Prophitius and Another v Campbell and Others (7068/06) [2007] ZAKZHC 37; 2008 (3) SA 552 (D); (11 December 2007)

IN THE

HIGH COURT OF SOUTH AFRICA

DURBAN

AND COAST LOCAL DIVISION

Case No 7068\06

In the matter between :

RICHARD PROPHITIUS First Applicant

ANNA MARGARETHA PROPHITIUS Second Respondent

and

ROBERT DAVID CAMPBELL First Respondent

BETSY CAMPBELL NO Second Respondent

WHITKEL PROPERTIES CC Third Respondent

ANDRIES PETRUS DU PLESSIS Fourth Respondent

THE REGISTRAR OF DEEDS,

PIETERMARITZBURG Fifth Respondent

J U D G M E N T

NICHOLSON J

The applicants, who are represented in this matter by Mr Humphrey, brought an application in July 2006 for the following relief :

(a) that they be declared the rightful owners of the immovable property described as Erf 757, Palm Beach, Registration Division ET, Province of KwaZulu-Natal, in extent 1 374 m².

(b) that the transfer of the said immovable property from the Campbell Children's Trust to the third respondent, registered by the fifth respondent under Deed of Transfer no. TO5 20530 on 5 May 2005 and the subsequent and simultaneous transfer of the property from the third respondent to the fourth respondent registered by the fifth respondent under Deed of Transfer no TO5 20531 on 5 May 2005, be and they are hereby set aside.

(c) that the fifth respondent is directed to amend the records in the Deeds Registry to give effect to the Orders in sub-paragraphs (a) and (b) above, and in particular for the records in the Deeds Registry to reflect the first and second applicants as the owners of the said property in terms of Deed of Transfer no TO5 06506, duly registered on 15 February 2005, and expunging from the records at the Deeds Registry any reference to the third and fourth respondents as registered owners of the said property.

(d) that the first and second respondents be ordered to pay the costs of the application on an attorney and client scale.

(e) alternatively to sub-paragraph (d) above, and in the event of any or all of the third, fourth or fifth respondents opposing the application, jointly and severally with the first and second respondents, on an attorney and client scale.

The first, second, third and fifth respondents do not oppose the relief sought by the applicants. The fourth respondent, who is represented by Mr van Ryneveld, opposes the grant of that relief and has launched a counter-application in which he seeks the following relief :

(a) that the fourth respondent be declared to be the rightful owner of the immovable property described as Erf 757, Palm Beach registration division ET, Province of KwaZulu-Natal, in extent 1 374 m².

(b) that the transfer of the said immovable property from The Campbell Children's Trust to the applicants, registered by the fifth respondent under Deed of Transfer TO5 06506 on 15 January 2005 be and is hereby set aside;

(c) that the fifth respondent be directed to amend the records in the Deeds Registry to give effect to the orders in paragraphs (a) and (b) above, and in particular for the records in the Deeds Registry to reflect the fourth respondent as the owner of the said immovable property in terms of Deed of Transfer no. TO5 20531, duly registered on 5 May 2005, and expunging from the records of the Deeds Registry any reference to the applicants as registered owners of the said property;

(d) that the first and second applicants and the first and second respondents be ordered to pay the costs of the application (the first and second respondent on the scale as between attorney and client, jointly and severally).

The following facts are either common cause or not disputed by the parties.

The Campbell Children's Trust ("the Trust") owned a property down the South Coast more fully described as Erf 757, Palm Beach, Registration Division ET, Province of KwaZulu-Natal, in extent 1 374 m² ("the property").

The property was registered in the name of the trust on 31 March 1989.

On 22 January 2004, a written purchase and sale agreement was concluded between the Trust (as seller) and the third respondent (as purchaser), in terms of which the Trust agreed to sell the property to the third respondent for a purchase price of R45 000,00.

In terms of the written agreement concluded between the Trust and third respondent, the agreement was subject to the condition that the third respondent obtain a loan of not less than R45 000,00 within 21 days of the date of acceptance of the offer by the Trust.

Some ten months later on 30 October 2004, a written agreement of purchase and sale was concluded between the Trust (as seller) and the first and second applicants (as purchaser), in terms of which the Trust agreed to sell the property to the applicants for the purchase price of R195 000,00.

In terms of the written agreement concluded between the Trust and the applicants, the agreement was subject to the condition that the applicant obtain approval by not later than 13 November 2004 or such extended period as the parties may agree in writing for the unconditional granting of a loan by an institution of not less than R195 000,00 upon security of a first mortgage bond to be registered.

On 26 December 2004, the third respondent (as seller) concluded a written agreement of sale with the fourth respondent (as purchaser) in terms of which the third respondent agreed to sell the property to the fourth respondent for the purchase price of R165 000,00.

In terms of the written agreement concluded between the third respondent and the fourth respondent, the agreement was not subject to any suspensive conditions and the fourth respondent was instead obliged to pay to the third respondent the sum of R155 000,00 within 14 days of the agreement being concluded and the balance upon registration of transfer.

