THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No: 654/12
Reportable

In the matter between:

KNOX D’ARCY AG
First Appellant

KNOX D’ARCY LIMITED                                        Second Appellant

and

LAND AND AGRICULTURAL DEVELOPMENT
BANK OF SOUTH AFRICA                                                Respondent

Neutral citation: Knox
D’Arcy
AG
v
Land
and
Agricultural
Development Bank of SA (654/12) [2013] ZASCA 93
(05 June 2013)
Coram:
LEWIS, MAYA, PETSE JJA, ERASMUS and
SWAIN AJJA
Heard:
7 May 2013
Delivered:
05 June 2013
Summary:
Contract – interpretation – whether appellants proved
compliance with the provisions of a written agreement entitling
them to a cession of book debts by respondent – issue arising
not pleaded – necessity and purpose of pleadings restated.

________________________________________________________
ORDER
___________________________________________________________

On appeal from: North Gauteng High Court, Pretoria (Makgoba J sitting
as court of first instance):

The appeal is dismissed with costs that include the costs of two counsel.
___________________________________________________________
JUDGMENT
___________________________________________________________
MAYA JA (LEWIS, PETSE JJA, ERASMUS and SWAIN AJJA
concurring):

[1] This appeal is the latest step in various, protracted court skirmishes
between the parties. The appellants appeal against a judgment of the
North Gauteng High Court, Pretoria (Makgoba J) which dismissed their
claim for a cession of book debts worth R123 million and payment of all
funds received from debtors in respect of those debts, alternatively
payment of the sum of R123 million and interest. The appeal is with the
leave of the court below.

[2] The two appellants are part of the Knox D’Arcy Group of
companies
which
conducts
business
as
profit
improvement
implementation consultants worldwide. The first appellant is a Swiss
company that carries on business as an international management
consultant. The second appellant was incorporated according to the
company laws of South Africa and has its principal place of business in

Johannesburg. It provides administration and marketing services to and
carries out its consultancy assignments in South Africa through the first
appellant. The respondent (the Land Bank) is a State owned corporate
entity. It is mainly concerned with promoting and facilitating access to
ownership of land for the development of farming enterprises for
agricultural purposes and provides financial services and assistance
therefor.

[3] The relationship between the parties commenced on 25 June 2002
when they concluded a written agreement in terms of which appellants
would perform certain services for the Land Bank. Disputes arose and the
Land Bank refused to pay the balance owing for the services rendered.
The Land Bank further refused to have the disputes referred to arbitration
as provided for in the agreement. The appellants then launched court
proceedings, which the Land Bank opposed, for a declaration that the
disputes were subject to arbitration. Subsequently, the appellants brought
contempt proceedings and other interlocutory applications against the
Land Bank. The parties ultimately settled all this litigation in terms of a
written agreement of settlement dated 7 March 2006, which was made an
order of court on 19 April 2006.

[4] The material terms of the settlement agreement read:

‘1.    The respondent shall pay to first [appellant] the sum of R32 million
… plus VAT on date of signature hereof.
2.
2.1   On date of signature, and thereafter for a period not exceeding two
months, the parties shall, in the utmost good faith, use their best
endeavours to identify to the reasonable satisfaction of both parties,

R123 million … worth of commercial debt in the medium to high and
in the low to medium risk categories, as defined by the respondent’s
Arrears Management System which meet the following criteria:
2.1.1 either the respondent has made a 100 percent provision in its
accounting books on the specific loan, in accordance with the AC 133
accounting standard; or
2.1.2 the respondent will not be required, in terms of the AC 133
accounting standard, to make additional provision as a result of ceding
to the first [appellant] any of the loans identified;
and the customers’ respective accounts shall have been in arrears for
twelve months or more. (“the identified debt”);

2.2
Notwithstanding the provisions of 2.1 above, the Parties may agree
other alternative criteria or other commercial debt for purposes of
determining the identified debt, which for the sake of clarity, shall
thereupon be incorporated in and form part of the identified debt.
2.3
… in determining what is reasonable, the respondent shall not be seen
as having acted unreasonably if it disagrees with a determination of an
account if such a determination would result in the respondent being
required to make additional provision in its accounting books in order
to comply with AC 133 accounting standard.

