THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Reportable
Case No: 172/07

In the matter between:

KOUMANTARAKIS GROUP CC

APPELLANT

and

MYSTIC RIVER INVESTMENT 45 (PTY) LTD
1ST RESPONDENT

REGISTRAR OF DEEDS

2ND RESPONDENT

______________________________________________________________

CORAM:
HOWIE P, FARLAM JA, NAVSA JA, KGOMO AJA and
MHLANTLA AJA

HEARD:

14 March 2008

DELIVERED:
14 May 2008

SUMMARY:            Sale of Land - Meaning and effect of clause in an  agreement of
sale in terms of which a bank guarantee must  be provided-
whether the  seller acted reasonably in  rejecting the guarantee.
Seller not entitled to reject the guarantee and cancel the

agreement.

NEUTRAL CITATION:
This judgment may be referred to as Koumantarakis
v Mystic River (172/07) [2008] 53 ZASCA (14 MAY 2008)

MHLANTLA AJA

[1] The appellant appeals against a decision of the Durban and Coast
Local Division (Madondo AJ) in terms of which an application to enforce
an agreement of sale of immovable property between the parties was
dismissed with costs consequent upon the employment of two counsel.
The court below found that the first respondent had acted reasonably and
in good faith in rejecting the bank guarantee the appellant had furnished,
purportedly in terms of the agreement.  The court held that the first
respondent had validly cancelled the agreement. This appeal is with leave
of the court below.

[2] The appeal turns on the meaning and effect of a clause in an
agreement of sale of immovable property in terms of which a bank
‘guarantee’ must be provided by the purchaser to the seller. It is
necessary at this stage to commence by setting out the factual
background.

[3] On 30 May 2006 at Durban, the appellant ( the purchaser) and the
first respondent (the seller) concluded a written agreement in terms of

which the immovable property described as Erf 301, Portion 16,
Springfield Park was purchased for  R12  million plus value added tax.

[4] The purchase price, in terms of clauses 3.2 and 3.31 of the
agreement of sale, was payable by way of:
(a)
A deposit of R1 million secured by a bank guarantee
acceptable to the seller and payable to the seller on transfer
to be lodged within three days of fulfilment of the
suspensive condition.  The agreement was made conditional
upon the purchaser conducting a due diligence exercise on
the property within a period of 30 days of acceptance of the
offer of the agreement and after receipt of the resolutions of
the seller.
(b)
A similar guarantee for the balance of R11 million payable
on transfer had to be lodged within 45 working days of the
deposit being lodged.

1 Clauses 3.2 and 3.3 read:
A deposit by the PURCHASER secured by way of a Bank Guarantee acceptable to the SELLER, in
favour of the SELLER, and payable to the SELLER on registration of transfer of R1, 000,000.00 (one
million rand). Such Guarantee to be lodged with the CONVEYANCER within 3 (THREE) days of
fulfilment of the suspensive condition. (Emphasis added).

The balance of the purchase price of R11, 000,000.00 (ELEVEN MILLION RAND) and the
VAT/TRANSFER DUTY payable, shall be secured by a bank guarantee acceptable to the SELLER, in
favour of the SELLER and payable to the SELLER on registration of transfer, such guarantee to be
lodged with the CONVEYANCERS within 45 (FORTY FIVE) working days of the date on which the
deposit; in the form of a guarantee; referred to in clause 3.2 above is lodged with the
CONVEYANCERS.

[5] The purchaser was furthermore obliged to notify the seller within
the time allowed for the due diligence exercise of its intention to proceed
with the sale, failing which the agreement would be cancelled.
Correspondence was exchanged in this regard between the parties.  It is
apposite at this stage to refer to this in some detail.

[6]    It became apparent to the purchaser as early as 15 June 2006 that the
due diligence exercise would take longer than the period allowed.  It
accordingly applied to the seller for an extension of time. That request
was refused by the seller which thereafter notified the purchaser that it
regarded the agreement as null and void.

