THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case no: 697/10

In the matter between:

ABSA BANK LIMITED

Appellant

and

THE SOUTH AFRICAN COMMERCIAL CATERING
AND ALLIED WORKERS UNION NATIONAL
PROVIDENT FUND (UNDER CURATORSHIP)

Respondent

Neutral citation:
ABSA v SACCAWU (697/10) [2011] ZASCA 150 (27
September 2011)

Coram:

Lewis, Ponnan, Cachalia, Bosielo and Shongwe JJA

Heard:

24 August 2011

Delivered

27 September 2011

Summary:
Rental agreements in respect of office equipment signed
only by principal officer of Provident Fund invalid: rules of Fund required
meeting of trustees and contracts to be signed by three trustees.

ORDER

On appeal from South Gauteng High Court (Bashall AJ sitting as court of first
instance):

The appeal is dismissed with costs including those of two counsel.

JUDGMENT

LEWIS JA (dissenting)
[1] At issue in this appeal is the validity of 15 contracts for the hire of office
equipment by the respondent, the South African Commercial Catering and
Allied Workers Union National Provident Fund (under Curatorship) (the Fund).
The appellant, Absa Bank Limited (the Bank), is the cessionary of the rights of
the lessors under the agreements. It instituted action against the Fund for
payment of arrears in respect of each of the leases, the amounts claimed
being substantial. The Fund pleaded that its Principal Officer, Mr A Mosiuoa,
did not have the authority to conclude the contracts. The parties agreed that a
stated case be placed before the high court on this issue alone, pending the
final determination of various other matters, and agreed facts for the purpose.
Bashall AJ in the South Gauteng High Court held that the principal officer was
not authorised to enter into contracts on behalf of the Fund and that the
contracts were thus ‗ultra vires‘ and not binding. The appeal to this court is
with his leave.

[2] Before turning to the stated case I shall set out in summary the
background facts that are not in contention as well as those agreed for the
purpose of determining the legal issue in question. During the course of 2000
and 2001 Sasfin Bank Ltd (Sasfin) and Sunlyn Investments (Pty) Ltd (Sunlyn),
financed the acquisition of office equipment by the Fund by entering into
rental agreements, negotiated and signed by Mosiuoa. The Fund took
possession of the equipment (from the suppliers) but then defaulted on
payment of rentals. The Bank, to which Sasfin and Sunlyn had ceded their

rights to claim payment under the agreements, instituted action against the
Fund, Sasfin and Sunlyn, but subsequently withdrew the claims against the
two companies. On 18 March 2003 the Fund was placed under the final
curatorship of Mr A L Mostert.

[3] In the statement of agreed facts the parties acknowledged that Sasfin
and Sunlyn ‗had sight‘ of the rules of the Fund before signing the 15 rental
agreements. Moreover, the companies had given the rules to the Bank before
they discounted their rights to it. They also stated that the contracts ‗were not
signed by the chairperson and two trustees of the Fund as contemplated by
Rule 4.13, at a duly constituted meeting of the Fund and by two trustees and
the chairperson‘.

[4] As will be apparent by now the argument by the Fund was that in order
for it to be bound by the rental agreements these had to have been executed
in a particular fashion prescribed by the rules. I shall turn to this issue shortly
for it is pivotal to the issues to be decided. It is useful at this stage, however,
to set out this rule in full. It is a subrule of rule 4 which regulates the Board of
Trustees – its composition, procedures and the trustees‘ duties and powers.
Rule 4.13 itself reads:1
‗Signatures to documents
All documents or contracts effected by the Fund . . . shall be binding upon the Fund
provided that they have been signed by the Chairperson and another two Trustees
(a) at a duly constituted meeting, or
(b) after such a meeting, provided that authorisation for the signing of these
documents or contracts was granted at such meeting.
Where, however, the Act [the Pension Fund Act 24 of 1956] prescribes specific
formalities for the signature of documents, such documents shall only be binding
upon the Fund subject to compliance with these requirements.‘

[5] The issues to be determined at the outset were framed as follows:
‗2.1 Whether Mr Abie Mosiuoa . . . in his capacity as the principal officer of the First
Defendant (―the Fund‖) acted ultra vires the applicable registered rules of the fund,