2.4
the identified debt shall be ceded and assigned by respondent to first
[appellant] in terms hereof.
3. …
4. …
5.
Once the first [appellant] and respondent have identified to the respective
parties reasonable satisfaction, the identified debt in the full amount of

R123 million … the first [appellant] will, within 7 (seven) days of the
identified debt being ceded and assigned to the first [appellant] as
contemplated herein, pay to respondent R2 300 000.00 …. To the extent
that the parties may only be able to agree the identified debt at some lesser
amount than the envisaged R123 million …, then in that event, the
aforesaid payment to the Respondent shall be reduced proportionately (my
emphasis).
6.
If the parties do not identify any accounts making up the identified debt,
the first [appellant] shall be absolved from paying the amount of R2,
300,000.00 or any portion thereof to the Respondent.’

[5] The Land Bank duly paid the sum of R32 million on 16 March
2006 in compliance with clause 1 of the settlement agreement. It further
furnished the appellants with a schedule (Annexure “B”), which reflected
its itemised bad debt in the sum of R142 315 736.68 for consideration as
debt to be ceded to the appellants (the identified debt).1

[6] However, the parties could not agree that they had identified debt
which met the criteria prescribed in clause 2.1 of the settlement
agreement.2 The appellants took the view that they had. The Land Bank
disagreed. This prompted the institution of the present suit, on 22
September 2006.

[7] But it transpired before the launch of the action that the Land Bank
was in fact recovering the identified debt. Its rejection of the appellants’

1 Annexure B sets out three separate categories of outstanding loans, (a) ‘Long Term Loans - Low to
Medium - 1-2 years (excluding unwanted debt)’, (b) ‘Long Term Loans - Low to Medium - 2-3 or 3+
years’ and (c) ‘Long Term Loans - Medium to High 1-2 years (excluding unwanted debt)’.

2 The dissension appears in a long trail of correspondence which flowed between the relevant officials
which culminated in a meeting held on 31 May 2006.

request to secure the collected funds pending the resolution of the
disagreement prompted yet another bout of litigation. The dispute was
resolved by a court order dated 31 August 2006. The Land Bank was
ordered, inter alia,  to ‘[r]ing fence all payments and/or remittances [it]
received … from debtors in respect of R142 million worth of identified
debt detailed in [Annexure “B”], into a ring fenced interest bearing
account to be held for the account of whichever party might ultimately be
successful in the proceedings’. By the time the matter reached this court,
the recovered, ring-fenced funds amounted to R155 227 275. And the
appellants’ claim, now accompanied by a tender to pay the sum of R2.3
million in terms of clause 6 of the settlement agreement, had also
escalated from R123 million to the sum of the ring-fenced funds.

[8] At the trial, the court below identified the issues for adjudication as
follows: (a) whether the parties identified debts which met the set criteria
in clauses 2.1.1 and 2.1.2 on 31 May 2006; (b) whether the appellants
proved that the identified debt described in Annexure “B” had been or
should have been 100 per cent provided for or impaired (in common
parlance, written off); (c) whether the Land Bank would be required in
terms of the AC 133 accounting standard (the AC 133)3 to make
additional provision as a result of ceding any of the identified loans and
(d) whether the Land Bank was in breach of the terms of the settlement
agreement.

[9] The appellants led the evidence of four witnesses; Mr Richard
Steele, Mr Willem Alberts, and two accounting experts, Professor Harvey

3 The AC 133 accounting standard is the acronym of the ‘IAS 39 (AC 133) Financial Instruments:
Recognition and Measurement (revised January 2006)’ which is a statement of generally accepted
accounting practice issued by the Accounting Practices Board of South Africa. It is a standard applied
by money lending companies when producing their financial reports and accounts.

