THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Reportable
Case no: 887/2021

In the matter between:
CORAL LAGOON INVESTMENTS 194
(PTY) LTD

FIRST APPELLANT
ASH BROOK INVESTMENTS 15
(PTY) LTD

SECOND APPELLANT
and
CAPITEC BANK HOLDINGS LIMITED
RESPONDENT

Neutral citation: Coral Lagoon Investments 194 (Pty) Ltd and Another v
Capitec Bank Holdings Limited (Case no.887/2021)
[2022] ZASCA 144 (24 October 2022)
Coram:
ZONDI, GORVEN and HUGHES JJA and WINDELL and
CHETTY AJJA
Heard:
5 September 2022
Delivered: 24 October 2022
Summary: Contract – agreement not to sue – pactum de non petendo
anticipando – enforcement thereof not against public policy.

________________________________________________________________________

ORDER
________________________________________________________________________
On appeal from: Western Cape Division of the High Court, Cape Town (Wille J,
sitting as court of first instance).
The appeal is dismissed with costs on an attorney and client scale, including the
costs of two counsel.
________________________________________________________________

JUDGMENT
________________________________________________________________________

WINDELL AJA (ZONDI, GORVEN and HUGHES JJA, and CHETTY AJA
concurring)

[1] This is an appeal against an order of the Western Cape Division of the High
Court, Cape Town (the high court). The order directed the appellants, Coral
Lagoon Investments 194 (Pty) Ltd (Coral) and its holding company, Ash Brook
Investments 15 (Pty) Ltd (Ash Brook) to withdraw an action for damages against
the respondent, Capitec Bank Holdings Limited (Capitec) (the 2020 action). In
doing so the high court, per Wille J, enforced a clause not to sue contained in a
written ‘consent agreement’ concluded between Capitec and the appellants.1 Such
a clause is known as a pactum de non petendo (the pactum). The high court found
that the appellants had breached the pactum by instituting the 2020 action against
Capitec. It further found that Capitec was entitled to specific performance of the
consent agreement and that the use of motion proceedings was permissible. It also
dismissed the appellants’ counter application contending that the pactum is
contrary to public policy. The appeal is with leave of the high court.

1 There were also other parties to the consent agreement namely K2017134938 (South Africa)
(Pty) Ltd (Bidco) and CB Employee Holdings (Pty) Ltd.

[2] Two main issues arise for determination in this appeal. Firstly, the
interpretation of the consent agreement and, secondly, whether the pactum, which
was a permanent one, was contrary to public policy.

Background
[3] Coral is wholly owned by Ash Brook, a broad based black economic
empowerment consortium comprising 13 black shareholders in different
formations. In 2006 Capitec, Coral, Ash Brook, the shareholders of Ash Brook (all
of which are black persons and black-owned entities) and the Industrial
Development Corporation (IDC) concluded a linked set of written agreements. Part
of the set of agreements was a subscription of shares and shareholders agreement
(the subscription agreement), concluded between Capitec and the appellants on
12 December 2006. The purpose of the subscription agreement was to facilitate
and promote the achievement of the transformational objectives set out in the
Broad-Based Black Economic Empowerment Act 53 of 2003 (B-BBEE Act), the
Financial Sector Charter2 (FSC) and the Codes of Good Practice on Black
Economic Empowerment3 (the transformation practises). As a result, Capitec
allotted and issued, and Coral subscribed for ten million ordinary shares in Capitec
at R30 per share for a total subscription price of R300 million (the CPI shares). The
CPI shares were equivalent to a 12,21 per cent stake in Capitec. The black
shareholders leveraged finance of R285 million to fund the acquisition using a third
party, the IDC.

[4] An important element of the subscription agreement are three sets of selling
restrictions, aimed at keeping the CPI shares in black shareholders’ hands. One
of these selling restrictions is clause 8.3 of the subscription agreement. This clause
provides that, should Coral in any manner endeavour to dispose of any of the CPI

2 The South African Financial Sector Charter is a transformation charter in terms of the Broad-
Based Black Economic Empowerment (B-BBEE) Act 53 of 2003. The Charter came into effect in
January 2004.
3 Codes of Good Practice on Black Economic Empowerment published in General Notice 112
in Government Gazette 29617 of 9 February 2007, as amended from time to time.

shares to any entity or person who, in Capitec’s opinion, does not comply with the
B-BBEE Act and transformation practises, Capitec will determine the number of
CPI shares sold and may require Coral to acquire an equal number of CPI shares
and cause them to be registered in Coral’s name.

[5] It was always Capitec’s and the appellants’ understanding of clause 8.3 that
Capitec’s consent was required for Coral to trade in the CPI shares. However, in
court proceedings instituted by the appellants against Capitec in September 2019
(which I deal with later in the judgment), Capitec stated that it had realized that
clause 8.3 is concerned with the consequences for Coral of selling any of its CPI
shares to an entity or person who, in Capitec’s opinion, does not comply with the
B-BBEE Act and transformation practices. The effect of this concession was that
Coral did not need Capitec’s consent to sell its CPI shares. Capitec’s
understanding of clause 8.3 was recently affirmed by this Court in Capitec Bank
Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and
Others.4

[6] In any event, after holding the shares for 5 years, Coral sold 5 284 735 CPI
shares to the Public Investment Corporation in 2012 in order to repay its debt to
the IDC. Coral obtained Capitec’s consent prior to the transaction. In addition,
Capitec required as a condition of its consent that the CPI shares be subject to a
further locked-in period of 10 years. That meant that the shareholders in Ash Brook
would not be entitled to dispose of, or trade, their CPI shares in the open market
during the locked-in period. The CPI shares were sold at a 15 per cent discount to
the market.

