- October 28, 2022
- |Concise Law Reports (CLR), Contracts, Legislation
CONTRACTS – PRIVITY OF CONTRACT
LEGISLATION – SECTION 17B OF THE COMMUNAL LAND REFORM ACT 5 OF 2002 – MINISTERIAL CONSENT TO THE SALE OF SHARES IS REQUIRED IN THE CIRCUMSTANCES
The Government of Namibia and the Namibia Development Corporation (NDC) (now the Namibia Industrial Development Agency (NIDA)) entered into an agreement termed a project lease agreement (the PLA) with Agri-Pro for the latter to manage and operate the agricultural project referred to in the agreement. After the death of the sole shareholder in Agri-Pro, the then executor of the estate engaged Serve Investments 84 (Pty) Ltd (Serve) to act as project manager of the project. Serve took on Agri-Pro’s task under the PLA and operated the project with effect from December 2015. On 7 September 2018, the former executor of the estate and Serve concluded a sale of shares agreement, selling those shares to Serve.
In terms of clause 22 of the sale of shares agreement, it was conditional upon the Minister of Agriculture, Water, and Forestry (the Minister) to provide his written consent for the transfer of shares. The condition requiring the Minister’s consent to the sale of shares is required by Art 11.1 of the PLA which, provides that no shares in Agri-Pro can be transferred without the written consent of the Minister and NDC. Serve endeavored over a period of time, without success, to secure the written consent of the Minister and NDC. As a consequence of the inaction of the Minister and NDC, Serve brought an application to the court a quo, seeking an order declaring that the Minister and NDC were deemed to have consented to the sale of shares, alternatively, for an order to direct them to consent to the sale or in the future alternative to make a decision to consent or not within seven days.
The application was opposed by the appellants on the grounds of privity of contract – the Minister declined to answer factual allegations concerning the background leading to the sale of shares agreement as the Government was not a party to it. The Minister however also opposed the relief on the grounds that a lease agreement of the premises to Agri-Pro, as it would be constituted under the sale of shares agreement, would be contrary to the provisions of s 17B of the Communal Land Reform Act 5 of 2002 (the Act) by reason of the shareholding in Serve (being held by shareholders outside Namibia).
The court a quo made an order on 22 December 2021 directing the Minister and NDC to make a decision within 5 days of the order whether or not to consent to the sale and transfer of the shares and communicate their decisions to the legal practitioner of Serve by that date. The court found it unnecessary to make a finding on the applicability or otherwise of s 17B of the Act because Serve had made an application under s 17B. The court a quo further ordered that the Minister and NDC were to pay the costs of the application.
The appeal is against the order compelling the Minister to make a decision. The appellants also opposed Serve’s cross-appeal against the refusal of the court a quo to declare that the Minister and NDC be deemed to have given their consent or to direct that such consent be given.
The issues on appeal were that the court must determine firstly whether the High Court was precluded by reason of privity of contract or secondly by s 17B of the Act from granting its order. The third issue concerns whether exceptional circumstances exist to justify this court to direct the Minister and NDC to grant their consent to the sale of shares as is sought in the cross-appeal.
SMUTS JA (DAMASEB DCJ and ANGULA AJA concurring) held that:
- The shares to be sold are those of Agri-Pro. Agri-Pro is a party to the PLA and has the rights and obligations as set out in the PLA. Under the PLA, its rights and obligations to operate and develop the agricultural project on that land are accorded to it by NDC and the Minister pursuant to the Government’s Green Scheme initiative. Its right to sell its shares are however restricted by article 11.1 of the PLA (requiring the consent of the Minister and NDC), failing which such a sale would amount to a breach as specified in article 11.2.
- The privity of contract point by the Minister in this regard is contrived and fails to take into account the contractual context of both clause 22 and article 11.1. It thus follows that the High Court was correct in brushing aside this baseless point.
- Agri-Pro’s rights and duties as project manager do not remotely approach the forms of customary land rights set out in their different manifestations contained in s 21 of the Act. Nor do they contemplate a leasehold under the Act in the sense that the term is generally understood and used in the Act.
- Section 17B of the Act does not find application by reason of Agri-Pro’s rights under the PLA not constituting a customary land right or a right to lease-hold as contemplated by the Act.
- It would be premature for this court to direct the Minister to consent to the sale as it has not been established that the Minister’s stalling amounted to a decision to refuse consent. Nor has it been shown that the Minister is biased or that the decision is a foregone conclusion. This matter is still at the mandamus
- Exceptional circumstances would need to be shown for a court to substitute its own decision for that of a decision-maker for the compelling reasons set out by the Chief Justice in Waterberg Big Game Hunting Lodge v Minister of Environment and Tourism 2010 (1) NR 1 (SC).
- Held further that, exceptional circumstances would ordinarily only arise after a decision is taken and would invariably relate to a fatally flawed and fraught process of decision-making and result in a reluctance on the part of a court to remit a matter for decision-making because of that.
As a result, both the appeal and cross-appeal were unsuccessful.
Minister of Agriculture, Water and Forestry v Serve Investments 84 (Pty) Ltd NASC 28 October 2022