[7] On 7 July 2006 the purchaser’s agent directed a letter to the seller’s
attorney challenging the seller’s stance in that regard.  The purchaser
accordingly gave instructions to the Standard Bank of South Africa Ltd
(the bank) to prepare a guarantee for payment of the deposit in terms of
the agreement.

[8] On the same day, the bank addressed a letter to the seller’s
conveyancers, attaching a specimen guarantee, enquiring whether it was
acceptable. No response was received whereupon, on 11 July 2006, the
purchaser gave written notice to the seller of its intention to continue with

the agreement.  The purchaser’s agent also requested the seller to submit
a format of a bank guarantee acceptable to it.  The seller did not respond.

[9] On 12 July 2006 at 14h00 the purchaser obtained a guarantee from
the bank in its standard form. Clause 4 thereof provides as follows:
‘Should any new or previously undisclosed fact emerge which may prejudice the
Bank’s security or any circumstances arise to prevent or unduly delay registration of
the abovementioned transaction/s we reserve the right to withdraw herefrom by giving
you written notice to that effect, whereupon the said sum will no longer be held at
your disposal.’

[10] After the delivery of the said guarantee, the seller’s attorneys, at
16h25 on the same day sent to the bank a draft guarantee, which would be
acceptable to it. This draft was different from the bank’s specimen
guarantee and it included the following clause:

‘This letter of guarantee expires one year from date of issue and is
irrevocable’.

[11] On 17 July 2006 the seller rejected the purchaser’s guarantee
contending that paragraph 4 thereof contained a ‘right to withdraw’ and
that it required an irrevocable guarantee. It demanded that the purchaser
provide an amended guarantee. The purchaser did not comply. Later that
day a notice was sent by the seller’s attorneys to the purchaser to the

effect that the seller deemed the agreement to be cancelled and null and
void because the purchaser had failed to present a guarantee acceptable to
the seller.  Notably however, a notice in terms of clause 14 of the
agreement of sale had not been given to the purchaser to enable it to cure
the alleged breach.2

[12] On 24 July 2006 the attorneys for the purchaser explained to the
seller’s attorneys that the right of the bank to withdraw contained in the
guarantee was a long-standing and general practice of financial
institutions and that the agreement could not be interpreted so as to
subject the purchaser to the unreasonable whim of the seller.  Thus they
called upon the seller, in terms of clause 15 of the agreement, to indicate
whether the purchaser’s guarantee was acceptable, failing which, the
purchaser would institute legal proceedings to enforce the agreement.

[13] Whilst this exchange was taking place an advertisement in a
weekly property magazine styled ‘Home Guide’, for the period 27 July –
2 August 2006, came to the attention of the purchaser.  The advertisement
related to the property in question, which was put up for sale, despite the

2 Clause 14 reads: SELLER’S RIGHT ON BREACH OF SALE:
‘If the PURCHASER commits any breach of the sale, the SELLER may serve on the PURCHASER
notice in writing to remedy such breach and if the PURCHASER fails to comply with such notice
within 7 (seven) working days from date of receipt by it of written notice calling upon it to remedy
such breach or failure, the SELLER shall have the following rights, either of which he may exercise in
his discretion, namely: 14.1…
14.2 to cancel the sale forthwith, by notice in writing to the PURCHASER. . .’

agreement between the parties.  The asking price therein was R2 million
higher than that in the agreement between the parties.

[14] On 4 August 2006 the seller’s attorneys addressed a letter to the
purchaser’s attorney rejecting the purchaser’s contention that the
guarantee provided accorded with a long-standing and general practice of
financial institutions, alleging that this only applied where a purchase is
conditional on the purchaser obtaining a mortgage bond and, that the
present was not such a case.  The attorneys contended that the agreement
was, in any event, not conditional upon the purchaser obtaining finance
from any banking institution.

