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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE HIGH COURT OF SOUTH AFRICA

WESTERN CAPE DIVISION, CAPE TOWN

REPORTABLE

CASE NO: 3991/19

In the matter between:

D E                                                                                                                                  First Applicant

A E                                                                                                                             Second Applicant

and

C E                                                                                                                              First Respondent

M E                                                                                                                         Second Respondent

CONFIDENT INTERNATIONAL CC                                                                  Third Respondent

(Registration No. 1993/004852/23)

THE COMPANIES AND INTELLECTUAL PROPERTY

COMMISSION                                                                                                      Fourth Respondent

Coram: P.A.L.Gamble, J

Date of Hearing: 26 August 2019

Date of Judgment: 10 October 2019

 

JUDGMENT DELIVERED ON THURSDAY 10 OCTOBER 2019

 

GAMBLE, J:

INTRODUCTION

[1] The subject of this litigation is a residential dwelling located at […] Road, West Beach in Table View (“the property”)[1]. Since about 2004, ownership of the property has at all material times vested in the third respondent (“the CC”). The CC was registered in 1993 with initially just the second applicant, Mr. A E, as the sole member. In January 2004 the membership of the CC was restructured so that the first applicant, Ms. D E, then held 40% of the members’ interest, the second applicant (her husband) 40% and the first respondent, their son, (“C”) 20%. For the sake of convenience, I will refer, where appropriate to the applicants collectively as “the parents”.

[2] In July 2016 the parents decided to give complete control of the CC to C in order that he might acquire exclusive beneficial ownership and use of the property. At that time C was living in the property with his wife, the second respondent (“M”), to whom he was married in 2013. Accordingly, the parents concluded a written document entitled “Agreement of Sale” (“the contract”) with C on 17 July 2016. The parents hold the view that in terms of the contract they sold the property to C for R2,1m. This allegation is the crux of this application. In any event, as of 15 August 2016 the records of the fourth respondent (“the CIPC”) reflect C as holding the entire members’ interest in the CC.

[3] Prior to their marriage C and M concluded an antenuptial contract (“ANC”) on 30 January 2013. In terms thereof they were married out of community of property with application of the accrual system. The declared value of each spouse’s estate at the commencement of the marriage was recorded as nil. The ANC also has the customary provision for a claim in favour of the spouse whose estate has shown a smaller accrual than the other’s at the dissolution of the marriage for payment of half of the difference between the respective accruals.

[4] In clause 5(b) of the ANC there is a provision which is a little out of the ordinary.

“5. The said intended spouses agree that:

(a)….

(b) at the dissolution of their marriage and in the event of them having acquired a communal dwelling during their marriage, M… shall be entitled to reside unencumbered in such dwelling together with her children, until all her children will have reached the age of majority…”

The papers reveal that M has a child with C as well as a child from a prior relationship.

[5] In May 2017 C transferred 50% of the members’ interest in the CC to M and she says in her answering affidavit in these proceedings that this was a donation intended to represent their “joint ownership of the house and its contents.” After referring to clause 5(b) of the ANC, M goes on to allege that C’s transfer to her of half of the members’ interest in the CC “was motivated by...[C’s]… perceived moral duty to provide a home and security for me… and my children at the dissolution of our marriage.” This allegation is not challenged by either the parents or C in the papers.

[6] In the latter part of 2017 the marriage between C and M fell apart and soon their relationship became acrimonious. On 17 October 2017 the erstwhile attorneys acting for the parents (Jurgens Bekker Attorneys of Bedfordview in Gauteng) wrote an urgent letter of demand to both C and M advising that C had breached the contract with his parents by, inter alia, failing to pay the purchase price in full and, further, by registering a mortgage bond over the property in favour of a financial institution in the amount of R1,4m in November 2017. This was said to be in breach of the provisions of the contract which, allegedly, expressly precluded the latter.[2]

[7] Having cited these alleged breaches, the letter continues as follows.

“6. We bring it to your attention that your actions are not only in breach of the agreement but also unlawful and contra bones mores (sic) and our clients are entitled to enforce the breach clause contained within the agreement.

7. In light of the above, the amount of R2 060 000.00 (two million and sixty thousand rand (sic)) remains due, owing and payable to our clients in respect of the purchase price for our clients (sic) membership in the CC.

8. Accordingly, we have been instructed to demand from you, as we hereby do, payment of the amount of R2 060 000.00... plus interest at the prescribed rate of 10.5% due by yourselves in respect of the aforesaid by no later than 30^th of November 2017.”

DIVORCE AND RELATED PROCEEDINGS

[8] On 1 November 2017 C initiated divorce proceedings against M out of this court, which proceedings M opposed and which remain unresolved. That step was accompanied by a concerted effort to evict M and the children from the property. Not only did C and his mother physically remove them from the premises and change the locks and burglar alarm code during November 2017, there was constant pressure from Jurgens Bekker aimed at securing return of M’s 50% member’s interest in the CC and the relinquishment of her occupation of the property. M’s occupation of the property was swiftly restored after this court granted an urgent spoliation order on 4 December 2017, while in mid- 2017 a domestic violence interdict was granted against C precluding him from entering upon the property.

