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Ronlou Property Development

13 October 2005

Division: High Court (Cape of Good Hope Provincial Division)
Reported as: Ronlou Property Development (Edms) Bpk v Lotter Frank Lackay, Estelle Lackay & Nimro 132 (Edms) Bpk
Case No: 1443/2005
Date of delivery: 5 July 2005
Coram: Erasmus, J

Summary
The applicant bought the property of the first and second respondent in terms of a contract of sale. The property was bought for subdivision in smaller residential properties. The applicant failed to pay the necessary amount as was stipulated in the contract and also did not provide the necessary guarantees on request. The respondents cancelled the contract due to the applicant's alleged non-performance.

Applicant averred that in terms of the contract no date was determined upon which the guarantee had to be given, and that it could therefore only be asked for when the transferring attorney was ready to lodge the relevant documents at the deeds office. Therefore the applicants were not entitled to ask for the guarantees when they did.

The respondents questioned this principle, maintaining the applicable principle is that a guarantee can be asked for as soon as the seller is in a position to immediately take the necessary steps to effect the transfer. And this was the case here according to them. In addition, the respondents claimed that a date had been agreed upon anyway, and with its passing the failure of the applicant to provide the necessary guarantee placed him in mora.

In a subsequent addendum, the onus of transferring the property as quickly as possible was placed on the buyer, after which the payment would then be effected. The guarantee according to the respondents, therefore, was not necessary to guarantee that the payment and delivery of the property would happen pari passu, but merely to guarantee that the buyer was able to pay the remainder of the selling price.

It is worth reproducing the following extract from the case in which the common law rule is discussed:

'Die gemeenregtelik reël
Die beginsel of reël waarop die applikant steun word soos volg saamgevat in Wilson v Spitze 1989 (3) SA 136 (A) op 142F-143B:
[I]t is a well-established rule of our law that where a contract of sale of land provides for cash to be paid against transfer, so that the merx ought in theory to be delivered pari passu with payment of the purchase price, the practical expedient is resorted to whereby the buyer fulfils his obligations by furnishing the seller with a suitable guarantee that the purchase price will be paid on registration of transfer of the property into his name. The expedient is adopted since, under our system of land registration, it is virtually impossible in practice for payment and transfer to take place pari passu, as an interval must necessarily elapse between the time the transfer documents are lodged in the Deeds Office and the moment of registration, and the buyer cannot know beforehand when to be in attendance with his money. The reason for permitting the buyer to adopt the said expedient is to protect the financial interest of both parties and to overcome their possible mutual distrust or uncertainty that if the one performs the other may be unable or unwilling to perform (per Trollip JA in AA Farm Sales (Pty) Ltd (t/a AA Farms) v Kirkaldy 1980 (1) SA 13 (A) at 17B-C). In a case such as the present, where no time is fixed in the contract for payment or transfer, the date upon which the buyer is obliged to furnish a transfer guarantee, according to the rule enunciated above, depends upon the date on which the seller will be able to lodge the documents required for transfer in the Deeds Office. I will return to this aspect later. The parties are, however, free to stipulate that the buyer should give a guarantee before transfer and irrespective of whether the seller is ready and able to lodge the transfer documents with the Registrar of Deeds. Such a provision places an additional burden on the buyer and requires clear language (Wehr v Botha NO 1965 (3) SA 46 (A) at 60F -H).

Oor die tydstip waarop die waarborg verskaf moet word waar die tydstip nie by ooreenkoms vasgestel is nie, word die volgende gesê in Hammer v Klein and Another 1951 (2) SA 101 (A) op 105G-106C:
It is common cause that in the present case payment was to be effected by a banker's guarantee, but no time was fixed within which such guarantee had to be provided by the plaintiffs. In such a case the date on which the buyer is obliged to provide a banker's guarantee depends upon the date on which the seller will be able to lodge the documents required for transfer with the Registrar of Deeds. The seller does not require the bank's guarantee until he is ready to lodge. The risk that he might lose his dominium in the property sold before he has received the purchase price does not arise until the documents required for transfer are on the point of being lodged with the Registrar of Deeds. It follows that the seller is not entitled to demand that the buyer should provide a banker's guarantee on a date earlier than that on which the seller proposes to lodge with the Registrar of Deeds the documents required for transfer. And if he does make such a demand, the buyer is entitled to ignore it without running any risk of being placed in mora. The buyer duly informs his obligation if he tenders the banker's guarantee at any time before the seller actually lodges the documents required for transfer with the Registrar of Deeds. The buyer cannot know when the seller will be ready to lodge, and there is therefore a duty on the seller, who demands a banker's guarantee, to inform the buyer when he proposes to lodge in order that the buyer may know when he must provide the banker's guarantee.

