To do so, the dissatisfied party must not only show the existence of reasonable prospects of success, but also the existence of special circumstances that merit a further appeal. Special circumstances may include a substantial point of law, a matter of great public importance, or instances where refusal of leave would likely result in a manifest denial of justice, the list is not closed.

In the recent case of 68 Wolmarans Street Johannesburg (Pty) Ltd and Others v Tufh Limited (1263/2022) [2024] ZASCA 48 (15 April 2024), the SCA dismissed such an application for special leave to appeal against a judgment and order of the Gauteng Division of the High Court, Johannesburg on the basis that the applicants failed to prove the existence of reasonable prospects of success, let alone the existence of any special circumstances that would justify special leave to appeal being granted. So, what went wrong?

Background

The matter involved a written loan agreement concluded between 68 Wolmarans Street Johannesburg (Pty) Ltd (Wolmarans) and Tufh Limited (Tufh) in terms of which Tufh lent and advanced to Wolmarans money for the purchasing and refurbishing of a block of residential units in Hillbrow, Johannesburg. A material term of the agreement was that Wolmarans, in addition to paying a monthly instalment due to Tufh in terms of the agreement, would also promptly pay, to the City of Johannesburg (CoJ), all municipal charges relating to property taxes, water, electricity and other services that were rendered to the property, on the relevant due date and would provide Tufh with proof of such payment together with certified copies of the municipal statements. In the event of default by Wolmarans, the parties agreed that Tufh would be entitled to accelerate and declare the entire principal amount outstanding and immediately due and payable.

While Wolmarans paid its monthly instalments in terms of the loan agreement, a dispute arose between Wolmarans and Tufh in terms of which Tufh alleged that Wolmarans breached specific terms of the loan agreement by failing to pay amounts due to the CoJ as per the loan agreement. This, according to Tufh, placed its security in and to the property at risk, which security was provided to Tufh in the form of unlimited suretyship agreements by the second and third applicants.

In response to the allegations by Tufh, Wolmarans submitted that there was an ongoing dispute between it and the CoJ about the way the CoJ was billing Wolmarans for the municipal services rendered. According to Wolmarans, the accounts received from the CoJ contained patent errors which, despite demand and continuing negotiations, were not rectified. Tufh’s response to this was that the billing query between Wolmarans and the CoJ was related to water and electricity and there appeared to be no dispute about the rates, refuse, sanitation and other charges levied by the CoJ to the property which according to Tufh, Wolmarans was obliged to pay to the CoJ on the due date. For this reason, Tufh was of the view that Wolmarans remained in breach of the loan agreement.

This dispute between the parties resulted in an application being brought by Tufh against Wolmarans in the Gauteng Division of the High Court, Johannesburg, in which Tufh sought, as its primary relief, payment of the sum of R4,897,004.22 together with interest and costs as well as the foreclosure of a mortgage bond executed by Wolmarans in favour of Tufh. The application came before Senyatsi J, who dismissed the application with costs. Tufh then applied for and was granted leave to appeal the judgment of the court of first instance to the full court of the Gauteng Division of the High Court, Johannesburg. The full court, which consisted of Matojane, Molahlehi and Strydom JJ, upheld the appeal, set aside the judgment and order of the court of first instance, and essentially substituted it with the order sought by Tufh.

Application for special leave to appeal

On 5 December 2022, unhappy with the finding of the full court, Wolmarans applied for special leave to appeal the judgment and order.

Counsel for Wolmarans conceded that there was a breach of the loan agreement by Wolmarans. He further submitted, however, that there were reasonable prospects of success in the appeal and that leave should be granted. On the issue of “special circumstances” which embodied the test for special leave, counsel for Wolmarans indicated that he would address three aspects only which, according to him, went to the merits of the matter. The first was that Wolmarans was engaged in a bona fide dispute with the CoJ about the municipal charges levied against the property. The second was that Tufh’s security was not in any way at risk as it still held suretyships by Mr Faber (the sole director and shareholder of Wolmarans) and the second respondent, and the third was that any risk to Tufh’s security was caused by Tufh itself when it elected to accelerate and declare all amounts owing in terms of the loan agreement, immediately due and payable. Further, it was submitted that Wolmarans was not attacking any of the relevant clauses in the loan agreement or the agreement per se as being unconscionable and contrary to public policy, but rather the implementation thereof.

In respect of the first aspect raised by Wolmarans, the SCA held the view that it could not be found that Wolmarans’ dispute with the CoJ was bona fide. The reasoning given was that while Wolmarans admitted that its dispute with the CoJ was limited to electricity and water charges, it nonetheless unreasonably, unlawfully, and inexplicably withheld payments for all municipal services and charges namely, electricity, water, sanitation, property rates, taxes and refuse. According to the SCA, Wolmarans had exploited the billing crisis which plagued the CoJ at the time and confirmed that the full court had come to the correct finding that there was no merit in the submission by Wolmarans that no amounts were due to the CoJ.

In respect of the second aspect raised by Wolmarans, the SCA found that Tufh made a request for other security from the second applicant, which was refused, and this refusal constituted a further breach of the loan agreement, which prompted Tufh to institute a further application in the High Court. There was therefore only one existing suretyship and thus Wolmarans’ contention that Tufh had sufficient security in the form of two suretyships was without merit.

In respect of the third aspect raised by Wolmarans, the SCA found this to be fallacious. In its opinion, Tufh was merely implementing the terms of the loan agreement so as to ensure that its security in and to the property was not jeopardised in any way. The SCA was of the view that it could not therefore be said that the full court was incorrect when it found that Wolmarans failed to discharge the onus to show that the enforcement of the relevant clauses would be unconscionable and contrary to public policy.

The SCA went on to contend that a party seeking to avoid the enforcement of a contractual term is required to demonstrate good reason for failing to comply with the term. In this matter, the applicants were unable to show how the implementation of the loan agreement would be unconscionable and contrary to public policy. After all, this was an agreement entered into freely and voluntarily. There was no suggestion that there was anything out of the ordinary or that they imposed any undue hardship on the applicants. For this reason, the SCA concluded that there were no reasonable prospects in any appeal challenging the findings of the full court, nor were there any special circumstances that would justify the granting of special leave to appeal.

This case serves to reiterate the principles surrounding special leave to appeal and the degree to which the SCA scrutinises the merits of each case when considering whether or not to grant an application for special leave to appeal.