Boundary Financing Limited v Protea Property Holdings (Pty) Limited

Protea Property Holdings (Pty) Ltd sought to acquire the Edward Hotel in Durban as part of a broader transaction with Boundary Financing Limited (formerly IBSA). A suite of agreements was concluded on 1 March 2001, including a sale of shares agreement whereby Boundary sold 60% of the shares in Swanvest (Pty) Ltd to Protea. Due to an error, a warranty clause in the sale of shares agreement recorded that Swanvest’s sole asset was the Arthur’s Seat Hotel, whereas all parties intended it to be the Edward Hotel. The agreements were not immediately implemented because the parties contemplated a possible restructuring linked to a section 311 Companies Act scheme involving Karos (Pty) Ltd, the then owner of the Edward Hotel. After prolonged negotiations, Boundary alleged that Protea’s claims had prescribed. Protea instituted action seeking rectification of the sale of shares agreement, delivery of the shares, and enforcement of the warranty.

The appeal was dismissed with costs, including the costs of two counsel. The High Court’s orders for rectification, delivery of the shares against payment, and enforcement of the warranty by specific performance were upheld.

This case is a leading authority confirming that prescription does not run against a claim for rectification of a contract in South African law. It clarifies the nature of rectification as declaratory rather than constitutive of rights and provides important guidance on warranties, undertakings, and the availability of specific performance. The judgment also explains how tacit acknowledgment of liability can interrupt prescription.