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IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE, GRAHAMSTOWN) CASE NO: 3023/10

In the matter between:

EKOSTO 1042 CC (reg no: 2006/00365623) …..............................................................APPLICANT

And

PIETER JOHANNES FRANCOIS VAN WYK …...........................................................RESPONDENT

JUDGMENT

ANDREWS, AJ

[1] The applicant seeks the eviction of the respondent from certain properties in the town of Rhodes, Eastern Cape and an order to hand over the hotel business conducted from the property, namely the Rhodes Hotel. The respondent opposes the application alleging that he has effected extensive improvements to the property for which he has not received compensation as yet, and that he is therefore entitled to retain possession of the disputed property until such compensation is paid. Respondent also alleges that there is a material dispute of fact on the papers which disallows the granting of final relief herein.

[2] In this matter applicant applies for an order

a) for the ejectment of respondent from the erfs 109, 110, 111,112,113 and 114 Rhodes each being approximately 535 m2 and held under title deed T36963/2002 by applicant and hereafter referred to as “the property”;

b) for the ejectment of respondent from the hotel business that is being conducted from the property trading as Rhodes Hotel, hereafter referred to as “the business”;

b) that respondent be ordered to hand the said business to applicant;

c) that the sheriff of this court be empowered and ordered to eject the respondent from the said premises and business immediately after the handing down of this order;

d) that the respondent be ordered to pay the costs herein on an attorney client scale.

[3] The following facts set out in the applicant’s heads of argument were not in dispute:

a) the applicant is the registered owner of the properties from which the hotel business is conducted;

b) during or about 15 May 2009 the respondent entered into a written contract (“the agreement”) with one Owles where Owles sold the respondent his entire member’s share, (100%) against the purchase price of R4,690,000;

c) in terms of that agreement the transfer of the property in the shares and the ceded claims were withheld until full payment of the purchase price by the respondent;

d) the effective purchase date of the agreement was 1 March 2009 where after all risk and benefits in the shares passed to the respondent excluding ownership;

e) respondent was as a result in a position in terms of the written agreement to run the business under the name of Rhodes Hotel for his own risk and benefit as of 1 March 2009;

f) the entire agreement was subject to a suspensive condition that the respondent would succeed in obtaining a loan from a commercial bank for the sum of R4 million within 40 days after the accountant had placed the respondent in possession of the financial statements of the closed corporation [applicant] up to and including the financial year ending 28 February 2009;

g) should the suspensive condition either not be fulfilled within the time stated or such time as the parties would agree, the respondent would remain the owner of the Ford Ranger vehicle, and would be entitled to manage the hotel and related businesses for his own account, while the parties made their best efforts to sell the business for an amount of at least R4 million together with interest thereon at 8,5% per annum from the effective date till date of payment;

h) in the event of a purchaser not being found with in 90 days from the date on which the suspensive condition was not fulfilled, the shares would be sold by public auction;

i) the parties also agreed as to how the proceeds of such sale would be handled as reflected in the agreement;

j) a public auction was held in accordance with the provisions of clause 14 on 17 September 2010 and the Rhodes Trust (hereafter referred to as “the trust”) purchased the shares together with loan account held by Owles in the applicant .

[4] The applicant stated that the written agreement between the parties was the exclusive record of the agreement between them and neither contracting party was bound by any implied or terms or other representations. Applicant asserted that it was entitled to approach the court for an order to bring to an end the unlawful occupation of the property by respondent and needed only prove that it was the owner of the property and that the respondent was in occupation, where after the onus would shift to the respondent to prove that the occupation was lawful. Applicant averred that the respondent had not discharged that onus. Applicant stated that the provisions of Act 19 of 1998 did not apply as the dispute related to commercial property. Also that there is no bona fide dispute of fact on the papers.

[5] The respondent opposed the application on the following basis:

1. The applicant is not entitled to relief because of the existence of a dispute of fact on the papers; alternatively the dispute has to be determined on the respondent’s version;

2. the suspensive condition was fulfilled by him and therefore clause 14.2 and 14.3 has not come into operation;

3. that the respondent is entitled to refuse to hand over the business and possession of the applicant’s immoveable assets on the basis of having an improvement lien over the property

[6] It is common cause that the applicant is the owner of the property. The respondent argued that there are bona fide disputes of fact relating to the fulfilment of the agreement and that applicant is therefore not entitled to the final relief sought in the application.

[7] Firstly, the respondent claimed that there was uncertainty as to whether there had been a fulfilment of clause 14.2 of the sale agreement, in that Owles’ 100% shareholding in the property was purported to have been purchased by a trust, which respondent argued is “alter ego” of Owles, since he is a beneficiary of the trust. This issue, it was argued, would need to be resolved by oral evidence. Respondent alleged that Owles, through the auction disposed of his shares in such a way as to deprive him of his right to possess and run the business, as agreed between the parties. He challenged the propriety of the auction sale, in order to justify his continued use and possession of the property in terms paragraph 14.2 of the agreement.

