration of transfer.”

[4]        The plaintiff alleged that the above clauses did not correctly reflect the common and continuing intention of the parties; that mistakes were made in the drafting of the clauses and further that the actual period of the initial lease as stipulated in clause 6.4.1 should read 9 years and 11 months and not in effect 10 years as is indicated therein.

[5]        The defendant opposed this action and further instituted a counter-claim evicting the plaintiff from the said property.  The defendant’s arguments are that Section 3(d) of the Act provides that no lease in respect of a portion of agricultural land of which the period is 10 years or longer, or is the natural life of the lessee or any other person mentioned in the lease, or which is renewable from time to time at the will of the lessee, either by the continuation of the original lease or by entering into a new lease, indefinitely or for periods which together with the first period of the lease in all amount to not less than 10 years  shall be entered into unless the Minister has consented in writing.   It is the defendant’s contention that it is therefore common cause between the parties that the lease agreement as contained in clauses 6.4.1 and 6.4.2 of the agreement (as unrectified) is void due to non – compliance with the provisions of section 3(d) of the Act.  According to the defendant, the plaintiff has admitted to this fact already during the Pre-trial conference.

[6]        The plaintiff called Mr Adriaan Francois Van Wyk, a practising attorney, who was responsible then for the drafting of the agreement.  His evidence basically related to how the parties met and agreed about the sale.  He indicated that because they did not have some legal expertise, he is the one that also advised them on how to structure their agreement.  This advice was prompted by the fact that according to him the seller was not keen to sell smaller portion.  He wanted to retain it for prospecting and mining purposes.  According to him it also appeared that the purchaser was also not keen to acquire that portion.  He then advised them that without the Minister’s consent, and or without the property being sub-divided, the purchaser could not buy only one portion on its own.  He suggested to them to conclude a lease in regard to that small portion, for the maximum period permissible in terms of the Act without the Minister’s consent.  The seller further indicated to him his wish to have that portion on a lease for a longer period permissible, and consensus was according to him reached that he could apply for the Ministerial consent and if it was successful, an extended lease with regard to that small portion will be granted for that extended period up to a maximum of 25 years.  He indicated that he unfortunately drafted the clauses which are the subject matter of the issue before this Court without refreshing his memory by checking the correct formulation of the words in the relevant section of the Act.  In hindsight, he testified, the formulation should have read “less than 10 years, and not 10 years or more”.  He concluded by saying that this was an honest mistake on his part and had no doubt that the parties intended to conclude a valid lease agreement with the maximum applicable terms in compliance with the Act.  He was at a much later stage made aware of this mistake by an attorney representing the plaintiff.

[7]        His cross-examination did not reveal much.  It is noteworthy to mention that when asked by the defendant’s Counsel that none of the parties including himself indicated during that time that they want to enter into a term of 9 years and 11 months during the discussions he held with them, he conceded to this fact.  The plaintiff closed its cases without calling any further witness and the defendant also closed its case without calling any person to testify on its behalf.

[8]        Counsel for the plaintiff submitted that it is clear from the evidence of Mr Van Wyk that consensus was reached, but there was a mistake on the part of Mr Van Wyk when he drafted the agreement because the written document does not reflect what the actual consensus was.  The parties believed that they were contracting in compliance with the provisions of the Act and therefore committed a common mistake.

[9]        He further indicated that because the witness Mr Van Wyk was a single witness, there is no reason to make a credibility finding about his testimony.  The defendant had not placed any contrary intention before this Court except to say that the agreement is void and therefore this Court must accept it as the only evidence that was unchallenged that the parties’ intention was to the effect that there has to be a lease agreement which was subject to compliance with the Act.  He urged this Court to accept the fact that the intention was not to have a lease agreement which was more than 10 years, but 10 years which is equivalent to 9 years and 11 months.

[10]      The defendant’s Counsel on the other hand submitted that it has not been established even through the evidence of Mr Van Wyk that the parties’ common and continuing intention at the time when the agreement was reduced to writing, was to agree to an initial lease period of 9 years and 11 months and not 10 years as stipulated in the agreement.  He further submitted that the actual wording of the true agreement, as it existed at that time remains integral to a successful claim for rectification, and in casu, it has neither been established that the wording of the true agreement, was an initial lease period of 9 years and 11 months.  He quoted the following case in support of his submission:       Propfokus 49 (Pty) Ltd and Others v Wenhandel 4 (Pty) Ltd [2007] 3 All SA 18 (SCA).

