Auby and Pastellides (Pty) Ltd v Glen Anil Investments (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Schreiner JA, Hoexter JA, Beyers JA, Ogilvie Thompson JA and Botha AJA
• Judgment Date: 30 September 1960
• Hearing Date: 13 September 1960
• Court: Appellate Division

Auby and Pastellides (Pty) Ltd v Glen Anil Investments (Pty) Ltd
1960 (4) SA 865 (A)

1960 (4) SA p865

Citation	1960 (4) SA 865 (A)
Court	Appellate Division
Judge	Schreiner JA, Hoexter JA, Beyers JA, Ogilvie Thompson JA and Botha AJA
Heard	September 13, 1960
Judgment	September 30, 1960

Flynote : Sleutelwoorde D

Sale — Lot in a township — Purchase price payable in instalments — Cancellation on failure to pay subject to forfeiture E of payments made as rouw-koop and of right to claim compensation for improvements — Forfeiture of claim to improvements not falling within penalty liquidated damages field — Semble: If it did it would be a penalty — Appeal — Appellate Division — Delay in lodging notice of appeal and in providing security, etc. — F Condonation under Rule 12 (A.D.) — When granted — Contract — Interpretation of — Certain and unambiguous — Evidence not required — Issue capable of being decided on exception to a declaration.

Headnote : Kopnota

The terms of a deed of sale of a lot in a township, bought by the appellant company from the respondent company, the township owner, G provided for cancellation on failure inter alia to pay instalments of the purchase price. In the event of cancellation the appellant was not to be entitled to compensation for improvements, forfeited all moneys paid under the agreement as rouw-koop, and was to surrender possession immediately. The appellant had fallen into arrear, the respondent had cancelled and the appellant, having surrendered possession, had brought action in a Provincial Division for payment of £9,400 on account of H buildings erected by it on the property. The respondent had successfully excepted to the declaration, and appellant now appealed, after applying for condonation under Rule of Court 12 of the late lodging of a notice of appeal and of the late provision of security, etc. On the merits the crucial issue was whether the clause providing for surrender of possession without any claim for compensation for improvements raised an issue of penalty or liquidated damages and if so whether it was invalid as constituting a penalty.

Held, as the periods of delay, though not trifling, had not been long, as the explanations for them, though they revealed reprehensible carelessness, did not show anything approaching wilful or reckless disregard of the

1960 (4) SA p866

respondent's rights, as a considerable sum was involved and as the question in issue was both arguable and of general importance, that the application for condonation should be granted.

Held, further, as no evidence was required to interpret the contract, which was quite certain and unambiguous, that respondent's contention that the issue on the merits could not be properly decided on exception failed.

A Held, further, that this was not a case within the penalty or liquidated damages field: the provision against the recovery of compensation was not unreasonable and if the appellant had suffered through its operation that had not involved any unjust enrichment of the respondent at its expense, but had simply been due to the appellant's failure to carry out the terms of the lawful contract into which it had entered. Appeal accordingly dismissed with costs.

Semble: That if the Court had been faced with the position that the B forfeiture of any claim for improvements was either a penalty or a genuine preestimate of loss, it would have to be regarded as a penalty.

The decision in the Durban and Coast Local Division in Auby and Pastellides (Pty.) Ltd v Glen Anil Investments (Pty.) Ltd., confirmed. C

Case Information

Appeal from a decision in the Durban and Coast Local Division (BROKENSHA, A.J.), upholding an exception to a declaration. The nature of the pleadings appears from the judgment of SCHREINER, J.A.

L. Pinshaw, Q.C. (with him J. D. Schwartz), for the appellant: At the date of cancellation of the contract appellant was a bona fide possessor D of the property. As such, if it had to surrender occupation of the property with improvements thereon, it had the right to recover compensation for the improvements; see de Beers Consolidated Mines v London & SA Exploration Co., 10 S.C. at p. 372; Meyer's Trustee v Malan, 1911 T.P.D. 559; Kommissaris van Binnelandse Inkomste v Anglo-American Housing Co., Ltd., 1960 (3) SA at p. 657. In terms of E the agreement, however, appellant would not have had the said right. Clause 11 imports a penalty and not a genuine pre-estimate of damages; see Pearl Assurance Co., Ltd v Union Government, 1934 AD 560. Here there is not a genuine pre-estimate of damages because the improvements in a definite sum are not provided for and the enhancement in value may F be of any amount, depending on the decision of appellant only, a decision not connected with the fulfilment of the contract; see Tobacco Manufacturers Commitee v Jacob Green & Sons, 1953 (3) SA at p. 487. Furthermore the forfeiture stipulated for could be so out of proportion to the greatest loss conceivable that it should be regarded as extravagant and unconscionable. Indeed, it is commonly found that G improvements to a property are more valuable than the unimproved property; see Dunlop Pneumatic Tyre Co., Ltd v New Garage & Motor Co., Ltd., 1915 A.C. at p. 87. The fact that clause 11 does not fix an amount does not show that a penalty has not been provided; see Tobacco Manufacturers case, supra at p. 487; Pothier, Contract (Evan's H translation, para. 354). As to the essential distinction between a penalty and liquidated damages, see Dunlop Pneumatic Tyre Co. case, supra; Tobacco Manufacturers case, supra at p. 488. There is a Presumption (but no more) that it is a penalty when a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious, and others, trifling damages; see the Dunlop case, ibid. In considering whether a penalty has been provided for, the fact that on breach there are additional remedies open to the creditor, is relevant; see Holt v Brook, 1960 (2) SA at p. 599. The Court a quo erred in following