[7] From about 2014 there was ongoing dissatisfaction about the selling
restrictions by Ash Brook and its shareholders. In 2016 the appellants instituted
action against Capitec and its subsidiary, Capitec Bank Limited, in which they

4 Capitec Bank Holdings Limited and Another v Coral Lagoon Investments 194 (Pty) Ltd and Others
[2021] ZASCA 99; [2021] 3 All SA 647 (SCA).

challenged the validity of certain provisions of the subscription agreement (the
2016 action). They specifically sought an order that they were entitled to dispose
of their shares without the selling restrictions. In 2018, the 2016 action was
removed from the pre-trial roll for purpose of settlement negotiations. It has not
been re-enrolled and is still pending.

[8] In 2017, Coral sought to sell 3 360 830 of its CPI shares to a subsidiary of
a 100 per cent black-owned company called Petratouch (Pty) Ltd (the 2017
Petratouch transaction). It involved numerous parties and the transaction was
embodied in numerous agreements. By then, Capitec’s relationship with the
appellants had deteriorated. At the time the appellants had remained invested in
Capitec for over 10 years and had already fully repaid the funding for the CPI
shares provided by the IDC. The CPI shares were thus fully owned by the
appellants without any residual financial obligations to third parties.

[9] Consistent with the practice adopted by the parties in the previous
transactions, Coral sought Capitec’s consent for the 2017 Petratouch Transaction.
Capitec agreed, subject to certain conditions, inter alia, that Petratouch could only
sell the CPI shares to people who are black persons approved by Capitec in
writing, and further that the purchaser had to enter into a written agreement with
Capitec on substantially the same terms. Coral accepted the conditions and sold
the CPI shares to Petratouch. One of the agreements constituting the 2017
Petratouch Transaction was the consent agreement entered into between Capitec
and the appellants, which contains the pactum.

[10] After the 2017 Petratouch Transaction, Coral held 1 354 435 CPI shares. In
2019 Coral sought to dispose of 810 230 CPI shares to the Transnet Second
Defined Benefit Fund. When Capitec was called upon to consent to the sale, it
refused. The appellants launched an urgent application seeking to declare the
refusal of consent to be in breach of Capitec’s duty of good faith to the appellants.
It is in this application that Capitec, for the first time, indicated that clause 8.3 of

the subscription agreement did not require Capitec’s consent to sell the CPI shares
and did not entitle Capitec to impose further restrictions on a sale of CPI shares by
Coral.

[11] On 19 June 2020 the appellants instituted the 2020 action against Capitec.
They claimed, in broad terms, that, but for Capitec’s conduct, Coral would not have
concluded the 2017 Petratouch Transaction at a discount of 52 per cent to the
prevailing 30-day weighted average, amounting to a loss of R 1,225 billion. This
led to the application before the high court that is the subject of this appeal.
Capitec’s main claim in the high court was that the 2020 action should be
withdrawn because the appellants agreed in clause 7.1.6.2 of the consent
agreement not to institute legal proceedings against Capitec in which they sought
to use or rely upon the 2017 Petratouch Transaction or any part of it. 5

[12] Before the hearing of the application in the high court, Capitec filed its plea
in the 2020 action. In the plea Capitec raised special defences which were similar
to the objections in its application. It also pleaded to the merits of the 2020 action.

Agreement not to sue
[13] Capitec’s consent to the 2017 Petratouch Transaction was embodied in the
written consent agreement, entered into between Capitec and the appellants. The
purpose of the consent agreement was for Capitec to waive various rights in
connection with the selling restrictions imposed in terms of the subscription
agreement so that the 2017 Petratouch Transaction could proceed. Without these
waivers, which Capitec was not obliged to make, the 2017 Petratouch Transaction
would have breached the selling restrictions in the subscription agreement.
Because of certain concerns (dealt with below), Capitec proposed the inclusion of
the pactum in the consent agreement, to which the appellants agreed. It is
necessary to quote the clause containing the pactum in extenso:

5 Capitec also sought alternative relief, directing the appellants to refer their claims for arbitration.

‘7.1 Each of Ash Brook and Coral hereby give the following warranties to Capitec Holdings.
…………
7.1.6 it shall not and shall procure that its related and inter-related persons (as defined in
the Companies Act) do not:
7.1.6.1 directly or indirectly use or rely on the Transaction (or any part thereof) or any of
the Transaction Agreements in the Legal Proceedings or any other legal proceedings
related thereto or flowing therefrom: and/or
7.1.6.2 directly or indirectly institute any legal proceedings against Capitec Holdings
and/or any of its subsidiaries (as defined in the Companies Act), whether as plaintiff,
applicant, defendant, respondent or otherwise, wherein it seeks to use or rely upon the
Transaction (or any part thereof).
(Transaction warranties)’.
It is common cause that the word ‘Transaction’ in the clauses above refers to the
2017 Petratouch Transaction and that ‘Legal Proceedings’ refers to the 2016
action.

The interpretation of clauses 7.1.6.1 and 7.1.6.2
[14] The appellants contend that clauses 7.1.6.1 and 7.1.6.2 are warranties that
do not give rise to the rights and obligations that Capitec contends for. It is
submitted that the only basis for the inclusion of the clauses was to protect Capitec
in the 2016 action.