1 The use of capital letters and different fonts in this rule, as well as others cited, is not
reproduced here.

read with the Pension Fund Act 24 of 1956 . . . and the Regulations promulgated
thereunder, in concluding the 15 rental agreements referred to in the Plaintiff‘s
Particulars of Claim (―the 15 agreements‖).
2.2 If held that Mosiuoa acted ultra vires the Rules as aforesaid, whether as a matter
of law on the facts and defences pleaded in the Plaintiff‘s replication, the Fund may
nonetheless be held bound in law by the 15 rental agreements.
2.3 Whether by virtue of what the Court holds as regards 2.1 and 2.2, the First
Defendant may in law be held bound by the 15 rental agreements.‘

[6] The high court, as I have said, found that Mosiuoa did act ultra vires;
that the facts and defences pleaded in the replication (reliance on the
Turquand rule or estoppel) did not bind the Fund and that the Fund ‗may not
in law be held bound by the 15 rental agreements‘.

[7] The Fund did not before us contend that the agreements were ultra
vires in the true sense – that rental of office equipment was not within the
power of the Fund. The correct characterisation of the issue is whether there
was compliance with peremptory formalities laid down by the Fund‘s rules.
That raises the question whether rule 4.13 was applicable to the contracts that
Mosiuoa in fact concluded.

[8] Before turning to the rules themselves it is important to note that
regulation 30(2) (of the Regulations promulgated in terms of the Act) provides
that the rules of a fund must provide for various matters, including ‗(k) the
manner in which contracts and other documents binding the pension fund
shall be executed‘. The Fund‘s only rule regulating execution of contracts in
express terms is 4.13. The question that arises, therefore, is whether this rule
applies to all contracts entered into by the Fund.

[9] The Bank argued that by virtue of his appointment as principal officer,
Mosiuoa was authorised to enter into contracts for the day-to-day running of
the business of the Fund. He could do so orally or in terms of a written
contract, and that written contracts executed by him did not have to be
authorised at a meeting of the board of trustees and signed by the
chairperson of the board and two other trustees. That, it argued, would make

the administration of the Fund impossible. The safeguards imposed by rule
4.13 were unnecessary for the acquisition of office equipment and other small
items – pizza and piffle, the Fund‘s counsel called it (though I hasten to add
that he did not regard rental contracts which involved large sums of money as
falling into this category).

[10] In making this argument the Bank relied heavily on two provisions in
the preamble to the rules. Clause 4 provides that the Fund ‗will, in its own
name, be capable of suing and being sued and of acquiring, holding and
alienating property, movable and immovable‘. And clause 5 provides that the
trustees will appoint a principal officer on terms determined by them. Clause 5
continues: ‗The Fund will, for the purposes of 4, above, at all times be
represented by the Principal Officer‘.

[11] Did these clauses give authority to Mosiuoa to conclude written
contracts for the hire of office equipment? The Bank contends they did. In
representing the Fund – including for the acquisition of property – the principal
officer would negotiate and conclude any contract on its behalf. Compliance
with rule 4.13 was thus unnecessary.

[12] The obvious difficulty with this submission is that the clauses fall within
the preamble, which is followed by an index of rules and then the general
rules themselves. And the only rule that prescribes a mode of executing a
contract, as required by reg 30(2)(k), is, as I have said, rule 4.13. Thus the
question of its applicability to the 15 rental agreements arises.

[13] The Bank contended that the rule governs only those contracts entered
into by the trustees, and that since they are not executive officers of the Fund
they do not deal with its general administration. Their task is to exercise
oversight over the Fund‘s investments and to protect the members of the
fund. They meet only from ‗time to time to conduct the business of the Fund‘
(rule 4.6.1) and are not required to meet more than twice a year. Rule 4.2
provides for the appointment of 24 trustees and a quorum for a meeting is 13
trustees (4.6.3). The duties of the trustees include ensuring that proper

‗records of the operations of the Fund are kept‘ and ensuring that the rules
and the ‗operation and administration‘ of the Fund comply with legislation
such as the Income Tax Act.

