Maseko v Maseko

Last updated

Maseko v Maseko, [1] heard in the Witwatersrand Local Division by Lazarus AJ from 22 to 25 October, 1990, with judgment handed down on 16 November, is an important case in South African contract law, with its stipulation, on the question of legality, that contracts designed to mislead creditors are immoral and against public policy.

Contents

The plaintiff in this case, in order to protect her property from possible attachment in execution, had entered into an agreement with the defendant that they would marry, transfer the property to him, thereafter divorce and then retransfer the property to her once the threat of attachment was over. The purpose of this agreement was to conceal the property from the creditor, and possibly others; as such, it was contrary to public policy.

The court also held that, when a contract is void ab initio, the remedy of restitutio in integrum will not be available. The essence of the remedy is that there should be a valid legal transaction from which the court will in certain circumstances grant relief by avoiding it ab initio.

Facts

The plaintiff acquired a certificate of occupation of certain property in Soweto, whereafter she signed as surety for two purchasers of motor vehicles. Some time later, when the purchasers defaulted in their payments on the purchase price of the vehicles, the possibility arose of her being held liable in terms of the suretyships. In order to protect her property—that is, her certificate of occupation—she and defendant entered into an agreement whereby they were to be married and then transfer the property to the defendant. They would later get a divorce and, when there was no longer a threat that the property might be attached in execution, retransfer the property to the plaintiff.

The parties were duly married on 9 May 1985. Less than a week later, the plaintiff ceded her property to the defendant. Divorce proceedings were instituted three days later, and an agreement of settlement was reached at the end of May. A divorce order, incorporating the agreement of settlement, was granted on 12 June. One of the terms of the agreement of settlement made an order of court was that the defendant "shall retain as his sole and exclusive property all right, title and interest in certain immovable property," which is to say the property transferred to him by the plaintiff.

The defendant refused to retransfer the property to the plaintiff, who sued.

Judgment

In an action for an order directing the defendant to fulfil his end of the agreement, the court held that there was no doubt that the purpose of the agreement had been to conceal the plaintiff's assets from the creditor in whose favour she had signed as surety, and possibly other creditors. While there could be no fraudem creditorum without proof of actual prejudice, an agreement designed to mislead creditors was immoral and against public policy, even if it had not yet served its purpose.

The court also found that the agreement operated to undermine the institution of marriage, in that the parties' overall plan had been inimical to the institution of marriage. Although the marriage and divorce were valid, the agreement itself was not. The transfer of the property was an inseparable part of that agreement.

The remedy of restitutio in integrum, furthermore, was not available to the plaintiff, as it was of the essence of that remedy that there should be a valid legal transaction to start with, from which the Court, in certain circumstances, granted relief by avoiding it ab initio. The court held that, as the transfer was ab initio void, the remedy of restitutio in integrum was not available to the plaintiff.

As to the remedy of restitution based on the transfer's being void ab initio, the court held that the parties were in pari delicto : If an order in favour of the plaintiff were not made, the defendant would be substantially enriched at the plaintiff's expense; if the order were made, the Court would be enforcing indirectly an illegal contract. The in pari delicto rule ordinarily served to preclude a plaintiff's recovering what was handed over under a contract or transaction which was void for illegality, but there were well-known exceptions to the rule. These were founded on the principles of equity and public policy. Each case had to be decided on its own facts; there was no general rule on the topic. Despite the fact that the relief sought might have an effect similar to enforcement (that is, of an illegal contract), the Court could still grant relief if the equities favoured it.

While the plaintiff's conduct was deserving of some censure, the court found that the defendant's conduct approximated theft. Public policy could surely not tolerate that. Accordingly, the in pari delicto rule was relaxed in this case.

If, however, relief were to be granted, it would be in conflict with the divorce order, with its provision that the defendant "shall retain as his sole and exclusive property" the property in issue. That order, although made by consent and in terms of an illegal agreement, was a valid order until set aside; it could not be ignored. As it could not be said that evidence relevant to the setting aside of the order had been fully canvassed, the court found that it could not grant such relief.

The action was dismissed.

