THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable

Case No: 20051/2014
In the matter between:
PANAMO PROPERTIES 103 (PTY) LTD                                             APPELLANT
and
LAND AND AGRICULTURAL DEVELOPMENT BANK
OF SOUTH AFRICA                                                                           RESPONDENT

Neutral Citation: Panamo Properties v Land and Agricultural Development Bank
(20051/2014) [2015] ZASCA 70 (22 May 2015)
Coram:
Lewis, Pillay, Willis JJA and Schoeman and Gorven AJJA
Heard:
7 May 2015
Delivered:  22 May 2015
Summary: Agreement of loan made in contravention of the Land and Agricultural
Development Bank Act 15 of 2002 invalid: mortgage bond registered as security for
moneys lent and advanced would nonetheless secure a claim based on unjustified
enrichment.

___________________________________________________________________

ORDER

On appeal from: Gauteng Local Division of the High Court, Johannesburg
(Claassen J sitting as court of first instance):  judgment reported sub nom Land and
Agricultural Development Bank of South Africa v Panamo Properties 103 (Pty) Ltd
2014 (2) SA 545 (GJ).
The appeal is dismissed with costs including those occasioned by the use of two
counsel.
__________________________________________________________________
JUDGMENT

Lewis JA (Pillay and Willis JJA and Schoeman and Gorven concurring)
[1] This appeal concerns the validity of a transaction concluded between the
appellant, Panamo Properties 103 (Pty) Ltd (Panamo), and the Land and Agricultural
Development Bank of South Africa (the Bank), the respondent. Also at issue is the
validity of a mortgage bond registered over Panamo’s property as security for the
indebtedness of Panamo to the Bank. These issues themselves depend on an
interpretation of the Land and Agricultural Development Bank Act 15 of 2002, and of
the mortgage bond in question.

[2] The dispute between the parties was heard by the Gauteng Local Division of
the High Court (C J Claassen J) after referral to it by the Bank as the plaintiff, and
Panamo as the defendant, of a stated case. The court a quo found that the loan
agreement between the parties was invalid since the Bank did not have the power to
enter into the transaction in question, but that the mortgage bond was nonetheless

enforceable. The court a quo also found that the Bank was not estopped from
asserting that the contract was invalid. That aspect of the decision is no longer
contested in the appeal, which lies with the leave of the court a quo.

[3] The parties asked the court a quo to order the separation of certain issues,
which were defined in the stated case, and to postpone the determination of other
issues. That order was granted. They defined the issues for determination in terms of
the stated case; annexed the agreement between them and the terms of the
mortgage bond (amongst other documents); agreed common cause facts and listed
their respective contentions.

[4] The background to the stated case was that on 5 April 2007 the parties
entered into a written agreement in terms of which the Bank would lend to Panamo
the sum of R52 919 845, which would be used by Panamo for the acquisition of
certain agricultural properties and the development of a township, with the services
required and engineering fees, on the properties. A mortgage bond was registered
over the properties giving the Bank continuous covering security for any existing or
future debt that Panamo might owe up to an amount of R76 million.

[5] The agreement was the culmination of negotiations between the parties,
commencing in August 2006 when Panamo asked the Bank for a loan for the
purpose of acquiring and developing the properties. In December 2006 the Bank
wrote to Panamo advising that it had agreed to make the finance requested
available. It also stated that it was a condition precedent to concluding the loan that
Panamo submit its shareholders’ agreement to the Bank, and that that had to reflect
a minimum 50.1 per cent black economic empowerment ownership of Panamo. The
offer was accepted on the same day.

[6] A term of the agreement that was concluded on 5 April 2007 was that a
Panamo Profit Sharing Agreement, in terms of which the Bank would participate in

the profits made on the sale of any properties, would also be concluded. A letter sent
by Panamo to the Bank on 9 May 2007 stated that the profit sharing agreement
would be entered into. The parties proceeded as if the loan agreement was in effect
and Panamo borrowed R18 500 000 from the Bank. However, on 17 January 2008
the Bank wrote to Panamo contending that the contract for the loan to it was invalid.