In terms of the sale agreement concluded between the Trust and the applicants, H P Steenkamp Attorneys was appointed as conveyancing attorney. H P Steenkamp Attorneys duly fulfilled their mandate and prepared the documents necessary for the transfer and the parties concerned signed the necessary documentation required for the said transfer.

In the transfer of the property from the Trust to the applicants, the first respondent alleged that the original title deed for the property had been lost and an application in terms of Regulation 68 of the Deeds Registries Act, No 47 of 1937 was therefore necessary and duly prepared by H P Steenkamp to be lodged with the Registrar of Deeds together with the transfer documents.

The Registrar of Deeds, Pietermaritzburg, registered the transfer of the property into the names of the applicants on 15 February 2005. The Registrar of Deeds issued the applicants with a Deed of Transfer allocated with deed no TO5 06506.

In terms of the sale agreement concluded between the Trust and the third respondent, as well as the sales agreement concluded between the third respondent and the fourth respondent, Stock & Steyn Attorneys were appointed as conveyancing attorneys.

H P Steenkamp Attorneys paid to the Trust the balance of the purchase price from the applicants on registration of transfer.

Stock & Steyn Attorneys duly fulfilled their mandate and prepared the documents necessary for the transfers between the Trust and the third respondent and simultaneously between the third respondent and the fourth respondent, and the parties concerned signed the necessary documentation to give effect thereto.

The Registrar of Deeds, Pietermaritzburg, registered the transfer of the property simultaneously between the Trust and the third respondent and then the third respondent and the fourth respondent, on 5 May 2006.

The Registrar of Deeds issued the fourth respondent with a Deed of Transfer allocated with deed no TO5 20531.

Stock & Steyn Attorneys paid to the Trust the purchase price from the third respondent on registration of transfer and also paid the third respondent the balance of the purchase price from the fourth respondent on registration of transfer.

A fair summary of these facts is that both the applicants on the one hand and the fourth respondent on the other claim to be the rightful owner of the same immovable property. Both are in possession of title deeds to the same property.

The Registrar of Deeds, the fifth respondent in this application has informed both parties that their office cannot make a determination as to who the rightful owner of the property is, and has requested that the parties approach this Honourable Court for a declarator as to who is the rightful owner of the property and who has no title thereto.

I am of the view that the Trust has committed a fraud by selling the property to both the applicant and the third respondent (which in turn sold it to the fourth respondent) and both the applicants and the fourth respondent are alive to this fact.

The fourth respondent however, on a number of occasions in his opposing affidavit, also accuses the applicants (and their attorney) of being party to the fraud, in collaboration with the Trust (and even possibly in collaboration with the Registrar of Deeds). I am not satisfied that any of the grounds relied on have any merit.

In argument Mr van Ryneveld very wisely did not rely on any such allegations. I will deal with the matter on the basis that the applicants and fourth respondent are innocent parties.

Both counsel relied heavily on the erudition of Van der Merwe in his seminal writing on the topic more especially his contribution to the title ‘Things’volume 27 in the Law of South Africa (first reissue) paragraph 362 et sequor and his book Sakereg Second Edition. Much of what follows is also indebted to the learned author whose analysis of the case law has been of great assistance to the Court.

Van der Merwe maintains that the Roman and Roman-Dutch authorities were equivocal on the question whether a iusta causa traditionis was required for the passing of ownership. (See paragraph 364.)

He cites authority for his proposition that most Roman-Dutch authorities did not require such a causa and thus followed the abstract system of transfer. (See paragraph 364).

Van der Merwe points out, however, that if the agreement giving rise to the transfer was influenced by fraud, a large number of Roman-Dutch writers were of the opinion that ownership did not pass, thus lending support to a causal system of transfer. He draws this distinction because a contract induced by fraud was considered void and not merely voidable. (See paragraph 364.)

In Commissioner of Customs and Excise v Randles Bros and Hudson Ltd 1941 AD 369 the majority of the Judges of Appeal came down on the side of the abstract system of transfer unequivocally. Watermeyer JA at 398-399 held that

‘If the parties desire to transfer ownership and contemplate that ownership will pass as a result of the delivery, then they in fact have the necessary intention and the ownership passes by delivery. It was contended, however, on behalf of the appellant that delivery accompanied by the necessary intention on the part of the parties to the delivery is not enough to pass ownership; that some recognised form of contract (a causa habilis . . .) is required in addition . . . I do not agree with that contention. The habilis causa referred to by Voet means merely . . . an appropriate reason for the transfer or a serious and deliberate agreement showing an intention to transfer.’

In similar vein Centlivres JA held at page 411:

‘[A] wide meaning must be given to the words ‘justa causa’ or ‘causa habilis’ . . . [A]ll that these words mean in the context I am at present considering is that the legal transaction preceding the traditio may be evidence of an intention to pass and acquire ownership. But there may be direct evidence of an intention to pass and acquire ownership and, if there is, there is no need to rely on a preceding legal transaction in order to show that ownership has, as a fact, passed. To put it more briefly it seems to me that the question whether ownership passed depends on the intention of the parties and such intention may be proved in various ways.’