[14] The trustees thus exercise an oversight role: they do not themselves
administer the Fund. They appoint a principal officer and an administrator to
deal with the business of the Fund – which is the investment of moneys for
the benefit of the members. But what contracts are then referred to in 4.13?
The Bank‘s answer is those contracts that require a meeting of at least 13
trustees – major investments or the appointment of the principal officer,
actuary or auditor.

[15] Rule 5 regulates the ‗method of investment and financial structure of
the Fund‘. Rule 5.2 states that the trustees have the power to invest in
immovable property or to lend moneys at interest and generally deal with the
money and the property of the Fund. But the same subrule states that the
trustees may delegate their power to make investments to a subcommittee of
members, or to a financial institution. And rule 5.2.6 provides that every
‗cheque, contract or other document pertaining to the Fund will be signed by
such persons as the trustees by resolution appoint and executed in such
manner as the trustees may determine‘. The rules do therefore envisage that
delegation is permissible and that even investment contracts may be
concluded other than by way of a formal meeting of trustees and with the
signature of three of them. Why then should contracts for the hiring of office
equipment be treated differently?

[16] The rules are far from clear. They do not prescribe in express terms
how the principal officer should represent the Fund. They do not indicate what
contracts must comply with rule 4.13, nor why the trustees, as non-executive
officers, should be burdened with the daily administration of the Fund‘s
business. Thus there is apparent non-compliance with reg 30(2)(k), unless the
Fund‘s contention (that all contracts entered into by the Fund must be
authorised in a trustees‘ meeting and signed by three trustees) is accepted.
We were urged to adopt this contention on the basis that the Fund is not a

business: it is not a trading company that requires regular intervention by
executive managers. Moreover, argued the Fund, since compliance with
prescribed formalities is necessary to protect the members of the Fund –
vulnerable pensioners – a strict approach should be taken to the interpretation
of the rules.

[17] In my view, however, the rules must be examined having regard to
their purpose and the context in which they operate. Rules, like contracts,
must be given a sensible meaning.2 And all the rules must be considered –
not one plucked out of context.3

[18] It is not sensible or reasonable to require that at least 13 trustees
should meet and authorise the hiring of office equipment. That is the function
of the principal officer. Even the conclusion of investment contracts, the prime
business of the Fund, may be delegated to a subcommittee of members or a
financial institution. It is inconceivable that the trustees would have to meet to
decide whether to hire a photocopier when a chief executive officer (principal
officer) must be appointed in terms of the Act. Section 8 of the Act lays down
stringent requirements that must be met before a person can be appointed as
a principal officer of a pension fund.

[19] The Fund did not contend that the running of the office of the Fund is
not the domain of the principal officer. It conceded that some contracts could
be concluded without a meeting, a written document and three signatures. But
it could not suggest where the line is to be drawn between those contracts
that do not require the rule 4.13 formalities, and those that do.

[20] The Fund‘s principal argument was that only rule 4.13 prescribed the
mode of executing contracts, as required by reg 30(2)(k), and thus that all
contracts (except for piffle and pizza) concluded by the Fund had to comply

2  Ekurhuleni Metropolitan Municipality v Germiston Municipal Retirement Fund 2010 (2) SA
498 (SCA) paras 12-14. And see Lloyds of London Underwriting Syndicates 969, 48, 1183
and 2183 v Skilya Property Investments (Pty) Ltd  [2004] 1 All SA 386 (SCA) para 14;
Trustees, Bus Industry Restructuring Fund v Break Through Investments CC 2008 (1) SA 67
(SCA) paras 14 and 15;
3 Ekurhuleni Metropolitan Municipality  above para 12, citing Sassoon Confirming and
Acceptance Co (Pty) Ltd v Barclays National Bank Ltd 1974 (1) SA 641 (A).

with rule 4.13. The result of that contention is that rule 4.13 and rule 5.2 are in
conflict. The contracts that are crucial to the fund – investments – may be
concluded by other bodies, but contracts for the rental of office equipment
must comply with unnecessary and burdensome procedures. That is not a
reasonable or sensible interpretation of the rules. And it undercuts the role of
a principal officer who is the only executive employed by the Fund and who, in
the preamble to the rules, is expressly said to represent the Fund in the
acquisition and holding of property.