[15] It is trite that interpretation is, generally speaking, an objective process of
attributing meaning to the words used in a document, read in the context of the
document as a whole and having regard to the apparent purpose of the words.6 It
is a unitary exercise which must be approached holistically: simultaneously
considering the text, context and purpose.7 In addition, extrinsic evidence may be
admitted as relevant to context and purpose.8

6 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593
(SCA) para [18].
7 University of Johannesburg v Auckland Park Theological Seminary and Another [2021] ZACC 13;
2021 (6) SA 1 (CC) para [65].
8 Footnote 1 para 47. Unterhalter AJA remarked, that ‘reasonable disagreements as to the
relevance of such evidence should favour admitting the evidence and the weight of the evidence

[16] The point of departure in interpreting the subject clauses is the text. The
introductory words in Clause 7.1.6, read with 7.1.6.1 and 7.1.6.2, make clear that
the institution of legal proceedings by Coral and Ash Brook and its related entities
against Capitec are not permitted under two distinct circumstances. Clause 7.1.6.1
is specifically directed to the 2016 action. It stipulates that the appellants (and its
related and inter-related persons) shall not use or rely on the 2017 Petratouch
Transaction in the 2016 action or any other legal proceedings related to the 2016
action. Clause 7.1.6.2 is framed in wider terms. It applies not only to the 2016
action but to any legal proceedings against Capitec where the appellants seek to
use or rely upon the 2017 Petratouch Transaction. The singular purpose of the
words used in clause 7.1.6.2 is clearly to prevent the appellants from instituting
any future legal proceedings against Capitec in which it seeks to use or rely upon
the 2017 Petratouch Transaction.

[17] The context in which the parties agreed to the pactum is similarly clear. In
the introduction to the consent agreement, it is recorded that the appellants and
other parties had proposed the 2017 Petratouch Transaction to Capitec (clause
1.2). Various steps in the 2017 Petratouch Transaction required the consent or
approval of Capitec in terms of the subscription agreement (clause 1.3). The
parties requested Capitec to consent to those steps (clause 1.3). Capitec was
willing to provide that consent on the terms and subject to the conditions in the
consent agreement (clause 1.4). Clause 7.1.6 then addressed Capitec’s two main
concerns: Clause 7.1.6.1 prevents the appellants from using or relying upon the
2017 Petratouch Transaction in the 2016 action; and clause 7.1.6.2 prevents the
appellants from instituting any other legal proceedings in which it will use or rely
upon the 2017 Petratouch Transaction. Clause 7.1.6.2 clearly does not refer to the
2016 action.

may then be considered. It is this enquiry into relevance that will determine the admissibility of the
evidence’.

[18] The appellants contend that on the assumption that clause 7.1.6.2 only
applies to new litigation in which it seeks to escape ‘from the selling restrictions’, it
is not triggered by the 2020 action as the 2020 action does not relate to the ‘selling
restrictions’. In support of this contention the appellants refer to Capitec’s founding
affidavit in which it stated that at the time the 2017 Petratouch Transaction was
concluded, it was ‘concerned that [the appellants] intended to use the 2017
Petratouch Transaction to either support that litigation, or to institute new litigation
in which it sought to escape from the Selling Restrictions’.

[19] The passage in the founding affidavit referred to above is not the only
instance in the founding affidavit where Capitec explained the reason for the
inclusion of the pactum. Capitec also averred that it gave its consent for the 2017
Petratouch Transaction only because it knew that the appellants could not
subsequently hold the 2017 Petratouch Transaction against it in litigation.  Clause
7.1.6. catered for both the 2016 action (which attacks the selling restrictions
directly) and any legal proceedings other than, and in addition to, the 2016 action.

[20] The context established that Capitec agreed to give its consent to the 2017
Petratouch Transaction only if the appellants agreed not to use or rely on the 2017
Petratouch Transaction or any part thereof against Capitec in the 2016 action or
any other legal proceedings which they might institute against Capitec.

Is clause 7.1.6.2 a warranty?
[21] Clause 7, in which the pactum is located, is headed ‘Warranties,
representations and undertakings by Ash Brook and Coral’. In Clause 7.1 it is
recorded that ‘Ash Brook and Coral hereby give the following “warranties” to
Capitec Holdings’. Clause 7.1.1 to 7.1.6 are also referred to in the agreement as
‘Transaction Warranties’. Clause 7.3 further states that the ‘transaction warranties
are a material representation inducing Capitec Holdings to enter into this
Agreement’.

[22] The appellants contend that clause 7.1.6.2, properly interpreted, is a
warranty that ‘reflected a position at the time the consent agreement was
concluded’. The appellants submit the purpose of the clause was limited and does
not give rise to legally enforceable rights and obligations beyond those specified
in clause 7.4 which provides:
‘If Ash Brook or Coral breach any of the Transaction Warranties, then Capitec Holdings
shall be entitled to immediately without having to give notice as envisaged in clause 11,
upon written notice to the other Parties and without prejudice to any other remedies
Capitec Holdings may be entitled in law, forthwith revoke all or any of the consents,
approvals, undertakings and confirmations envisaged in clause 6 ab initio, and/or exercise
its rights pursuant to the Mandatory Acquisition Option and/or the Repurchase option as
the case may be.’
At most, so it is argued, a breach of a warranty would give rise to a damages
action, and not the ‘drastic remedy’ granted by the high court. In support of their
argument the appellants rely, inter alia, on Absa Bank v Swanepoel.9 In that matter
Cameron JA emphasised that not all terms in a contract create enforceable rights
and obligations. He remarked that to establish whether a clause has an operational
effect ‘depends on what it says within its context in the contract, against the
background in which the parties concluded it’.