[9] M’s response to the aforesaid demand from Jurgens Bekker was that she was not a party to the contract with the parents, that she was not in breach thereof and that she was accordingly not obliged to return her 50% interest in the CC to the parents.

[10] During 2018 the matter seems to have meandered along fairly aimlessly as Jurgens Bekker (then also acting for C) and M’s attorneys embarked on the customary pre-divorce sparring. Towards the end of 2018 there was a change of legal representation, with the parents being represented by Swanepoel Albasini Attorneys in Boksburg (who continue to represent them in these proceedings) and C instructing Di Siena Attorneys of Sandton. Both firms adopted the common stance that M was required to give up her half share in the CC in favour of the parents while she continued to resist that demand.

INSTITUTION OF THESE PROCEEDINGS

[11] On 11 March 2019 the present application (in the long form) was issued by the parents against C, M, the CC and the CIPC for the following relief.

“1. That the Sale Agreement entered into between the [parents] and [C] dated 17^th of July 2016 and whereby the property described as Erf 22365 Milnerton… was sold to [C], be and is hereby avoided (sic) and set aside, alternatively, declaring that the aforesaid agreement has been cancelled as at 17 November 2018, alternatively, 30 November 2018, further alternatively, confirming the cancellation of the aforesaid agreement;

2. An Order declaring the alleged donation of [C’s] purported 50% member’s interest in the [CC] to [M], as invalid and void, alternatively, that the aforesaid purported donation be terminated and set aside;

3. That the register of members held by the [CC] as well as the records and register of members held by the [CIPC]… be rectified... [so as to reflect the parents] as each holding a 40% membership interest in the [CC] and [C] as being the holder of a 20% interest [therein]…;

4. That the [CC] and [CIPC] be… authorised… to amend their records and registers to delete and cancel the purported donation of a 50% members interest to [M], and the inscriptions reflecting [C] as holding a 50% members interest in the [CC], in order to reflect [the parents] as each holding a 40% membership interest in the [CC] and [C] as a member holding a 20% membership interest in the [CC];

5. That [C] and [M] be ordered to sign all documents and to do all things reasonably required of them in order to effect the re-registration [of the amended members’ interests as aforesaid]…;

6. [Authorising the Sheriff to sign all documents and do all things necessary in the event that either C or M fail to do so];

7. That [the parents] be ordered to repay to [C] the amount of R40 000.00 as against [C and Maegan] complying with the Orders granted and more fully referred to in prayers 2 to 6 above, it being the amount paid by [C] pursuant to the conclusion of the written agreement dated 17 July 2016;

8. That the costs of this application be paid by such party/parties who oppose(s) the relief herein claimed;

9. … (A)lternative relief…”

[12] M opposed the relief sought against her while C filed a confirmatory affidavit in his parents’ application confirming the contents of the founding affidavit where these referred to him. C does not oppose the relief sought by his parents. At the hearing of this application, the parents were represented by Advs.G.Meyer and C.J.Cmith from the Johannesburg Bar while M was represented by Adv.A.J.van Aswegen from the local Bar. The Court is indebted to counsel for their helpful heads of argument and their submissions in Court.

THE APPROACH TO INTERPRETING THE CONTRACT RELIED UPON BY THE PARENTS

[13] In argument Mr. Meyer submitted that the contract was one for the sale of land and that it was void for want of compliance with the provisions of the Alienation of Land Act, 68 of 1981, while Mr. van Aswegen argued that the contract was for the transfer of the members’ interest in the CC and that it was valid concluded as such. It therefore becomes necessary to examine the contract in some closer detail to examine its true purpose and hence its nature.

[14] In KPMG[3] Harms DP reassessed the approach of the appellate court to the interpretation of written instruments and observed, with reference to the earlier approach in seeking to draw a distinction between the concepts, that

“(t)he time has arrived for us to accept that there is no merit in trying to distinguish between ‘background circumstances’ and ‘surrounding circumstances’. The distinction is artificial and, in addition, both terms are vague and confusing. Consequently, everything tends to be admitted. The terms ‘context’ or ‘factual matrix’ should suffice.

[15] In Novartis[4] that court (per Lewis JA) considered, inter alia, KPMG and its subsequent judgment in Endumeni[5] and commented as follows.