[21] While I do not accept that clauses 4 and 5 in the preamble are in
themselves rules, I consider that they do indicate clearly (and in this they
reflect the provisions of the Act) that it is the principal officer who is charged
with the administration of the office of the Fund. This conclusion is reinforced
by rule 4.1, dealing with the board of trustees, which records that the object of
the board is to ‗direct, control and oversee the operations of the Fund‘ – an
echo of s 7C of the Act. It is not to run the daily business of the Fund.

[22] There is undoubtedly a gap in the rules: they do not prescribe how
contracts are to be executed when they do not fall within the ambit of rules
4.13 and 5. That cannot mean, however, that any contract concluded by the
Fund that does not comply with rule 4.13 is invalid. In my view what the
framers must have intended is that the principal officer was authorised, by
virtue of his office, to conclude contracts within the powers of the Fund (intra
vires) in the usual fashion.

[23] In view of this conclusion it is not necessary to consider whether the
Fund would have been bound by virtue of the Turquand rule or estoppel.
Whether in fact Mosiuoa had authority is a matter that could have been
explored in the trial.

[24] I would accordingly have upheld the appeal with costs and replaced the
order of the high court with one to the effect that the contracts concluded by
the principal officer were not invalid by reason only of the fact that they did not
comply with the requirements of rule 4.13.

_____________
C H Lewis
Judge of Appeal

PONNAN JA (CACHALIA, BOSIELO and SHONGWE JJA concurring)
[25] I have had the benefit of reading the judgment of Lewis JA with which I
regret I am unable to agree. The parties agreed to a written statement of facts
in the form of a special case for adjudication before the high court. The facts
agreed upon or assumed to be correct for the purpose of the special case are:
'3.1
The Plaintiff is ABSA Bank Limited, a public company duly registered and
incorporated in accordance with the laws of the Republic of South Africa,
carrying on business as a bank duly registered under the Banks Act 94 of
1990 with branches throughout the country and having its principal place of
business situate at 160 Main Street, Johannesburg.
3.2

3.2.1 The First Defendant is the South African Commercial Catering and
Allied Workers Union National Provident Fund ("the Fund"), a body
corporate capable of being sued under its own name by virtue of its
due registration as a pension fund under the Pension Funds Act 24 of
1965, ("the Act") and having its principal place of business at 6th floor,
SA Centre Building, 253 Bree Street, Johannesburg.
3.2.2 The First Defendant was placed under provisional curatorship by order
of the Transvaal Provincial Division under case number 24187/02 on
10 September 2002. The said order was made final on 18 March 2003
in terms of which Antony Louis Mostert, a director of A L Mostert &
Company Incorporated, was appointed the curator.
3.2.3 The Fund is and was a pension fund in terms of the Act and governed
by it, by the Regulations under the Act (a copy of which is attached
marked A) and by the consolidated Rules of the Fund, ("the Rules")
effective from 1 January 1999 (a copy of which is attached, marked
B), and which have been registered under the Act.
3.3
Sasfin Bank Limited ("Sasfin") is a private company duly registered and
incorporated in accordance with the laws of the Republic of South Africa,
carrying on business as such and having its principal place of business
situate at 29 Scott Street, Waverley, Johannesburg.

3.4
Sunlyn Investments (Pty) Limited ("Sunlyn") is a private company duly
registered and incorporated in accordance with the laws of the Republic of
South Africa, carrying on business as such and having its principal place of
business situate at Sasfin Place, 29 Scott Street, Waverley, Johannesburg.
3.5
Sasfin and Sunlyn had sight of the Rules before signing the 15 rental
agreements (which Rules Sasfin and Sunlyn also furnished to the Plaintiff
before the conclusion of the three discounting agreements and the cessions
and payments as pleaded in the particulars of claim).
3.6
Mosiuoa was appointed by the First Defendant to the position of principal
officer as envisaged by section 8 of the Act read with clause 4.10.1 of the
Rules.
3.7
Mosiuoa signed each of the 15 rental agreements referred to in the
Particulars of Claim, purportedly on behalf of the First Defendant.
3.8
The 15 rental agreements were not signed by the chairperson and two
trustees of the fund as contemplated by Rule 4.13, at a duly constituted
meeting of the Fund and by two trustees and the chairperson.'

