On 24 January 2013, Goldex 16 (Pty) Ltd (the appellant) and the Des Property Trust, represented by Mr Dene Capper (second respondent), signed a written agreement of sale. The trust purported to purchase a real right of extension reserved in terms of section 25(1) of the Sectional Titles Act 95 of 1986 for R1.45 million. It was common cause that the agreement was required to comply with the Alienation of Land Act 68 of 1981 but did not do so, rendering it void ab initio. Mr Capper signed the agreement on behalf of the trust but lacked the necessary authority as there was another trustee who had not authorized the sale and refused to do so. Clause 12.1 of the agreement contained warranties that the signatory was duly authorized to enter into the agreement on behalf of the trust and that all conditions had been complied with to make the agreement binding on the trust. The appellant initially sued both the trust (represented by its trustees) and Mr Capper personally. At the commencement of proceedings, the appellant abandoned its claim against the trust, conceding that the sale was unenforceable, but continued its claim against Mr Capper in his personal capacity.
The appeal was dismissed with costs.
A signatory who lacks authority to bind a trust to a contract of sale that is void ab initio for non-compliance with the Alienation of Land Act cannot be held personally liable to perform the obligations of the void contract, even where the signatory gave warranties of authority. An order requiring the signatory to pay the purchase price in exchange for transfer of the property would constitute specific performance of the void contract under a different guise and is impermissible. No tacit term can be implied that if the principal is not bound due to lack of authority, the signatory will personally fulfill all the principal's obligations. While a claim for damages for breach of warranty of authority is theoretically available, such damages must be properly pleaded and proved with appropriate evidence of quantum, typically measured by the difference between the contract price and market value.
The court observed that the only mistake made by the High Court was concluding there was a reasonable prospect of success when it granted leave to appeal, noting that the appeal was inevitably doomed to failure. The court noted that clause 12.3 of the agreement, which provided that a signatory could be deemed to be the purchaser where acting for a company or close corporation to be formed, had no application to cases involving existing trusts. The court made a passing observation about the ingenuity of the appellant's argument being "surpassed only by its lack of substance."
This case clarifies the limits of personal liability for signatories who sign agreements on behalf of trusts without proper authority. It establishes that warranties of authority in contracts that are void ab initio for non-compliance with formality requirements (such as the Alienation of Land Act) cannot be used to circumvent the invalidity of the underlying contract by seeking what amounts to specific performance against the signatory personally. The case reinforces that while damages for breach of warranty of authority may be theoretically available, such claims must be properly pleaded and proved, with appropriate evidence of quantum. It also demonstrates the importance of distinguishing between different types of representations in sale agreements, particularly between provisions dealing with entities to be formed versus existing entities. The judgment serves as a warning against attempting to use creative pleading to achieve indirectly what cannot be achieved directly when fundamental formality requirements have not been met.