[15] On the same date, the seller’s attorneys sent a letter to the
purchaser itself, stating that the purchaser was in breach of clause 3.2 of
the agreement in that it had failed to furnish a guarantee acceptable to the
seller.  The attorneys attached a draft of the guarantee the seller required
and indicated that the seller, as it was legally entitled, would not accept a
guarantee in any other format.  The purchaser was directed, in terms of
clause 16 of the agreement, to furnish the seller with the said guarantee
within seven working days, failing which the purchaser would be deemed
to be in breach of the agreement and that the seller would exercise its
rights to cancel the agreement.

[16] On 17 August 2006 the seller’s attorneys addressed a letter to the
purchaser advising it that the agreement was being cancelled due to the
non-compliance by the purchaser as stated above.

[17] On 21 August 2006 the purchaser launched an application for an
interim order restraining and interdicting the seller from encumbering the
property or alienating it to any person other than the purchaser and
interdicting the second respondent from registering the transfer of the
property to any person other than the purchaser.

[18] In finding for the seller, the court below held that Clause 3.2
presented two requirements, namely, that the purchaser had to provide the
seller with a bank guarantee in the amount of R1 million, and that such a
guarantee had to be acceptable to the seller.  The court also found that the
fulfilment of the requirement was largely dependent upon the seller’s
discretion regarding the nature and acceptability of the bank guarantee.
The court accordingly held that in this case the function of the guarantee
was to provide security and that the purchaser had been fully aware of
this from the outset.

[19] The court concluded that the seller had given due consideration to
and had exercised an honest judgment on the acceptability of the
guarantee and found in favour of the seller.

[20] The issues which arise for determination in this appeal can be
outlined as follows:-
(a)
The meaning and ambit of Clause 3.2 of the agreement of
sale;
(b)   Whether the seller acted reasonably in rejecting the guarantee
provided by the purchaser.

[21]   As regards the first issue, counsel for the respondent submitted that
the starting point of the enquiry lies in the interpretation of the language
of both the agreement of sale and the guarantee from the bank.   He
contended that the guarantee was replete with loopholes, dangers, doubts
and uncertainties and that it could not be said that the seller, in rejecting
it, did not act arbitrio bono viri as legal principle required it to do.

[22] The meaning and purpose of the word “guarantee” has to be
ascertained in relation to the context in which it is used.  In Mouton v
Mynwerkersunie,3 Wessels JA said:
‘Die woord “waarborg” het meerdere betekenisse, en die sin waarin dit in ‘n
bepaalde dokument gebruik word, sou van die inhoud en strekking van daardie
dokument afhang.’

[23] In Hermes Ship Chandlers (Pty) Ltd v Caltex Oil (SA) Ltd4 Kriek J,
after considering a number of decisions in which the interpretation of the
word ‘guarantee’ was considered, said:
‘The passages from the various judgments I have mentioned deal with the
popular or ordinary meaning of the word “guarantee”, but it seems to me that
they demonstrate only that the word is capable of bearing different meanings
depending upon the context in which it is used.  It seems to me also that when
the meaning of the word in a particular document is being considered, it is
undesirable to commence the enquiry on the basis that any one of its possible
meanings predominates, and that the proper approach to the question is to be
alive to the various meanings which it can bear and by a consideration of the
context in which it is used (together with such other circumstances as may be
permissible) to decide which meaning must be attributed to it in that context.’

[24]    The nature of bank guarantees in relation to the sale of immovable
property is explained in various authorities as follows: In a sale of

3 1977 (1) SA 119 (A) at 136B.
4 1973 (3) SA 263 (D) at 267 E-G.

movables payment and transfer should take place pari passu. In a sale of
land, where large sums of money are usually involved, it is obviously
desirable to achieve the same result, since the seller will be reluctant to
part with ownership of his land until he has the money and the purchaser
will be reluctant to part with his money until he has ownership of his
land. It is thus necessary to resort to a device in order to achieve as nearly
as possible, the desired reciprocity of payment and transfer. The standard
device is the furnishing by the purchaser, when called upon to do so by
the seller’s conveyancers who are ready to lodge the necessary
documentation, of a bank guarantee payable on registration of transfer,
normally a revocable guarantee unless the contract expressly calls for an
irrevocable guarantee.5 Generally guarantees are required to be provided
by a date in advance of registration because the date of registration is not
precisely predictable.

