IN THE SUPREME
COURT OF NAMIBIA

CASE
NO.: SA 17/2012

DATE:
26 MARCH 2014

REPORTABLE

In the matter
between

LAURENT ANDRÈ
RAYMOND MAROT..................................................First
Appellant

ANNIE RENEÈ
MAROT..........................................................................Second
Appellant

BENOIT RENÈ
RAYMOND
MAROT.......................................................Third
Appellant

And

LANCE CLIFFORD
COTTERELL..................................................................Respondent

Coram: SHIVUTE
CJ, MARITZ JA and MAINGA JA

Heard: 26 June
2013

Delivered: 26
March 2014

APPEAL
JUDGMENT

SHIVUTE CJ
(MARITZ JA and MAINGA JA concurring):

[1] The appellants,
who are all foreign nationals, entered into an agreement with the
respondent, a Namibian citizen, in terms of which they purported to
purchase 50% member's interest in a close corporation known as
Wildlife Conservation Namibia CC (the close corporation) and 100% of
the respondent’s claims against the close corporation. The
Memorandum of Agreement of Sale (the agreement) included a clause
providing that the agreement was in effect a sale of 50% of the
immovable property and 100% of the movable property owned by the
corporation.¹
It is common cause that the immovable property in question is
commercial agricultural land and that the appellants were entitled to
take possession of the immovable property on signature of the
agreement. The agreement further provided that N$1 million was
payable on the date of signature and would not be refundable should
the agreement be cancelled due to the purchasers having breached any
of the terms and conditions contained therein.

[2] The appellants
paid the N$1 million to the respondent as a ‘deposit’.
Subsequent to this payment, the respondent alleged that he became
aware of the provisions of s 58 of the Agricultural (Commercial) Land
Reform Act 6 of 1995 (the Act), which, amongst others, prohibits a
foreign national from entering into an agreement 'with any other
person' in terms of which a right of occupation or possession of
agricultural land is conferred on the foreign national for a period
exceeding 10 years or for an indefinite period without the consent of
the Minister of Lands and Resettlement (the Minister). The respondent
accordingly instructed his legal practitioners to cease forthwith
with the implementation of the agreement. Subsequent to this
instruction, the appellants instituted proceedings in the High Court
to recover the N$1 million they had paid to the respondent, as well
as N$410 010,25 for damages which they had allegedly suffered as
they maintained that the respondent’s instruction to his legal
practitioners not to proceed with the implementation of the agreement
constituted a repudiation of the agreement, which repudiation they
had accepted.

[3] The appellants'
claims were met with a special plea of illegality. The respondent
contended that the agreement was void ab initio as it contravened the
provisions of s 58(1)(b)(ii) of the Act. The respondent also
instituted a counter-claim conditional upon the special plea failing
and alleged in turn that the appellants had repudiated the agreement
which repudiation the respondent had accepted.

[4] At the request
of the parties, the special plea was argued separately. The High
Court upheld the special plea, reasoning that the agreement is one in
contravention of s 58(1)(b) of the Act and is accordingly void ab
initio. It concluded that the Court would not entertain any claim
based on such a contract.

[5] The appellants
accordingly appealed to this Court. The appeal was argued on behalf
of the appellants by Mr Tötemeyer, assisted by Mr Strydom, while
Mr Heathcote, assisted by Ms Bassingthwaighte, argued on behalf of
the respondent. The Court is indebted to counsel for the extensive
and helpful submissions made to it.

Is the Agreement
in contravention of the Act?

[6] The right to
acquire, own and dispose of property whether immovable or movable in
Namibia has been conferred to 'all persons'. However, such a right is
subject to the rider that Parliament may by legislation prohibit or
regulate the right to acquire property by persons who are not
Namibian citizens. Article 16 of the Namibian Constitution says so
and provides in full that:

‘All persons
shall have the right in any part of Namibia to acquire, own and
dispose of all forms of immovable and movable property individually
or in association with others and to bequeath their property to their
heirs or legatees: provided that Parliament may by legislation
prohibit or regulate as it deems expedient the right to acquire
property by persons who are not Namibian citizens.’

