King Sabata Dalindyebo Municipality v Landmark Mthatha (Pty) Ltd and Another

The King Sabata Dalindyebo Municipality leased a portion of Erf 912, Mthatha, to Landmark Mthatha (Pty) Ltd for 30 years to enable Landmark to develop a retail centre. Landmark contracted African Bulk Earthworks (Pty) Ltd to perform bulk earthworks. After commencement of works, it emerged that the land was subject to several land claims lodged in 1998, one of which (KwaLindile Community) was gazetted in May 2007. The Regional Land Claims Commissioner warned that development was unlawful and threatened interdict proceedings. An interim interdict was later granted by the Land Claims Court. Landmark was unable to continue development and defaulted on payments to Bulk Earthworks, which cancelled the contract and sued Landmark. Landmark, in turn, instituted third party proceedings against the Municipality, alleging breach of the lease agreement for failure to give vacant possession and claiming damages. The Municipality raised a defence of supervening impossibility of performance.

The appeal by the Municipality was dismissed with costs. The cross-appeal by Landmark succeeded with costs. The order of the High Court was amended to direct the Municipality to pay interest at 15.5% per annum from 5 March 2008 to date of payment.

The case confirms key principles of South African contract law, particularly that fault and knowledge are not elements of contractual breach and that supervening impossibility requires objective impossibility, not mere difficulty or commercial impracticability. It also clarifies the onus regarding allegations of unreasonable interest under the Prescribed Rate of Interest Act and has important implications for development projects affected by land restitution claims.