[7] In July 2010 the Bank instituted action against Panamo, claiming enforcement
of the contract. Panamo counterclaimed. In 2012 the Bank amended its particulars of
claim and asked for a declaration that the contract was invalid. The Bank contended
that the agreement of loan was unauthorized and void in that it did not comply with
s 3 of the Act which sets out the objects of the Act – what it is intended to achieve;
secondly, that the agreement was in contravention of the provisions of s 23 which
prohibits the investment of funds by the Bank in unlisted companies, trusts, business
undertakings or ventures without the prior written approval of the Minister
responsible for agriculture; and, thirdly, in contravention of s 66 of the Public Finance
Management Act 1 of 1999 (the PFMA). It contended also that despite the invalidity
of the agreement of loan, the mortgage bond over Panamo’s property remained valid
and enforceable.

[8] Panamo denied these contentions and pleaded that the Bank was estopped
from denying the invalidity of the agreement; alternatively that, on the basis of the
Turquand Rule, it was precluded from denying that the Minister had given her prior
written approval of the agreement. As I have said, the defences based on estoppel
and the Turquand Rule were abandoned at the hearing of the appeal, and rightly so.

[9] And that was the background to the determination of the legal issues by the
court a quo. These were framed as follows. ‘Whether or not the agreement is
unauthorized and thus void for . . . alleged want of compliance with the Act and the
PFMA; whether or not the mortgage bond concluded pursuant to the Agreement is
enforceable notwithstanding the alleged invalidity of the Agreement;  . . . .’ The

parties agreed that the Bank bore the onus of proving that the agreement was invalid
and that the bond was enforceable.

[10] The facts that were common cause, and that are germane to the issues are:
(a) that the Bank agreed to lend to Panamo the sum of R52 919 845; (b) of that
amount, R18 500 000 would be used for the acquisition of two properties, as
described in the stated case; (c) the balance of R34 419 845 would be used for
township establishment and engineering service fees, as described in the loan
agreement; (d) the agreement was subject to a number of suspensive conditions
relating to the conclusion of further agreements, all of which were either fulfilled or
waived; (e) at all material times the parties intended to enter into the agreement and
be bound by it; (f) the Bank in fact lent Panamo the sum of R18 500 000 to finance
the acquisition of the properties and undertook to advance a further amount of R34
419 845; (g) the parties intended that the capital amount lent to Panamo, plus
interest, would be repaid to the Bank; (h) Panamo was an unlisted company, trust or
other equivalent legal entity, business undertaking or venture as contemplated by
s 23 of the Act; and that (i) the agreement constituted an ‘investment’ in one of the
entities identified in s 23. The last ‘fact’ was qualified by a statement that Panamo did
not  agree  that  the  agreement  was ‘exclusively’ an investment as contemplated in
s 23.

[11] The Bank’s contentions, set out in the stated case, were, in summary, these.
The loan fell outside the scope of the Act and did not comply with the PFMA and was
thus void. The fact that moneys had been advanced pursuant to the agreement did
not affect the validity of the agreement and the advances were sine causa. The
mortgage bond registered pursuant to the agreement remained valid, having regard
to its terms. The profit sharing agreements had not been concluded, but the
conditions of the loan agreement that they be entered into had been waived.

[12] Panamo contended that on a construction of the agreement and the Act the
Bank was empowered to enter into the agreement. Such agreements were not

expressly prohibited by the Act, and there was no numerus clausus of all the juristic
acts that the Bank was empowered to perform. The agreement was intended to
achieve the objects of the Act indirectly, which was not prohibited by the Act.
Accordingly, the agreement was not ultra vires: the Bank had the power to conclude
it because indirectly it would achieve the objects of the Act set out in s 3. I shall deal
with further contentions in respect of the achievement of the objects of the Act, and
whether the transaction amounted to an investment, as they are set out in the stated
case, when dealing with the legal framework within which the validity of the loan
agreement must be determined.

[13] Claassen J found that the loan agreement was invalid. It was not within the
power of the Bank to conclude a transaction for the development of a township on
agricultural land. In this regard, he relied on a decision of Bashall AJ in Land and
Agricultural Development Bank of South Africa v Impande Property Investments
(Pty) Ltd (GSJ case No 2010/35355, 9 April 2013) where it was found that a very
similar transaction was void since it was not in furtherance of the objects of the Act.