[25]    Of course the particular wording of a clause in an agreement of
sale of immovable property which requires a guarantee might be such that
one is left in no doubt that what is required is security beyond what is set
out in para 24 above and more particularly that an irrevocable guarantee
such as that demanded by the seller in the present case is what was
intended.

5 RH Christie The Law of Contract in South Africa 5ed pp. 414-415, Trichardt v Muller 1915 TPD 175,
Breytenbach v Van Wijk 1923 AD 541 at 547.

[26]   It was contended on behalf of the seller that because the agreement
in the present case required the guarantee to be provided in tiers well
before transfer, there could be no doubt that security rather than a
revocable guarantee was intended and that in effect meant an irrevocable
guarantee.

[27]   This argument is without merit. The fact that the agreement
required the guarantees to be provided by dates in advance of registration
does not, in my view, subject to the further analysis of clause 3.2 set out
hereafter, detract from the general nature of guarantees described earlier
in this judgment.

[28]     The express terms of clause 3.2 of the agreement merely refer to a
guarantee acceptable to the seller.  Neither a provision for irrevocability
nor a provision that the guarantee provide security was expressly
stipulated for in the agreement. It is evident that the guarantee provided
only for the payment of the deposit and balance of the purchase price.
Furthermore, if what was indeed required was security of a kind as
contended by counsel and that the guarantee should be irrevocable, clause
3.2 should have said so in express terms. The contract was not in a
standard form but specially drafted. Irrevocability was provided for
elsewhere but not in clause 3.

[29]  In Wehr v Botha, N.O.,6 an agreement for the sale of immovable
property for R9000 provided for payment of the purchase price by way of
a deposit of R1000 with the balance to be secured by means of a banker’s
guarantee or a reputable and acceptable letter of guarantee to be paid on
demand on registration of transfer. The court held that a contract which
seeks to impose on a purchaser an obligation to furnish security that the
seller will in any event be paid the price ‘must place this extra duty and
burden on a purchaser in the clearest of terms.’7

[30]    Returning to the words used in clause 3.2, there is no special magic
to the words ‘secure’ or ‘security’. In Rosen v Ekon8 the court stated that
subject to any express term in an agreement for the sale of immovable
property, the function of the bank guarantee for payment against transfer
is not one of security but is one of payment. Wunsh J held:9
‘Most agreements for the sale of properties, and indeed that in the present case,
require a guarantee to be delivered by a specified date which would be more than a
few days before transfer.  The legitimacy of a revocable letter of credit would be open
to challenge in such a case if, because a date is fixed for the delivery of a guarantee,
the function of the guarantee becomes one of security rather than payment.’
Wunsh J further stated:

6 1965 (3) SA 46 (A).
7 At 60G.
8 2001 (1) SA 199 (W)
9 At 208E-G and 209H.

‘Since the function of a property guarantee is to provide for payment and not to serve
as security, the delivery of a revocable guarantee is compliance with the purchaser’s
obligation. The statement in clause 4.2 of the agreement that the balance of the
purchase price “shall be secured by means of a … guarantee” does not detract from
this view.’

[31]   The court below dealt with the decision in Rosen and apart from
distinguishing it rejected its conclusion. The distinction is fallacious. The
guarantee in this case was to be payable on registration of transfer as was
the guarantee for payment of the balance of the purchase price. The only
‘security’ afforded by the provision of the guarantees was the knowledge
that the purchaser had access to the necessary funds to pay the purchase
price when due. This was the same position in Rosen. In my view, the
finding in the Rosen case is correct and that matter is not distinguishable.

[32] In this case, it appears to me that the guarantee in the context of
this contract is not irrevocable and was not intended to serve as security
in the true sense of the word.  It is evident that the letter issued by
Standard Bank is a contractual undertaking and that payment will be
made upon registration of transfer.