Wainer and Mr Mark Pinington. Steele testified as follows. He was
seconded by the Knox D’Arcy Group to the first appellant between 2001
and 2006. His mandate was to carry out the performance improvement
programme for the Land Bank which was struggling to recover loans
from its debtors. The programme was three-pronged. The module
relevant for present purposes was designed to improve the Land Bank’s
recoveries process and reduce its arrear debt.4

[10] In that process, he obtained intimate knowledge of the Land Bank’s
accounting and debt recoveries processes, some of which were designed
by him. The systems implemented by the Land Bank comprised (a) the
AC 133; (b) the doubtful debt provisions policy (the DDPP) which the
Land Bank adopted by 2003 to comply with the AC 133 for the
establishment of loan loss provision for irrecoverable debt and, during the
same period, (c) the arrears management system (the AMS), a computer
database programme which analysed the Land Bank’s entire book loan in
arrears by breaking down and quantifying the arrears into different
categories to allow monitoring of progress and the measuring of the
recoveries processes. Incidentally, the performance improvement
programme was successful. With the aid of its new efficient recoveries
processes, the Land Bank recovered a substantial number of loans it had
written off as irrecoverable and saved an approximate sum of R501
million per annum.

[11] The effect of the DDPP was to classify all commercial long term,
low to medium and medium to high risk loans overdue for at least 12
months as a loss. One hundred per cent provisioning or impairment was

4 The other two modules redesigned the Land Bank’s organization structure, improved its productivity,
reduced its costs base, improved loans and designed new products that the Land Bank could supply to
its customers.

applied to the loans unless they were well-secured and legal action had
commenced for realisation of the collateral. The Land Bank’s auditors,
Deloitte, verified that provisioning of its accounts for the year ended in
March 2005 complied with the AC 133. In Steele’s view, the Land Bank
could have so complied only by applying the DDPP to the debts because
if ‘they were not 100% provided for, then they did not comply with AC
133’. He believed that the provisioning percentages in Annexure “B”,
which were all less than 100 per cent, were not the specific provisions
required by the DDPP but general provisions applied to the different loan
categories in accordance with the auditors’ model. He mentioned that the
appellants’ efforts to ascertain on which documents the audit was based
from the Land Bank’s auditors failed.

[12] He compiled a schedule which contained published accounts of the
Land Bank for the years 2001 to 2009. For the year ended 2005 the total
provision for long term loans amounted to R764 million. This meant that
there was ‘more than enough provisions in the [Land Bank’s] accounts
for the identified debt’ as all long term debt was fully provided for. The
loans in Annexure “B” fell squarely within that category despite the
different percentages reflected in the schedule. The Land Bank would,
therefore, not have to make additional provision for the debt in its
account by ceding it to the appellants.

[13] Steele explained that the appellants initially claimed R42 million
from the Land Bank. At a meeting he had with its directors on 18 January
2006, they offered to pay the appellants R29.7 million in cash. Through
negotiations, the parties then agreed that the Land Bank would pay the
amount it tendered and cover the R12.3 million shortfall by ceding to the
appellants debts of the nature described in the settlement agreement worth

R123 million to which they ascribed the value of ten cents in the rand.
The appellants would keep the profit if they collected more than was
anticipated. And if they collected less, they would bear the loss. Steele
testified that Mr Mukoki, the Land Bank’s Chief Executive Officer, and
its directors thought this a very good bargain as they considered the debt
completely worthless.

[14] Mukoki undertook at the meeting that the Land Bank would cede
to the appellants loans that were fully provided for and required no
further provisions on the settlement agreement. Steele substantiated this
claim with an extract of minutes of the Land Bank’s board of directors
held on 23 February 2006. The minute recorded that:
‘In reply to a comment on the debtor’s book to be handed to Knox D’Arcy, Mr
Mukoki advised that it was a book that had been written off and the files closed.
These debtors were normally handed over to debt collectors who took what they
believed could be collected. In addition the amount to be paid to Knox D’Arcy had
been provided for in 2005 year end so would not impact on the current year results.’
Mr Vallentgoed, the Land Bank’s legal recoveries manager, did not
dispute Mukoki’s undertaking when he mentioned it to him subsequently.

