In the High Court of Namibia, Main Division

1

REPUBLIC OF NAMIBIA

IN THE HIGH COURT OF NAMIBIA, MAIN DIVISION

JUDGMENT

Case no: I 1751/2007

In the matter between:

WILLEM DU TOIT PLAINTIFF

and

ALETTA CATHERINA DREYER 1ST DEFENDANT

WILLEM DREYER 2ND DEFENDANT

ZARIS FARMING CC 3RD DEFENDANT

Neutral citation: Du Toit v Dreyer(I 1751/2007)[2013] NAHCMD 64 (08 March 2013)

Coram: DAMASEB, JP

Heard: 18 July 2011;23-27 January 2012; 11-13 April 2012;8-11 October 2012;22-23 October 2012 and 3-6 December 2012.

Delivered:08March 2013.

Flynote: Contract – Purchase and sale of Agricultural land – ‘Foreigner’ – Minister’s consent required – Certificate of waiver not a requirement at that point – Consent not obtained – Agreement null and void ab initio – Both parties contributed to the illegality - Par delictum rule applicable – Restitution allowed of purchase price only and not interest.

Summary: Contract – Purchase and sale of agricultural land – Purchaser “foreigner” in terms of the Agricultural (Commercial) Land Reform Act 6 of 1995– Section 58,59 applicable –Minister’s prior consent had to be obtained before any acquisition of controlling interest in a company or corporation passed to a foreign national – Agreement entered into in February 2003 before amendment of Act making certificate of waiver necessary also where controlling interest passed to foreigner in corporation, but such requirement not necessary at time agreement concluded – When agreement concluded no ministerial consent obtained – Agreement therefore illegal and void ab initio – Court finding both parties contributed to illegality and therefore what applied was par delictum rule and not turpuscausa – Restitution intergrum not applicable – Plaintiff’s turpitude greater than defendants’ – Court allowing restitution to plaintiff to do justice between ‘man and man but only to extent of purchase price – Interest at prescribed rate denied as doing so would enforce illegal contract – Costs not allowed to either party because of reprehensible conduct by both in conduct of litigation plaintiff also denied costs because of his disrespect for laws of land.

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ORDER

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1. The defendants are ordered to pay to the plaintiff the amount of N$672 000, jointly and severally, the one paying, the other to be absolved;
2. The defendants are ordered to pay interest at the prescribed rate of 20% per annum on the sum of N$ 672 000 from the date of this judgment to the date of payment at the rate prescribed by law.
3. Each party shall pay their own costs.

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JUDGMENT

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DAMASEB JP:

Introduction:

[1]This is a difficult case. It is difficult because it raises, in a very real way and on a human level, conflict between the need on the one hand to do justice between man and man and, on the other, the importance of exacting respect for the law of the land. At the core of the dispute before court is a failed transaction involving the acquisition by a foreigner of a corporate entity that owns agricultural land in Namibia. Namibian law[1] places restrictions on foreigners' access to and ownership of agricultural land. It is the product of the country's political past which was described by this court in the case of Kesslv Minister of Lands Resettlement and Two Similar Cases[2]as ‘the product of an intensive effort by the Namibian Government to address the need for land reform’.[3] The Chief Justice charachterised it as follows in Schweigerv Muller[4]:

‘It is evident …that the legislative purpose [of the LRA] is to provide for the acquisition of agricultural land by the state for the objective of land reform. Once such land has been acquired, the primary beneficiaries thereof are those Namibian citizens who do not own or have the use of any land or adequate agricultural land and foremost those Namibian citizens who have been disadvantaged by past discriminatory laws or practices. In a nutshell, therefore, the purpose of the Act is, amongst other things, to address the pressing issue of land reform, a perennial problem associated with this country’s history. It is apparent from the relevant provisions of the Act that the purpose is also to regulate the acquisition of land by foreign nationals.’

[2]The LRA in its Preamble states the following:

‘To provide for the acquisition of agricultural land by the State for the purposes of land reform and for the allocation of such land to Namibian citizens who do not own or otherwise have the use of any or of adequate agricultural land, and foremost to those Namibian citizens who have been socially, economically or educationally disadvantaged by past discriminatory laws or practices; to vest in the State a preferent right to purchase agricultural land for the purposes of the Act; to provide for the compulsory acquisition of certain agricultural land by the State for the purposes of the Act; to regulate the acquisition of agricultural land by foreign nationals; to establish a Lands Tribunal and determine its jurisdiction; and to provide for matters connected therewith.’

[3]The LRAas it was applicable at the time the transaction giving rise to the present dispute was concluded[5], contained the following provisions on acquisition of agricultural land.Section 17 of the Land Reform Act reads:

‘. . . The state shall have a preferent right to purchase agricultural land whenever any owner of such land intents to alienate such land. . . ’

It means that the Namibian State has apreferent right to acquire agricultural land that becomes available on the market. In terms of s17(2)no agreement for the alienation of agricultural land shall be of any force or effect until the owner of the land in question has first offered such land to the state and has been furnished with a certificate of waiver in respect of such land.