[33] The parties agreed to structure payment in staggered phases.  This
was a two-tier stage, where the guarantee for the deposit had to be
furnished within three days after the due diligence exercise and the
guarantee for the balance to be provided 45 days later.  It was a term of
the agreement that such guarantees would only be payable upon a later
date, that is, on registration of transfer. In my view, absent the word
‘irrevocable’ in the present contract, one is left with the usual undertaking
provided by a financial institution. If the seller required security pending
transfer, it should have stipulated in the agreement that it required an
irrevocable guarantee. It is not for the seller to achieve by later objection
what it could have, but did not, achieve by appropriate agreement.

[34] Aside from the general discussion in relation to guarantees usually
provided in relation to the sale of immovable properties, it is in my view
necessary to have regard to the evidence of Mr Roger Green and Mr
Gareth Scott, who in the present case deposed to affidavits on behalf of
the purchaser.

[35]   Mr Green has practised as a conveyancer for over 30 years.  He has
extensive experience in the practice of property law and conveyancing
and served on committees of Property Law Matters of the Law Societies
of KwaZulu-Natal and of South Africa for about 14 years and eight years

respectively.  He has had extensive dealings with letters of undertakings
issued by financial institutions and stated that the guarantees issued by
these institutions in property transactions invariably contain a clause
providing for the withdrawal of the guarantee in certain circumstances,
unless the parties have agreed on an irrevocable guarantee.  According to
him clause 4 is unexceptional and similar clauses are found in all
guarantees issued by financial institutions in property transactions.

[36] Mr Scott stated in his affidavit that he was employed by Standard
Bank as an accounts executive and was conversant with the practice and
policy of the bank in regard to the issue of the letters of undertaking.
According to Mr Scott, the provision for the right of withdrawal was a
standard clause that the bank required in every guarantee regarding the
transfer of property whether or not mortgage finance was required and
that the bank would not permit the deletion of such a clause.

[37] No contrary evidence was tendered on behalf of the respondent.
Counsel for the respondent argued that no reliance could be placed on the
evidence of these witnesses and furthermore that their evidence did not
discharge the stringent requirements for establishing a trade usage or
custom.  Counsel further argued that the clause was a recent development
of a draconian nature imposed unilaterally on clients of financial

institutions without just cause and for the sole benefit of the institutions
which have become a ‘law unto their own’.

[38] This submission cannot, in my view, prevail.  Mr Green’s
experience is of importance and is relevant.  It cannot be denied that he is
an experienced conveyancer and has wide experience in the field. He can
rightly be regarded as an expert.  In my view this is good and proper
evidence that has to be accepted.  Mr Scott’s testimony is equally
relevant.  There is in my view no basis to reject their testimony in this
regard. I accordingly conclude that the seller was not contractually
entitled to insist on an irrevocable guarantee.

[39] The final issue to be determined is whether the seller acted
reasonably when it rejected the guarantee. Put simply, what is at the heart
of this part of the case, is the so-called ‘whimsical revocability’ of the
guarantee.  In order to determine this issue, the court must consider the
grounds expressed by the seller and apply a double requirement. First, a
seller must exercise an honest judgment in deciding whether to accept or
reject a guarantee. (Honesty was not in issue here.) Second, the seller’s
decision to reject must objectively viewed, be based on reasonable
grounds.

[40] In Herbert Porter & Co. Ltd v Johannesburg Stock Exchange,10 the
court held:
‘When parties have stipulated in their contract that something must be done to
the “satisfaction” of one of them, the Courts have applied an objective test ─
what would satisfy a reasonable man?’

[41] It is common cause that the bank reserved itself the right to
withdraw from the guarantee in two circumstances: First, where any new
or previously undisclosed facts emerge which might prejudice the bank’s
security, and, second, where any circumstances arise to prevent or unduly
delay registration of transfer.