[14] Those objects are set out in s 3 of the Act:
‘3(1) The objects of the Bank are the promotion, facilitation and support of—
(a) equitable ownership of agricultural land, in particular the increase of ownership of
agricultural land by historically disadvantaged persons;
(b) agrarian reform, land redistribution or development programmes aimed at historically
disadvantaged persons  . . . for the development of farming enterprises and
agricultural purposes;
(c) land access for agricultural purposes;
(d) agricultural entrepeneurship;
(e) the removal of the legacy of past racial and gender discrimination in the agricultural
sector;
(f) the enhancement of productivity, profitability, investment and innovation in the
agricultural and rural financial systems;
(g) programmes designed to stimulate the growth of the agricultural sector and the better
use of land;

(h) programmes designed to promote and develop the environmental sustainability of
land and related natural resources;
(i) programmes that contribute to agricultural aspects of rural development and job
creation;
(j) commercial agriculture; and
(k) food security.’

[15] It seems apparent that the acquisition of agricultural land for the purpose of
transforming it into an urban township is not only not consonant with the objects of
the Act, but also completely contrary to that which the Bank is supposed to achieve.
That was the finding of Bashall AJ in Impande and of Claassen J in this matter. But,
contended Panamo, it was a condition of the offer made by the Bank that 50.1 per
cent of its shareholders would be previously disadvantaged people, and the land
acquired was agricultural. That meant that the promotion, facilitation and support of
equitable ownership of agricultural land and the removal of the legacy of racial
discrimination were achieved – meeting at least two of the objects of the Act. And the
investment of the funds for township establishment and engineering services
resulted in a better use of the land, within the ambit of s 3(1)(g).

[16] These contentions were not hard-pressed on appeal. The transformation of
agricultural land to an urban township can hardly be regarded as use of agricultural
land, and ownership of a township development company cannot be said to give
greater access to agriculture by historically disadvantaged people. The contention
was perverse. Counsel for Panamo sought to avoid this conclusion by arguing that
by entering into the profit sharing agreement Panamo was contributing to the funds
of the Bank, which could then better achieve the objects of the Act. It was thus
indirectly achieving the objects of the Act.

[17] But that, it seems to me, is no more than making an investment – contributing
to the Bank’s funds. It is correct that the Bank is given the power to make
investments by the Act. And an investment need not be made in order to achieve the
objects of the Act. However, investments by the Bank require the consent of the

Minister. Section 23 of the Act, which governs investments by the Bank, states that
the Board must adopt an investment policy, approved in writing by the Minister.
Section 23(2) provides that: ‘The Bank may not, without the prior written approval of
the Minister, invest money in an unlisted company, trust or other equivalent legal
entity, business undertaking or venture.’

[18] It was common cause in the stated case that Panamo was such an entity and
thus the Minister’s written approval was required in order for the investment to be
made. It was implicit in the facts stated and the arguments made that ministerial
approval had not been granted. At the hearing counsel sought to distance Panamo
from the agreement that an investment had been made. The common cause fact, it
was argued, was no more than a view of law.  But the argument is in any event of no
moment because even if the transaction did not amount to an investment it has still
to be determined whether it was within the power of the Bank.

[19] And the question remains whether the Bank had the power to conclude the
transaction even if it did not conform with the objects of the Act. In my view, this
question is determined by s 26 of the Act, which deals with the conduct of business
by the Bank. It reads:
‘(1) The business of the Bank is to provide agricultural and rural financial services in
furtherance of the objects of the Bank contemplated in section 3, against security or on such
alternative conditions as the Board may from time to time determine, or in such other
manner as may be provided for by this Act.
(2) The Bank may conduct its business by way of any operation, method or practice
envisaged in this Act or in any other applicable law, including but not limited to—
(a) providing finance for the purposes contemplated in section 3;
(b) investing money;
. . .

(m) in general, making all such advances and performing all such acts as the Bank may by
this Act or any other law be authorized to make or perform or which reasonably form part of
or are generally associated with agriculture or developmental financial services.’

[20] Section 26(3) provides that ministerial authority is required for investing
money (as well as for other acts referred to in the subsections I have not quoted).
But written approval of the Minister is not required for s 26(2)(m). Panamo thus
argued that the loan transaction fell under that subsection: the Bank made an
advance to it which reasonably formed part of or was generally associated with
agricultural or developmental financial services. This argument must also fail. One
cannot read s 26(2) apart from s 26(1). The latter qualifies the acts and transactions
referred to in s 26(2): they must all be in furtherance of the objects of the Bank set
out is s 3.