[4]Section 58(1)in relevant part states as follows:

‘Notwithstanding anything to the contrary in any other law contained, but subject to subsection (2) and section 62[6], no foreign national[7] shall, after the date of commencement of this Part, without the prior written consent of the Minister, be competent-

(a)to acquire agricultural land through registration of transfer of ownership in the deeds registry; or

(b)to enter into an agreement with any other person whereby any right to the occupation or possession of agricultural land or possession of agricultural land or a portion of such land is conferred upon the foreign national-

(i)for a period exceeding 10 years; or

(ii)for an indefinite period or for a fixed period of less than 10 years , but which is renewable from time to time, and without it being a condition of such agreement that the right of occupation or possession of the land concerned shall not exceed a period of 10 years in total.

(2) If at any time after the commencement of this Part the controlling interest in any company or close corporation which is the owner of agricultural land passes to any foreign national, it shall be deemed, for the purposes of subsection(1)(a), that such company or close corporation acquired the agricultural land in question on the date on which the controlling interest so passed.’ (My underlining for emphasis)

[5]Section 59 in turnstates:

‘Acquisition and holding of agricultural land for foreign national

No person shall acquire and hold, as a nominee owner, on behalf or in the interest of any foreign national any agricultural land if the Minister's written consent therefor has not been obtained as required by section 58.

An agreement which breached s 58(1) (b) (ii) of the LRA was described in Schweiger bythe Justice in as follows:

‘In so far as the invalid agreement therefore purported to grant the respondent the right of occupation and possession of commercial agricultural land for a period exceedingten years apparently without first complying with the requisites set out in the Act, such agreement falls foul of the provisions of s 58(b) (ii) of the Act, is illegal and void ab initio.’( My underlining for emphasis)

[6]It is clear from s 58 (1)(a) read with subsec(2) that the alienation and transfer of a ‘controlling interest’in a company or close corporation owning agricultural land is subject to the Minister’s consent if such acquisition is by a foreign national.Section 60 of the LRAempowers the Minister to either order the sale of the land acquired by a foreign national in breach of s 85(1)(a) or to acquire it in accordance with Part IV.[8] Breach of s 58 does not attract criminal sanctions. Two things are apparent from this: the first is that an agreement for the alienation and transfer of a controlling interest in a close corporation without the consent of the Minister is illegal and void ab initio. Secondly, by empowering the Minister to compulsorily acquire such land for the purpose of land reform, the LRA links the prohibition against ownership of land by foreign nationals to the public policy imperative of availing agricultural land to previously disadvantaged Namibians.

[7]It is common cause that the plaintiff, a South African national, is a ‘foreign national’ and as such hit by the provisions of s 58(1)(a) read with subsec (2) of the LRA.It also common cause that he, on 18 February 2003, executed (with the first and second defendants as ‘sellers’) a deed of sale to buy members’ interest in a Close Corporation,Zaris Farming CC (‘third defendant’), whose only asset was a farm, Zaris-Oos No. 195, Maltahöhe. Farm Zaris, it is also common cause, is agricultural land as contemplated in the LRA. The first and second defendants are Namibians whoheld 50% shares each in the third defendant. In terms of this written agreement, the plaintiff would become the 100% shareholder in the third defendant. As consideration for the 100% members’ interest in the third defendant, the plaintiff agreed to, on their behalf, honor their liability for the acquisition of a flat at Sand and See Complex, Swakopmund (‘the flat’) - in terms of the offer for the flat as advertised by the developer of the complex.

[8]The agreement between the parties reads as follows:

‘Sales Agreement: Farm Zaris

Zaris CC, property of W & AC Dreyer, is sold to W du Toit on the following terms:

4 payments of R168, 000 payable on the following dates:

28/02/03

12/04/03

11/07/03

17/10/03.’

2 payments of R84 000 payable upon completion of the Sand & See Flats around 15 December ’03 and the following [one] on registration of the flat. Transfer of shares will be effected upon payment of the last installment.’

The pleadings

History of pleadings

[9]When the present action commenced in 2005, the plaintiff’s main claim was predicated on fraudulent misrepresentation. The amount claimed was N$ 672 000.[9] The defendants denied fraudulent misrepresentation but consistently admitted the purchase price. The pleadings on which this case ended up being adjudicated are radically different from those which brought it to life.

The pleadings in their amended form can be summarised as follows:

The plaintiff

[10]The ultimate amended particulars of claim are dated 20 June 2011 and contain a main claim and two alternative claims. The basis of the claim remains the agreement dated 18 February 2003. The plaintiff alleges that he, in compliance therewith, made payments towards the flat in return for the defendants’ members’ interest in the third defendant. He alleges that when the agreement wasentered into the parties erroneously assumed that a waiver certificate was required in terms of the LRA and that what was required in terms of the law as it stood was the Minister’s consent for the acquisition by the plaintiff of the defendants’ members’ interest in the third defendant.[10] It is alleged further that the Minister’s consent was not obtained and as a result the agreement was canceled. Since possession of farm Zaris was then returned to the agreement was canceled and the plaintiff became entitled to the repayment of the purchase price of N$672 000 with interest a tempore morae at the prescribed rate of 20% interest per annum.