[23] Although clause 7.1.6.2 is referred to as a ‘warranty’ in the consent
agreement, there is no magic in the contractual terminology. As remarked by
Hoexter JA in Resisto Dairy v Auto Protection Insurance Co:10
‘The terms of the contract cannot be changed into suspensive conditions merely by calling
them conditions precedent. A term of the contract may be so material that a breach of it
will entitle the other party to repudiate the contract, and in the present case the parties
have used the words “conditions precedent to any liability” to indicate that the so-called
conditions are material terms of the contract.’11

9 ABSA Bank Ltd v Swanepoel [2004] ZASCA 60; 2004 (6) SA 178 (SCA) paras 6-8.
10 Resisto Dairy v Auto Protection Insurance Co 1963 (1) SA 632 (A).
11 Ibid at 644F-G.

[24]  In Parsons Transport (Pty) Ltd v Global Insurance Ltd12 this Court had to
interpret certain clauses in an insurance contract. In dealing with the ‘warranties’,
Mpati DP applied the approach adopted in Resisto Dairy, and held that they were
material terms of the contract and did not ‘become warranties merely because they
are referred to as warranties in the schedule’.13 In Protea Property Holdings (Pty)
Ltd v Boundary Financing Ltd (formerly known as International Bank of Southern
Africa Ltd) and Others,14 Griesel J said:
'In the final analysis, there is no unanimity among the authorities as to what the expression
"warranty" connotes, save that it is a contractual term. It accordingly becomes necessary,
as pointed out by Farlam JA in Masterspice (Pty) Ltd v Broszeit Investments CC, "in every
case where the expression is used, to examine the terms of the contract in question closely
in order to endeavour to ascertain in what sense the parties have used it". (Footnotes
omitted)

[25] Warranties, in the narrow sense, can give rise to contractual remedies if
they were intended to do so. But, depending on the context, they can also be used
in a wider sense to mean contractual undertakings.15 I have already dealt with the
context in which the pactum was included in the consent agreement. Clause
7.1.6.2 was clearly intended to create obligations and afford rights and remedies.
This is made clear by clause 7.4. Clause 7.1.6.2 is not a warranty in the true sense
of the word, ie a representation about a past or present state of affairs.16 It is about
how the appellants warrant or undertake that they shall not conduct themselves in
future. It is a contractual undertaking. This interpretation is fortified by the use in
the heading to clause 7 of the word ‘undertakings’.

Breach of the consent agreement

12 [2005] ZASCA 95.
13 Ibid para [7].
14 Protea Property Holdings (Pty) Ltd v Boundary Financing Ltd (formerly known as International
Bank of Southern Africa Ltd) & Others [2007] ZAWCHC 39; 2008 (3) SA 33 (C) para 39.
15 See Wessels: The Law of Contract in South Africa 2 ed Vol 2 paras 3044 and 3049.
16 Lewis Ltd v Norwich Union Fire Insurance Co 1916 AD 509.

[26] The claim against Capitec in the 2020 action is based on four causes of
action, which are all framed in the alternative. Capitec’s synopsis of the four claims
can be summarized as follows:
1. Claim A: This is a contractual claim for damages based on a breach of duty of
reasonableness and good faith allegedly owed in terms of the subscription
agreement, alternatively the common law duty of good faith, and what the
appellants described as the duty to achieve BEE. It is alleged that Capitec
breached these duties by imposing a condition that its consent be obtained for the
2017 Petratouch Transaction, which caused Coral to sell its CPI shares at a
discount.
2. Claim B: This is a delictual claim for damages based on an alleged grossly
negligent and/or fraudulent material misrepresentation by Capitec that the 2017
Petratouch Transaction was conditional upon Capitec’s consent.
3. Claim C: This is a delictual claim for damages based on pure economic loss
allegedly suffered by Coral as a result of Capitec’s breach of duty to ‘not engage
in conduct that diminished or reduced the value of [Coral’s and Ash Brook’s]
proprietary interest in the [Capitec] shares’. Capitec allegedly breached this duty
by facilitating the 2017 Petratouch Transaction.
4. Claim D: This is a statutory claim for damages based on an allegation that
Capitec engaged in a fronting practice in contravention of the B-BBEE Act, which
amounted to conduct or the conducting of Capitec’s business in a manner that is
oppressive or unfairly prejudicial to, or that unfairly disregards the interests of Coral
in terms of s 163(1)(a) and (b) of the Companies Act 71 of 2008 or which amounted
to unfair discrimination on the basis of race as contemplated in s 7 of the Promotion
of Equality and the Prevention of Unfair Discrimination Act 4 of 2000. Capitec
allegedly engaged in a fronting practice by requiring the appellants to sell their sale
shares at a discount.