[21] The Bank is thus obliged and empowered to use its funds only for the
purposes set out in s 3: other transactions are not within its powers. Its powers are
conferred by the Act and it has no others. As a public entity the Bank may do only
those things that the Act authorizes. The loan to Panamo for the purpose of
acquiring land for the establishment of a township is clearly not authorized by the
Act. The loan agreement is thus in contravention of the Act, and, as the Bank
contended, is invalid.

[22] While not every contravention of a statute results in invalidity of the
contravening act or contract, where its recognition would defeat the purpose of the
statute, the act or contract will be void. (See Standard Bank v Estate Van Rhyn 1925
AD 266; Pottie v Kotze 1954 (3) SA 719 (A); Metro Western Cape (Pty) Ltd v Ross
1986 (3) SA 181 (A).) But it is not necessary in this matter to consider whether the
Act intended to render the transaction invalid as the issue is determined by the
PMFA. Sections 66 and 68 of that Act provide that where a public institution, as the
Bank is, enters into a transaction that is not authorized by legislation governing the

institution, it will not be bound by the transaction. Accordingly the loan agreement
between the parties cannot be enforced. I turn then to the second issue.

[23] The Bank may well have an enrichment claim against Panamo for the money
that it advanced pursuant to the invalid contract. Thus while the Bank contended for
invalidity, it nonetheless argued that the mortgage bond registered in its favour is
valid and constitutes real security for a possible enrichment claim.

[24] Claassen J in the court a quo concluded that the bond was valid despite the
fact that the contract pursuant to which it was passed was not. The bond agreement,
he said (para 18), was a separate agreement of hypothecation and its ‘validity is not
dependent upon the validity of the anterior transaction’. A mortgage bond is of
course always accessory to an obligation, no matter its origin. If the obligation is
unenforceable the security in respect of it is unenforceable too. Authority for this is to
be found in Albert v Papenfus 1964 (2) SA 713 (E) at 717H in fin where the court
referred to the principle as ‘trite’, and cited Voet 46.1.9,11 (Gane’s translation vol 7 at
22 and 28). See also Bay Loan Investment (Pty) Ltd v Bay View (Pty) Ltd 1972 (2)
SA 313 (C) at 316E-F; Badenhorst, Pienaar and Mostert Silberberg’s The Law of
Property 5 ed (2006) at 359; 17 (Part 2) Lawsa ‘Mortgage and Pledge’ para 327;
and T J Scott and Susan Scott Wille’s Mortgage and Pledge 3 ed (1987 at 6).

[25] That does not mean that a principal obligation must exist before a mortgage is
entered into: it may be given as security for a future debt or as a covering bond. But
when enforcement of the bond is sought it must be in respect of a valid obligation.
And when determining whether an obligation is secured by a bond, one must have
regard to its particular terms.

[26] In Impande Bashall AJ found that the bond purportedly securing the Bank’s
obligation was invalid too. He cited the authorities referred to above as support for

this conclusion, and found that an enrichment claim was not covered by the terms of
the bond which were confined to moneys borrowed and advanced.

[27] Claassen J declined to follow this reasoning. He pointed out that Bashall AJ in
Impande had not been referred to the decision of this court in Thienhaus NO v Metje
and Ziegler Ltd 1965 (3) SA 25 (A) in which it was held that a formal defect in the
description of a party (a slip of the pen that referred to an individual instead of a
company bearing his name) did not render the bond invalid. As I have said, the
question whether the bond secures a claim for enrichment must be determined by
construing the terms of the bond itself. My colleague Gorven AJA will deal with this
issue.
Gorven AJA (Lewis, Pillay and Willis JJA and Schoeman AJA concurring)
[28] The mortgage bond in this matter was registered pursuant to the loan
agreement. The issue is whether it is enforceable in the face of a finding that the
loan is void. All mortgage bonds are accessory to another obligation, as the
authorities cited above show. This is because the fundamental nature of a mortgage
bond is the provision of security for an underlying obligation. In Kilburn v Estate
Kilburn,1 this court held as follows:
‘The settlement of a security divorced from an obligation which it secures seems to me
meaningless. It is true that you can secure any obligation whether it be present or future,
whether it be actually claimable or contingent. The security may be suspended until the
obligation arises, but there must always be some obligation even if it be only a natural one to
which the security obligation is accessory.
. . .
It is therefore clear that by our law there must be a legal or natural obligation to which the
hypothecation is accessory. If there is no obligation whatever there can be no hypothecation
giving rise to a substantive claim.’
And in Lief NO v Dettmann,2 Van Wyk JA said:
‘. . . real rights, however, can only exist in respect of a debt, existing or future, and it follows
that they cannot be divorced from the debt secured by them’.

