Agreements with friends and family often rely on trust, but as shown in De Kock v Du Plessis and Others (284/2023) [2024] ZASCA 117, they can quickly become complex without proper documentation. What began as a well-meaning family arrangement escalated into a courtroom dispute, ultimately leading to the eviction of the Du Plessis’ from their home. This article explores the key lessons from this case, highlighting the risks involved and the critical importance of legally documenting such agreements.

Background

De Kock was married to Mr. and Mrs. du Plessis’ daughter until her passing on 26 September 2018. The relationship between De Kock and his in- laws was initially warm, caring and loving.

De Kock is a businessperson and Mr. and Mrs. du Plessis are a retired couple.

In 2015, the family began discussing the possibility of De Kock purchasing the property owned by the retired Mrs. Du Plessis. De Kock purchased the property and took registration at a purchase price of R4,500,000. To facilitate this, De Kock and Mrs. Du Plessis entered into a loan agreement, where De Kock would pay monthly instalments to Mrs. Du Plessis in order to settle the loan. As part of the arrangement, Mrs. Du Plessis continued to reside on the property.

Mrs. Du Plessis believed that the agreement permitted her and Mr. Du Plessis to live on the property rent-free until the loan was completely paid off. However, by mid-2019, the relationship between De Kock and his in-laws deteriorated.

Initial Proceedings

De Kock engaged the services of an attorney who advised him that the loan agreement between him and Du Plessis was a credit transaction as contemplated in s 8(4)(f) of the National Credit Act 34 of 2005 (the NCA) and thus a credit agreement as defined in s 1 read with s 8(1) of the NCA. The loan agreement was, as per the advice, unlawful because Du Plessis was not registered as a credit provider. On that advice, De Kock ceased to make payments and about October 2019 he notified the retired Du Plessis couple to vacate the property as he intended to sell the property. They refused to vacate the property resulting in De Kock filing an eviction application.

De Kock’s Version

De Kock alleged the parties had entered into two distinct oral agreements. The first agreement was that, after acquiring the property, the Du Plessis’ would remain in occupation of the property, indefinitely and rent free, subject to them paying for the amenities used and the necessary maintenance. He was advised that the arrangement was not a proper lease and was therefore terminable at reasonable notice. The second agreement was the loan agreement.

Du Plessis’ Version

She alleged the parties entered into a single oral agreement constituted of two parts (composite agreement). Until the loan was paid Du Plessis’ would remain in the property free of rent. They retained the right to remain in occupation of the property in terms of the agreement.

Court Findings

At the hearing of the matter, De Kock’s counsel sought to introduce a supplementary replying affidavit. The purpose of the affidavit was to draw to the court’s attention that Du Plessis had, on 4 November 2020, instituted an action in the high court, against De Kock in which she averred she had cancelled the oral agreement between her and De Kock.

The high court ruled against admitting the affidavit and dealt with the eviction application and accepted Du Plessis’ version and dismissed the application.

De Kock approached the Supreme Court of Appeal for special leave to appeal, which was granted on 6 March 2023. The Supreme Court of Appeal found that the affidavit simply sought to place the fact that Du Plessis had instituted action, in which she claimed cancellation of the agreement. That fact was important and central to the issue in dispute. This allegation could not have been made in the founding affidavit because it occurred after the filing of the eviction application.

The Supreme Court held that du Plessis could not insist on retaining occupation of the property in terms of the agreement, having cancelled the contract. She was entitled to sue for damages. She could not both accept and reject. She may cancel and sue for damages or accept the contract and claim performance.

The Supreme Court concluded that an eviction order would be just and fair. It granted an order incorporating the offer of alternative accommodation made by de Kock.

Here’s what we learn from this judgement:

1. Relationships within family and friends can change over time, sometimes unexpectedly. Given this certainty, any arrangement between these parties should be documented in writing with absolute clarity and in accordance with legal standards.
2. Property and loan agreements are significant and should be treated with seriousness. These agreements must be documented in detail and comply with the National Credit Act. Since this legislation can be complex, it’s essential to have an expert guide the parties through the process before finalizing any loan agreement.
3. Lease agreements are governed by Consumer Laws and the Rental Housing Act. When dealing with property, specific legislation ensures that agreements adhere to specific legal requirements. For instance, long-term lease agreements can attain real right status if they are documented in writing, notarized, and registered with the Deeds Office.
4. There is a notable difference between specific performance and cancellation of a contract. Specific performance requires a party to fulfill their obligations under the contract, effectively rejecting cancellation. In contrast, cancellation of a contract results in its nullification and leads to a claim for damages rather than performance.
5. The saying “no good deed goes unpunished” highlights the importance of professionalism in agreements. When dealing with familiar parties, it’s wise to step back, involve attorneys to handle the matter objectively, and ensure that the details are documented in legal language. If the relationship deteriorates, having a written contract is crucial and often less costly than facing litigation in the Appellate Division.

Written by Erusha Reddy and edited by Michelle Horn.