1960 (4) SA p867

Ngomezulu v Alexandra Townships, 1927 T.P.D. 801, followed in Louw v Riekert en 'n Andere, 1957 (4) SA 170. Ngomezulu's case, where it deals with the reason for a provision that improvements shall accrue to the seller, is erroneous. The seller has no need of contractual A protection as the Common Law affords him this very protection; see Meyer's case, ibid.; Boshoff v B. & S. Syndicate, 1933 T.P.D. 253. As the law at present stands there is no room for the application of Conradie v Rossouw, 1919 AD at p. 288, to the liquidated damages penalty field; cf. Tobacco case, supra at pp. 492 - 3; Baines Motors v Piek, 1955 (1) SA at p. 546; see further Acceptances & Finance Co., Ltd v Engels, 1959 (2) SA at p. 732; Union Government B v. Foster, 1915 CPD at pp. 209 - 10. The dictum of Schrassert cited in Human v Rieseberg, 1922 T.P.D. 163, is not sufficiently comprehensive to apply to the instant case. Even if the words 'shall not be entitled to claim any compensation' are a renunciation, they also import a penalty. The object of the clause is that the renunciation C shall have the effect of a penalty. Alternatively, the Court a quo should have dismissed the exceptions because oral evidence of the surrounding circumstances might have assisted in deciding whether the stipulation is a penalty. The admissibility of such evidence was considered but not decided in Durban Corporation v McNeil, 1940 AD at p. 71. See also Hazis v Transvaal and Delagoa Bay Investment Co., Ltd., D 1939 AD at p. 385; Ber v Brand, 1960 (1) SA at p. 588. In Milk Traders Trustee Co. (Pty.), Ltd v Levin, 1953 (3) SA at p. 681, affidavit evidence was referred to in considering whether the indebtedness was a genuine pre-estimate of damage.

D. L. Shearer, for the respondent: The meaning of clause 11 might equally well be conveyed by the expression 'improvements shall accrue to the seller'; see Conradie v Rossouw, supra. Unless, therefore, there is any principle in law which renders the provision unenforceable, appellant is bound and cannot recover compensation. As to appellant's F contention that the forfeiture provisions in clause 11 amount to a penalty, see Pearl Insurance Co v Union Government, supra. The 'fixed amount' there referred to, has been extended by Tobacco Manufacturers' Committee v Jacob Green & Sons, supra, to include amounts 'ascertained from the circumstances as revealed in the carrying out of the agreement'; see p. 487. The finding of MARAIS, J., in Louw v Riekert en G 'n Andere, supra at p. 172, that the question there, similar to that in the present case, was a question governed by penalty principles is open to question but even if it is correct, it does not assist appellant in any way. The penalty must be some consideration that can be equated with the payment of a fixed or ascertainable sum of money; see Pearl H Assurance, and Tobacco Manufacturers' cases, supra. It is true that the forfeiture of a right to repayment of instalments paid has been held to be such a consideration; see, inter alia, Moll v Pretoria Tyre & Vulcanising Works, 1923 T.P.D. 465; Cloete v Union Corporation, 1929 T.P.D. 508; Mine Workers' Union v Prinsloo, Prinsloo & Greyling, 1948 (3) SA at p. 851; Smith v Thorrold, 1959 (1) SA at p. 51. But in the main, all these cases are concerned with the exception set out in Voet, 18.3.3 to the general proposition that penalties are unenforceable. The forfeiture was treated as prima facie E

1960 (4) SA p868

a penalty and the next enquiry was as to whether it was enforceable or not. In the present case, no right ever comes into existence. There is no right to compensation at the time of the contract and the purchaser A ...