[26] The principal question is whether, notwithstanding non-compliance with
rule 4.13 of its rules, the Fund is nonetheless bound by the agreements in
question. The rules of the Fund are its constitution. It is the document by
which the Fund was constituted and is binding on the Fund and its members.
The appeal turns upon the interpretation to be placed on the rules of the
Fund. And whilst it is not seriously contested that the scope and functions of
the various organs of the Fund fall to be determined, primarily from its rules, it
is nonetheless necessary in interpreting the rules to examine the general
framework according to which the Fund has been constituted.

[27] The Act read together with the regulations and the rules define the
limits of the Fund‘s contractual capacity. In deciding how to approach the
problem raised by this appeal one would thus do well to start with the
Pensions Fund Act 24 of 1956 (the Act). The Fund is a juristic person (s
4B(1)), a body corporate capable in law of suing and being sued (s 5). Section
7A(1) of the Act provides that every fund shall have a board consisting of at
least four board members. The objects of the board are set out in s 7C4 and

4 Section 7C reads:

its duties in s 7D.5 In terms of s 8 every fund shall have a principal executive
officer. Section 8 then deals with who may be appointed a principal officer,
considerations of such person‘s fitness to hold office and the termination of
such person‘s appointment. Section 11(1) empowers the Fund to adopt rules,
which shall be in the prescribed format and form and shall comply with the
prescribed requirements. Section 13 provides:

‗(1)
The object of a board shall be to direct, control and oversee the operations of a fund
in accordance with the applicable laws and the rules of the fund.
(2)
In pursuing its object the board shall -
(a)
take all reasonable steps to ensure that the interests of members in terms of
the rules of the fund and the provisions of this Act are protected at all times,
especially in the event of an amalgamation or transfer of any business
contemplated in section 14, splitting of a fund, termination or reduction of
contributions to a fund by an employer, increase of contributions of members
and withdrawal of an employer who participates in a fund;
(b)
act with due care, diligence and good faith;
(c)
avoid conflicts of interest;
(d)
act with impartiality in respect of all members and beneficiaries.'

5 Section 7D provides:
'The duties of a board shall be to —
(a)
ensure that proper registers, books and records of the operations of the fund
are kept, inclusive of proper minutes of all resolutions passed by the board;
(b)
ensure that proper control systems are employed by or on behalf of the
board;
(c)
ensure that adequate and appropriate information is communicated to the
members of the fund informing them of their rights, benefits and duties in
terms of the rules of the fund;
(d)
take all reasonable steps to ensure that contributions are paid timeously to
the fund in accordance with this Act;
(e)
obtain expert advice on matters where board members may lack sufficient
expertise;
(f)
ensure that the rules and the operation and administration of the fund comply
with this Act, the Financial Institutions (Protection of Funds) Act, 2001 (Act
No. 28 of 2001), and all other applicable laws.'

‗Subject to the provisions of this Act, the rules of a registered fund shall be binding on
the fund and the members, shareholders and officers thereof, and on any person
who claims under the rules or whose claim is derived from a person so claiming.'

[28] Section 36 authorises the Minister of Finance to make regulations not
inconsistent with the provisions of the Act in respect of all matters which he
considers necessary or expedient to prescribe in order to achieve the
purposes of the Act. The Minister has done so. The Regulations provide for a
variety of matters. Regulation 30(2)(k) states that the rules shall provide for
‗the manner in which contracts and other documents binding the pension fund
shall be executed'.

[29] Of the rules adopted by the Fund only one – Rule 4.13 – meets that
purpose. It provides:
'Signatures to documents
All documents or contracts effected by the FUND … shall be binding upon the FUND
provided that they have been signed by the Chairperson and another two
TRUSTEES
(a)
at a duly constituted meeting, or
(b)
after such a meeting, provided that authorisation for the signing of these
documents or contracts was granted at such meeting.
Where, however, the ACT [the Pension Fund Act 24 of 1956] prescribes specific
formalities for the signature of documents, such documents shall only be binding
upon the Fund subject to compliance with these requirements.'