“[27] I do not understand these judgements to mean that interpretation is a process that takes into account only the objective meaning of the words (if that is ascertainable), and does not have regard to the contract as a whole or the circumstances in which it was entered into. This court has consistently held, for many decades, that the interpretative process is one of ascertaining the intention of the parties - what they meant to achieve. And in doing that, the court must consider all the circumstances surrounding the contract to determine what the intention was in concluding it. KPMG, in the passage cited, explains that parol evidence is inadmissible to modify, vary or add to the written terms of the agreement, and that it is the role of the court, and not witnesses, to interpret a document. It adds, importantly, that there is no real distinction between background circumstances and surrounding circumstances, and that the court should always consider the factual matrix in which the contract is concluded - the context - to determine the parties’ intention.

[28] The passage cited from the judgment of Wallis JA in Endumeni summarises the state of the law as it was in 2012. This court did not change the law, and it certainly did not introduce an objective approach in the sense argued by Novartis which was to have regard only to the words on the paper… A court must examine all the facts - the context - in order to determine what the parties intended. And it must do that whether or not the words of the contract are ambiguous or lack clarity. Words without context mean nothing…

[31]… A further principle to be applied in a case such as this is that a commercial document executed by the parties with the intention that it should have commercial operation should not likely be held unenforceable because the parties have not expressed themselves as clearly as they might have done. In this regard and see Murray and Roberts Construction Ltd v Finat Properties (Pty) Ltd 1991 (1) SA 508 (A) …at 514B-F where Hoexter JA repeated the dictum of Lord Wright in Hillas & Co. Ltd v Arcos Ltd [1932] UKHL 2; 147 LTR 503 at 514:

‘Businessmen often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the Court to construe such documents fairly and broadly, without being too astute or subtle in finding defects.’ “

[16] Lastly, it must be noted that in his earlier judgment in Telcordia[6] Harms JA (as he then was) confirmed that evidence regarding the subsequent conduct of the parties was admissible as part of the court’s process of interpretation. More recently, in G4S[7], Fourie AJA, following Novartis, remarked that

“(T)his court has consistently held that the interpretative process is one of ascertaining the intention of the parties…To this end the court has to examine all the circumstances surrounding the conclusion of the agreements, i.e. the factual matrix or context, including any relevant subsequent conduct of the parties.”

 

CONSIDERING THE CONTRACT

[17] I turn then to an analysis of the contract itself which is headed “AGREEMENT OF SALE”. After reciting the personal details of the parents, who are described as “the Seller” of “CONFIDENT INTERNATIONAL CC” and C, who is described as “the Purchaser”, the contract contains the following clauses which I consider to be relevant.

“1. SALE

1.1 Subject to the terms and conditions contained in this agreement the Seller agrees to sell to the Purchasers (sic), who agree to purchase, the immovable property Erf 22365 Milnerton and commonly known as 57 Richmond Road, West Beach, Cape Town, together with all improvements thereon (‘the Property’), voetstoots, that is in the condition in which it stands at the date of this agreement and subject to all conditions and servitudes contained or referred to in the current and/or prior title deeds to the Property together with all visible and non-visible defects in the Property known to the Seller at the time of conclusion of this agreement.

1.2 The Property is sold together with all fixtures and fittings and the entire contents thereof.

1.3 The Seller warrants that the building plans have been approved by the local authority, where required by such authority, in respect of all the improvements on the Property alternatively shall procure such approvals prior to transfer and at his cost. If requested by the Purchasers (sic), the Seller shall furnish them with copies of such plans at the Seller’s cost.

2. PURCHASE PRICE and PAYMENT

2.1 The purchase price of the Property shall be the sum of R2 100 000.00 (two million rand one hundred thousand).

2.2 The purchase price shall be payable in monthly instalments of not less than R10 000.00 (ten thousand rand) per month. The first instalment shall be paid on the first day of the month following the month during which transfer of ownership of the CC to the Purchasers (sic) is registered and thereafter on or before the first day of each succeeding month.

2.3 The purchase price shall not attract interest.

2.4 It is recorded that C… holds 20% of the members’ interest in the Seller. It is also recorded that the other 2 members, [Mr. and Ms.] E, are his parents and they hold the remaining 80%.

3. TRANSFER

3.1 The transfer of the shares will be at the cost of purchaser (sic).

3.2 The sellers both own 40% each and they will transfer the shares to the purchaser who will then own 100% of the CC.

4. POSSESSION AND OCCUPATION

4.1 om the date of registration of transfer all profit, loss, risk and expense in the Property shall pass to the Purchasers (sic).

4.2 It is recorded that the Purchasers (sic) are in occupation of the property and they agree and undertake to maintain the Property in the (sic) good order and condition.

5. SECURITY

The Purchasers (sic) agree and undertake to perform all necessary acts to cause a first mortgage bond in favour of the Seller to be registered over the Property securing payment of the full purchase price simultaneously with transfer of the Property to the Purchasers (sic).”

[18] The agreement goes on to stipulate in clause 6 that the parents are obliged to deliver “to the conveyancers” electrical and plumbing certificates so as to ensure compliance with national regulations. Clause 8 grants jurisdiction to the Magistrates’ Court “for the district in which the Property is situated” to hear any disputes in connection with the agreement but further notes that the jurisdiction of the High Court is not excluded.