See also

Related Research Articles

<span class="mw-page-title-main">Annulment</span> Legal procedure for declaring a marriage null and void

Annulment is a legal procedure within secular and religious legal systems for declaring a marriage null and void. Unlike divorce, it is usually retroactive, meaning that an annulled marriage is considered to be invalid from the beginning almost as if it had never taken place. In legal terminology, an annulment makes a void marriage or a voidable marriage null.

<span class="mw-page-title-main">Clean hands</span> Doctrine used in law to show the plaintiff is not acting in good faith

Clean hands, sometimes called the clean hands doctrine, unclean hands doctrine, or dirty hands doctrine, is an equitable defense in which the defendant argues that the plaintiff is not entitled to obtain an equitable remedy because the plaintiff is acting unethically or has acted in bad faith with respect to the subject of the complaint—that is, with "unclean hands". The defendant has the burden of proof to show the plaintiff is not acting in good faith. The doctrine is often stated as "those seeking equity must do equity" or "equity must come with clean hands". This is a matter of protocol, characterised by A. P. Herbert in Uncommon Law by his fictional Judge Mildew saying, "A dirty dog will not have justice by the court".

A legal remedy, also referred to as judicial relief or a judicial remedy, is the means with which a court of law, usually in the exercise of civil law jurisdiction, enforces a right, imposes a penalty, or makes another court order to impose its will in order to compensate for the harm of a wrongful act inflicted upon an individual.

Restitutio ad integrum, or restitutio in integrum, is a Latin term that means "restoration to original condition". It is one of the primary guiding principles behind the awarding of damages in common law negligence claims.

In pari delicto , Latin for "in equal fault ", is a legal term used to refer to two persons or entities who are equally at fault, whether the malfeasance in question is a crime or tort. The doctrine is subject to a number of exceptions, including that the plaintiff must be an active, voluntary participant in the wrongful conduct, the plaintiff's wrongdoing must be at least substantially equal to or greater than that of the defendant, the "adverse interest" exception, and the "innocent insider" exception.

<span class="mw-page-title-main">Constructive trust</span> Type of legal remedy

In trust law, a constructive trust is an equitable remedy imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding a legal property right which they should not possess due to unjust enrichment or interference, or due to a breach of fiduciary duty, which is intercausative with unjust enrichment and/or property interference. It is a type of implied trust.

<span class="mw-page-title-main">Misrepresentation</span> Untrue statement in contract negotiations

In common law jurisdictions, a misrepresentation is a false or misleading statement of fact made during negotiations by one party to another, the statement then inducing that other party to enter into a contract. The misled party may normally rescind the contract, and sometimes may be awarded damages as well.

<span class="mw-page-title-main">Rescission (contract law)</span> Remedy which allows a contractual party to cancel the contract

In contract law, rescission is an equitable remedy which allows a contractual party to cancel the contract. Parties may rescind if they are the victims of a vitiating factor, such as misrepresentation, mistake, duress, or undue influence. Rescission is the unwinding of a transaction. This is done to bring the parties, as far as possible, back to the position in which they were before they entered into a contract.

Incidental questions in private international law with respect to the problems and elements discussed below

<span class="mw-page-title-main">Adequate remedy</span>

An adequate remedy or adequate remedy at law is part of a legal remedy which the court deems satisfactory, without recourse to an equitable remedy This consideration expresses to the court whether money should be awarded or a court order should be decreed.. Adequate remedy at law refers to the sufficient compensation for the loss or damages caused by the defendant with a proper monetary award. The court must grant the adequacy of remedy that will lead to a "meaningful hearing". Whether legal damages or equitable relief are requested depends largely on,whether or not the remedy can be valued. Both two elements, compensation and the meaningfulness of hearing, provide a proper way to have an adequate remedy. The word "meaningfulness" of hearing in the law process is the assumption that the defendant compensated must be meaningful for the injured party where the defendant made a fully covered compensation for all the losses. Hence, the hearing in which cannot give any right amount of compensation award or settlement is not "meaningful", and the unavailability of the compensation will lead to an inadequate remedy. The adequate remedy at law is the legal remedies by meaning it is satisfactory compensation by way of monetary damages without granting equitable remedies.

Voidable, in law, is a transaction or action that is valid but may be annulled by one of the parties to the transaction. Voidable is usually used in distinction to void ab initio and unenforceable.

