Application of the Pari Delictum Rule

Proprietors of liquor businesses should take heed of a recent decision of the Supreme Court of Appeal reported in the case of Hitler Adolf Klokow v Michael Boyton Sullivan.

Application of the Pari Delictum Rule

18 February 2006

Article by Tim Mills & Rudolph Chetty of Cliffe Dekker Inc

Proprietors of liquor businesses should take heed of a recent decision of the Supreme Court of Appeal reported in the case of Hitler Adolf Klokow v Michael Boyton Sullivan.

In this matter, the Appellant (Klokow) entered into a written agreement of sale in terms of which he acquired from the Respondent (Sullivan) a business in which liquor was sold. Klokow paid Sullivan R250 000 and took possession of the business.

Klokow alleged that Sullivan, as holder of the liquor license, concluded the agreement permitting Klokow to procure the business without obtaining the required permission of the Chairperson of the Liquor Board, as envisaged by the provision of Section 38(1) of the Liquor Act.

This omission, Klokow averred, constituted a contravention of section 38(1) and that, accordingly the agreement was illegal and void. Klokow cancelled the agreement and tendered the return of the business to Sullivan. He then sought recovery of the money paid to Sullivan.

Sullivan on the other hand, pleaded that regulation 28 as read with section 38(1) of the Act imposed an obligation on Klokow, jointly with himself, to make written application for the consent of the Chairperson of the Liquor Board. Sullivan pleaded that Klokow was precluded from recovering the money as both he and Klokow were in pari delicto (meaning, equally morally guilty).

The court concluded that the pari delictum rule did not arise, because section 38(1) placed a burden to secure the consent of the Chairperson of the Liquor Board on the holder of the license only, in this case being Sullivan. The Court therefore attributed the blame for the failure to obtain the consent before signing the agreement on Sullivan alone. Sullivan then appealed to the full court.

Having decided that the parties were in pari delicto, the full court approached the matter on the basis that it was incumbent upon Klokow to have pleaded ‘further facts’ to show that justice and public policy required a relaxation of the pari delictum rule.

It concluded that as no further facts had been pleaded, the pari delictum rule operated against Klokow and accordingly reversed the decision of the Court of first instance.

The Supreme Court of Appeal was of the view that whilst our courts are reluctant to decide the relaxation of the pari delictum rule on public policy grounds on exception, it is also evident that our courts have not adopted an over technical approach to the pleadings.

The Court expressed that in general, where public policy considerations do not favour either party, the pari delictum rule will operate against the plaintiff. At an exception stage, however, the rule will generally defeat a plaintiff’s claim only in the clearest of cases.

The Court expressed that there was no need for Klokow to specifically plead the relaxation of the rule on the grounds of public policy, or that Sullivan had been unjustly enriched. Once it was alleged that Sullivan was in possession of the business, as well as the money, it was he, and not Klokow, who needed to show that he had not been enriched.

The Supreme Court of Appeal accordingly ruled in favour of Klokow.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Specific Questions relating to this article should be addressed directly to the author.

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