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[2018] ZAWCHC 9
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Commissioner for the South African Revenue Service v Short and Another (A289/2017) [2018] ZAWCHC 9; [2018] 2 All SA 100 (WCC); 2018 (3) SA 492 (WCC); 80 SATC 241 (7 February 2018)
Republic
of South Africa
IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Case No: A 289/2017
Before: The Hon. Mr Justice Waglay
The Hon. Mr Justice Binns-Ward
The Hon. Mr Justice Nuku
Hearing: 2 February 2018
Judgment:
7 February2018
In the
matter between:
COMMISSIONER
FOR THE SOUTH AFRICAN
REVENUE
SERVICE
Appellant
and
JANICE
BEVERLEY
SHORT
First
Respondent
JOHANNES
HERMANUS
JACOBS
Second
Respondent
JUDGMENT
BINNS-WARD
J (WAGLAY and NUKU JJ concurring):
[1]
The Commissioner for the South African Revenue
Service has come on appeal from the judgment of the Tax Court (Cape
Town) upholding
the appeal by the respondents to that court against
the assessment by SARS of transfer duty on the value of the property
acquired
by them in terms of an agreement they concluded, as
purchasers, with Morrow Investments 252 CC, as seller, in
respect of an
apartment in a sectional title development in Green
Point, Cape Town. The agreement was subject to the formalities
prescribed
in terms of the
Alienation of Land Act 68 of 1981
, and its
terms were entrenched in a deed of alienation, dated 7 August 2009,
accordingly. It stipulated that the agreed purchase
price was
R4,2 million, payable to the seller’s conveyancers by way
of a deposit of R250 000 within five days of
the acceptance of
the offer to purchase, with the balance to be paid ‘
in
cash against transfer of the Property into the name of the
Purchaser
’
.
[2]
Pursuant to the terms of the agreement, which will
be considered in some detail presently, and against payment of the
aforementioned
purchase price, ownership of the apartment and its
stipulated associated amenities was transferred to the first
respondent subject
to a right of
habitatio
registered in favour of the second respondent. By
reason of the definition of ‘
date
of acquisition
’
in
s 1
of
the
Transfer Duty Act 40 of 1949
,
[1]
transfer duty, as set forth in
s 2
of the
Act, became payable by the respondents within six months of the
conclusion of the agreement.
[2]
[3]
In terms of
s 14
,
[3]
the parties to any ‘
transaction
’
by which ‘
property
’
is acquired are required to furnish declarations
in the prescribed form to the Commissioner for transfer duty
purposes. The
respondents completed separate transfer duty
declarations, thereby implying that two
transactions
had been entailed. The first respondent
declared that she had acquired the ‘bare dominium’ of the
property for
a consideration of R2 869 103,40, and the second
respondent separately declared that he had acquired the right of
habitatio
for
a consideration of R1 330 896,60. No mention of any
consideration in the aforesaid amounts was made in the deed of
alienation, but added together they make up the sum of R4,2 million
that was stipulated in the contract as ‘
the
purchase price
’
.
[4]
The seller, on the other hand, made a single
transfer duty declaration in which, under ‘
Details
of purchase transaction
’
, it was
indicated that transfer duty was payable on R4,2 million ‘
being
total consideration
’
. The
seller’s declaration gave the details of the
purchaser(s)/transferee(s) as follows: the first respondent’s
name (‘
bare dominium holde
r’)
and the second respondent’s name (‘
right
of habitatio
’
). The fact
that the seller made a single transfer duty declaration necessarily
implied that it considered that its disposal
of the property had
involved a single transaction.
[5]
Treated as separate transactions in accordance
with the respondents’ transfer duty declarations, and because
the rate of transfer
duty is determined on a sliding scale in terms
of
s 2(1)(b)
of the Act, the total amount of duty payable would
be R225 998,49 (R174 526,77 in respect of the
declared value
of the ‘bare dominium’ and R51 471,72
in respect of the value imputed by the second respondent to the right
of
habitatio
).
The Commissioner determined, however, that the transfer duty fell to
be calculated in the amount of R281 000 with
reference to the
agreed consideration of R4,2 million in respect of a single
transaction.
[6]
The respondents paid the transfer duty in the
amount assessed by the Commissioner under protest. Their
subsequent appeal against
the Commissioner’s determination was
upheld by the Tax Board and thereafter, on rehearing in terms of
s 115
of the
Tax Administration Act 28 of 2011
, also by the Tax
Court.
[7]
The
res vendita
was ‘
property
’
as defined in paragraph (a) of the definition in
s 1
of the Act, which at the time read as follows:
'property'
means
land in the Republic and any fixtures thereon, and includes-
(a)
any
real right in land but excluding any right under a mortgage bond or a
lease of property other than a lease referred to in paragraph
(b) or
(c)
.
It was
common ground between the parties, correctly so, that a right of
habitatio
constitutes a limited real right in land and
qualifies as ‘property’ under the aforementioned
paragraph of the definition.
[8]
The following further provisions of the Act are of
particular relevance to the issue that falls to be determined in this
appeal:
A.