Hierdie beginsel of reël word in 'n belangrike opsig gekwalifiseer in Linton v Corser 1952 (3) SA 685 (A). Met verwysing na die stelling in Hammer v Klein and Another, supra, dat daar 'n verpligting rus op 'n verkoper wat 'n waarborg aanvra om die koper in the lig "when he proposes to lodge", sê Centlivres HR op 694B-D:
I do not understand by the words "when he proposes to lodge" that the Court intended to lay down that there is a duty on the seller to inform the buyer of the exact date when he proposes to lodge. It seems to me that if the seller informs the purchaser that he will, without any delay after receiving the required guarantee, lodge the necessary documents in the Dees Office, it will be a sufficient compliance with the rule laid down by this Court. And in my opinion this Court never intended to lay down a stereotyped form of demand for a guarantee. The rule is sufficiently complied with if it is obvious (as it was in the present case) to the purchaser on the receipt of the demand that the seller is in a position to take immediate steps to give transfer, and will do so, as soon as he is furnished with a satisfactory guarantee.

Hierdie kwalifikasie van die beginsel word uitdruklik onderskryf deur Williamson AR in Wehr v Botha NO 1965 (3) SA 46 (A) op 61D-F. Die kwalifikasie van die beginsel is in hierdie Hof gevolg in Wilson v Spitze 1987 (4) SA 118 (C) op 142D-G.

Daar is dus genoegsame nakoming van die reël as dit aan die koper duidelik by ontvangs van die aanvraag vir die waarborg blyk dat die verkoper in die posisie is om onmiddelik stappe te doen om oordrag te bewerkstelling, en dat hy dit sal doen sodra 'n bevredigende waarborg verskaf is.

Die gemeenregtelike reël het toepassing gevind in, onder andere, Hofmeyr NO v Brunofarms (Pty) Ltd 1955 (2) PH A42 (C); Wehr v Botha NO, supra, op 60E-61C; Wilson v Spitze 1987 (4) SA 118 (C) op 118C; Wilson v Spitze 1989 (3) SA 136 (A) op 142J-143A en 143I-144C; Holtzhausen and Another v Gore NO and Others 2002 (2) SA 141 (C) op 152A-155E.

Die beginsel moet natuurlik toepassing vind binne die raamwerk van die besondere omstandighede van elke geval - soos Van den Heever R dit stel in Wilson v Spitze 1989 (3) SA 136 (A) op 142G, "[a] great deal depends on what the parties intended or on the circumstances of each case". In Wehr v Botha NO, supra, op 61F word gesê dat "[i]t remains to examine the position in the present case in the light of these considerations".'

Erasmus J found as regards the clause 3 of the addendum, because the applicant had an obligation to take all necessary steps to transfer the property "as quickly as possible" he was under an obligation then to provide the respondents with a guarantee. This he did not do and once the period for giving the guarantee had lapsed, he was in mora and consequently the respondents were justified in cancelling the contract.

Regarding clause 4 of the contract, Erasmus J rejected the contention that respondents were not entitled to ask for the guarantee when they did because the transferring attorney was not ready to lodge the relevant documents at the deeds office, or that the words "binne sewe dae na skriftelike daartoe versoek" were superfluous. In fact they fulfilled the common law requirements in determining that a guarantee for a purchase price could have been asked for at any time and that the buyer had to furnish it within seven days. The respondents were therefore also justified in cancelling the contract under these circumstances.

Full judgment

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