[27] It is clear from the above that the appellants ‘use or rely on’ the 2017
Petratouch Transaction in support of their claims. But, if there was any doubt, the

following paragraphs in the particulars of claim, describing the conduct causing
loss, make it plain:
‘96. At the time of the 2017 Petratouch Transaction, Capitec maintained that Coral was
prohibited from disposing of its CPI shares without Capitec’s consent.
97. As a condition for granting its consent, Capitec required that Coral could only sell its
CPI shares subject to the requirement of Capitec’s consent as to the identity of the
purchaser and the terms on which the sale takes place, including subjecting the Sale
Shares to further restrictive conditions as a condition of its consent as reflected in the
Framework Agreement, the Capitec Consent Agreement and the Relationship Agreement
to persuade BidCo to conclude the transaction.17
98. At the time of imposing this condition, Capitec knew or would have known with the
exercise of reasonable care, that imposing this condition would have the effect of the Black
shareholders having to sell the Sale Shares at a significant discount of 52% of their market
value, given the highly restrictive nature of the restrictive conditions.
104. But for Capitec’s conduct in breach of one or more of the legal duties pleaded below,
Coral would not have concluded the 2017 Petratouch Transaction and would have been
able to sell its CPI shares to any Black purchaser at a discount of at most 5% of the value
of the Sale Shares.’

[28] To finally test if the claims in the 2020 action contravene clause 7.1.6.2, is
to ask whether they can be sustained without using or relying upon the 2017
Petratouch Transaction. The answer is no. The institution of the 2020 action clearly
breached the undertaking not to sue.

Remedy
The nature of a pactum de non petendo in anticipando
[29] A pactum de non petendo in anticipando forms part of our law.18 It is a
contractual undertaking not to institute an action. The appellants contend that our
courts have recognised such a pactum only (a) as a defence and (b) to grant a

17 The particulars of claim define “Sale Shares” as meaning the shares sold by Coral in the 2017
Petratouch Transaction.
18 Miller v Dannecker 2001 (1) SA 928 (C); Tuning Fork (Pty) Ltd t/a Balanced Audio v Greeff and
Another [2014] ZAWCHC 78; 2014 (4) SA 521 (WCC) para 43 (iv).

temporary stay of proceedings to afford a debtor an opportunity to repay,
alternatively (c) as part of settling (compromising an already existing dispute).

[30] A pactum is an agreement like any other. It is a contract that gives rise to
rights and correlative duties. The nature of the right in question varies from case
to case and is dependent on the text and the facts. Although the court in Miller v
Dannecker19 held that the pactum merely suspends the enforcement of a contract,
usually for a specific period or until the occurrence of some contingency, the court
in that matter was dealing with a pactum that was temporary. In the present matter
the limitation of the right not to be sued is not linked to time. The pactum in the
present matter is one operating in perpetuity.20 Van Zyl makes it clear that there is
no bar in our law to such a pactum.21 Formulations emphasising time limitation or
contingency aspects cannot therefore be said to mean that such features are
requirements for a pactum to be valid.

Specific performance
[31] The law on specific performance is well established. Injured parties have
the right of election whether to hold the parties in breach to their contract and claim
performance by them for precisely what they had bound themselves to do, or to
claim damages for the breach.22 It is in the court’s discretion to award specific
performance. The discretion must be exercised judicially upon a consideration of
all relevant facts.23 The ultimate principle is that the order which the court makes
should not produce an unjust result such as in a situation where it is impossible for
the appellants to comply with the order or if the order would operate unduly harshly
on the appellants.24

19 Ibid at 937A-B.
20 Van Zyl v Auto Commodities (Pty) Ltd [2021] ZASCA 67; 2021 (5) SA 171 SCA.
21 Ibid para 32.
22 Benson v SA Mutual Life Assurance Society [1985] ZASCA 114; 1986 (1) SA 776 (A).
23 Ibid at 783C.
24 Ibid at 783 E-G.

[32] The appellants contend that Capitec was not entitled to specific performance.
It was submitted that in the event of breach of the consent agreement Capitec
could rescind the consent agreement or seek damages. They rely on clause 7.4 of
the consent agreement (referred to earlier), which they argue caters for the only
remedies a party can claim in the event of a breach.

[33]  Firstly, clause 7.4 expands, rather than restricts, Capitec’s remedies. It
specifically provides that the remedies in 7.4 are ‘without prejudice to any other
remedies to which Capitec Holdings may be entitled in law’. Secondly, it is not clear
what damages Capitec would be able to claim in these circumstances. The
appellants were unable to identify any. Thirdly, specific performance in the present
matter is possible and is not unprecedented. In Rayden v Hurwitz25 the court
granted an order that an action be withdrawn on the basis of a similar provision in
an agreement.

[34] Capitec has the right to not be sued by the appellants where they use or
rely upon the 2017 Petratouch Transaction. The appellants breached the pactum
by instituting the 2020 action. Under the circumstances there is no reason why
Capitec cannot enforce the pactum by instituting application proceedings aimed at
compelling the appellants to comply and withdraw the 2020 action. The only issue
is whether the ordering of specific performance in the circumstances of this case
would result in an injustice. To answer this question, it is necessary to deal with
the appellants’ claim that the high court should not have enforced clause 7.1.6.2
because it would be contrary to public policy.

The enforceability of the pactum
[35]  The appellants made two main submissions: first, that a constitutional right
cannot be waived, and second, that the pactum is against public policy.