[30] As Centlivres CJ put it in Cape United Sick Fund Society v Forrest
1956 (4) SA 519 (A) at 527H -528A:
'The Society's constitution is in writing and, to use the words of Stratford, JA, in
Wilken v Brebner and others, 1935 AD 175 at p 187,
"we have only to solve the question submitted to us by ascertaining the meaning of a
written document according to the well-established rules of construction."
This dictum is in consonance with a long line of cases in which emphasis is laid on
the necessity of adhering to the terms of the constitution of a body like the Society.'

[31] Rule 4.13 is the only effective overriding control over the legal capacity
of the Fund to enter into written contracts. It is common cause that it has not

been complied with. That one would have thought would be the end of the
matter. For, as Trollip J stated in Abrahamse v Connock's Pension Fund 1963
(2) SA 76 (W) at 79B-E:
'As the defendant is a corporate body its legal capacity to enter into a particular
contract must be sought for exclusively within the expressed and implied provisions
of its constitution and if it is not found there then the defendant has exceeded its
powers in entering into the contract and it is null and void. That is because according
to the Act, the constitution not only defines defendant's legal capacity but also
confines it to what is expressly or impliedly contained therein. That is the effect of the
sections of the Act quoted above. In other words the doctrine of ultra vires applies to
the defendant like any other corporation (see Street, Doctrine of Ultra Vires, pp 4, 22,
23; Cape United Sick Fund Society & others v Forrest & others 1956 (4) SA 519
(AD); The Mineworker's Union v Prinsloo 1948 (3) SA 831 (AD) at 843-4, 847).
Street's summary of the position at p 4 is so lucid and apposite that it is worth quoting
in full:
"A corporation is commonly styled a 'legal person', but the appellation 'person' is
applicable to it only by analogy; and the analogy fails when it is thus clearly stated
that this legal person is wanting in much that belongs to a natural person - that its
course of existence is marked out from its birth; that it has been called into being for
certain special purposes; that it has all the powers and capacities, and only those,
which are expressly given it, or are absolutely requisite for the due carrying out of
those purposes; and that all the obligations it affects to assume which do not arise
from or out of the pursuit of such purposes, are null and void." '

[32] But, as Lewis JA points out, great stress was laid by the Bank on
clauses 4 and 5 of the preamble to the rules. Clause 4 headed ‗Legal
Persona‘ provides: ‗The Fund will, in its own name, be capable of suing and
being sued and of acquiring, holding and alienating property, movable and
immovable‘. Whilst clause 5 headed ‗Principal Officer‘ reads:

‗The TRUSTEES will appoint a Principal Officer in terms of Rule 4.10.16 on
such terms and conditions as they may determine.

The FUND will, for the purposes of 4. above, at all times be represented by
the Principal Officer.'
R H Christie The Law of Contract in South Africa 6 ed (2011) at 219 states:

6  Rule 4.10.1 provides: ‗The TRUSTEES will appoint a Principal Officer, an ACTUARY and
an AUDITOR for such periods as they may determine. The TRUSTEES may withdraw any
such appointment and make another appointment in its place.'

'Preambles or recitals in a written contract present more of a problem. The general
principle is that they should be regarded as subordinate to the operative part which, if
its meaning is clear, must be taken as expressing the common intention of the parties
and so must prevail over anything to the contrary in the preamble. If the operative
part is not clear, recourse may be had to the preamble to assist in elucidating it.'
It is therefore wrong to approach a written contract as though every provision
is intended to create contractual obligations (Absa Bank Ltd v Swanepoel NO
2004 (6) SA 178 (SCA) at para 6). Indeed Standard Bank v Fisher's Trustee
1919 TPD 83 at 88 makes the point that the operative parts of the document
(a bond in that case) had to be construed first without construing the recitals,
because ‗one ought to determine first what the operative part of the bond
clearly lays down'. The recital, so Clayton, NO v Metropolitan and Suburban
Railway Company and Walker (1892-1893) 10 SC 291 at 304 held, can only
control the operative part of the deed if the operative part is doubtful in its
meaning. In my view no words can be less ambiguous than those employed in
rule 4.13. I thus do not think that clauses 4 and 5 of the preamble carry the
matter any further.