[7] Subsections (1)
and (2) of s 58 of the Act, evidently promulgated in terms of the
proviso in Art 16, provide as follows:

'58 Restriction on
acquisition of agricultural land by foreign nationals

(1) Notwithstanding
anything to the contrary in any other law contained, but subject to
subsection (2) and section 62, no foreign national shall, after the
date of commencement of this Part, without the prior written consent
of the Minister, be competent-

(a) to acquire
agricultural land through the registration of transfer of ownership
in the deeds registry; or

(b) to enter into an
agreement with any other person whereby any right to the occupation
or possession of agricultural land or a portion of such land is
conferred upon the foreign national-

(i) for a period
exceeding 10 years; or

(ii) for an
indefinite period or for a fixed period of less than 10 years, but
which is renewable from time to time, and without it being a
condition of such agreement that the right of occupation or
possession of the land concerned shall not exceed a period of 10
years in total.

(2) If at any time
after the commencement of this Part the controlling interest in any
company or close corporation which is the owner of agricultural land
passes to any foreign national, it shall be deemed, for the purposes
of subsection (1)(a), that such company or close corporation acquired
the agricultural land in question on the date on which the
controlling interest so passed.’

[8] 'Agricultural
land' is defined in s 1 of the Act as meaning,

'any land or an
undivided share in land, other than-

(a) land situated in
a local authority area as defined in section 1 of the Local
Authorities Act, 1992 (Act 23 of 1992);

(b) land situated in
a settlement area as defined in section 1 of the Regional Councils
Act, 1992 (Act 22 of 1992);

(c) land of which
the State is the owner or which is held in trust by the State or any
Minister for any person ;

(d) land which the
Minister by notice in the Gazette excludes from the provisions of
this Act.'

[9] 'Controlling
interest' is defined as follows:

'"controlling
interest", in relation to-

(a) a company,
means-

(i) more than 50
percent of the issued share capital of the company;

(ii) more than half
of the voting rights in respect of the issued shares of the company;
or

(iii) the power,
either directly or indirectly, to appoint or remove the majority of
the directors of the company without the concurrence of any other
person; or

(c) a close
corporation, means more than 50 percent of the interest in the close
corporation.'

[10] 'Foreign
national' is defined in s 1 as meaning,

'(a) a person who is
not a Namibian citizen;

(b) in relation to a
company-

(i) a company
incorporated under the laws of any country other than Namibia; or

(ii) a company
incorporated in Namibia in which the controlling interest is not held
by Namibian citizens or by a company or close corporation in which
the controlling interest is held by Namibian citizens; and

(c) in relation to a
close corporation, a close corporation in which the controlling
interest is not held by Namibian citizens.'

[11] By enacting s
58 of the Act the Legislature chose to regulate rather than prohibit
the acquisition of agricultural land by foreign nationals. This
scheme is sanctioned by Art 16 of the Constitution. The
constitutionality of the section cannot therefore and does not arise
in the present proceedings. As previously mentioned, the appellants
are foreign nationals as defined by the Act. It is also common cause
between the parties that the property concerned is agricultural land
as defined by the Act, and that the consent of the Minister was not
obtained for the sale of 50% collective member's interest in the
close corporation to the appellants. The issue in contention is
whether s 58 of the Act finds application on the facts of this case.

Counsel's
submissions

[12] Mr Tötemeyer’s
first argument concerns the term ‘controlling interest’
which, as already noted, is defined by the Act in relation to a close
corporation as being more than 50% of the interest in the close
corporation. He contends that the agreement is not hit by s 58(1)(a)
read with subsec (2) because the appellants had not acquired
controlling interest in the corporation and so the Minister's consent
was not required. In the submission of counsel, the right to own and
dispose of property conferred to persons by Art 16 includes the right
to use and enjoy such property. Close corporations, so the argument
runs, do not have bodies to kick or souls to damn. Accordingly, the
right to use and enjoy property is exercised by the human agents of
the corporation, namely the members. It follows then, so it is
argued, that a close corporation that owns agricultural land cannot
'possess' or 'occupy' such land other than by means of humans
possessing or occupying such land on its behalf.