Waiver

25 Rayden v Hurwitz 1932 CPD 336.

[36] Section 34 of the Constitution provides that everyone has the right to have
any dispute that can be resolved by the application of law decided in a fair public
hearing before a court or, where appropriate, another independent and impartial
tribunal or forum. The issue whether this right can be waived was addressed in
Lufuno Mphaphuli & Associates Pty Ltd v Andrews (Lufuno).26 That matter
concerned whether parties to arbitration agreements could waive their right to a
fair hearing. The majority held that where parties agree to arbitrate, they arguably
do not so much as waive their s 34 rights as simply agree not to exercise them.
O’Regan ADCJ, speaking for the majority said:
‘If we understand section 34 not to be directly applicable to private arbitration, the effect
of a person choosing private arbitration for the resolution of a dispute is not that they have
waived their rights under section 34. They have instead chosen not to exercise their right
under section 34. I do not think, therefore, that the language of waiver used by both the
European Court of Human Rights in Suovaniemi and by the Supreme Court of Appeal
in Telcordia is apt. Indeed, it may not be apt in relation to constitutional rights at all, but
that is a topic for another day.’27

[37] The high court applied Lufuno and found that the concept of waiver did not
arise. It held that the appellants were fully informed of their rights and elected
voluntarily to consent to the terms of the subject clause. It then proceeded with an
enquiry to establish whether clause 7.1.6.2 was inconsistent with public policy. The
high court cannot be faulted in its approach. The proper inquiry in the present
matter is to determine whether the subject clause or its enforcement is consistent
with public policy.28

Public policy

26 Lufuno Mphaphuli & Associates (Pty) Ltd v Andrews and Another [2009] ZACC 6; 2009 (4) SA
529 (CC).
27 Ibid para 216. See also Schoombee and Another v S [2016] ZACC 50; 2017 (2) SACR 1 (CC);
2017 (5) BCLR 572 (CC) para 25.
28 See Barkhuizen v Napier [2007] ZACC 5; 2007 (5) SA 323 CC.

[38]  In Beadica 231 CC and Others v Trustees for the time being of the Oregon
Trust and Others,29 the Constitutional Court held that public policy is the basis on
which courts may decline to enforce contractual terms where the term itself or its
enforcement would be contrary to public policy.30 Public policy requires in general
that parties should comply with contractual obligations that have been freely and
voluntarily undertaken. This is neither the only nor the most important principle, but
is a factor that gives effect to the central constitutional values of freedom and
dignity and is essential to the achievement of the constitutional vision of our
society.31 In determining what public policy requires, courts must conduct a careful
balancing exercise in which it has to ‘employ [the Constitutional] values to achieve
a balance that strikes down the unacceptable excesses of “freedom of contract”,
while seeking to permit individuals the dignity and autonomy of regulating their own
lives’.32 This includes a consideration of various factors, including, but not limited
to, whether the parties negotiated with equal bargaining power and whether they
understood what they were agreeing to. This much is accepted by the appellants.

[39]  Courts should use the power to invalidate a contract or not to enforce it
sparingly and only in the clearest of cases.33 This principle of perceptive restraint
has been endorsed by the Constitutional Court subject to the caveat that the
degree of restraint to be exercised must be balanced against the backdrop of our
constitutional rights and values.34 The principle of perceptive restraint flows from
the underlying principle that contracts that are freely and voluntarily entered into
should be honoured.35

Is Clause 7.1.6.2 consistent with public policy?

29 Beadica 231 CC and Others v Trustees for the time being of the Oregon Trust and Others [2020]
ZACC 13 (Beadica); 2020 (5) SA 247 CC.
30 Beadica para 80.
31 Ibid paras 57 and 87.
32 Ibid para 71.
33 AB v Pridwin Preparatory School [2018] ZASCA 150; 2019 (1) SA 327 (SCA) para 27.
34 Footnote 28 paras 88-90.
35 Ibid para 89.

[40] The appellants submit that clause 7.1.6.2 ousts their right to access to court.
In general, with reference to, amongst others, Barkhuizen v Napier36 and
Schierhout v Minister of Justice,37 they contend that a litigant will always be
entitled, even at common law, to an adequate and fair opportunity to seek judicial
redress and that it would be contrary to public policy to enforce a clause that does
not afford such an opportunity.

[41]  The appellants bear the burden of showing that clause 7.1.6.2 or its
enforcement would be contrary to public policy.38 The appellants allege that it
would be unfair to enforce the clause because Capitec was a central participant in
the 2017 Petratouch Transaction and its enforcement will have the effect that the
appellants will not be able to exercise their s 34 rights of access to courts. They
further contend that their status as BEE shareholders is relevant; that Capitec
owed them a duty to protect the value of their shares; and they had no commercial
power to prevent Capitec’s alleged abuse of clause 8.3 of the subscription
agreement.

[42] The following factors are instructive. Firstly, in clause 9 of the consent
agreement it was agreed that the parties were ‘free to secure independent legal
and other professional advice (including financial and taxation advice) as to the
nature and effect of all the provisions of the consent agreement and the other
Transaction Agreements’. The appellants did just that. They were legally
represented at the time of the negotiation and conclusion of the 2017 Petratouch
Transaction. In fact, they obtained substantial independent professional and legal
advice spending over R16 million.

[43] Secondly, the parties to the consent agreement were all experienced
business people who engaged in detailed and complex negotiations over a period

36 Barkhuizen v Napier [2007] ZACC 5; 2007 (5) SA 323 CC (Barkhuizen).
37 Schierhout v Minister of Justice 1926 AD 99.
38 Barkhuizen para 58 and Pridwin para 27 (iv).

of time. They themselves shared Capitec’s belief that its consent for the 2017
Petratouch Transaction was legally required. They specifically agreed in clause
9.3.1 and 9.3.2 that: (a) They had not placed any reliance upon any view expressed
by any other party, except those express representations, warranties, covenants,
undertakings and agreements set forth in the consent agreement and the other
Transaction Agreements to which it is or will become a party; (b) The terms and
conditions of the 2017 Petratouch Transaction were fair and reasonable in all the
circumstances and were in accordance with the parties’ commercial intentions; and
(c) They had the necessary sophistication, knowledge and experience in financial
and business matters and were capable of evaluating the merits, risk and suitability
of entering into the consent agreement.  There is no indication on the facts that the
parties did not have equal bargaining power.