[19] The breach clause in the contract reads as follows.

“7. BREACH

7.1 Should either party commit any breach of this agreement and fail to rectify the same within ten (10) days of receipt of written demand calling upon it to do so, then the aggrieved party shall be entitled, without prejudice to any of its or their rights, to:

7.1.1 to (sic) claim immediate specific performance of all the other party’s obligations in terms of this agreement; or

7.1.2 to (sic) cancel this agreement by written notice.”

[20] Clause 9 is entitled “GENERAL” and deals with the usual incidentals to a written agreement, including domicilia and the requirements for the giving of any notices. It further contains a sole memorial clause and a non-variation provision.

“9.3 This agreement constitutes the entire agreement between the parties. They acknowledge that no other conditions, warranties or representations have been made by the parties and/or their agents except as are included in this agreement.

9.4 Any amendments to this agreement or any consensual cancellation here of shall be of no force and effect unless reduced in (sic) writing and signed by the parties.”

[21] Clause 9.5 provides for joint and several liability on the part of the “Purchasers” (sic) while clause 9.6 records an acknowledgement that the parties were free to seek independent legal advice. Finally, clause 10 records that there is no commission payable on the sale “as no estate agency was involved” therein. The agreement is dated 17 July 2016 and bears only the signature of C as purchaser, while at the conclusion of the document there is the following typed insertion which is not counter-signed.

“NB. IN THE EVENT OF THE DEMISE OF EITHER SELLER PAYMENTS MUST BE MADE TO THE SURVIVOUR (sic)”

[22] On the face of it the parties seem to have utilised a pro forma document ordinarily intended to cover the sale of immovable property. When asked to speculate as to its origin (it being manifestly not something that a qualified lawyer would have drafted) Mr. Meyer speculated that the agreement may have been drawn off the Internet. In any event, the agreement suggests that the parents wanted C to have beneficial ownership and the exclusive control over the house which he and M admittedly occupied at the time. To do so the parents had 2 obvious choices – either transfer their respective member’s interest in the CC to C or retain their membership in the CC and sell the property out of the CC to C.

[23] Considering the document as a whole, and particularly in the context of its origin, I am of the view that the parents intended to pursue the first option. I consider the following aspects of the agreement to be indicative of that choice.

· Firstly, in terms of clause 2.2, the commencement of payment of the purchase price is linked to the first day of the month following transfer of the ownership of the CC to C.

· Secondly, under clause 3.2 the parents undertake to transfer their collective members’ interest of 80% to C.

· Thirdly, there is no provision in the agreement for the transfer of the property (as such) to C.

· Fourthly, there is no provision for the appointment of conveyancing attorneys nor a stipulation as to who would pay the costs associated with the transfer of the property.

· Finally, there is no provision for the payment of outstanding rates and taxes (and any other applicable municipal levies) in respect of the property prior to transfer thereof.

[24] Turning to the parties’ conduct subsequent to the conclusion of the agreement, one finds, firstly, that the parents transferred their respective member’s interest in the CC to C on 15 August 2016, just about a month after concluding the agreement of sale. To date hereof, the property remains registered in the name of the CC.

[25] Thereafter, C paid 4 instalments (i.e. R40 000) under the agreement to his parents before defaulting in December 2016. When the parents eventually decided to put C in mora nearly a year later (in terms of Jurgens Bekker’s letter of 17 October 2017 referred to above), and after they had become aware of the breakdown of his marriage to M, they demanded specific performance by way of payment of the outstanding balance, alternatively, return of their respective member’s interests.

[26] Importantly, after the appointment of Swanepoel Albasini as their attorneys, the parents’ position did not change. On 30 November 2018 this firm wrote to C informing him of the cancellation of the agreement with his parents due to his breach thereof viz. the failure to make any further monthly payments after December 2016 and the failure to comply with clause 5 thereof and register a bond in favour of his parents. The demand made of C in that letter was as follows.

“5. We hereby demand that you complete and sign the necessary CK documents and/or any other required documentation in order to transfer the 80% members interest back to our Clients which you had acquired in accordance with the agreement with our Clients within 14 (FOURTEEN) days from date hereof and furnish ourselves with the original duly signed documentation within the aforesaid time period.”

Nothing could be clearer. The parents had sold C the CC (not the house which it owned) and they wanted their corporation back. And, as can be seen above, that is precisely what they demanded in their notice of motion – return of their members’ interests.

[27] Finally, there is C’s affidavit in an application lodged in this Court for the winding up of the CC in which he says in terms that he entered into an agreement with his parents for the sale of their 80% members’ interest to him[8]. Indeed, such an arrangement would have made good commercial sense to the parties: the parents would enable their son to acquire effective control of the property without having to incur unnecessary expenses such as transfer costs, transfer duty and the like.