[33] No doubt it may be said to be desirable that there should be a provision
in the rules that would enable the principal officer to enter into written
contracts with regard to the day-to-day functioning of the Fund. But there is no
such express provision. Nor for that matter does one find any such provision
in the Act. The question that then arises is whether it can be inferred by
necessary implication from the rules (Cape Union Sick Fund Society v Forrest
at 532D). Needless to say a court should be very slow to do so (Mullin (Pty)
Ltd v Benade Ltd 1952 (1) SA 211 (A)). Solomon JA held in Union
Government (Minister of Railways and Harbours) v Faux Ltd 1916 AD 105 at
112:
'The rule to be applied by a Court in determining whether or not a condition should be
implied, is well stated by Lord Esher in the case of Hamlyn & Co v Wood & Co (1891
(2) QBD  491) as follows: "I have for a long time understood that rule to be that a
Court has no right to imply in a written contract any such stipulation, unless, on
considering the terms of the contract in a reasonable and business manner, an
implication necessarily arises that the parties must have intended that the suggested
stipulation should exist. It is not enough to say that it would be a reasonable thing to

make such an implication. It must be a necessary implication in the sense that I have
mentioned." '

[34] In Alfred McAlpine & Son (Pty) Ltd v Transvaal Provincial
Administration 1974 (3) SA 506 (A) at 532G-533A Corbett JA pointed out:
‗The implied term . . . is essentially a standardised one, amounting to a rule of law
which the Court will apply unless validly excluded by the contract itself. While it may
have originated partly in the contractual intention, often other factors, such as legal
policy, will have contributed to its creation. The tacit term, on the other hand, is a
provision which must be found, if it is to be found at all, in the unexpressed intention
of the parties. Factors which might fail to exclude an implied term might nevertheless
negative the inference of a tacit term. . . The Court does not readily import a tacit
term. It cannot make contracts for people; nor can it supplement the agreement of
the parties merely because it might be reasonable to do so. Before it can imply a tacit
term the Court must be satisfied, upon a consideration in a reasonable and
businesslike manner of the terms of the contract and the admissible evidence of
surrounding circumstances, that an implication necessarily arises that the parties
intended to contract on the basis of the suggested term.'
Here if a term is to be imported at all it is not one to be imported by law from
without (an implied term) but rather one to be based on the inferred intention
of the parties – a tacit term (South African Forestry Co Ltd v York Timbers Ltd
2005 (3) SA 323 (SCA) para 28). Any such term as may be imported seems
though to be against the Bank in view of the specific requirements of rule
4.13. For, as Trengrove JA put it in Robin v Guarantee Life Assurance Ltd
1984 (4) SA 558 (A) at 567C-D:
‗A tacit term cannot be imported into a contract in respect of any matter to which the
parties have applied their minds and for which they have made express provision in
the contract. As was said by Van Winsen JA in SA Mutual Aid Society v Cape Town
Chamber of Commerce 1962 (1) SA 598 (A) at 615D:
―A term is sought to be implied [a tacit term in the terminology of Alfred McAlpine] in
an agreement for the very reason that the parties failed to agree expressly thereon.
Where the parties have expressly agreed upon a term and given expression to that
agreement in the written contract in unambiguous terms, no reference can be had to
surrounding circumstances in order to subvert the meaning to be derived from a
consideration of the language of the agreement only.‖ '
(See also Pan American Airways Incorporated v SA Fire and Accident
Insurance Company Ltd 1965 (3) SA 150 (A) at 175C.)

[35]  The further difficulty with the Bank‘s case is that even if one construes
the rules as conferring capacity on the principal officer to conclude binding
written agreements on behalf of the Fund, it is not clear what the limits of that
capacity will be or how it is to be exercised. As I have pointed out, in terms of
rule 4.13 the trustees have to follow a fairly rigorous procedure to bind the
Fund to written agreements. One finds no similar provision in respect of the
principal officer. The absence of any such provision pertaining to the principal
officer, as complete and comprehensive as rule 4.13, may be the clearest
indicator that it was never intended that the principal officer should be
endowed with the capacity to bind the Fund to written contracts. It may be a
contradiction in terms to say that the trustees control and administer the Fund,
but that the principal officer, who is appointed by them, has, by virtue of his or
her unlimited capacity to bind the Fund to written contracts, the power to
control the Fund and in turn the trustees. Needless to say the principal officer
cannot control the board of trustees in respect of matters where authority is
specifically conferred on them by the Act and the rules of the Fund. To allow
that would constitute a violation of the Act and the rules.

