Klokow v Sullivan

• Jurisdiction: South Africa
• Judge: Mpati DP, Cameron JA, Brand JA, Nkabinde AJA and Cachalia AJA
• Judgment Date: 29 September 2005
• Citation: 2006 (1) SA 259 (SCA)
• Docket Number: 410/2004
• Hearing Date: 06 September 2005
• Counsel: C J van Coller for the appellant. A J Louw (with J J Teesen) for the respondent.
• Court: Supreme Court of Appeal

Cachalia AJA:

[1] The appellant claims repayment of a sum of R250 000, being part of the purchase price for a liquor-licensed business, which was paid to the respondent pursuant to the conclusion of an agreement of sale. The agreement was illegal and void for want of compliance with the requirements of the Liquor Act 27 of 1989 (the F Act). It will be convenient to refer to the parties as they were cited in the Court of first instance, as plaintiff and defendant respectively.

[2] On 4 September 2000 the parties entered into a written agreement in terms of which the plaintiff was to acquire from the G defendant a business that provided 'adult entertainment', which included the sale of liquor to its patrons. Pursuant thereto, the plaintiff paid to the defendant an amount of R250 000, which represented half of the agreed purchase price of R500 000. The plaintiff took possession of the business on 5 September 2000. However, on 18 October 2000, for reasons not relevant to this H appeal, the plaintiff returned the business to the defendant and issued summons against him for repayment of the R250 000. [1]

[3] The matter originally came before Hartzenberg J in Transvaal Provincial Division where the plaintiff was successful. He refused the I defendant leave to appeal. Leave was then granted by this Court to the Full Court. That Court (per De Villiers J; Patel J and Jooste AJ

Cachalia AJA

concurring) upheld the defendant's appeal. The plaintiff now comes on further appeal, again with special leave of this Court. A

[4] In the plaintiff's amended particulars of claim, several causes of action are pleaded. Only one of those is relevant for a determination of this appeal. The plaintiff alleges that the defendant, as holder of the liquor licence, concluded the agreement permitting the plaintiff to procure a controlling interest in the B business without obtaining the necessary permission of the chairperson of the Liquor Board (the chairperson). This omission, the plaintiff avers, constituted a contravention of s 38(1) of the Act, which provides:

'The holder of a licence shall not permit any other person to procure a controlling interest in the business to which the licence C relates, unless the chairperson has, on application by the holder, granted consent that such a person may procure such an interest in that business.'

(A 'controlling interest' in relation to any business or undertaking, 'means any interest of whatever nature enabling the holder thereof to exercise, directly or indirectly, any control whatsoever over the activities or assets of the business or undertaking D . . .'.) [2] In consequence of this contravention, the plaintiff avers that the agreement is illegal and void. Accordingly, he cancelled the agreement, returned the business to the defendant and now seeks to recover the amount of R250 000 that he paid to the defendant in terms of the agreement. [3] E

[5] In resisting the claim, the defendant pleads, inter alia, that reg 28 as read with s 38(1) of the Act imposed an obligation on the plaintiff, jointly with the defendant, to make written application for the consent of the chairperson. This he did not do. Regulation 28 provides as follows:

'28 Form of application F

(1) The applicant who is the holder of a licence, shall jointly with the applicant who desires consent to procure a controlling interest in the business to which the licence . . . relates . . ., make written application, in duplicate, for such consent, substantially in the form of Form 9. . . .'

[6] Accordingly, the defendant pleads that the plaintiff is precluded from recovering the amount claimed, as 'both he and the plaintiff were in pari delicto'. The plaintiff did not file G a replication.

The proceedings before Hartzenberg J

[7] When the matter came before Hartzenberg J, the parties elected not to lead any evidence at that stage. Counsel for the plaintiff, with the acquiescence of the defendant's legal representative, H requested the Court to record two admissions on his behalf: that neither party had complied

Cachalia AJA

with reg 28, [4] and that the defendant had handed to the plaintiff a blank pro forma A document (Form 16) on 24 August 2000, prior to the agreement being signed. This document is titled: 'Appointment in terms of s 39(1) or 39(2) of a natural person to manage and be responsible for the business to which the licence relates.' It is issued in terms of reg 95, which provides that B

'(a)

person other than a natural person who is the holder of a licence, shall, in terms of s 39(1), and a natural person who is the holder of a licence shall, in terms of s 39(2), appoint a natural person to manage and be responsible for the business, substantially in the form of Form 16 . . .'.

Sections 39(1) and (2) of the Act provide as follows:

'(1) A person other than a natural person shall not conduct any business under a licence unless a natural person who permanently C resides in the Republic and who is not disqualified in terms of s 25 to hold a licence, is appointed by him or her in the prescribed manner to manage and be responsible for its business.

(2) A natural person who is the holder of a licence may in the prescribed manner appoint another natural person who permanently resides in the Republic and who is not disqualified in terms of s 25 to hold a licence, to manage and be responsible for the business to D which the first-mentioned licence relates.'

[8] Counsel for both parties thereupon requested the Court to adjudicate four issues separately in terms of the provisions of Rule 33(4):

•

whether s 38(1) of the Act was of application to the agreement;

•

if the answer to that question is positive, whether non-compliance with the section renders the agreement void; E

•

if the answer to second question is positive, whether any portion of the agreement is severable from the remainder of the agreement; and

•

whether the plaintiff had made out a case for the repayment of the amount of R250 000. F

[9] It was agreed between the parties' legal representatives that these issues were to be decided 'as on exception' on the basis of the factual averments that were made in the plaintiff's particulars of claim, together with the facts that plaintiff had admitted. The learned Judge answered the first, second and final questions in the G affirmative, and to the third, he answered 'No'. Each question was therefore decided in favour of the plaintiff. In so deciding, Hartzenberg J concluded that the rule in pari delicto potior est conditio defendentis (the par delictum rule) relied upon by the defendant to defeat the plaintiff's claim, did not arise. The basis of this conclusion, so he reasoned, was that s 38(1) placed a burden to secure the consent of the chairperson for the H procurement of controlling interest by an applicant on the holder of the licence only, the defendant in this case. He therefore...