[13] Counsel
proceeded to argue that a 50% member of a close corporation by virtue
of his or her membership in the corporation, has possessory rights
over the property in the corporation: he or she is entitled to a
right of occupation of the agricultural land owned by a close
corporation of which he or she is a member and is entitled to
conclude an agreement with fellow members giving him or her even
exclusive occupation of such property. Section 58(1) of the Act does
not render the acquisition (without ministerial consent) of a 50%
member's interest in a close corporation that owns agricultural land
illegal and likewise would not render rights of possession which flow
from such acquisition illegal. In terms of the Close Corporations Act
26 of 1988 (the Close Corporations Act), members of the corporation
may by agreement regulate its internal affairs and agree on anything
relating to them, as long as it is not inconsistent with the
provisions of the Close Corporations Act, so it is contended.

[14] Counsel further
argues that the principles relating to close corporations 'to a large
extent' resemble those of partnerships. After mentioning the
similarities, he submits amongst other things, that the relationship
between the members of a close corporation resembles that of partners
in a partnership. Consequently, so he submits, the principles
relating to partnerships 'to a large extent' find application to the
relationship between members of a close corporation. Since the rights
of members of a close corporation and partners are allegedly akin,
each partner has the right to engage in any act concerning the
management of the affairs of a partnership, including the right of
possession of the partnership property. Counsel argues furthermore
that to interpret s 58 as precluding members of a close corporation
from dealing with its property would amount to an unjustified
interference with the right of Namibian citizens to deal with their
property as they please.

[15] In Mr
Tötemeyer's further submission the phrases 'subject to’
used in the introductory part of s 58(1) and ‘or’ used at
the end of s 58(1)(a) meant that s 58(1)(b) has no bearing
at all on possessory rights flowing from a member's interest of a
foreign national in an agricultural land-owning close corporation.
According to counsel, s 58(1)(b) deals with rights afforded to
foreign nationals in the context of lease agreements, habitation,
usufruct and the like, whilst s 58(1)(a) pertains to the transfer of
ownership in the deeds registry. The use of the word 'or' at the end
of s 58(1)(a) signifies that two separate and disjunctive concepts
were intended by the legislature when enacting s 58(1).

[16] As I understand
it, the gist of counsel's argument is that s 58(1)(b) does not
restrict rights of occupation or possession of commercial
agricultural land by foreign nationals who are members of a close
corporation owning such land and who have legitimately acquired
non-controlling interest in the close corporation. Thus, no
ministerial consent is required in those circumstances. This
interpretation, according to counsel, is in line with a purposive and
liberal interpretation of Art 16 of the Constitution. It also
accords with the common law rights of such a foreign national member
and would be in line with presumptions of interpretation that the
legislature does not intend harsh, unjust and unreasonable
consequences or absurd or anomalous results.

[17] Mr Heathcote,
on the other hand, contends in the first place, that there is no such
principle in our law that a member of a close corporation qua member
has possessory right over the property of the corporation. Secondly,
counsel argues that even if such a principle had existed, it is
excluded by the provisions of s 58(1) of the Act which commences with
the phrase: ‘notwithstanding anything to the contrary in any
other law contained . . . .' Thus even if it is to be assumed that
Mr Tötemeyer’s argument based on the alleged resemblance
between partners and members in a partnership and close corporation
respectively is correct, the above phrase displaces the alleged legal
principles relied on by the appellants and replaces them with the
provisions of that section.

[18] Mr Tötemeyer’s
submissions cannot be accepted as correct. To start with the argument
based on the meaning of 'subject to' and the use of the word 'or' in
s 58, the phrase ‘subject to’ must be interpreted in the
context it is used. As stated in S v Marwane 1982 (3) SA 717 (AD) at
747 which authority was cited by counsel for the appellants, the
expression 'subject to' is ordinarily:

‘...to
establish what is dominant and what is subordinate or subservient;
that to which a provision is "subject", is dominant - in
case of conflict it prevails over that which is subject to it.
Certainly, in the field of legislation, the phrase has this clear and
accepted connotation. When the legislator wishes to convey that that
which is now being enacted is not to prevail in circumstances where
it conflicts, or is inconsistent or incompatible, with a specified
other enactment, it very frequently, if not almost invariably,
qualifies such enactment by the method of declaring it to be "subject
to" the other specified one . . . . .’