1 Kilburn v Estate Kilburn 1931 AD 501 at 505-6.
2 Lief NO v Dettmann 1964 (2) SA 252 (A) at 259.

[29] It is clear that the bond was initially passed to secure the performance of
Panamo under the loan. Its terms make it accessory to the loan. Once the loan is set
aside as invalid, unless the bond is accessory to a different obligation than the loan,
it must suffer the same fate as does the loan and be subject to cancellation.
However, even though the loan is void, this does not in itself mean that there is no
obligation secured by the bond.

[30] The Bank says that it has a claim for unjust enrichment under one of the
condictiones. No such finding can be made on this issue here. I assume, for the
purposes of deciding the question, that such a claim is valid. An enrichment claim
gives rise to indebtedness. I know of no reason why a mortgage bond cannot secure
a debt arising from an enrichment claim.3 Indeed, no argument was advanced before
us why a debt of that nature cannot be covered. The question is whether that kind of
debt is secured by this particular bond.

[31] In the first place, the bond is a covering bond. A covering bond may provide
security for more than one specific debt. The bond may therefore afford security for
more than obligations arising under the loan. It is not necessarily extinguished
merely because the loan is void. It complies with the formalities required by s 51 of
the Deeds Registries Act4 for those covering future indebtedness. The nature of the
bond thus does not exclude the possibility that an enrichment claim may be covered.

[32] In the preamble, the passing of the bond is said to have given expression to
an undertaking. This undertaking was by Panamo to pass a ‘continuous covering
bond as security for [Panamo’s] liability towards the Land Bank for whatsoever
reason’.5 It therefore goes further than one to pass a bond to cover indebtedness
under the loan and, indeed, under only some form of an agreement. It is stated in the

3 Silberberg  above at 359.
4 Deeds Registries Act 47 of 1937.
5 I have not used the same formatting as in the bond when quoting from it.

broadest possible terms. The preamble therefore describes the circumstances under
which the bond came into existence.

[33] Clause 2.1 provides that the bond affords continuing covering security for four
distinct and separately stated categories of debt: (a) money borrowed and advanced;
(b) money to be borrowed and advanced; (c) money that the Bank may from time to
time in the future lend and advance to Panamo; and (d) in general, for any existing or
future debt that Panamo owes or may owe to the Bank. On a straightforward reading
of this clause, the fourth category gives expression to the undertaking referred to in
the preamble: to pass a bond which will cover ‘liability towards the Land Bank for
whatsoever reason’. Once again, this clause does not restrict the cover to
indebtedness arising from the loan agreement or some other agreement.

[34] Clause 8 concerns the circumstances under which the Bank is entitled to have
the mortgaged properties declared executable. It is headed ‘Default’ and reads, in its
material parts, as follows:
‘Should the Mortgagor be in breach of or fail to comply with any written agreement or
agreements between the Mortgagor and the Land Bank in respect of any amounts secured
by this bond, or should the Mortgagor be in breach of or fail to comply with any of the terms
and conditions of this bond or should the Mortgagor, at the request of the Land Bank, fail to
pay to the Land Bank any sum which the Land Bank may lawfully claim, or should the
Mortgagor fail to meet any obligation or commitment to the Land Bank on the expiry date
thereof . . . the Land Bank shall be entitled to institute legal action for the  recovery of all
such amounts and have the property mortgaged in terms of this bond declared executable.’
There are other circumstances referred to but these do not bear on the issue at
hand.