[44] Thirdly, there are no special rules that apply to contracts designed to
promote black economic empowerment. In Beadica the contract under scrutiny
was part of an empowerment scheme and enforcing it would lead to the failure of
a publicly funded BEE initiative. The Constitutional Court held that carving out
special rules for BEE contracts would:
‘. . . increase the risk of contracting with historically disadvantaged persons who benefit
from the Fund. If the applicants were to succeed, it would establish the legal principle that
enforcement of a contractual term would be inimical to the constitutional value of equality,
and therefore contrary to public policy, where enforcement would result in the failure of a
black economic empowerment initiative. This could, in turn, deter other parties from
electing to contract with beneficiaries of the Fund, or force beneficiaries to offset the
increased risk by making concessions on other contractual aspects during contract
negotiations. These outcomes would, in effect, undermine the very objects that the Fund
and section 9(2) seek to achieve’.39

[45] The fact that the appellants are BEE shareholders of Capitec is therefore
irrelevant. They were fully advised, fully informed, believed the terms were

39 Beadica para 101.

reasonable and freely relinquished the right not to institute legal proceedings in
which they use or rely on the 2017 Petratouch Transaction, in return for Capitec’s
consent to the 2017 Petratouch Transaction.

[46] Fourthly, the pactum was concluded in a particular context for a specific
legitimate reason. Coral required the 2017 Petratouch Transaction to settle a
substantial tax liability to SARS and to enable 71,3 per cent of Ash Brook’s
shareholders to exit the consortium. Coral chose to sell to Petratouch at the sale
price with the result that R975 287 684 was paid out to the existing shareholders.
At all material times, Mr Tshepo Mahloele was a director of both Coral and
Petratouch. At the time of the 2017 Petratouch Transaction the appellants had
already instituted the 2016 action in which they had sued Capitec over the legality
of the selling restrictions in the subscription agreement. Capitec was concerned
that the appellants intended to use the 2017 Petratouch Transaction to either
support that litigation or to institute new litigation in which it sought to escape from
the selling restrictions. But it did not want to stand in the way of a deal between the
appellants and Petratouch. It therefore proposed the inclusion of the pactum in the
consent agreement, to protect its interests, which the appellants agreed to. The
appellants determined that the benefit that they would obtain from concluding the
2017 Petratouch Transaction was worth the cost of agreeing not to sue Capitec.
Capitec was not a party to the 2017 Petratouch Transaction, it did not initiate the
transaction nor did it directly benefit from it. As for the alleged duty owed to the
appellants, no basis for such a duty was established by the appellants.

[47] Lastly, the clause does not prevent the appellants from suing Capitec for
breach of the consent agreement, or for matters unrelated to the 2017 Petratouch
Transaction. This is expressly set out in clause 7.2:
‘For the avoidance of doubt, it is recorded that the provisions of clause 7.1.6 do not apply
to a cause of action or claim resulting or arising from a breach by Capitec Holdings of any
of the provisions of this Agreement, and shall not preclude another Party from instituting
legal proceedings against Capitec Holdings in order for that Party to enforce compliance
by Capitec Holdings with any of the provisions of this Agreement.’

What they agreed not to do was ‘use or rely upon the 2017 Petratouch Transaction’
to sue Capitec outside such a breach. The pactum went no further than was
necessary to prevent very specific litigation. As such it is a limited and reasonable
restriction on the appellants’ ability to litigate.

[48] Agreements not to litigate are not necessarily unreasonable. Most
agreements of compromise, in which one party settles a claim against the other,
as a matter of course entails an agreement by one party not to institute or persist
with the same proceedings against the other party in the future. Each case must
be assessed on its own terms undertaking the enquiry set out in Barkhuizen. On
the facts in the present matter the pactum is consistent with public policy. In the
premises, the appellants’ counter application was correctly dismissed.

[49] The subscription agreement and the consent agreement provide that costs will
be recoverable on an attorney and own client scale. There is no reason why such
costs, including the costs of two counsel, should not follow the result.

[50]  In the result the following order is made:
The appeal is dismissed with costs on an attorney and client scale, including the
costs of two counsel.

________________________
L WINDELL
ACTING JUDGE OF APPEAL

Appearances
For appellants:

I V Maleka SC with T Scott
Instructed by:
Mkhabela Huntley Attorneys Incorporated,
Johannesburg
McIntyre van der Post, Bloemfontein

For respondent:
A M Breitenbach SC with M Bishop and P
Wainwright
Instructed by:

Van der Spuy, Cape Town
Hill McHardy & Herbst Attorneys, Bloemfontein.
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
MEDIA SUMMARY OF JUDGMENT DELIVERED IN THE SUPREME COURT OF
APPEAL
From:
The Registrar, Supreme Court of Appeal
Date:
24 October 2022
Status:
Immediate
The following summary is for the benefit of the media in the reporting of this case and does
not form part of the judgments of the Supreme Court of Appeal
Coral Lagoon Investments 194 (Pty) Ltd and Another v Capitec Bank Holdings Limited [2022]
ZASCA 144
Today the Supreme Court of Appeal (SCA) dismissed an appeal from the Western Cape
Division of the High Court (high court). The high court ordered the appellants, Coral Lagoon
Investments 194 (Pty) Ltd (Coral) and its holding company, Ash Brook Investments 15 (Pty)
Ltd (Ash Brook) to withdraw an action for damages against the respondent, Capitec Bank
Holdings Limited (Capitec), thereby enforcing a clause not to sue, a pactum de non petendo
(pactum), contained in a written consent agreement between Capitec and the appellants. Two
main issues arose for determination in the appeal. Firstly, the interpretation of the consent
agreement and, secondly, whether the pactum, which was a permanent one, was contrary to
public policy.
Coral, wholly owned by Ash Brook, is a broad based black economic empowerment
consortium comprising 13 black shareholders. In 2006 Capitec, Coral, Ash Brook, the
shareholders of Ash Brook and the Industrial Development Corporation concluded a linked set
of written agreements. Part of the set of agreements was a subscription agreement concluded
between Capitec and the appellants on 12 December 2006. Capitec allotted and issued, and
Coral subscribed for ten million ordinary shares in Capitec (CPI shares).  An important element
of the subscription agreement was three sets of selling restrictions, aimed at keeping the CPI
shares in black shareholders’ hands. One of these selling restrictions provided that should
Coral in any manner endeavour to dispose of any of the CPI shares to any entity or person
who, in Capitec’s opinion, does not comply with the B-BBEE Act and transformation practises,

Capitec will determine the number of CPI shares sold and may require Coral to acquire an
equal number of CPI shares and cause them to be registered in Coral’s name.
It was always the parties understanding that Capitec’s consent was required for Coral to trade
in the CPI shares. However, in proceedings instituted against Capitec in September 2019,
Capitec stated that it had realized that the clause was concerned with the Coral’s
consequences of selling any of its CPI shares to an entity or person who Capitec found to be
in non-compliance with the B-BBEE Act and transformation practices. The effect of this
concession was that Coral did not need Capitec’s consent to sell its CPI shares.
From about 2014 there was ongoing dissatisfaction about the selling restrictions by Ash Brook
and its shareholders. The appellants instituted proceedings against Capitec in 2016 (the 2016
action) in which the validity of certain provisions of the subscription agreement were
challenged. The matter is still pending. In 2017, Coral sought to sell 3 360 830 of its CPI shares
to a subsidiary of a 100 per cent black-owned company called Petratouch (Pty) Ltd (the 2017
Petratouch Transaction). Consistent with the practice adopted by the parties in the previous
transactions, Coral sought Capitec’s consent for the 2017 Petratouch Transaction. Capitec
agreed, subject to certain conditions.  Coral accepted the conditions and sold the CPI shares
to Petratouch.
One of the agreements constituting the 2017 Petratouch Transaction was the consent
agreement entered into between Capitec and the appellants, which contained the pactum.
The purpose of the consent agreement was for Capitec to waive various rights in connection
with the selling restrictions imposed in terms of the subscription agreement so that the 2017
Petratouch Transaction could proceed. Without these waivers, which Capitec was not obliged
to make, the 2017 Petratouch Transaction would have breached the selling restrictions. On
account of certain concerns, Capitec proposed the inclusion of the pactum in the consent
agreement.
On 19 June 2020 the appellants instituted action against Capitec and claimed, in broad terms,
that, but for Capitec’s conduct, Coral would not have concluded the 2017 Petratouch
Transaction at a discount of 52 per cent to the prevailing 30-day weighted average, amounting
to a loss of R 1,225 billion.
The SCA interpreted the consent agreement and found that the institution of legal proceedings
against Capitec was not permitted under two circumstances. Firstly, in terms of clause 7.1.6.1,
the appellants were not allowed to use or rely upon the 2017 Petratouch Transaction in the
2016 action. Secondly, in terms of clause 7.1.6.2 the appellants were not permitted to institute
any legal proceedings against Capitec where reliance is placed on the 2017 Petratouch
Transaction. The context established that Capitec agreed to give its consent to the 2017

Petratouch Transaction only if the appellants agreed not to use or rely on the 2017 Petratouch
Transaction or any part thereof against Capitec in the 2016 action or any other legal
proceedings which they might institute against Capitec. The SCA found that the two clauses
were clearly intended to create obligations and to afford rights and remedies and, as such,
they constituted contractual undertakings. The claims against Capitec in the 2020 action were
all reliant on the 2017 Petratouch Transaction, and the institution of the 2020 action was clearly
in breach of the undertaking not to sue.
The appellants submitted that a constitutional right of access to a court cannot be waived and
that the pactum is against public policy. This Court confirmed that a pactum is an agreement
like any other. There was, therefore, no reason why Capitec could not enforce the pactum.
This Court found that the appellants, as experienced businesspersons and negotiators, were
fully aware of their rights and obligations, and voluntarily elected to consent to the terms of the
pactum. The pactum was concluded in a particular context for a specific, legitimate reason
and went no further than was necessary to prevent very specific litigation. As such it is a limited
and reasonable restriction on the appellants’ ability to litigate. In light hereof, public policy
require that parties should comply with the contractual obligations that have been entered into
freely.
The SCA emphasised that courts should use the power to invalidate a contract or not to
enforce it sparingly and only in the clearest of cases. In addition, agreements not to litigate
are not necessarily unreasonable but each case should be determined on its own terms.
In the result, the SCA dismissed the appeal.

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