[15] Alberts stated that he was employed by the Land Bank from 1981
to 2006. In 2004, he was appointed head of retail and managed the Land
Bank’s loan book which was then valued at R7 billion. He became acting
general manager of operations in 2006 and assumed overall responsibility
for the AMS. The official responsible for running the AMS reported to
him directly and informed him that the DDPP was applied to all loans in
the relevant categories. He saw the relevant supporting documents.

[16] He said he was present at a board meeting of the Land Bank’s
directors where Mukoki confirmed that the debt to be ceded was fully

provided for and needed no further provisions in the books. He was
certain that the loans in Annexure “B” were fully provided for in
accordance with the Land Bank’s policy. He believed Annexure “B” to be
an inaccurate summary, ‘cut and pasted’ from the global operational
report of all the Land Bank’s loans and spread sheets indicating 100 per
cent provisioning for the relevant debt that he reviewed on a monthly
basis. He surmised that the schedule was prepared by the legal
department, and not the operations department that was qualified to do so,
‘to prepare themselves for the agreement’ with the appellants. The figures
reflected in the schedule were contrary to the Land Bank’s policy.

[17] The appellants’ accounting experts were called to explain whether
the requirements of clause 2.1 of the settlement agreement were met.
According to Wainer, whose mandate was confined to an examination of
clause 2.1.2, the latter provisions were superfluous and ‘made no
accounting sense’ because they sought to make provision for a debt that
no longer existed in the Land Bank’s books of account. He would not
venture an opinion on whether the loans were fully provided for because
he had no access to the relevant underlying documentation.

[18] Pinington’s evidence did not go beyond confirming that the Land
Bank’s approach to calculating provision or impairment for its debt
complied with the AC 133 and supporting Wainer’s view on the value of
clause 2.1.2. He said that the provisions on Annexure “B” were average
based. It transpired during his cross-examination that he had recourse
only to Annexure “B” and based his opinion that the debt it reflected was
fully provided for on the assumption that the DDPP had been applied to
it. He did not know if any of the debt was secured and, if it was, whether
the realisation processes would have commenced against its collateral. He

ultimately conceded that he was unable to conclude that the loans were or
ought to have been fully provided for without that information.

[19] The Land Bank called one witness, Ms Ntsietso Mofokeng. She
was the Land Bank’s legal services and recoveries general manager
during 2006 until she left the Land Bank in 2008. She believed that
Annexure “B” was prepared by the Land Bank’s AMS unit at the request
of her department. She had no insight into its compilation. She knew
about the AMS, the DDPP and the AC 133 but disavowed any knowledge
of the manner in which the Land Bank made provision for its loans. She
thought that the percentages allocated to the different loans in the
schedule were not specific provisions but rather general provisions made
on an average basis.

[20] She understood the settlement deal to mean that the Land Bank
would cede to the appellants its irrecoverable debt which had no value to
it, in respect of which it had exhausted its recoveries processes, and
would not affect its results by requiring additional provisioning. She
recalled the board meeting of 18 January 2006 which she said she
attended. According to her, Mukoki meant that whilst the debt to be
ceded would be fully provided for, it nonetheless still had to be identified.
The debt in Annexure “B” did not meet the relevant criteria and that was
the core of the dispute. Agreement was never reached in that respect and
Steele was not amenable to her proposal to explore other criteria to
resolve the impasse as the settlement agreement allowed.

[21] The court below made adverse credibility findings against Steele
and Alberts and rejected their evidence. It found Steele unimpressive for
being long-winded, defensive and incoherent. Alberts’ evidence was

jettisoned as unreliable hearsay because ‘he relied … on information
acquired from Mr Mukoki and also … a certain individual that reported to
him’. The court concluded that his entire evidence was false because he
wanted it to believe that the provisioning percentages in Annexure “B”
‘were thumb-sucked’ by the Land Bank’s legal department and failed to
provide an acceptable explanation for different percentages reflected in
the schedule. Regarding Pinington, the court found that his opinion was
based on wrong assumptions and that he ‘correctly admitted that the
entire basis of his report that the debts in annexure “B” should have been
fully provided for was wrong’.