[36] In my view questions of equity cannot, when the rule is clear and
unambiguous, affect the interpretation to be placed on it. The question that
naturally arises is what was the purpose of the Fund in adopting rule 4.13 if it
can simply be ignored as the Bank postulates. And, the further rhetorical
question that then remains unanswered is: if rule 4.13 does not apply to these
contracts then when precisely would it apply? Here we are dealing with an
elaborately framed constitution from which it is clear, as I hope I have shown,
the control of expenditure is entrusted to the trustees. Indeed that is precisely
what the Act envisages, given the public interest at stake. In those
circumstances it is not difficult to appreciate why such an elaborate and
cumbersome procedure was chosen in rule 4.13.  It was to ensure the
greatest measure of protection for the funds entrusted to the Fund which was
to be administered by the board of trustees. The chosen procedure thus has a
legitimate and rational purpose. One looks in vain for similar protection were
the principal officer to act as postulated by the Bank. There is nothing to

suggest that although somewhat cumbersome the chosen procedure is
unworkable or that the Fund cannot regulate its affairs in such a way as to
ensure compliance with the requirements of the rule. Moreover the Fund is
free, if so advised, to effect such amendments as it may desire to its rules.
For, even if we were to hold that the constitution of the Fund may be a foolish
contract, this Court has no power to make a new contract for its members.

[37]  In Gründling v Beyers & others 1967 (2) SA 131 (WLD) at 139 Trollip J
drew the following important distinction:
'Now, the constitution does specify certain acts which the Union is required or
permitted to do; it often specifies too the manner in which those acts are to be done.
The former are the Union's powers, the latter, its internal management (cf. Mine
Workers' Union v. Prinsloo, 1948 (3) S.A. 831 (A.D.)). If it exceeds the former
powers, that is, does an act that the constitution does not require or permit it to do,
that act is ultra vires, and null and void. Such an act cannot be validated by
ratification or estoppel, and the Union, any outsider affected by it, or a member may,
if necessary, have it set aside or declared null and void. On the other hand, if the act
is within its powers, but the manner of doing it deviates from or is contrary to the
constitution, it is not null and void; at most, it is voidable, but it can be validated by
ratification or estoppel.'

I have approached the matter thus far on the basis of the former of the two
postulates articulated by Trollip J. But even if rule 4.13 were to be approached
on the basis of the latter, namely that it is a simply a matter of internal
management - for the reasons that follow, the conclusion to which I have
come remains unaltered. In The Mine Workers' Union v J J Prinsloo; The Mine
Workers' Union v J P Prinsloo; The Mine Workers' Union v Greyling (3) 1948
SA 831 (A) at 849 Greenberg JA held:
'I do not think that the validity of a transaction such as the one in question in
Turquand's case is to be decided on a subjective basis, depending on whether the
other party does or does not know of the constitution or whether — as would follow if
the basis were subjective — even though he knew of the constitution, he did or did
not apply his mind to the question whether the internal acts of management had been
performed. It seems to me that the true position is that the necessary acts of internal
management are presumed to have been performed and not that a particular person
is entitled to assume that they have. (See also per Scrutton, L J in the Kreditbank

Cassel case at pp 837/8.) I have already said that this presumption does not arise
when the other contracting party knows that the acts have not been performed.'
Here as the agreed facts in the stated case reveal both third parties to the
contract, as also the Bank, to whom the contracts were ceded, knew of the
existence of the rule and knew, furthermore, that it had not been complied
with.

[38] It follows, in my view, that the appeal must fail and I would, in the result
dismiss it with costs including those consequent upon the employment of two
counsel.

_________________
V M  PONNAN
JUDGE OF APPEAL

APPEARANCES:

For Appellant:

A Subel SC (with him D K Nigrini)

Instructed by Schwellnus Spies Haasbroek

(Gauteng) Inc

Randburg

Symington & De Kok

Bloemfontein

For Respondent:

J J Gauntlett SC (with him  L J Van Tonder and

S B Rose)

Instructed by A L Mostert & Company Inc

Bryanston

Matsepes Inc

Bloemfontein