[42] Counsel for the respondent submitted that the guarantee could be
revoked at any time, that is, prior to and after registration of transfer.  He
furthermore argued that the previously undisclosed facts would relate to
dealings between the bank and the purchaser; that these were entirely
outside the knowledge and beyond the control of the respondent and that
it was impossible for the respondent to judge objectively whether any
such new or previously undisclosed facts might prejudice the bank. It was
submitted that this meant that the bank could act capriciously and on a
whim.

10 1974 (4) SA 781 (W) at 789E.

[43] In regard to ‘new or undisclosed facts’, it has to be borne in mind
that the guarantee conferred rights on the seller and the bank would have
to justify its withdrawal on grounds which would have to be related to its
security. It seems to me that the bank would have to demonstrate which
new facts had arisen or prior material facts had not been disclosed. The
construction adopted by the seller is unjustifiably an exaggerated
characterisation of risk. I am accordingly satisfied that the bank would
not be entitled to a ‘whimsical’ withdrawal but is limited to a withdrawal
that is factually based and related to its security. The reference to the
‘bank security’ is a reference to the registration of a mortgage bond over
the immovable property which registration was to occur simultaneously
with the registration of transfer.

[44] I turn to deal with the second prerequisite, that is, ‘any circumstances
that may arise to prevent or unduly delay’ the registration of transfer. In
Friedman v Blumenthal11  Margo J stated the following:
‘[I]t is of course correct that the occurrence of an event which prevents the condition
from being fulfilled would, by implication, discharge the guarantee.  However, in my
view it is not an implied term of a guarantee in cases such as this that, if “unforeseen
circumstances” arise which “unduly delay” the final decision of the creditor’s claim,
the guarantee is to be discharged.  If, for example, a delay of say three or even more
years were to occur because of the unexpected congestion of the trial roll, or because

111981 (2) SA 398 (W) at 401E-H.

of a prolonged illness of the Judge seized of the matter, or because of repeated
postponements forced on the applicant through no fault of her legal representatives or
herself, would the Court be driven, in order to give business efficacy to the contract,
to hold that the guarantee was discharged?  I hardly think so.
It may be argued that such circumstances would not constitute undue delay within the
meaning of the provision whereby the bank has reserved its right to withdraw from
the guarantee.  However, undue delay in this context is not the same as unreasonable
delay. The undue delay here contemplated is such occasioned by unforeseen
circumstances, that is irrespective of breach of contract on the applicant’s part,
whereas unreasonable delay would presumably be delay which is unreasonable
because of the applicant’s failure to pursue the claim with reasonable diligence.
While there would no doubt be an implied obligation on the applicant’s part in respect
of unreasonable delay, the breach of which obligation would entitle the bank to
withdraw, the same does not necessarily hold good for undue delay in the particular
sense in which the words “unduly delay” are used in the guarantee in this case.’

[45] In Friedman12 the applicant sought an irrevocable guarantee the
terms of which had to be satisfactory to the applicant. The bank issued a
guarantee but reserved to itself the right to withdraw should ‘any
unforeseen circumstances’ arise to prevent or unduly delay the fulfilment
of the agreement. Margo J held that the applicant was entitled to reject the
guarantee as it was not irrevocable. However, he stated that the term
‘irrevocable’ could not have been intended as an absolute, and that there

12  At 402D.

could be circumstances entitling the bank to withdraw from its
undertaking. The ambit of the withdrawal clause in Friedman was more
extensive than in the present case.

[46]  In Davis v Braatvedt13 the bank reserved the right to withdraw at
any time prior to registration of transfer should any circumstances arise
which prevent or unduly delay the registration of the transaction. It was
contended on behalf of the purchaser that bank guarantees as a matter of
practice were all couched in that sort of way and that the seller must have
known of it and could not be heard to complain about it. The court left
this question open after the seller’s counsel had conceded that something
in the nature of the trade usage had grown up and ‘particularly where the
right is unqualified and exercisable by the grantor at its whim’.