<i>Erlanger v New Sombrero Phosphate Co</i>

Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 is a landmark English contract law, restitution and UK company law case. It concerned rescission for misrepresentation and how the impossibility of counter restitution may be a bar to rescission. It is also an important illustration of how promoters of a company stand in a fiduciary relationship to subscribers.

This collection of lists of law topics collects the names of topics related to law. Everything related to law, even quite remotely, should be included on the alphabetical list, and on the appropriate topic lists. All links on topical lists should also appear in the main alphabetical listing. The process of creating lists is ongoing – these lists are neither complete nor up-to-date – if you see an article that should be listed but is not, please update the lists accordingly. You may also want to include Wikiproject Law talk page banners on the relevant pages.

Illegality in English law is a potential ground in English contract law, tort, trusts or UK company law for a court to refuse to enforce an obligation. The illegality of a transaction, either because of public policy under the common law, or because of legislation, potentially means no action directly concerning the deal will be heard by the courts. The doctrine is reminiscent of the Latin phrase "Ex turpi causa non oritur actio", meaning "no cause of action arises from a wrong". The primary problem arising when courts refuse to enforce an agreement is the extent to which an innocent party may recover any property already conveyed through the transaction. Hence, illegality raises important questions for English unjust enrichment law.

<span class="mw-page-title-main">South African contract law</span> Law about agreements between two or more parties

South African contract law is "essentially a modernized version of the Roman-Dutch law of contract", and is rooted in canon and Roman laws. In the broadest definition, a contract is an agreement two or more parties enter into with the serious intention of creating a legal obligation. Contract law provides a legal framework within which persons can transact business and exchange resources, secure in the knowledge that the law will uphold their agreements and, if necessary, enforce them. The law of contract underpins private enterprise in South Africa and regulates it in the interest of fair dealing.

<i>Westdeutsche Landesbank Girozentrale v Islington LBC</i> English legal case

Westdeutsche Landesbank Girozentrale v Islington LBC[1996] UKHL 12, [1996] AC 669 is a leading English trusts law case concerning the circumstances under which a resulting trust arises. It held that such a trust must be intended, or must be able to be presumed to have been intended. In the view of the majority of the House of Lords, presumed intention to reflect what is conscionable underlies all resulting and constructive trusts.

Civil procedure in South Africa is the formal rules and standards that courts follow in that country when adjudicating civil suits. The legal realm is divided broadly into substantive and procedural law. Substantive law is that law which defines the contents of rights and obligations between legal subjects; procedural law regulates how those rights and obligations are enforced. These rules govern how a lawsuit or case may be commenced, and what kind of service of process is required, along with the types of pleadings or statements of case, motions or applications, and orders allowed in civil cases, the timing and manner of depositions and discovery or disclosure, the conduct of trials, the process for judgment, various available remedies, and how the courts and clerks are to function.

Kragga Kamma Estates CC and Another v Flanagan is an important case in the South African law of contract, an appeal from a decision in the South Eastern Cape Local Division by Jansen J. It was heard in the Appellate Division on August 19, 1994, with judgement handed down on September 29. The presiding officers were EM Grosskopf JA, Nestadt JA, Kumleben JA, Howie JA and Nicholas AJA. The appellants' attorneys were Tobie Oosthuizen, Port Elizabeth, and Webbers, Bloemfontein. The respondent's attorneys were Jankelowitz, Kerbel & Schärges, Port Elizabeth, and Lovius-Block, Bloemfontein. HJ van der Linde appeared for the appellants; JRG Buchanan SC for the respondent.

<i>Holman v Johnson</i> 1775 English contract law case

Holman v Johnson (1775) 1 Cowp 341 is an English contract law case concerning the principles behind illegal transactions.

The anti-deprivation rule is a principle applied by the courts in common law jurisdictions in which, according to Mellish LJ in Re Jeavons, ex parte Mackay, "a person cannot make it a part of his contract that, in the event of bankruptcy, he is then to get some additional advantage which prevents the property being distributed under the bankruptcy laws." Wood VC had earlier observed that "the law is too clearly settled to admit of a shadow of doubt that no person possessed of property can reserve that property to himself until he shall become bankrupt, and then provide that, in the event of his becoming bankrupt, it shall pass to another and not to his creditors."

References

Books

Cases

Notes

  1. 1992 (3) SA 190 (W).