[11]      He further submitted that in actual fact the common continuing intention of the parties was to agree to a long term lease of a portion of agricultural land which is clearly in contravention of the provisions of the Act, which agreement is void ab initio, and the fact that a ministerial consent will be obtained after the agreement was entered into does not revive the agreement.  Furthermore, he argued, that even if the plaintiff can be successful with its claim for rectification as pleaded, the relevant clauses 6.4.1 and 6.4.2 will still be void, because a contract of sale made subject to a suspensive condition is not a contract unless and until the condition is fulfilled.  He referred to the case of Soja (Pty) Ltd v Tuckers Land and Development Corporation (Pty) Ltd 1981 (3) SA 314 (A) to substantiate this proposition.

[12]      He further submitted that the lease agreement in clause 6.4.2 of the agreement  (as might be rectified) makes provision for a lease period of 25 years together with the initial lease period of 9 years and 11 months subject to a suspensive condition that the minister’s consent be obtained. In the premises a lease has already been entered into between the parties in contravention of the provisions of the Act which results in the lease agreement becoming void ab initio.

[13]      To support the defendant’s counterclaim he argued that plaintiff’s only right to remain in occupation of the relevant portion of the agricultural land is derived from the lease agreement contained in clause 6.4.1 and 6.4.2 of the agreement. As this lease agreement was shown to be void ab initio, the plaintiff has no right to remain in occupation of the defendant’s property and the plaintiff stands to be evicted from the property as prayed for in the defendant’s claim in reconvention.

[14]      He lastly urged this Court to dismiss the plaintiff’s claim with costs and further order the plaintiff, and any person occupying through the plaintiff to be evicted from the second portion defined in Annexure “POC1” to the Particulars of Claim, namely, the portion of 38 hectares lying South of the public road being a part of portion 8 and/or portion 9 (both portions of portion 3) of the farm Koornfontein 385, Registration Division JP, North West Province.

[15]      In reply to the counter-claim plaintiff’s Counsel submitted that the contract should not bind the parties because the mistake was made by their attorney.  Furthermore that Section 11 of the Act creates an offence in case of non-compliance with the Act.  It does not say it is void.

[16]      For a better understanding of the submissions and arguments of the parties it is better to quote section 3(d) of the Act verbatim.  It provides as follows:-

            “         No lease in respect of a portion of agricultural land of which the period is 10 years or longer, or is the natural life of the lessee or any other person mentioned in the lease, or which is renewable from time to time at the will of the lessee, either by the continuation of the original lease or by entering into a new lease, indefinitely or for periods which together with the first period of the lease amount in all to not less than 10 years  shall be entered into unless the Minister has consented in writing. (own emphasis)”

[17]      The defendant as indicated above did not call any witnesses, because it contends that the evidence of Mr Van Wyk does not at all establish or proof that the wording of the agreement which existed at the time it was reduced to writing, was an initial lease period of 9 years and 11 months.   What basically came out of his evidence is that he made a mistake himself by not verifying the wording of the Act when he drafted the contract, but the parties, intended that it should comply with the Act.  Unfortunately a careful reading of the two contentious clauses in this matter, clause 6.4.1 and 6.4.2, do not at all support the version as put by him, instead it support the defendant’s submission that in actual fact, the common continuing intention was to agree to a term of 10 years lease period of a portion of agricultural land and for much longer than 10 years without the Minister’s consent, which is clearly in contravention of the provisions of the Act.  The wording of their agreement does not at any stretch of imagination suggest a period less than 10 years, but a period of 10 years instead.   What compounds this fact is that the period agreed to, which is 10 years, is still contrary to the provisions of this section.   A literal interpretation of the Act reveals that if the contract entered into is 10 years, then the Minister’s consent is required.  The words the parties used were not to enter into an agreement for a period of less than 10 years.  It does not help the plaintiff to come and say that the words “9 years and 11 months” should be added to the agreement, which words are fictional and do not tally with or discern from the words as expressed by the parties at the time.  The written agreement also does not suggest anything less than 10 years as prayed for.   On this fact alone, the plaintiff’s claim for rectification cannot succeed.