[19] The above
conclusion was reached with reference to the entire context in which
the phrase was used, including the provisions to which a certain
section is ‘subject to’. In this case, s 58(2) merely
aims to further regulate the provision contained in s 58(1)(a), hence
the term ‘for the purpose of s 58(1)(a)’. The phrase
‘notwithstanding anything contrary in any other law contained’
applies to both scenarios in subsecs (1)(a) and (b) irrespective of
the use of the conjunctive 'or' at the end of s 58(1)(a). Subsection
(2) does not envisage a separate prohibition other than that found
in subsec (1). As regards counsel for the appellants' argument
pertaining to subsecs (1)(a) and (b), which refer to different
prohibitions, I agree with the submission, save for the limitation
counsel seeks to ascribe to subsec (1)(b)(ii) that a sale of member's
interest in a close corporation is excluded from that section
automatically by virtue of the membership of the close corporation.
Subsection (1)(b) clearly prohibits a foreign national from entering
into ‘an agreement with any other person whereby any right to
the occupation or possession of agricultural land or a portion of
such land is conferred upon the foreign national . . . .’ This
is a phrase of wider import and makes no distinction between the
different types of agreements in terms of which such a right of
occupation or possession can be conferred. 'Any other person'
evidently includes a Namibian citizen who is a member of a close
corporation seeking to dispose of his or her member's interest in the
agricultural land-owning close corporation.

[20] This
interpretation is furthermore supported by that part of the provision
in s 58(1) that states that 'notwithstanding anything to the
contrary in any other law contained'. 'Any other law' would include
the law of partnership and close corporations. Thus, even if the
contention that there is a resemblance between a close corporation
and a partnership is to be accepted, or that a member of a close
corporation qua member is entitled to occupy or possess immovable
property belonging to the corporation, an agreement whereby a foreign
national purports to acquire a member's interest in a close
corporation owning agricultural land for the periods prohibited in s
58 without the Minister's consent would also fall foul of the
provisions of that section.

[21] As regards the
argument by counsel for the appellants that the interpretation above
of s 58 severely restricts the constitutional right of Namibian
citizens to own property to the extent that they will not be free to
dispose of their property as they wish, the short answer is that the
right to own or dispose of property like many other constitutional
rights is not unlimited. Such right is subject to the restrictions
contemplated in the Article. The proviso in Art 16 evidently
authorises the limitation of the rights of Namibian citizens to the
extent that they may wish to dispose of commercial agricultural land
to a foreign national. In other words, a limitation to that effect is
constitutionally sanctioned and any Namibian citizen wishing to
dispose of his or her commercial agricultural land to a foreign
national will have to bear the provisions of the constitution and the
law in mind when doing so. To my mind, s 58 of the Act constitutes a
permissible limitation and its provisions are clear. There is no
ambiguity or absurdity in its provisions. As the law stands, a
foreign national may occupy or possess agricultural land for those
periods not prohibited by s 58(1)(b) of the Act and provided that the
Minister's consent has been obtained. Moreover, I agree with counsel
for the respondent's submission that exclusive possession of
immovable property is an incident of ownership of immovable property,
not of membership in a close corporation that owns immovable
property.

[22] The argument
regarding the proposed assimilation of partners and members in
partnerships and close corporations respectively cannot also not be
correct as it loses sight of the fact that the phrase
'notwithstanding anything in any other law contained . . . ' in s
58(1) overrides any other law or legal principle which conceivably
has the effect of affording foreign nationals the right to occupy or
possess agricultural land indefinitely without prior written consent
of the Minister by virtue of their membership in a close corporation.
Quite apart from the fact that no such principle or right exists in
our law, the argument seemingly conflates the two very distinct
business vehicles and appears to ignore the juristic nature of a
close corporation as opposed to a partnership.