[8] Respondent referred to an unsuccessful application for his ejectment from the same premises brought by applicant in the Free State High Court in Bloemfontein under case number 2746/2010. In this application reliance was placed by applicant on a purported purchase of the members shares by Owles at an earlier public auction of the property in or about March of 2010. The court dismissed this application on the 5^th August 2010. Subsequent to this litigation the trust was formed and purchased the member’s interest in the property at a public auction on 17 September 2010.

[9] In his answering affidavit in the present matter respondent states that the trust is in no way independent of Owles and was created as a front to circumvent the order of the Free State High Court under case number 2746/2010. “The whole application is mala fide and structured to deprive me of a business that I built up with my work and capital.”

[10] Applicant denied that any circumvention of a court order had taken place. It stated that respondent was also entitled to bid at the auction, and the trust is a properly constituted legal entity in terms of the applicable legislation, that had made the highest bid. It averred that the purchase of the Applicant’s sole member’s interest by a trust where Owles is a beneficiary is a perfectly lawful, and legitimate transaction.

[11] On the face of it, the trust whose beneficiaries are Owles, his spouse and legal descendants is a legitimate purchaser of the shares with a separate legal identity from its beneficiaries. Respondent, however, suggested that there was uncertainty as to whether this arrangement could have led to the fulfilment of clause 14.2 of the sale agreement, being in essence a subterfuge by Owles to terminate the respondent’s right of possession in terms of the contract. This issue, it was argued, would need to be resolved by oral evidence, suggesting that there are more facts that need to be ventilated before this issue can be determined. This argument suggests that the issue is therefore not simply a question of law which can be determined based on the facts at hand in the application.

[12] As stated in Wightman t/a JW Construction versus Headfour (Pty) Ltd and another¹

“Recognizing that the truth almost always lies beyond mere linguistic determination the courts have said that an applicant who seeks final relief on motion must in the event of conflict accept the version set up by his opponent unless the latter's allegations are in the opinion of the court not such as to raise a real, genuine or bona fides dispute of fact or are so far-fetched or clearly an tenable that the court is justified in rejecting them merely on the papers: Plascon-Evans Paints Ltd v Van Riebeek Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 A at 634 E – 635C.

A real, genuine and bona fide dispute of fact can only exist where the court is satisfied that the party who purports to raise the dispute has in his affidavit seriously and unambiguously addressed the facts stated to be disputed. There will of course be instances where a bare denial meets the requirement because there is no other way open to the disputing party and nothing more can therefore be expected of him. But even that may not be sufficient if the fact averred lies purely within the knowledge of the averring party and no basis is laid for disputing the veracity or accuracy of the averment….

There is thus a serious duty imposed upon the legal advisor who settles the answering affidavit to ascertain and engage with facts which his client disputes and to reflect such disputes fully and accurately in the answering affidavit. If that does not happen it should come as no surprise that the court takes a robust view of the matter.”

[13] The respondent’s challenge to the sale to the trust is little more than a bare denial of the legitimacy of the transaction and does not create a real and genuine dispute of fact. The respondent intimates that more evidence needs to be led so that the issue in dispute can be determined, but does not indicate what it envisages this evidence would comprise of.

[14] In fact on the face of it, and without the suggestion of what that further evidence might be, the issue appears to be a question of law, namely whether the trust legally is entitled to bid for the applicant’s member’s interests if one of its beneficiaries is also the sole shareholder in the applicant. In terms of the test set out in Wightman the respondent has provided insufficient basis to enable the court seriously and unambiguously to address the facts stated to be disputed. As a result it has failed to demonstrate that there is a real dispute of fact in this issue in the application.

[15] The second ground on which the respondent alleges there is a dispute of fact relating to the fulfilment of contract terms concerns the suspensive condition in the agreement. The respondent claims that the suspensive condition was fulfilled and it was his intention to assert his rights in terms of the agreement, as the agreement had not lapsed. However in his particulars of claim under case number 2470/2010 the respondent stated that the suspensive condition had not been fulfilled and the agreement had indeed lapsed. The cause of action under the case number 2470/2010 and amount claimed therein was confirmed by him under oath in an application for summary judgment in that matter. The Respondent referred to this action, which was instituted prior to the present application, in his answering affidavit by way of background.

The particulars state:

“die ooreenkoms was onderhewig aan ‘n opgeskorte voorwaarde, welke voorwaarde nie vervul is nie en het die ooreenkoms uitgelsuit klosule 14.2 and 14.3 derhalwe verval”

The contrary averment in the Respondent’s answering affidavit, which states that the suspensive condition was fulfilled, is without any explanation, and therefore untenable.

I therefore conclude based hereon that the assertion by Respondent that there is a dispute of fact regarding the fulfilment of contract terms is without foundation.

The lien

[16] Respondent argued that he is currently occupying the property on the basis that he has a lien arising out of reasonable and necessary improvements effected thereto in the amount of R827 237, 90 and that he is entitled to run the hotel business in order to limit damage thereto.

