Dadoo Ltd and Others v Krugersdorp Municipal Council

• Jurisdiction: South Africa
• Judge: Innes CJ, Solomon JA, CG Maasdorp JA, De Villiers JA and Juta JA
• Judgment Date: 01 July 1920
• Citation: 1920 AD 530
• Hearing Date: 24 February 1920
• Court: Appellate Division

Dadoo Ltd and Others Appellants v Krugersdorp Municipal Council Respondents
1920 AD 530

1920 AD p530

Citation	1920 AD 530
Court	Appellate Division, Bloemfontein
Judge	Innes CJ, Solomon JA, CG Maasdorp JA, De Villiers JA and Juta JA
Heard	February 24, 1920
Judgment	July 1, 1920

Flynote : Sleutelwoorde

Land — Statute prohibiting Asiatic or coloured person, from owning land — Formation of company — Transaction in fraudem legis — Law 3 of 1885 (T) — Law 35 of 1908 (T) — Municipal Council — locus standi.

Headnote : Kopnota

A registered company is a legal persona distinct from the members who compose it.

A transaction is in fraudem legis when it is designedly disguised so as to escape the provisions of the law but falls in truth within those provisions. (Per INNES, C.J.)

The 2nd section of Law 3 of 1885 as amended by a Volksraad besluit of August, 1886, prohibits Asiatics from owning immovable property in the Transvaal, whilst sec. 130 of Act 35 of 1908 in effect prohibits coloured persons from acquiring or occupying ground held under the gold laws.

In 1915 appellant company was registered in the Transvaal with a share capital divided into 150 shares, of which 149 were held by D, an Asiatic, and the remaining one by another Asiatic. The objects of the company according to its memorandum of association were the acquisition of, and the traffic in, landed property, and the conduct of any business connected with property so acquired. Thereafter the company purchased and received transfer of two stands situated within the municipality of K. of these stands one was leased to D for the purposes of a business, and upon the other, D or (in his absence) his Asiatic manager resided. In 1919 the municipal council of K obtained from the Transvaal Provincial Division an order setting aside the transfers to the company as being in fraudem legis and therefore contrary to law.

On appeal from the decision of the Provincial Division, Held (DE VILLIERS, J.A., dissenting), assuming that the municipal council had a locus standi in applying for the order, that the provisions of Law 3 of 1885 and Act 35 of 1908 did not apply to joint stock companies, even though their shares were held by Asiatics or coloured persons, that the transfers to the company were not in fraudem legis, and that the order should not therefore has been granted,

(Per DE VILLIERS, J.A.) that in so far as the company was formed for the purpose of dealing in land in the Transvaal it was formed for an unlawful purpose, and that the registration of the stands in the name of the company was in fraudem legis, and null and void.

Further, that the municipal council, as the health authority and as an owner of property, had a locus standi to apply for the order granted by the Provincial Division.

The decision of the Transvaal Provincial Division in Krugersdorp Municipal Council v Dadoo Ltd and others, reversed.

Case Information

Appeal from a decision of the Transvaal Provincial Division (WESSELS, J., and CURLEWIS, J.).

1920 AD p531

The facts are stated in the following reasons of WESSELS, J.: -

WESSELS, J. : The following are the facts material to the present inquiry.

1. Dadoo Ltd is the registered owner of stand 171 Krugersdorp.

2. It was transferred to Dadoo Ltd by Pieter Johannes Fouche and Christoffel Rudolph Howell.

3. Dadoo Ltd consisted at the time of the purchase and transfer of stand 171 of Mahomed Mamojee Dadoo, who is both a British Indian and a coloured person, and another Indian named Dindar.

4. The stand is occupied by Mahomed Mamojee Dadoo and his family when they happen to be in South Africa. When they ape away it is occupied by the manager of the business of Dadoo Ltd., viz., Jassup Ebrahim Gardee and another Indian.

The Krugersdorp Municipality contends that though stand No. 171 is registered in the name of Dadoo Ltd it is virtually owned by Mahomed Dadoo and was transferred into the name of Dadoo Ltd in order to evade the provision of the law prohibiting Asiatics from being owners of fixed property.

The first question to decide is whether the Krugersdorp Municipality has any locus standi in judicio to ask this Court to set aside the transfer of stand 171 from Fouche and Howell to Dadoo Ltd.

It appears that the stands in the Township of Krugersdorp were originally granted under the Transvaal Gold Law, as leasehold lots subject to the payment of monthly licences. The Municipality of Krugersdorp is at present the owner of the Krugersdorp Town Lands, and of many stands in the Township.