[18]      The plaintiff’s case as pleaded does not allege that the parties entered into the written agreement under the mistaken impression that the written agreement correctly reflects their common intention.   This is another reason why the plaintiff’s case is bound to fail.  It actually establishes that the written agreement was entered into under the common assumption that their common intention was legal. This is certainly not a ground for rectification but could lead to the consequence of the contract being void if the assumption turns out to be false.  See:  Van Reenen Steel (Pty) Ltd v Smith N.O. and Another 2002 (4) SA 264 (SCA).

[19]      A party seeking to obtain rectification must show the facts entitling him to obtain that relief ‘in the clearest and most satisfactory manner’, where the common intention is to be shown not by any writing but by verbal evidence, the Courts may have great difficulty in determining whether there was a mistake in the written contract. These cases do not require more than a balance of probability in favour of the party seeking rectification but indicate that such a claim is in fact difficult to prove. See: Bardopoulos and Macrides v Miltiadous 1947 4 SA 860 (W) 863–864.

[20]      There is yet another problem the plaintiff’s case is confronted with.  Christie, in his book, The Law of Contract, 2^nd Edition on page 348-349 sums up the law which has become trite as far as rectification is concerned as follows:-

“Even Mouton v Hanekom has not swept away the difficulty caused by statutes requiring certain formalities for certain types of contract, such as the Alienation of Land Act 68 of 1981 s 2 (1).  A document that is invalid because it fails to comply with the statutory requirements cannot be validated by rectification, and even if this rule leads to anomalous results it must be maintained so that the statutory requirements are not subverted,  Nevertheless rectification can be granted if the written contract as it stands complies with the statute and the term sought to be added falls outside the purview of the statute, or if the contract as a whole complies with the statute and it is sought to rectify a single severable clause which does not so comply because it is inchoate; or if a contract of suretyship complies with Act 50 of 1956 s 6 but by mistake the wrong person has been shown as creditor;  or if the written agreement fails to comply with statutory formalities imposed to provide the Commissioner for Revenue Services with formal proof of specified facts.”

[21]      I fully agree with the submissions of the defendant’s Counsel that even in the event of the plaintiff being successful with its claim for rectification as pleaded, which fact I do not find, the relevant clauses 6.4.1 and 6.4.2, taken together will still be void due to non-compliance with section 3(d) of the Act which should result in the claim for rectification not being granted for this reason as well.  He succinctly summarised the reasons for this proposition in his heads of argument as follows:-

21.1    When a contract of sale is made subject to a suspensive condition, there exists no contract unless and until the condition is fulfilled.  Soja (Pty) Ltd v Tuckers Land & Development Corporation (Pty) Ltd 1981 (3) SA 314 (A).  

21.2    This led to parties circumventing the provisions of the Act regarding the sale of a portion of agricultural land by just inserting a suspensive condition that the sale is made subject to the minister’s consent being obtained. In reaction hereto the legislature in 1981 inserted a definition of “sale” in the Act to include a sale made subject to a suspensive condition.  See: Guba v Odendaal and Another (Unreported), [2006] JOL 18230 (T).

21.3    The legislature however never inserted any definition of a lease in the Act to also include a lease made subject to a suspensive condition in order to prevent a similar circumvention of the provisions of the Act. The reason for this can only be that contrary to a contract of sale, a lease agreement made subject to a suspensive condition still comes into existence on the signing of the lease and only the obligation to perform may be suspended. See: Absa Bank Ltd v Sweet & Others 1993 (1) SA 318 (C) on 322G – 323A

[22]      The two clauses relied upon by the plaintiff which it wanted to rectify denotes that they must be read together.  Clause 6.4.1 read thus:-

“The purchaser will, subject to clause 6.4.2, let the Second Portion …………”

The fact that the plaintiff not only seek to rectify only clause 6.4.1, but both of them, further supports the contention that they should be read together and most significantly, that they are not severable or divisible.  Of significance in this matter is that the plaintiff has never renounced the second part of the lease agreement stipulated in clause 6.4.2 in order to rely on the first part only.  It therefore becomes apparent that the two leases as provided in the two clauses are void ab initio.  See: Morkel v Thornhill (unreported) [2010] JOL 25219 (FB).