[22] Mofokeng, who is shown by the record to have had limited
independent recall of the relevant events and mostly gave vague answers,
on the other hand, made a strikingly favourable impression on the court
below. The court accepted her evidence without hesitation because in its
view she ‘gave evidence in a very relaxed and confident manner … was
in good spirit … was very lucid … impressed as a person of intelligence
[and] displayed an excellent recall of her own evidence.’

[23] The court below considered the evidence of Steele and Mofokeng
vital for deciding what it considered to be the appellants’ cause of action
ie, whether the parties identified debts which met the relevant criteria as
alleged by the appellants. It then found that there were ‘two irreconcilable
versions’ in light of the ‘stark differences’, in that evidence. It proceeded
to resolve the ‘dispute’ merely by pitting the respective versions against
each other and rejecting Steele’s evidence, for being ‘very poor’, unless it
corresponded with that given by Mofokeng.

[24] The court below found that (a) the Land Bank had no duty to prove
the percentage provisions in Annexure “B”, (b) the appellants failed to
prove that the Land Bank fully provided for the loans set out in Annexure
“B”, (c) clause 2.1.2 was void for vagueness and therefore unenforceable
and (d) the evidence adduced by the appellants was insufficient to prove
their pleaded case that the parties identified debts which met the relevant
criteria.

[25] On appeal before us, it was contended on the appellants’ behalf
that the court below erroneously made credibility findings without having
regard to the probabilities. It is so that that court made credibility findings
which it based solely on the demeanour of the witnesses. Its assessment
of the evidence was, in turn, based wholly on such credibility findings. In
that exercise, it completely ignored the general probabilities of the matter
and the proven facts which it ought to have also considered. That
approach, from which counsel for the Land Bank prudently dissociated
themselves, is wrong and constitutes a material misdirection.5 And that
apart, its impressions of the witnesses are simply not supported by the
evidence. But more importantly, the court plainly did not grasp the import
of Mofokeng’s evidence as it would otherwise have realised that she did
not refute the appellants’ version. There was, essentially, no factual
conflict to be resolved between the respective versions. It thus had no
reason to engage in the enquiry upon which it embarked.

5 Body Corporate of Dumbarton Oaks v Faiga 1999 (1) SA 975 (SCA) at 979B-I; Santam Bpk v
Biddulph 2004 (5) SA 586 (SCA) paras 5 and 6; ABSA Bank v Bernet 2011 (3) SA 74 (SCA) para 12;
Stellenbosch Farmer’s Winery Group Ltd & another v Martel et Cie & others 2003 (1) SA 11 (SCA).

[26] But this finding does not assist the appellants’ case. Their main
contention was that they proved on a balance of probabilities that full
provision was made or should have been made by the Land Bank for the
debt on Annexure “B”, regardless of the fact that the schedule recorded
that the debt had been provided for in percentages lower than 100 per
cent as these were not specific but general provisions and the Land Bank
did not rebut their evidence that the debts were fully provided for. It was
submitted further that the criterion in clause 2.1.2, which was not void for
vagueness but was unnecessary, was met, in compliance with the AC 133,
as no additional provision as a result of the cession of the debt would be
required.

[27] There is a fundamental difficulty with the main proposition. It is
rooted in the party’s pleadings. The key allegations in the appellants’
particulars of claim read:
‘7 Consequent upon the conclusion of the agreement:
7.1 During or about March 2006 the [Land Bank] made payment to the [first
appellant] of R32 million.
7.2 On or about 31 May 2006 the parties identified R142 315 736.68 worth of debt
that met the criteria set out in the agreement. The schedule recording such identified
debt as defined in the agreement is attached marked “B”.
8 The R142 315 736.68 worth of debt set out in Annexure “B” meets the criteria set
out in [clause 2.1 of the settlement agreement].’

[28] In its plea, the Land Bank denied the allegations in paragraphs 7.2
and 8. It averred that Annexure “B” reflected all the loans in its books of
account and that they did not meet the criteria in clause 2.1 of the

settlement agreement. This was because it had not made 100 per cent
provision for them in accordance with the AC 133. It would thus be
required to make additional provision in its books of accounts as a result
of ceding any or all of the loans to the first appellant.