[47] The words, ‘any circumstances’ would be limited to the
circumstances that would arise after the issue of the guarantee and
occasion an undue delay in effecting transfer.  It has to be borne in mind
that the seller is responsible for the timeous transfer of the property. It
would thus be within the seller’s powers to ensure maximum reduction of
delay. In my view the right to withdraw is not as wide as contended for
and is not liable to be employed capriciously.

13 1989 (3) SA 327 (N) at 331J-332A.

[48] Counsel for the respondent also argued that the guarantee could be
revoked after registration, inter alia, due to the insolvency of the
purchaser. In my view, the post registration points raised are fanciful and
are accordingly rejected. The possibilities raised by counsel could
perhaps have occurred during the communication delays of past eras.
Nowadays there would be almost immediate communication relating to
registration of transfer due to current technology.  It follows therefore that
this is not a realistic argument and furthermore is not a reasonable ground
to reject the letter of undertaking.

[49]  In my view the seller was not entitled to reject the guarantee. In the
result the guarantee delivered on behalf of the purchaser complied with
the obligations set out in the agreement of sale.  The seller was
consequently not entitled to cancel the agreement of sale between the
parties. The court a quo therefore erred in accepting the first respondent’s
argument. It follows therefore that the appeal must succeed.

[50]   The following order is made:

1. The appeal succeeds with costs.
2. The order of the court a quo is set aside and replaced by an order in the
following terms:

‘ (a) (i)
The written agreement concluded between the
applicant and the first respondent on 30 May 2006
(the agreement) in respect of the immovable property
described as Erf 301, Portion 16, Springfield Park (the
property), is of full force and effect;
(ii)
The letter of undertaking TRN No. M466831 dated 12
July 2006 by The Standard Bank of South Africa Ltd
is in compliance with the agreement;

(b)
the first respondent is ordered to do all such things and
execute all such documents, within five days of the service
of this order upon it, to cause the property to be transferred
from the first respondent to the applicant in the Deeds
Registry, Pietermaritzburg, against provision by the
applicant of a guarantee in terms of clause 3.3 of the
agreement;

(c)
in the event of the first respondent failing to do so, the
Sheriff: Durban North is hereby authorised and directed to
do all such things and execute all such documents to cause
the property to be so transferred;

(d)
the first respondent is ordered to pay the costs of this
application.’

____________________________
N Z MHLANTLA
ACTING JUDGE OF APPEAL

CONCUR:

HOWIE P

FARLAM JA

NAVSA JA

KGOMO AJA

THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:  The Registrar, Supreme Court of Appeal
Date:  22 MAY 2008
Status: Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal

P R CILLIE v M L GELDENHUYS
The SCA today delivered judgment in this case, which dealt with the rights to water from a fountain
on the farm Uitkomst in the Ceres district, Western Cape. The fountain is close to the border of the
farm and the water has been running down naturally due to the topography to the adjoining farm,
Matjiesrivier, where it had been used since time immemorial. The owner of Matjiesrivier, more than
30 years ago, opened the fountain and laid a pipe down to Matjiesrivier.

The owner of Uitkomst, in the ordinary course of his farming activities, had a borehole drilled some
200 m from the fountain. The extraction of water from the borehole affects the delivery of the
fountain.

The two main issues were (a) whether Matjiesrivier had, by means of prescription, obtained a
servitude over the water from the fountain and (b) if so, does that servitude prevent the owner of
Uitkomst from using his borehole to the detriment of Matjiesrivier. The SCA agreed with the
judgment of the Cape High Court concerning the first question (albeit on somewhat other grounds)
that a servitude by presciption had been established. However, it overruled the lower court on the
second question, holding that the prescriptive right did not include the right to prevent the owner of
Uitkomst of using water that is flowing towards the fountain. The servitude is limited to water as it is
emitted from the fountain.

The appeal was accordingly upheld and the interdict preventing the owner of Uitkomst to use his
borehole was set aside.
---ends---