[23]      In Headermans (Vryburg) (Pty) Ltd v Ping Bai 1997 (3) SA 1004 (SCA), the SCA made the following remark: 

“It was common cause that in principle a sale of land, which complies with the requirements of the Alienation of Land Act, may be rectified by substituting for the description of the land another description which gives effect to the parties' true common intention. See Magwaza v Heenan1979 (2) SA 1019 (A). It was also not contended that rectification was necessarily excluded where the contract was on the face of it invalid on grounds other than the absence of required formalities. In such a case the contract is formally in order, but in substance (in the present case because it relates to a sale of erven in an unproclaimed township) it is invalid. The difference, for purposes of rectification, between a contract which is void for want of compliance with essential formalities, and one which is invalid for some other reason, was stated as follows by Didcott J in Spiller and Others v Lawrence 1976 (1) SA 307 (N) at 312B--D: 

‘The two situations are fundamentally different. In the one . . ., when the question of validity relates to the substance of the transaction and not its form, nullity is an illusion produced by a document testifying falsely to what was agreed. In the other . . . the cause of nullity is indeed to be found in the transaction's form. When it is said to consist of a failure to observe the law's requirement that the agreement be reflected by a document with particular characteristics, the document itself is necessarily decisive of the issue whether the stipulation has been met; for it has been only if this emerges from the document ’ ”.

[24]      An agreement not in compliance with the provisions of the Act is void ab initio and the fact that ministerial consent is obtained after the agreement was entered into, does not revive the agreement.  See: Guba v Odendaal matter referred to above.

[25]      In order to succeed with a claim for rectification, the plaintiff had to allege and prove the following facts:-

1.         An agreement between the parties which was reduced to writing;

2.         That the written document did not reflect the common intention of the parties, as it existed when the agreement was reduced to writing, correctly;

3.         An intention by both parties to reduce the agreement to writing;

4.         A mistake in drafting the document which may be as a result of a bona fide mutual error or intentional act of the other party;

5.         The wording of the agreement as rectified.  It does not suffice to give the general import of the common intention.   

[26]      Clearly the plaintiff with its approach is having a problem to prove requirement 2 and 5.  As already indicated above, even if the defendant did not lead any evidence, the evidence by the plaintiff’s witness did not establish the essentials of rectification.  On papers before Court the plaintiff also failed to establish the requisite requirements.  It follows that the claim of the plaintiff for rectification must fail.  The plaintiff’s counter-claim succeeds as the agreement is void ab initio.   As far as costs is concerned, the defendant is substantially successful and there are no reasons why the costs order should not follow the result, including the costs previously reserved, which costs should be costs in the cause.

[27]      In the premises, an order is hereby granted in the following terms:

            27.1    The plaintiff’s claim is dismissed with costs;

27.2    The plaintiff, and any person occupying through the plaintiff, is evicted from the second portion defined in Annexure “POC1” to the Particulars of Claim, namely, the portion of 38 hectares lying South of the public road being a part of portion 8 and/or portion 9 (both portions of portion 3) of the farm Koornfontein 385, Registration Division JP, North West Province;

27.3    The plaintiff is ordered to vacate the said property within 60 days from the date of the order;

27.4    If the plaintiff fails and/or refuses to vacate the property by the date set out in paragraphs 27.3 above, the Sheriff of the Court is ordered to carry out the eviction of the plaintiff;

27.5    The plaintiff is ordered to pay the costs of the defendant.

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A M KGOELE

JUDGE OF THE HIGH COURT

ATTORNEYS:

FOR THE PLAINTIFF                                 :           Senekal Simmonds Inc

                                                                                   C/O Nienaber & Wissing

                                                                                   10 Tillard Street

                                                                                   MAHIKENG

FOR THE DEFENDANT                :           Du Plessis & VD Westhuizen

                                                                                 C/O Minchin & Kelly Inc

                                                                                   Kelgor House

                                                                                   Ground Floor, East Annex

                                                                                   14 Tillard Street

                                                                                   MAHIKENG  

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