[11]The first alternative claim is founded on the premise that the agreement was subject to the suspensive condition that the Minister’s prior consent would be obtained and that the payment of the purchase price was done in the bona fide belief that such consent would be obtained. Since such consent was not obtained the agreement was canceled and the farm returned to the defendants and that the defendants were enriched in respect of the purchase price, entitling plaintiff to repayment thereof, with interest.

[12]The second alternative claim is conditional upon the court finding that the agreement is void for being in conflict with s58 because of the absence of the Minister’s consent. It is alleged that the defendants in that regard induced the plaintiff into entering into the agreement representing to him that the sale of the members’ interest was lawful. It is alleged that the plaintiff was thus induced by the representation and that, had he known that the sale was not lawful, he would not have entered into the agreement. The particulars allege that the plaintiff was at the time not aware that the agreement was in conflict with s 58, alternatively that neither party was aware of the illegality. In support of this claim the plaintiff alleges that, acting on the assumption that the agreement was lawful, he made the payments for the flat and that, to the extent the defendants were enriched thereby, they are obliged to repay same to him. It is allegedthat given the enrichment it is in the interests of public policy that the defendants repay the purchase price in order to prevent injustice to the plaintiff.

The defendants’ plea and counterclaim

[13]In their amended plea filed of record on 23 March 2012[11], the defendants proceed from the premise that because of an error common to the parties the agreement of 18 February ‘does not correctly record the full and precise terms and conditions’ agreed by the parties and that it stands to be corrected to reflect that the purchase price agreed was N$ 1m and that the plaintiff was to take ‘all necessary steps and assure that all the requirements of the’ of the LRA were complied with, with the reasonable cooperation of the defendants. They also plead that the original agreement was novated by two other subsequent agreements. In the way the case has crystallized I need not decide whether or not there was a novation or not.The defendants admit receiving payment of the N$ 672 000 and although they do not specifically deny it was from the plaintiff, put him to the proof. They allege that the plaintiff failed to take reasonable steps to comply with the LRA and that they canceled the agreement but not on the grounds alleged by the plaintiff. The defendants deny making the representations attributed to them by the plaintiff, alleging that it was the plaintiff who ‘pursued’ the defendants and ‘convinced them to sell’ their members’ interest in third defendant. They plead specifically that the plaintiff assured them that as foreign national he had previously acquired agricultural land and knew how to go about getting it legally, by taking all necessary steps to ensure that the transaction would be lawful for the registration of the members’ interest into his name.

[14]The defendants deny that the agreement was illegal in nature and that it was in fact lawful and that it was at all times possible for the parties to comply with the LRA as long as the plaintiff took the necessary steps towards that end.[12]They plead that only later did they discover that the plaintiff had no bona fide intention to comply with the LRA and that in fact he intended to circumvent s 58 by introducing a sham Namibian member as a 51% interest holder in the third defendant, making him in delicto ( potiorestconditiopossidentis) and as such not entitled to restitution on the assumption he made the purchase price. They deny unjust enrichment or that they are obliged to repay the plaintiff. They also deny that public policy dictates plaintiff being restituted.

Counterclaims

[15]The defendants counterclaim and seek to have those claims off-set against any restitution the court may order.The first counterclaim is predicated on the plaintiff taking possession of the farm following the agreement and remaining there for a period of 18 months and that on account of the cancellation of the agreement the defendants were deprived of possession,occupation and use of the farm. The plaintiff, it is said, unlawfully occupied the farm and grazed his livestock thereon and conducted a hunting lodge business. They allege that the plaintiff was therefore unjustly enriched at the defendants’ expense in the fair and reasonable value of N$15 000 per month, entitling the defendants to repayment in the amount of N$270 000.

[16]The second counterclaim is a reivindicatio for specified goods which the plaintiff was allegedly in possession of knowing they belonged to the defendants. The amount of N$95 000 is claimed as representing the value of those goods.The third counterclaim is for alleged use of the farm as a hunting rest camp for which the total amount of N$ 240 000 is claimed. The last claim is for wood allegedly illegally harvested by the plaintiff on the farm during his occupancy totaling N$ 40 000. Interest and costs are claimed on all claims.

[17] Plaintiff’s case is that these claims were introduced by the defendants in an attempt to defeat his claim for restitution as the only way the defendants can escape repaying the moneys paid on their behalf is if they are the innocent parties in the failed transaction and are able to prove damages which they can off-set against the amount they are liable to restitute. The plaintiff maintains that the defendants failed to prove any damages and therefore the need does not arise for the court to determine who bears the responsibility for the failure of the agreement.