[28] In the result I conclude that the probabilities are overwhelmingly in favour of an interpretation that the agreement was intended to be a transfer of the parents’ members’ interest in the CC to C. That being so, the Alienation of Land Act does not apply and the agreement is valid and binding as between the parents and C.

THE CONSEQUENCES OF CANCELLATION OF THE AGREEMENT

[29] It is common cause that Swanepoel Albasini validly cancelled the agreement on behalf of the parents on 30 November 2018. In the result the parents are entitled to claim from C that which they have performed in terms of the agreement, as well as any damages that they may have suffered as a consequence of his breach. They have tendered (as they are obliged to do) to return their performance under the agreement by offering to repay the sum of R40 000 to C. In the result, and subject to what is set out hereunder, the parents are entitled to demand return of their respective member’s interests and that C be directed to sign all documents to give effect to such return[9].

[30] What then of the 50% share of his member’s interest which C transferred to M in May 2017 and which transfer was formally recorded in the records of the CIPC in July 2017? It is common cause that M was not a party to the agreement (the curious and persistent reference to purchasers in the agreement notwithstanding) which has been validly cancelled. Mr. van Aswegen submitted that in any event there was no privity of contract between the parents and M and that they are not entitled to claim rescission as against M in circumstances where she lawfully obtained her rights before the parents cancelled the agreement. Counsel relied on the decision in Toffee[10] in this regard.

[31] In my view the position is akin to the following. A farmer sells a flock of 100 sheep to his neighbour on extended payment terms. Delivery of the flock takes place immediately and ownership is simultaneously transferred to the neighbour. The latter thereafter gives 50 of the sheep to his son before he has fulfilled his payment obligations to the seller. When the neighbour fails to pay the purchase price of the flock in full the seller cancels the agreement and demands return of 100 sheep from the neighbour, while tendering to repay to the neighbour that which he has already received by way of instalments on the sale. The neighbour can only return 50 sheep to the seller and the question that then arises is whether the seller can recover from the neighbour’s son the 50 sheep given to him by his father.

[32] Following the dictum of Maritz J in Toffee the answer to this question must be in the negative.

“Wessels on Contract, Vol.1, sec.141, is to this effect: ‘As we saw, a contract based upon fraud is voidable at the instance of the defrauded party… Thus, if through the fraud of A, I am induced to sell my horse on credit, and to deliver it to him, then, if he in turn sells and delivers the horse to B, who is innocent of the fraud, I cannot recover it from B. The reason is that I keep the contract open at my own risk, and until I elect to declare it void, the contract will support the transfer of movable property by delivery and of the immovable property by registration. The delivery in such a case is based upon justa causa.’

On the strength of these authorities I am of the opinion that, as the first respondent acquired rights in respect of the property before the applicant repudiated, she cannot claim against the Society (first respondent) the relief set out in the rule nisi.”

WAS THE TRANSFER OF MEMBER’S INTEREST TO M VALID?

[33] On this approach, the issue which then falls to be determined is whether M’s acquisition of her 50% members’ interest in the CC is based on a iusta causa. Firstly, I did not understand counsel on either side to argue that there is any formality which requires that the transfer of a member’s interest (or part thereof) need be reduced to writing. Indeed that is not required under the Close Corporations Act, 69 of 1984[11], s33(1)(a) whereof prescribes how a new member might acquire part of the member’s interest.

“33. Acquisition of member’s interest by new member.

(1)  A person becoming a member of a registered corporation shall acquire his member’s interest required for membership-

(a)  from one or more of the existing members or his or their deceased or insolvent estates…”

[34] Be that as it may, from the documents attached to M’s answering affidavit, it appears in any event that she complied with the necessary administrative requirements in acquiring her 50% interest in the CC.

1. On 1 June 2017 C emailed a certain Ms. Lezel van den Berg (apparently an employee of his accountant) giving her the following instruction:

“Please can you prepare the necessary documentation to have 50% of the shares transferred to M E.”

2. On 5 June 2017 Ms. van den Berg emailed C enclosing the necessary documents to be signed and returned to her.

3. Later that day, C returned to Ms. Van den Berg a written resolution of the members of the CC recording that a meeting was held at West Beach on 5 June 2017 at which it was decided that “member changes will be done” so as to decrease C’s “member’s share” to 50% and M was to “be added” as a member. The document was signed by both C and M.

4. Documents issued by the CIPC record that effect was given to C’s instruction forthwith, while a search conducted by the “Windeed” company reporting system shows that the change of membership occurred on 1 July 2017.

[35] The attack by Mr. Meyer on the invalidity of M’s acquisition of membership was based, not on any non-compliance with any relevant statutory provisions but rather on s5 of the General Law Amendment Act, 50 of 1956, (“the GLAA”) the submission being that it was an executory donation which had not been reduced to writing and accordingly fell foul of the provisions of that section. For the purposes of dealing with this submission I shall assume that the transfer by C to M of 50% of his member’s interest was a donation in the true sense (“donatio meru”) in which our law understands the concept, and I shall deal later with the approach to establishing what constitutes such a true donation.