[23] The principles
relating to the juristic nature of close corporations are trite.
However, in the light of the facts of this appeal, it has become
necessary to restate them herein. I find the summary given in The
Guide to the Close Corporations Act and the Regulations by Geach and
Schoeman at pp 501–502 succinct and useful. I refer only to
some of the principles set out therein and I paraphrase the passage
omitting reference to authorities in the process:

Although a
corporation does not have a physical existence, it is an entity
distinct from its members. The property of the corporation belongs to
it and not to its members. A member of the corporation does not have
a real right in the property of the corporation but merely has a
personal right to claim a share of the surplus assets of the
corporation if the corporation is deregistered or dissolved.
Likewise, the profits of the corporation belong to it and not to its
members. Only after a payment is made according to the provisions of
the Close Corporations Act do the members obtain a right thereto. No
member can treat the corporation's assets or profits as his or her
own irrespective of the extent of his or her interest or control over
the affairs of the corporation. Moreover, a member stands in a
fiduciary position to the corporation and must therefore exercise his
or her powers for the benefit of the corporation. A corporation is
very different from a partnership or a firm.

[24] Mr Tötemeyer,
as an alternative argument, seeks to differentiate between two
periods during which different circumstances allegedly existed
entitling the appellants to the possession of the immovable property.
He argues that in terms of clause 10.2 of the agreement, the right of
occupation arose some 14 months before the member's interest would
have passed onto the appellants (a period of less than 10 years). The
agreement is thus not for a 'period exceeding 10 years' or 'for an
indefinite period' nor for a period renewable for more than 10 years.
Therefore, so the argument develops, s 58(1)(b)(ii) finds no
application. The second period was described as the period from 2
June 2010 onwards. In terms of this period, it is argued that the
right of occupation directly flowed from the transfer of the member's
interest and the rights acquired by the appellants as a result
thereof. It is therefore not the type of occupation or possession
contemplated by the legislature in terms of s 58. If the agreement as
per clause 10.2 continues to be in operation during the 'second
period', then the parties were entitled to conclude an agreement for
the second period to regulate the exercise of that right during that
period.

[25] Counsel for the
respondent, on the other hand, maintains that this argument is
premised on the assumption that the right to possess the immovable
property is an automatic right flowing from the member's interest
held in the close corporation, which in his submission, is contrary
to the juristic personality of a close corporation.

[26] As regards the
argument concerning the period during which the appellants may occupy
the immovable property before member's interest passes to them, it is
indeed so that the first period does not exceed 10 years nor is it
renewable for more than 10 years as contemplated by s 58(1)(b)(i). A
perusal of the agreement bears out Mr Tötemeyer’s argument
that the agreement does in fact entitle the appellants to possess the
immovable property prior to the member's interest passing to them.
However, Mr Heathcote is undoubtedly correct in his submission that
the so-called temporary possession is premised on an erroneous
assumption that the right to possess the immovable property
automatically flows from the member's interest held in the close
corporation. The argument clearly ignores the legal principles
applicable to a close corporation as juristic person. As already
mentioned, a member of a close corporation does not have possessory
rights over the property of the close corporation merely by being a
member thereof. The property belongs to the close corporation. A
member may not occupy or possess the close corporation's property
until such time that the corporation has passed a resolution or there
is an underlying agreement to that effect. It is true that a member
of a close corporation is entitled to participate in the management
of the corporation's business, but this is a far cry from dealing
with the assets of the corporation as if it was the member's personal
property.

[27] Regarding the
legality of the alleged second period, it is common cause that the
agreement does not make provision for the appellants’
possession of the immovable property to continue for a period not
exceeding 10 years. In fact, the period for such possession is not
specified at all. In the absence of such stipulation, it is a fair
assumption that the possession would pass to the appellants for an
indefinite period.

[28] The second
period described by Mr Tötemeyer is clearly in contravention of
s 58(1)(b)(ii), because as mentioned already it is for an indefinite
period. The agreement between the parties was clearly to confer a
right to the occupation or possession of agricultural land upon
foreign nationals; for an indefinite period, and the Minister's
consent had not been obtained. Therefore, in the light of what has
been discussed in the preceding paragraphs of this judgment, the
agreement in both periods is evidently in contravention of s
58(1)(b)(ii).