[29] These issues remained in contention up to trial stage as evidenced
by counsel’s opening addresses. In that court, counsel for the appellants
defined their case as follows:
‘The issue in the case is whether there are debts which meet the requirements, the
criteria which the written agreement provides they were to be. They had to be of a
certain type and a certain class and they had to comply with certain criteria and that is
the dispute in this matter.  … The parties had to get together and within two months
identify the debt. … The parties did get together and agreed everything in relation to
the loans except [the] two criteria [in clause 2.1].’

[30] The Land Bank’s counsel dismissed this statement as a
misidentification of the issues between the parties that was not supported
by the cause of action pleaded by the appellants. He reiterated the Land
Bank’s stance that the parties never identified debt which satisfied the
relevant criteria and that this was the real issue that the court below had to
adjudicate.  The court below then captured the arguments as follows:
‘But Mr Burman, the defendant’s case is that the parties never identified such a debt.
You operate on the premises that such debt was identified, all what was thought
agreed upon was the criteria … they say that even the identification never took place
let alone criteria, so you people are not with each other ….’
To this summation, the appellants’ counsel responded ‘Yes, yes, you are
entirely correct, M’Lord’. The case then proceeded on that basis. And
this, obviously, is the reason for the Land Bank’s subsequent failure to

call its proposed expert witnesses who were to testify on whether the
criteria in clause 2.1 were met.

[31] Counsel for the appellants was constrained to concede in argument
before us that there was no evidence of a vital element of the appellants’
cause of action – that the parties agreed on the identified debt as pleaded
in paragraph 7.2 of their particulars of claim. The concession was proper
in light of the evidence in which the appellants’ own witnesses
impeached even Annexure “B”, the very foundation of their case as
pleaded in paragraph 7.2.

[32] Realising the grave problem this posed, appellants’ counsel then
argued that the appellants could still rely on the allegations in paragraph 8
of the particulars of claim successfully as they constituted a separate and
distinct cause of action that had been an issue at the trial. The Land Bank
did not meet its end of the bargain by ensuring that suitable debt was
identified as contemplated in the settlement agreement, continued the
argument. On that basis, counsel urged, we should find in the appellants’
favour that, despite the lack of agreement between the parties on that
issue, there was nevertheless, ‘objective compliance with or objective
fulfilment of the criteria in clause 2.1’.

[33] I venture to say that there are strong hints in the undisputed
evidence that the conduct of the Land Bank in its dealings with the
appellants, and in this particular regard too, may easily be construed as
obstructive. In addition to all the parties’ other skirmishes often brought

about by the Land Bank’s resistance, which have kept our courts very
busy, the appellants told of its unyielding refusal to produce documents
that formed the basis of the perplexing Annexure “B” and would explain
the computation of the percentage provisions it reflected. The source
documents were not produced on the basis that they were confidential or
privileged. When confronted with a court order obtained in a hard fought
application that compelled it to discover the documents, the Land Bank
raised an incredible excuse that the documents did not exist or were no
longer available.

[34] Be that as it may, however, the appellants’ contention for a finding
of a ‘deemed agreement’ is beset by its own problems. First, even
assuming that the allegations in paragraph 8 of their particulars of claim
encompass a cause of action that is separate from the one set out in
paragraph 7.2, as contended, the requirement in clause 2.1 for the parties
to identify suitable debt, which was not met, remains a hurdle. But the
real obstacle is the manner in which the appellants couched their cause of
action. From the onset of the proceedings until trial, the appellants’ case
was simply that the parties identified the relevant debt which was
reflected in Annexure “B” and disagreed only in respect of the question
whether such debt met the criteria in clause 2.1 of the settlement
agreement. Now they seek to rely on a radically mutated version of that
case: one that is akin to a claim based on the equitable doctrine of
fictional fulfilment which prevents a party from taking advantage of its
own default to the loss or injury of another.6

6 East Asiatic Co Ltd v Hansen 1933 NPD 297; Koenig v Johnson & Co Ltd 1935 AD 262; First
National Bank Ltd v Avtjoglou 2000 (1) SA 989 (C) at p 996D-H; Du Plessis NO & another v Goldco
Motor Supplies (Pty) Ltd 2009 (6) SA 617 (SCA) paras 22-27; RH Christie and GB Bradfield
Christie’s The Law of Contract in South Africa 6 ed (2011) 156.

