Roodt Inc South Africa
Block A 7 Eton Road Sandhurst Johannesburg
Tel +27 11 685 0000
info@roodtinc.com
Johannesburg Office
JOHAN ROODT
jaroodt@roodtinc.com
UK Office
JOHN COHEN
jcohen@roodtinc.com

The limited protection afforded to a seller by a voetstoots clause in a contract of sale

A voetstoots clause does not protect a seller from liability for latent defects that were known to him and were not disclosed to the purchaser

The decision of the Supreme Court of Appeal in Banda v Van der Spuy [2013] ZASCA 23, handed down on 22 March 2013, does not make new law, but it will be a wake-up call to all sellers of property, particularly in the residential property market.

A seller's liability for latent defects and the effect of a voetstoots clause

It is trite that the seller of property incurs a legal liability toward the purchaser if the res vendita (the property being sold) had a latent defect at the time of sale, that is to say a non-obvious defect that rendered the property unfit or partially unfit for its intended purpose.

The purchaser's remedy in these circumstances is the actio quanti minoris for a reduction in the purchase price. The judgment in this case noted (at para [25]) that the cost of repairs may be used to quantify that amount where the actual value of the property cannot be determined, or is difficult to determine.

It is also trite that a seller can contract out of liability for latent defects by ensuring that the contract of sale contains a provision stipulating that the sale is voetstoots, but it has never been doubted that the seller forfeits the protection of a voetstoots clause if he was aware of the latent defect at the time of the sale but failed to disclose it to the purchaser prior to the conclusion of the agreement, and instead "designedly, craftily or fraudulently" concealed the existence of the defect.

Background facts

This particular case involved the sale of a house, the roof of which leaked prior to the sale and continued to leak after the sale.

It was not in dispute that, prior to the sale, the seller had effected repairs to the leaking roof, but in issue before the court was whether he knew, at the time of the sale, that the repairs had not fixed the cause of the leaks. The trial court (the Johannesburg High Court) had earlier held that, on a balance of probability, the purchaser had failed to prove that the seller had possessed such knowledge at the time of the sale, and dismissed the purchaser's claim.

At the trial, the seller had called an expert witness whose testimony established that the cause of the leaks in the roof was two-fold. Firstly, certain wooden roof poles were inadequate to support the weight of the thatch roof as a result of which the roof was gradually collapsing and, due to the movement of the roof, an opening had appeared between the flashing and the thatch through which rain water gained ingress and ran down the internal walls of the roof.

Secondly, the pitch of the roof was inadequate (that is to say, the roof was not steeply enough inclined) with the result that rain water was not running off the roof, but was being absorbed into the thatch, causing it to rot, which resulted in leaks.

The expert witness testified that the only way to fix the cause of the leaks was to demolish and reconstruct the roof with a proper design and the correct pitch.

The court concluded that these deficiencies in the roof constituted latent defects which rendered the house "unfit for habitation".

Was the seller aware that the cause of the leaking roof had not been remedied?

The question before the court was whether, at the time of the sale, the seller knew of these latent defects in the roof and whether he also knew that the repairs that had been done were inadequate to address the cause of the leaks. He of course denied such knowledge, but the court quoted decisions of the Appellate Division to the effect that –

‘...absence of reasonable grounds for belief in the truth of what is stated may provide cogent evidence that there was in fact no such belief’

and that –

‘The fact that a belief is held to be not well-founded may, of course, point to the absence of an honest belief, but this fact must be weighed with all the relevant evidence in order to determine the existence or absence of an honest belief.’

The seller had fraudulently promised to transfer to the purchaser a guarantee on the roof

A further factor in the case was that the contract of sale stated that the seller would transfer to the purchaser the guarantee on the thatch roof, given by the contractor who had effected repairs to the roof. In fact, at the time of the sale, the guarantee period had expired and no guarantee existed. The seller conceded that he knew this at the time of the sale.

The Supreme Court of Appeal affirmed the trial court's conclusion on this point that –

‘To have undertaken in these circumstances to provide a guarantee was thoroughly misleading and ... fraudulent’

Adverse credibility findings regarding the plaintiff's testimony

The trial court had concluded, having heard the testimony of witnesses, that the seller had been untruthful regarding the guarantee, and had in effect undertaken to deliver a guarantee to the purchaser, knowing that it had already lapsed because he did not want to sabotage the sale and he hoped that the purchasers would not have to invoke the guarantee.

On appeal, the Supreme Court of Appeal picked up on a point that the trial court had not sufficiently emphasised, namely why the seller had been reluctant to reveal that the guarantee had lapsed if he believed that the roof repairs were adequate.

The Supreme Court of Appeal held that, on the evidence, the seller did not have reasonable grounds to believe that the earlier repairs to the roof were adequate. The insurance assessor had told the seller, prior to the sale, that the repairs that had been done would merely delay further movement of the roof, and he had not said (as the seller claimed) that the leaks had been permanently cured.

The Supreme Court of Appeal asked, rhetorically, why, on his version of events, the seller had not revealed to the purchaser that the guarantee had lapsed and invited the purchaser to ask the assessor for confirmation that the cause of the leaks in the roof had been remedied.

A genuine belief is negated where there was fraudulent diligence in ignorance

The Supreme Court of Appeal quoted a judgment of the Appellate Division which held that a belief is not honest where that belief –

‘though in fact entertained by the representor may have been itself the outcome of a fraudulent diligence in ignorance – that is, of a wilful abstention from all sources of information which might lead to suspicion, and a sedulous avoidance of all possible avenues to the truth, for the express purpose of not having any doubt thrown on what he desires, and is determined to, and afterwards does (in a sense) believe.'

The court pointed out (at paras [20] – [22])that the seller had testified that the insurance assessor had told him that the roof repairs had not been executed as he would have liked, but the seller had then avoided asking the insurance assessor what he meant by this or what his reservations were. The court said that the seller's conduct in failing to press this source of information amounted to a "wilful abstention" and that he had embarked on –

"an avoidance of all possible avenues to the truth, for the express purpose of not having any doubt thrown upon what he desired and was determined to believe."

The court concluded (at para [22]) that the seller had not had an honest belief in the adequacy of the repairs that had been done to the roof or that the leaks had been permanently fixed. The court concluded that the seller was, at the least, conscious of the inadequate nature of the repairs to the defects in the roof and that he was therefore obliged to disclose this knowledge to the purchaser.

The court accepted, however, that the seller had not been aware that an additional cause of the leaks was the inadequate pitch of the roof.

The conclusions drawn by the court

The court concluded (at para [24]) that the sellers had been aware of, and had concealed, one of the causes of the leaks in the roof, namely an inadequate roof design that had resulted in a sagging of the roof that had not been permanently repaired. The seller's fraudulent conduct in concealing the existence of the defective and leaking roof resulted in a forfeiture of the protection of the voetstoots clause in the contract.

Consequently, said the court, the purchaser was entitled to be paid the difference between the purchase price of the house and its value, once the defective roof was taken into consideration.

The court also (at paras [28] – [30]) upheld the purchaser's claim for fraudulent, alternatively negligent misrepresentation, based on the seller's statements, prior to the sale, that the thatched roof was sound, that the leaks had been rectified, and held that the sellers were also aware that the contractor's guarantee on the roof had expired.

In the result, the purchaser was held to be entitled to delictual damages in the amount by which his patrimony had been diminished, namely the R450 000 that it would cost to repair the roof, and the court gave judgment in favour of the purchaser for this amount, plus interest and costs.

Back

 
Copyright © 2019 Roodt Inc.  Designed and Developed by Fyre Interactive home | newsletter| contact us