Severability of
the Agreement

[29] The appellants’
counsel argues in the further alternative that in the event that it
is held that clause 10.2 of the agreement (the impugned clause) is
illegal on any basis, then it should be severed from the rest of the
agreement. The impugned clause reads:

‘The purchaser
is entitled to take possession of the immovable property and movable
property on date of signature of this agreement.’

[30] Counsel further
contends that the rights conferred on the appellants in terms of the
contract, include rights of occupation or possession which a member
would have had qua member. If the impugned clause were to be severed,
those rights would arise ex lege as from 2 June 2010, the so-called
second period. The rights conferred on the appellants would therefore
only operate for a short period and be merely subsidiary or
collateral rights and are thus severable from the remainder of the
contract. The substance of the contract would, however, remain
intact, so counsel submits.

[31] The
respondent’s counsel counter argues that the impugned clause is
not severable as it taints the entire agreement. The appellants would
not have concluded the agreement had the effect thereof not been that
they have possession of both the immovable and movable property. The
nature of the movable property is such that the appellants had to
have possession of the immovable property too. In any event, so
counsel contends, severability could not succeed as the appellants
relied on the lawfulness of the entire contract.

[32] In order for a
provision to be severed from an agreement to render the remaining
part legal and enforceable, one has to consider, amongst others,
whether the provision concerned embodies the main purpose of the
transaction as a whole or whether the agreement is made up of several
distinct provisions. The former would result in the entire contract
being illegal as the said provision cannot be severed from the
contract.²
If the illegal provision is merely an additional stipulation not
going to the principal purpose of the contract, it is severable. The
intention of the parties must also be considered. I respectfully
agree with the proposition made by Professor Kerr that the crucial
question is whether the parties would have entered into the agreement
if the phrase in question had been expunged. ³
I am persuaded that the parties would not have entered into the
agreement had the impugned clause not been part of it. In their
particulars of claim, the appellants alleged amongst other things,
that the impugned clause was a 'material' term of the agreement. This
allegation was admitted by the respondent. It is thus common cause
that the impugned clause was a material term without which the
agreement would not have been concluded. Furthermore, as previously
noted, clause 3.1 starts by stating that ‘It is expressly
recorded that the sale and the purchase as provided herein is, in
effect, a sale of 50% of the immovable property and 100% of the
movable property.' The agreement continues to stipulate the manner in
which payment is to be effected, which incorporates the sale and
purchase of the property in question, as in many other clauses. I am
accordingly persuaded that the impugned clause cannot be severed from
the rest of the agreement as it is a material term thereof. The
parties clearly wished to sell and buy 50% ownership of the close
corporation and for the purchasers to occupy the immovable property
as soon as possible. In any event, the agreement would remain illegal
since, as stated above, it does not comply with the relevant
provisions of the Act.

Alternative
relief sought by the appellants

[33] The appellants
prayed in the alternative that in the event that the agreement is
found to be illegal, then the order in the court below dismissing the
claims should be substituted for an order granting the appellants
leave to amend their particulars of claim so as to plead
severability. The issue of severability has been raised and decided
in the context of the special plea. Given my conclusion that the
impugned clause was not severable from the rest of the contract, the
alternative relief sought by the appellants cannot be entertained.

[34] In the result,
I find that the High Court was correct in holding that the agreement
was illegal and void ab initio. I would make an order dismissing the
appeal.

Costs

[35] The appellants
have been unsuccessful and there is no good reason why they should
not be ordered to pay the costs of the appeal. I am also satisfied
that the matter justifies the employment of two instructed counsel.

Order

The following order
is made:

1. The appeal is
dismissed.

2. The appellants
are ordered to pay the costs of the appeal jointly and severally, the
one paying the other to be absolved. Such costs are to include the
costs of two instructed and one instructing counsel.

SHIVUTE CJ

MARITZ JA

MAINGA JA

APPEARANCES

APPELLANT:........................R
Tötemeyer assisted by J A N Strydom

….......................................Instructed
by Theunissen Louw & Partners

RESPONDENT:.............R
Heathcote assisted byN Bassingthwaighte

….................................................................Instructed
by Kirsten & Co