[35] It is trite that litigants must plead material facts relied upon as a
basis for the relief sought and define the issues in their pleadings to
enable the parties to the action to know what case they have to meet.7
And a party may not plead one issue and then at the trial, and in this case
on appeal, attempt to canvass another which was not put in issue and fully
investigated.8 The Land Bank (and the trial court for that matter) was
never put on notice that it would answer a case that it had frustrated,
deliberately or otherwise, the performance of the obligation imposed by
clause 2.1 of the settlement agreement. Clearly, we cannot now, on
appeal, decide issues that have neither been raised nor fully ventilated
previously.9

[36] For these reasons the appeal cannot succeed and the following
order is made:
‘The appeal is dismissed with costs that include the costs of two counsel.’

__________________
MML MAYA
JUDGE OF APPEAL

7 See, for example, Moaki v Reckitt & Colman (Africa) Ltd 1968 (3) SA 98 (A) at 102A; Durbach v
Fairway Hotel Ltd 1949 (3) SA 1081 (SR) at 1082; Imprefed (Pty) Ltd v National Transport
Commission 1993 (3) SA 94 (A) at 107C-H.
8 Middleton v Carr 1949 (2) SA 374 (A) at 386.
9 Ras NNO v Van der Meulen 2011 (4) SA 17 (SCA) para 16.

APPEARANCES
For the appellant:       B W Burman SC (with him B W Maselle)
Instructed by:
Bowman Gilfillan Inc, Johannesburg
McIntyre & Van der Post, Bloemfontein

For respondents:        I V Maleka SC (with V P Ngutshane and H Rajah)

Instructed by:

Strauss Daly, Johannesburg

Claude Reid Inc, Bloemfontein

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:
5 June 2012
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.

KNOX D’ARCY AG v LAND AND AGRICULTURAL DEVELOPMENT BANK
OF SA

The Supreme Court of Appeal (SCA) today dismissed an appeal by Knox D’Arcy AG and
Knox D’Arcy Ltd (the appellants) against an order of the North Gauteng High Court,
Pretoria dismissing their claim against the Land Bank for a cession of book debts worth
R123 million and payment of all funds received from debtors in respect of those debts,
alternatively payment of the sum of R123 million plus interest. By the time the matter came
before the SCA, the Land Bank had recovered approximately R156 million from its
debtors. The appellants’ claim, therefore, escalated to that amount.

The parties had entered into an agreement in terms of which the appellants would render
certain services to the Land Bank. A dispute arose between the parties which resulted in
Land Bank refusing to pay the balance owing for the services rendered by the appellants.
The appellants then instituted proceedings against the Land Bank in which they sought

certain relief. However, these proceedings were abandoned after the parties entered into a
written settlement agreement, which was subsequently made an order of court. In terms of
clause 2.1 of the agreement the parties were required to identify loans owing by the Land
Bank’s customers, which met certain criteria. This was the debt to be ceded to the first
appellant. There was disagreement between the parties regarding whether they had
identified debt which met the criteria set out in clause 2.1, which resulted in the appellants
instituting proceedings in the high court. The high court held that the parties had not
identified the debt which met the criteria and dismissed the appellants’ claim with costs.
The appellants then appealed to the SCA.

Before the SCA counsel for the appellants conceded that the appellants had failed to
establish that the parties had agreed on the identified debt as pleaded in their particulars of
claim. Despite this concession, counsel argued that the Land Bank had frustrated the
fulfilment of clause 2.1 and that the clause should be deemed to have been fulfilled. On this
basis, counsel argued, the appellants were entitled to succeed. The appellants had not
pleaded nor made out a case before the high court, however, that the Land Bank had
frustrated the fulfilment of clause 2.1. The issue was raised for the first time before the
SCA. In rejecting counsel’s argument, the SCA held that it could not decide, on appeal, an
issue that was neither raised nor fully ventilated before the high court. It then dismissed the
appeal.