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Court case about consequences of void contract with trust

Goldex 16 (Pty) Ltd v Capper NO & others [2019] ZASCA 105

The appellant (Goldex) sold a real right of extension reserved in terms of s 25(1) of the Sectional Titles Act 95 of 1986 in respect of a sectional title scheme, against payment of a purchase price of R1.45 million to the Des Property Trust (the Trust) represented by the second respondent, Mr Des Capper.  Capper is the first respondent in his capacity as trustee of the Trust, and the second respondent in his personal capacity.  In the trial court the appellant had already conceded that the agreement did not comply with the requirements of the Alienation of Land Act, 68 of 1981, and was therefore void.

The appellant’s claim against both the Trust and Capper was dismissed in the trial court.  On appeal to the Supreme Court of Appeals (SCA) the appellant accepted that the claim against the Trust could not stand, but attempted to convince the court that Capper should be forced to pay the purchase price himself and take delivery of the right, which Capper was prepared to transfer.  The appellant’s case that Capper had warranted that he was properly authorised to act on behalf of the Trust, which was not the case.  The warranty given by Capper, so it was argued, was severable from the void agreement and the appellant’s claim was then supposedly based on the breached warranty and not the void agreement.

The SCA (Leach JA) did not entertain this artificial argument and stated:
“The ingenuity of this argument is surpassed only by its lack of substance. Despite appellant’s counsel’s contrary protestations, what the appellant is essentially seeking is specific performance of a void and invalid contract against the person who signed that contract but was not a party to it – this on the basis that if he’d had the authority to sign, which he had not, the property would have been sold to another. This merely had to be stated to be rejected.” (par 7)

The appellant’s case was further that a term in the agreement which bound Capper in his personal capacity if he acted as trustee for a company to be formed and such company was not formed within three months after signature of the agreement.  The court held that this argument held no water either, as Capper purported to act on behalf of an existing trust and not on behalf of a company to be formed.

While Capper may well be liable for any financial loss suffered by the appellant on the strength of the warranty, this was not pleaded by the appellant nor was any evidence produced of the amount of any such damages.

The appeal was dismissed with costs.

Comment:

Anyone entering into any agreement with anyone purporting to represent a trust should take great care to verify the representative’s authority.

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