[35] It can therefore be seen that the defaults cited above comprise four distinct
categories: (a) a breach or failure to comply with a written agreement; (b) a breach or
failure to comply with a term of the bond; (c) a failure to pay on demand any sum
which the Bank may lawfully claim; and (d) a failure to meet an obligation by the

expiry date. If the bond is construed to cover only debts arising from an agreement of
sorts, the third of these categories is redundant. The first, a failure to comply with the
terms of a written agreement, would cover all circumstances in which the security
may be invoked. The second basis, concerning the terms of the bond, would also be
unnecessary. I can conceive of no circumstance in which a further category of
default could arise. But the failure to pay any sum which the Bank may lawfully claim
is set up in addition to these first two. There is a presumption against superfluity in
construing documents.6 The inclusion of this category shows conclusively that a
basis exists for invoking the security which need not arise from an agreement or
even the terms of the bond. The security afforded by the bond thus clearly covers a
lawful claim by the Bank which falls outside of the terms of any agreement or the
bond.

[36] In addition, clause 15 is phrased widely. It hypothecates the properties as
‘security for the proper and timeous payment of the capital sum or any part thereof
plus interest and other money recoverable in terms of this bond or which may at any
time become owing or payable to the Land Bank from whatsoever cause . . .’. Once
again, a number of distinctive categories are mentioned. The first, timeous payment,
arises from the loan or any other agreement. The second is money recoverable
under the bond. The third is ‘other money . . . which may at any time become owing
or payable from whatsoever cause’. This category is stated to be an alternative to
money recoverable in terms of an agreement or the bond.

[37] The three clauses dealt with above pertinently afford the security under the
bond to indebtedness other than that arising from an agreement and the bond. They
would clearly cover a debt arising from an enrichment claim. Reading these together
with the preamble, which deals with the circumstances in which the bond came into
existence, it would thus require clear wording to exclude recovery of a claim under
one of the condictiones.

6 National Credit Regulator v Opperman & others 2013 (2) SA 1 (CC) para 99; African Products (Pty)
Ltd v AIG South Africa Ltd 2009 (3) SA 473 (SCA) para 13.

[38] It must therefore be considered whether any of the terms of the bond do
exclude such a debt. In this regard, clauses 2.2 to 2.4, 3, 5, 6 and 13, which might
indicate the contrary, shall be considered in turn.

[39] Clauses 2.2 and 2.3 deal with the primary source of indebtedness envisaged:
the loan. This is natural and understandable but does not function to exclude the
broad fourth category in clause 2.1 dealt with in paragraph 6 above. In passing,
clause 2.2 is clearly tailored to ensure that the bond complies with the provisions of
s 51(1)(b) of the Deeds Registries Act.7 Clause 2.4 provides security for costs
incurred in the preservation and realisation of the hypothecated properties. This
applies to the security and is not dependent on the nature of the claim.

[40] Clause 3 provides that ‘the causes of said debt and this bond may emanate
from one or more of the following’. Clause 1 contains a declaration of indebtedness
in the sum which is stated to be ‘the capital sum emanating from one or more of the
hereinafter mentioned causes of debt . . .’. This spells out what is meant in
paragraph 1. It primarily relates to the loan. It in no way qualifies the cover of the
bond where it is said to go beyond the first three categories in clause 2.1.

[41] In addition, clause 3.1 is to the following effect:
‘All amounts whatsoever already owed or may be owed hereafter in terms of advances, cash
credit accounts, fixed loans, credit, promissory notes, loan agreements, instalment sale
agreements, lease agreements, other agreements, any facilities granted to the Mortgagor’.
The clause specifically differentiates between advances and a number of
agreements, including loan agreements. In other words it covers advances made
outside of agreements as well as those made pursuant to them. It is clear that the
moneys forming the basis for the enrichment claim were advanced; they were simply
advanced without there being a legal basis for doing so.

7 This requires that ‘a sum is fixed in the bond as an amount beyond which future debts shall not be
secured by the bond’.

[42] Clause 5 regulates the terms of advances. They should only be disbursed if
the terms and conditions of an agreement have been met. The question arises as to
what can be done by the Bank if an advance is made which does not comply with
clause 5. It does not mean that money has not been advanced. It is still an advance,
but the advance contravenes clause 5 of the bond. It should therefore not have been
made because this clause regulates how advances should be disbursed and when
they can be claimed. Since such a payment has no lawful basis, a claim for
repayment would have the character of the enrichment claim relied on by the Bank in
this matter. This does not mean that advances made in conflict with this clause do
not qualify as advances. It simply sets out when an advance has been made
pursuant to a lawful underlying causa under the bond.