Applicant argued that the lien was an improvement lien which had not been exactly computed by respondent and was therefore unenforceable. Secondly that the amount claimed in respect of this lien is also being claimed as moneys loaned and advanced to Applicant in the action under case number 4760/2010, and is therefore unenforceable as an improvement lien. Applicant states that it is the respondent’s case in that action, that it was a tacit term of the agreement that if the suspensive condition was not fulfilled he would be entitled to the repayment of that loan.

[17] The essential requirements of an improvement lien over a buiding site were set out in MMAC Access Scaffolding CC v Xstrata South Africa (Pty)Ltd 2010 JDR 1052 (GNP) as follows:

“The lawful possession of the site; that the expenses were useful for the site’s improvement; the actual expenses and the extent of the enrichment of the respondent – both have to be given because the lien covers only the lesser of the two amounts; that the respondent’s enrichment is justified; and that there was no contractual arrangement between the parties in respect of the expenses. See Buzzard Electrical (Pty) Ltd v 158 Jan Smuts Avenue Investments (Pty) Ltd 1996(4) SA 19 SCA.

[18] It was common cause between the parties that the right of retention could only be exercised in regard to moveable or immoveable property. Applicant argued that the respondent was refusing to hand over a business which is neither. It claimed that the assertion of the lien was mala fide in that respondent had indicated that he was entitled to remain in possession because he had “built the business with own capital and labour” and this was not any legally sustainable basis.

[19] Respondent claimed that he had spent R827 237.90 on reasonable and necessary improvements to the applicant’s property entitling him to retain possession of it until he was compensated for these expenses. He substantiated this claim using a letter from applicant’s auditors dated 2 August 2010 which stated that in the financial year 2009 improvements were made to the applicant’s fixed property in the amount of R280 154, and in 2010 in the amount of R547 084. He stated that the amounts reflected in this letter were computed by the auditors using information supplied by him and included invoices from himself and his wife. Applicant disputed that the auditor’s report was proof of moneys spent on improvements to the properties, as it stated that auditors do not vouch for the accuracy of information supplied to them. It also disputed that the auditors report reflected a precise amount spent by respondent on improvements, given that the figure computed included expenses claimed by respondent’s wife.

[20] The covering letter of the auditors report which reflects the total figures for improvements effected does not state who effected the improvements. As such it does not provide any proof that respondent made improvements totalling the amount of R827 237.90. Given the fact that the auditor’s computation included amounts from five invoices for “building additions” from respondent’s wife, it is not possible to conclude from this document that respondent incurred actual expenses of R827 237.90 on improvements as he claims.

Accordingly the respondent has failed to prove his actual expenses on reasonable and necessary improvements in the amount averred and therefore that he is entitled to retain possession arising out of an improvement lien. The court was also not placed in a position to substitute this amount with any other, precisely computed amount spent on improvements.

[21] Even if respondent was able to prove the right of retention in respect of an improvement lien, the general principle is that he would not be entitled in the absence of an agreement to use the asset for his own benefit (see Rekdurum (Pty Ltd v Weider Gym Athlone Health and Fitness Centre²). As regards any contractual basis for continuing to run the hotel business, this ceased when the property was sold by public auction to the trust on 17 September 2010. Any further use of the assets for personal benefit after that date was unlawful.

[22] The respondent justifies his continued possession of the business on the basis of wanting to prevent damage to the business, for his own benefit but also for the benefit of the applicant. He could have bought the property on the public auction but did not do so. After 17 September he had no right to be in possession of the property and any claim that he was justified in doing so in order to prevent damage to the business cannot be sustained. In any event any such claim is negated by the fact that he is keeping the profits of the business, and claiming for expenses that he has incurred in running it. There is no benefit to the applicant in this conduct. The respondent is not entitled to a lien over the business, it being neither a moveable or immovable asset. The justification for continued possession in order to prevent harm to the applicant must therefore also fail.

[23] The applicant is the lawful owner of the property. The respondent has failed to discharge the onus of proving that its possession of the applicant’s property, and utilisation thereof for own benefit is lawful. There are no bona fide disputes of fact which would disentitle the applicant to final relief on these papers. The applicant is thus entitled to the relief it seeks in the notice of motion herein.

[24] It is ordered that

a) respondent be ejected from the erfs 109, 110, 111,112,113 and 114 each being approximately 536 m2 and held under title deed T36963/2002 by applicant and hereafter referred to as “the property”,

b) respondent be ejected from the hotel business that is being conducted from the property trading as Rhodes Hotel (hereafter referred to as “the business”);

b) that respondent hand the said business to applicant;

c) that the sheriff of this court be empowered and ordered to eject the respondent from the said premises and business after four weeks after the handing down of this order;

d) that the respondent be ordered to pay the costs herein on a party and party scale.

_________________

A ANDREWS

ACTING JUDGE OF THE HIGH COURT

DATE HEARD : 24 FEBRUARY 2011

DATE DELIVERED : 3 MARCH 2011

For the Plaintiff : ADV SNELLERBURG

Instructed by : MESSRS NEVILLE BORMAN & BOTHA

22 HILL STREET

GRAHAMSTOWN

For the Defendant : ADV SCHOEMAN

Instructed by : NETTELTONS

118A HIGH STREET

GRAHAMSTOWN

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