Van der Merwe suggests that the effect of this case is that ownership passes in accordance with the abstract system whenever a thing is transferred with the clear intention to transfer and accept ownership.

The abstract theory was followed in Trust Bank van Afrika Bpk v Western Bank Bpk 1978 4 SA 281 (A) where Trengove AJA stated unequivocally that the fact that the preceding contract was void on account of the fact that delivery of the underground portion of the irrigation system was impossible could therefore in principle have no influence on the passing of ownership of the irrigation system. See also Air-Kel (Edms) Bpk h/a Merkel Motors v Bodenstein 1980 3 SA 917 (A).

Van der Merwe sees no reason why the abstract system should not also be applicable in the case of transfer of immovables. He points to an obiter dictum in Klerck v Van Zyl & Maritz 1989 4 SA 263 (SE) 273G–H where the court suggested, relying on Brits v Eaton 1984 4 SA 728 (T) 735, that the abstract system is applicable to the transfer of both movable and immovable property (in casu a sectional title unit). See now also Mvusi v Mvusi 1995 4 SA 994 (TkSC) 999D–H supra 100G–I.

Mr Humphrey also relied on the case of Radebe v Government of the Republic of South Africa and others 1995 3 SA 787 (N) where Booysen J held as follows at 803:

‘There is only one requirement for the transfer of ownership of immovable property, namely registration of title in the deeds office… That ownership transfers notwithstanding the invalidity of the underlying or causal transaction is clear…’ (Case references omitted.)

Similarly in Mnisi v Chauke and others; Chauke v Provincial Secretary, Transvaal and others 1994 4 SA 715 (T) Goldstein J held at page 720

‘[I]t seems to me that once transfer of erf 2520 had been effected into the widow’s name, and after that into the name of the owner, no attack can be brought against such transfer by reason of a defect in the causa which gave rise to such transfers…’

There is other authority on the point including Kriel v Terblanche and others 2002 6 SA 132 (NC) at page 140 et sequor.

Mr van Ryneveld argued that these cases should be distinguished and that the fraud of the Trust vitiated both the preceding causa and the passing of ownership in terms of such an agreement.

Van der Merwe deals with this argument by indicating that it is repugnant to an abstract system of transfer. (Paragraph 364.)

It seems to me that the principles applicable to movables should apply a fortiori to immovables. The public system of deeds registration is a notice to the world of the ownership of immovable property and this would take no consideration for the underlying causa of the transaction. The fact that the applicants obtained transfer first means that they became the real owners by the delivery of the immovable property. This is in accordance with the principle qui prior est tempore potior est jure.

As Van der Merwe points out the main reason for applying an abstract system of transfer is the legal certainty it brings about in commercial dealings. (See paragraph 364.)

Matters would of course have been completely different had there been proof of knowledge by either the applicants or the third and fourth respondent of the fraud, perpetrated by the Trust. That has not been proved, as I have already mentioned, earlier in this judgment.

The ground for setting aside the registration of the transfer of the farm to the purchaser (second defendant) in Mvusi v Mvusi at 1006B–D was that the purchaser was not an innocent transferee. The court, however, stressed that both the transferor (the deceased) and the purchaser knew that the deceased’s right of disposal was challenged by other heirs.

As Van der Merwe comments in his note in Lawsa as Davies AJ gave no authority for his decision, it is possible that the fraudulent knowledge of the deceased’s lack of capacity to transfer was the real ground that vitiated the real agreement. (See paragraph 365.)

I do have considerable sympathy for the fourth respondent who has only the solace of an action for damages against the first and second respondents.

I would therefore grant the following order:

The first and second applicants are declared to be the rightful owners of the immovable property described as Erf 757, Palm Beach, Registration Division ET, Province of KwaZulu-Natal, in extent 1 374 m².

The transfer of the said immovable property from the Campbell Children's Trust to the third respondent, registered by the fifth respondent under Deed of Transfer no. TO5 20530 on 5 May 2005 and the subsequent and simultaneous transfer of the property from the third respondent to the fourth respondent registered by the fifth respondent under Deed of Transfer no TO5 20531 on 5 May 2005, is hereby set aside.

The fifth respondent is directed to amend the records in the Deeds Registry to give effect to the Orders in sub-paragraphs a and b above, and in particular for the records in the Deeds Registry to reflect the first and second applicants as the owners of the said property in terms of Deed of Transfer no TO5 06506, duly registered on 15 February 2005, and expunging from the records at the Deeds Registry any reference to the third and fourth respondents as registered owners of the said property.

The first, second and fourth respondents are ordered to pay the costs of the application jointly and severally the one paying the others to be absolved,

The first and second respondents are ordered to pay any attorney and client costs over and above the party and party costs set out in (d) above, jointly and severally, the one paying the other to be absolved.

The counter application is dismissed with costs.

Application heard on : 14 November 2007

Counsel for the Applicants : Mr S I Humphrey

Instructed by : H P Steenkamp Attorneys

Counsel for the Fourth Respondent : Mr P M van Ryneveld

Instructed by : Strauss Daly Incorporated

Judgment handed down on : 11 December 2007