[36] At the outset it should be observed that there is no longer any prohibition on a donation between spouses: the common law was varied to that extent by s22 of the Matrimonial Property Act, 88 of 1984 (“the MPA”). Moreover, in terms of s5 of the MPA, any donation accruing to a spouse during the subsistence of the marriage is excluded from that spouse’s estate for the purposes of accrual calculation at the termination of the marriage.

[37] Prior to the promulgation of the GLAA, the common law provided that any donation, whether executed or not, was revocable to the extent that it exceeded GBP 500 unless it was registered in the deeds office or embodied in a notarial deed[12]. With the passing of the GLAA in June 1956 the position changed when limited formality was stipulated in regard to executory contracts of donation only.

“5. Formalities in respect of donations.

No donation concluded after the commencement of this Act shall be invalid merely by reason of the fact that it is not registered or notarially executed: Provided that no executory contract of donation entered into after the commencement of this Act shall be valid unless the terms thereof are embodied in a written document signed by the donor or by a person acting on his written authority granted by him in the presence of two witnesses.”

The formality for an executory donation is therefore limited only to a written document signed by the donor – no witnesses being required in that event – or a person authorized by the donor in writing, in which event the authority granted by the donor is to be witnessed by two people.

[38] What then is meant by an executory contract of donation? The issue was dealt with in detail by Van Zyl J in the Full Bench decision in this Division in Marx[13] and I shall therefore quote extensively from the judgment.

“[23] It must be borne in mind that a donation made during the lifetime of the donor (donatio mortis causa) becomes contractually and legally binding from the moment the donees accept the donation. It creates rights and obligations just like any other consensual contract as appears from the following definition and elucidation in Joubert (ed) The Law of South Africa [second edition (2005) vol 8 para 301]:

‘A donation is an agreement which has been induced by pure (or disinterested) benevolence or sheer liberality, whereby a person under no legal obligation undertakes to give something… to another person, called the ‘donee’, with the intention of enriching the donee, in return for which the donor receives no consideration nor expects any future advantage.’

[24] The donor’s intention to make a donation (animus donandi) must arise from generosity (liberalitas) or liberality (munificentia) and be expressed as a promise (offer) to donate, which promise (offer) must be accepted by the donee before a binding contract of donation comes into existence. Once this happens the donation is perfected and it may be revoked only under certain circumstances. The resultant contract is not sufficient, however, for purposes of transferring the donated asset into the ownership (dominium) of the donee. Performance of the obligation arising from the donation, in the form of delivery (traditio) of the asset donated, first has to take place, as appears from the following dictum of Jansen JA in Mankowitz v Loewenthal [1982 (3) SA 758 (A) at 765A]:

‘At the outset it must be remembered that a contract of donation and the performance thereof, viz the delivery of the article donated, are two separate juristic acts: the one directed at creating an obligation and the other at transferring possession (and dominium).’

[25] An executory donation is so-called because it still requires to be effected or perfected, in the sense that something is required to be done before it can be regarded as completely performed. [Nezar v Die Meester en Andere 1982 (2) SA 430 (T) at 436E; Savvides v Savvides and Others 1986 (2) SA 325 (T); Stander v Commissioner for Inland Revenue 1997 (3) SA 617 (C) at 622D-E].  In the present case [the Court a quo] held the donation was executory because delivery thereof would take place at some future time, namely when the donor died. As such, it was valid and enforceable in terms of s5 of [the GLAA]…

[26] After suggesting, in his discussion of this section, that the first question is, what qualifies or does not qualify as a donation, Christie [Law of Contract in South Africa 4^th ed (2001) at 141] continued:

‘The second question raised by [s5 of the GLAA] is what is, and what is not, an executory contract of donation. This section obviously requires that a distinction should be drawn… between an accepted promise to donate, giving the promisee a personal right of action against the donor to compel him to fulfil his promise by delivery or the passing of transfer, and a donation completed by the delivery of transfer, which gives the donee a right in rem. The latter, the completed donation, cannot be described as an ‘executory contract of donation’ and therefore falls outside [the ambit of s5 of the GLAA].