Mr. Tindall contends on behalf of the Municipality that although Act No. 37 of 1919 exempts certain British Indians who on 1st May, 1919, were carrying on business on any stand from the operation of sec. 130 of the Transvaal Gold Law (35 of 1908) they are not entitled by virtue of Act 37 of 1919 or of any other law to be the registered owners of any stand; also that Fouche and Howell held the stand subject to a prohibition to transfer on their title. This being the case the Krugersdorp Municipality is entitled to ask this court to set wide the transfer to an Indian of any stand in the Municipality, (a) because the Municipality is the owner of the Town lands, the Burghershoop brickfields, the Monument brickfields and many stands in the township of Krugersdorp; (b) also because it is the representative and guardian of the interests of the inhabitants of the township, and lastly, because it is charged with the duty of watching over the health conditions of the town.

For these reasons he argues that the Krugersdorp Municipality is entitled to prevent the commission of any act which is expressly prohibited by law, where such an act affects the inhabitants of Krugersdorp and the owners of property The transfer of a stand to an Indian is prohibited by law and prohibited by the transferor's title, and therefore the Krugersdorp Municipality has an interest in setting aside the transfer of any stand to any Indian. Hence the Municipality is entitled to ask the Court to say that the transfer to Dadoo Ltd of stand No. 171 is in fraudem legis, for it is virtually a transfer to an Indian since Dadoo Ltd is a company consisting of and controlled by Indians.

I shall first consider the question whether the Municipality has a locus standi because it is the owner of land and stands in the Municipality.

1920 AD p532

The condition under which Fouche and Howell held stand 171 was that they were not entitled to transfer or sublet the stand or any portion of it to any coloured person nor to permit any coloured person other than the lotholder's bona fide servants to reside on or occupy it.

This was a condition intended to be for the reciprocal benefit of all owners of stands. It makes no difference whether the restriction is derived from the Gold law or whether its origin lay elsewhere. Now it is a principle of our law, differing in that respect from the Roman and English law, that A can contract with B and exact a promise from him that he will or will not do something for the benefit of C. If C accepts the benefit C can sue B on his promise to A. Grot. Introd. 3.3.38; Groenewegen ad Inst. 3.19. (20). 5.; Vinnius ad Inst. 3.19 (20). Voet, 24.14.12; Tradesman's Benefit Society v du Preez, 5 S.C. 279.

If therefore persons buy or lease, from a common transferor or landlord lots in a township and each agrees that he will not transfer or let his lot to a coloured person he is bound by this condition to all the other owners of the lots. Every lotholder is entitled to sue any other lotholder if the letter seeks to avoid the restriction on his covenant provided be accepts the benefit. In Alexander v Johns (1912 AD 431) the Court of Appeal decided that a leaseholder in the township of Boksburg North could sue any other leaseholder who transferred his lease without inserting the restriction against letting to coloured persons which was found upon his title. INNES, A.C.J., said in that case:-

"Each original lessee therefore agreed with the ground owner in terms of the lease which he signed, to subject his holding to the burden of this restriction for the benefit of each and every present or future holder of the other lots, and agreed to accept the benefit of the same restrictions, imposed, or to be imposed on all the other holdings for his own advantage. Each contract with the common landlord was made for the benefit of third parties, and each involved an acceptance of similar benefits from time to time from those parties. One would think therefore that on general principles such an arrangement should be binding upon and enforceable by the original leaseholder& inter se. And the restrictive condition being one directly affecting the user of the lots, it was properly registered against the leasehold titles, and ought therefore to be binding upon all successors of the original lessees."

This view was followed in the case of Madrassa Anjuman Islamia v Johannesburg Municipality (1917 AD 718). In that case SOLOMON, J.A., in delivering the judgment of the Court said:-

"The council was directly interested in obtaining an interdict to prevent the commission of an act which is expressly prohibited by the Statute in the interest of owners of property," and again, "Now, in the present case I do not think that there can be any question that the prohibition in the Act against the occupation of stands by Asiatics and coloured persons was enacted partly for the protection of owners of land in the township. If therefore the Council is such an owner it would be entitled to claim an interdict without any proof of actual damage."

If the Municipality of Krugersdorp could in this case claim an interdict, as according to the above authorities it could, I can see no reason why it cannot cite the transferor and transferee before the Court and claim as a third party interested in the restriction, that the transfer should be...