[43] The concluding sentence of clause 5 incorporates the terms and conditions of
the loan into the bond. It may be asked how terms and conditions of an invalid
agreement can be so incorporated. The simple answer is that because the loan is a
nullity, its terms are not incorporated. The terms of the bond stand alone,
unaugmented by those of the loan. Many of the provisions of the bond do not apply
because the loan is void and no other agreements between the parties exist. That
would also be the position if the loan had been valid and all liability under it had been
discharged but an enrichment claim remained.

[44] Clause 6  deals with the mechanism for the calculation of interest. It requires
a written agreement where a particular basis and rate of interest is claimed. This
does not mean that a debt free of interest is not secured by the bond. In any event, it
may well be that, even if no agreement provided for interest, the common law
relating to when and how much interest accrues on a debt would apply.8 It is not

8  F D J Brand 9 LAWSA  2 ed para 213, says: ‘Interest which the defendant may have received on a
sum of money paid to him or her indebite is apparently not regarded as fruit and need not be
restored.’ In footnote 4 on that page he goes on to say: ‘The issue of interest actually received by the
defendant should not be confused with the question whether the defendant is liable for interest a
tempore morae. The basis for the claim of mora interest is not enrichment but compensation paid to
the plaintiff for the loss that the plaintiff suffered through being deprived of the use of his or her
money. Accordingly, liability for mora interest is determined by the legal principles regarding mora
interest in general and not by the law of enrichment.’

necessary here to determine whether this is so or not. At worst for the Bank, this
clause does not provide a basis for excluding an enrichment claim.

[45] Clause 13, the acceleration clause, clearly envisages an agreement.
Acceleration does not apply to an enrichment claim. The fact that such a claim is not
susceptible to acceleration does not exclude it from the cover of the bond. As
mentioned earlier, it is understandable and appropriate that most of the clauses in
the bond deal with agreements and the basis on which it affords security in relation
to agreements.

[46] The bond is not a model of clarity. However, construing it as a whole, I can
find no basis for limiting the broad, all-encompassing language contained in the
preamble, clause 2.1, clause 8 and clause 15. I disagree with the submission that
the bond must suffer the same fate as the loan. In my view, the bond affords security
for a claim for moneys due under one of the condictiones.

[47] The second question was therefore correctly answered in favour of the Bank
by the court below. There is no basis for an order declaring that the bond is not
enforceable due to the invalidity of the loan if the Bank has a claim against Panamo
for unjust enrichment.

[48] Accordingly, the appeal is dismissed with costs, including those occasioned
by the use of two counsel.

_____________________
CH Lewis
Judge of Appeal

_____________________
T R Gorven
Acting Judge of Appeal

APPEARANCES
For Appellant:

J Roos SC (with him J K Berlowitz)
Instructed by:

Harris Billings Attorneys, Johannesburg
Honey Attorneys, Bloemfontein

For Respondent:

V Maleka SC (with him P Seleka)
Instructed by:
Mkhabela
Huntley
Adekeye
Inc,
Johannesburg
McIntyre & Van der Post, Bloemfontein
SUPREME COURT OF APPEAL OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT
OF APPEAL

FROM

The Registrar, Supreme Court of Appeal

DATE

22 May 2015

STATUS

Immediate

Panamo Properties v Land and Agricultural Development Bank [2015]
ZASCA 70

Please note that the media summary is intended for the benefit of the
media and does not form part of the judgment of the Supreme Court of
Appeal.

The Supreme Court of Appeal today upheld the decision of the Gauteng Local
Division of the High Court that an agreement concluded by the Land and
Agricultural Development Bank in contravention of the Land and Agricultural
Development Bank Act 15 of 2002 was invalid. The Bank had advanced
moneys to a property development company to purchase and develop
agricultural land for the purpose of developing an urban township. The Bank,
the SCA found, did not have the power to enter into a contract that was
contrary to the objects of the Act, which all relate to the development of
agricultura land.

Nonetheless the SCA confirmed the finding of the court a quo that the terms
of the mortgage bond registered as security for the loan made to the company
were such that the bond would be enforceable if the Bank successfully
brought a claim for unjustified enrichment against the company.