[39] In the latest edition of Christie[14], the judgment in Marx is cited with approval. In the same passage, the learned author also refers to the judgment of Botha J (as he then was) in Weiner[15], a case involving the waiver by certain heirs of their rights to inherit under a will drawn by one Nathan Herman, in which the following was said.[16]

“(It) is quite clear that the gist of the agreement was that Julius and the third respondent transferred all their rights under Nathan’s will to Rose. Their rights were to receive from the executor in Nathan’s estate, in due course, the balance of the estate available for distribution. I agree with counsel for the respondents that the family arrangement arrived at was an agreement whereby a cession was effected of the rights of Julius and the third respondent to their inheritances in Nathan’s estate, in favour of Rose. They divested themselves of their rights and Rose acquired those rights from them. Counsel for the applicant did not attack the legality of an agreement of this nature, and I am unable to think of any reason for doubting its validity…No doubt the cession of rights constituted a donation by Julius and the third respondent to Rose, but since a transfer of rights takes place by the mere agreement of cession, this was not an executory donation requiring writing for its validity in terms of the proviso of [s5 of the GLAA]; in any event, the actual delivery of the assets in Nathan’s estate to Rose would have precluded any reliance being placed on the statutory provision mentioned.” (Emphasis added)

[40] Mr. van Aswegen submitted that the transfer of a member’s interest was in fact a cession of rights in respect of the CC and relied on the following passage in Henochsberg[17].

“37.6 Transfer of interest.

It is submitted that a person’s interest in a corporation comprises a conglomeration of rights, i.e. available to such person in his capacity as a member of such corporation. Transfer of his interest can ensue only as between a proposed transferee thereof and himself if he delivers the rights to the former and such delivery can occur only by way of cession. (Johnson v Incorporated General Insurances Ltd 1983 (1) SA 318 (A) at 330-331). And the effective cession of the rights exists if there is an agreement to cede founded on a justa causa (e.g. sale, donation, pledge) (Botha v Fick [1994] ZASCA 184; 1995 (2) SA 750 (A) at 762), unless such agreement renders the cession conditional (e.g. on registration of the requisite amended founding statement…) and such condition has not been fulfilled. It is submitted that the rights are merely evidenced by the certificate of interest (s 31) and accordingly delivery of the certificate by the cedent to the cessionary is not necessary to render the cession effective, but the possession thereof will be important evidence in proceedings, whether between the cedent and the cessionary and another alleged cessionary of the rights, where the cession is disputed (Botha v Fick supra at 778-779). Registration of the amended founding statement is, however, essential effectively to transfer the interest as between the corporation, the transferor and the transferee.”

[41] The documents annexed to the parents’ founding affidavit and M’s answering affidavit, and to which reference has already been made reflect, inter alia -

1. An intention (in the form of the instruction to Ms. van den Berg) by C to transfer 50% of the entire member’s interest held by him to M;

2. M’s written acceptance (qua donee) of that transfer through her signature of the resolution of the members of the CC dated 5 June 2017;

3. M and C’s signatures on the CK2 Form (“Member Amendments”) of 5 June 2017 confirming the restructuring of the membership in the CC; and

4. The endorsement of the restructured member’s interest in the records of the CIPC as contained in the Windeed report dated 6 November 2017.

[42] In the circumstances, it is clear that the cession by C of M’s 50% interest has taken place, that M has accepted the donation to her of the interest in the CC and that there is nothing further which M is required to do to enable her to exercise her rights and interest as 50% member in the CC. The donation by C is accordingly not executory in nature. It follows, in my view, that the provisions of s5 of the GLAA are not applicable to this matter and that M has established a valid iusta causa in the form of a donation inter vivos for ownership of her member’s interest.

REVOCATION OF THE DONATION

[43] The last leg of Mr. Meyer’s argument was that, assuming that the donation was not executory in nature, it was capable of being revoked by C on the grounds of gross ingratitude. This principle is dealt with in detail by the learned authors in the same volume of LAWSA[18] referred to by van Zyl J above in the extract from Marx. Suffice it to say that the authors point out that the following may constitute grounds for revocation:

“(1) the donee physically attacks the donor ;(2) the donee intentionally causes the donor a loss of property; (3) the donee attempts to take the life of the donor; and (4) the donee fails to comply with the conditions stipulated by the donor. The above do not constitute an exhaustive list of the grounds which entitle a donor to resile from the contract due to ingratitude. The donor may demand the return of a gift on any act of ingratitude. The ingratitude must be of a sufficiently serious nature (for example it must have caused the donor considerable financial loss) and must be accompanied by dolus.

[44] But before it can be found that gross ingratitude has been established and that the donation is capable of revocation, it must be clear that the transaction was in fact a donation in the proper sense in which our law understands it: a donation meru. The leading authority on the contract of donation and the right of revocation thereof on the ground of gross ingratitude is Avis[19] in which 4 of the 5 members of the Court delivered judgments. While the dismissal of the appeal was unanimous, the learned Judges of Appeal differed on their findings of fact and the application of the law.

[45] It is not necessary for the purposes of this judgment to embark on a detailed analysis of the judgments. Suffice it to say that the case establishes that a donation meru (referred to by the court as “a pure donation”) must be founded on the sheer liberality or benevolence of the donor to benefit the donee. If the transaction is based upon other considerations (such as a moral obligation or a perceived duty to benefit the donee) it does not constitute a pure donation and is therefore not capable of revocation on the grounds of gross ingratitude.

[46] The judgment of Watermeyer ACJ[20] in Avis the most helpful in setting out the law in this regard. After considering the Roman and Roman Dutch authorities in detail the learned Acting Chief Justice remarked as follows.

“The conclusion to be drawn from these authorities seems to me to be that in Roman Dutch law remuneratory donations are exempted from the restrictive rules governing donations in general by reason of the fact that they are not inspired solely by a disinterested benevolence but, as a rule, made in recognition of, or in recompense for, benefits or services received, and therefore are akin to an exchange or discharge of a moral obligation. Whether or not a donation is remuneratory must, of course, depend principally upon the motive inspiring the gift… The motive for a pure donation - apart from those cases where the donor seeks publicity or personal advancement - is usually sentiment, affection or charity.”

[47] Considering the remark made by M in her answering affidavit to which reference is made in [5] above which is to the effect that, in transferring half of the membership in the CC to her, C was giving effect to a moral obligation sourced in the parties’ ANC to provide M and her children with a roof over their heads, it would appear that one is dealing in this case not with a pure donation but what Watermeyer ACJ termed a “remuneratory donation”. This is accordingly not a pure donation which is capable of being revoked on the basis of gross ingratitude.[21]

[48] In his concurring judgment in Avis Centlivres JA[22] dealt with the issue of the onus of proof in regard to a donation.

“On whom was the onus to show that it was a gift? A gift is never presumed: the intention to donate must be clearly proved… Under our law any promise seriously and deliberately made (subject to certain exceptions which are not relevant to this case) can be sued on… If the defendant wishes to avoid a promise seriously and deliberately made by him, my prima facie view is that the defendant must prove something which will relieve him of the effect of the promise.”

In the context of the present matter, I am of the view that this would include proof of the entitlement to claim revocation of a pure donation on the basis of gross ingratitude.

CONCLUSIONS

[49] I am bound therefore to conclude that it is for C to establish that the transfer of 50% of his member’s interest in the CC to M was a pure donation and, having done so, that grounds exist for the revocation thereof on the basis of gross ingratitude. C is not an applicant in this case and he has filed no separate claim against M alleging either a revocable donation or the basis therefor. Rather, it is the parents, in their quest to recover the full extent of that which they transferred to C, who seek to allege a revocation of the donation to M. Their claim in this regard is however fundamentally flawed. Not only do they not have the locus standi to revoke the donation, they have not established that the transfer of 50% of the member’s interest to M was a pure donation nor have they set out any grounds for the revocation thereof on the basis of gross ingratitude.

[50] In the circumstances the parents cannot succeed with their claims against M: they are limited to the relief which they seek against their son, relief which C has not opposed. In making these findings I must not be understood, however, to conclude that it is not possible for C to seek to allege in separate proceedings that the transfer of the member’s interest to M was a pure donation which is capable of revocation on the basis of gross ingratitude. My finding in this matter is limited to the relief sought against M by the parents.

[51] As far as the issue of costs is concerned, the parents only sought costs against such parties as opposed the application. In resisting the claims made against her by the parents M has been substantially successful and justice and fairness demands that the parents be ordered to pay her costs.

Accordingly an order is granted in the following terms:

A. It is declared that the sale agreement entered into between the applicants and the first respondent dated 17 July 2016 was validly cancelled by the applicants on 30 November 2018.

B. The register of members held by the third respondent as well as the records and register of members held by the fourth respondent reflecting the names and details of the members who hold a member’s interest in the third respondent are to be rectified by the deletion of the current entry in respect of the first respondent holding 50% of such member’s interest and are to be replaced with an entry reflecting the first and second applicants as each holding a 25% membership interest in the third respondent.

C. The second respondent shall retain her 50% member’s interest in the third respondent.

D. The third and fourth respondents are hereby authorised and directed to amend their records and registers accordingly so as to give effect to the relief granted in paragraphs B and C above.

E. The first respondent is ordered to sign all documents and to do all things reasonably required of him in order to effect the re-registration of the first and second applicants’ respective 25% interests in and to the third respondent in accordance with the relief granted in paragraph B above.

F. Should the first respondent fail and/or refuse to sign all documents or do all things reasonably required of him in order to effect the re-registration of the first and second applicants’ respective 25% membership interests in the third respondent, the Sheriff of this court is authorised to sign all documents and to do all things reasonably required in order to give effect to the orders granted and more fully set out above.

G. The applicants are ordered to repay to the first respondent the  amount of R40 000.00 (Forty Thousand Rand) as against the first respondent complying with the orders granted above, it being the amount paid by the first respondent pursuant to the conclusion of the aforesaid sale agreement dated 17 July 2016.

H. The applicants are ordered, jointly and severally, to pay the second respondent’s costs in this application.

I. Save as aforesaid, the applicants’ application is refused.

 

 

__________________

GAMBLE, J

 

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