Section 2(1)
, which insofar as relevant provides:
Imposition of transfer duty
(1)
Subject
to the provisions of
section 9
, there shall be levied for the benefit
of the National Revenue Fund a transfer duty (hereinafter referred to
as the duty) on the
value of any property (which value shall be
determined in accordance with the provisions of
sections 5
,
6
,
7
and
8
) acquired by any person on or after the date of commencement of
this Act
by
way of a transaction
or
in any other manner, or on the amount by which the value of any
property is enhanced by the renunciation, on or after the said
date,
of an interest in or restriction upon the use or disposal of that
property, at the rate of - ….
(Underlining
supplied for emphasis.)
(Section
2(1)
falls to be construed with reference to the defined meaning of
‘transaction’ in
s 1
, which insofar as relevant
provides: ‘“
transaction”
means –
(a) in relation to paragraphs (a), (b) and (c) of the definition
of “property”, an agreement whereby
one party thereto
agrees to sell, grant, waive, donate, cede, exchange, lease or
otherwise dispose of property to another person
or any act whereby
any person renounces any right in or restriction in his or her favour
upon the use of or disposal of property
…
’.
B.
Section 5(1)
, which provides:
Value of property on which duty payable
(1) The value on which duty shall be payable shall,
subject to the provisions of this section-
(a) where consideration is payable by the person who
has acquired the property, be the amount of that consideration; and
(b) where no consideration is payable, be the
declared value of the property.
[9]
The respondents, who are life partners, bought the
apartment to be their home. The idea that the first respondent
should be
registered as the sole owner, with the second respondent
having a registered right of
habitatio
,
was intended to provide them with protection against the possibility
of losing their home should the second respondent, who is
a partner
in a firm of attorneys, happen to be faced with a crippling liability
in consequence of any large claim that might be
made against the
firm. The registered right of
habitatio
(which would endure for his lifetime) would afford
the second respondent security of occupation in respect of the
property and by
virtue of its legal character would not be exigible
by his creditors. (It seems implicit in the scheme that should
the couple
choose to sell the property and live elsewhere, the second
respondent would renounce his right of
habitatio
so that full dominium of the property could be
transferred to a purchaser.)
[10]
The seller did not give evidence, but I think it
may be accepted that a seller of the apartment in an arm’s
length transaction
would have had no interest in the purchasers’
scheme to protect themselves against potential creditors. It
would have
been interested only in obtaining a market-related
consideration for the sale of the property; an object the achievement
of which
ordinarily would not be facilitated by disposing of the
right just to occupy it and, separately, of the so-called ‘bare
dominium’
over it. All the indications are that this was
an arm’s length transaction.
[11]
It is apparent from the aforementioned provisions
of the Act as applied to the facts that the appeal turns on whether
there was
one ‘transaction’, as contended by the
Commissioner, or two ‘transactions’, as contended by the
respondents.
In order for the respondents’ contention to
prevail, the reservation of a right of
habitatio
to the second respondent would have to be an
acquisition that was independent of, and not integral to, the
transfer of title of
the property from the seller to the first
respondent. For transfer duty purposes an objective
determination has to be made
whether one or two transactions were in
fact involved. That turns on the proper construction of the
parties’ contract.
[12]
The fact that separately registerable rights were
to be acquired by the purchasers is not determinative. It is
authoritatively
established that a multiplicity of individually
registerable properties of various values may be the subject of a
single transaction
for transfer duty purposes. See
Commissioner
for Inland Revenue v Freddies Consolidated Mines Ltd
21
SATC 132
, 1957 (1) SA 306 (A),
[1957] 1 All SA 344
, in which the
character of the dispute over the calculation of transfer duty was
closely analogous to that in the current case.
Centlivres CJ
described the factual background to the matter as follows:
In terms of two separate
agreements entered into on the same day the respondent company bought
the whole of the undertaking and
assets of two other companies for
the sums of £5,075,980 and £5,177,942 10s. 0d.
respectively. In the one agreement
the following clause appears:—
“
4. It is hereby
acknowledged and recorded that of the consideration payable by the
purchaser company to the seller company, £730,695
is payable in
respect of the immovable property referred to in the schedule hereto
marked ‘A’, which £730,695
is the value of such
immovable property, as shown in the books of the seller company.
”
In the other agreement the same clause appears,
excepting that the figure is £717,463. Each of the “A”
schedules
shows that the immovable property referred to in clause 4
of the agreement consists of a large number of separate erven in
townships,
each erf being referred to by its number. That schedule
does not place a value on any of the erven. Those erven were at the
time
the agreements were entered into registered as separate erven in
the Deeds Registry at Bloemfontein.
The respondent and the sellers submitted declarations of
purchaser and seller to the Receiver of Revenue in which the true
value
of each of the erven was stated separately, totalling the above
sums of £730,695 and £717,463 respectively. In the case
of most of the erven the value of each individual erf was less than
£5,000. The appellant admits that the value of each individual
erf is the value shown in the declarations of purchaser and seller
but denies the relevancy of such value.
A dispute arose between the parties as to the amount of
the transfer duty that was payable in terms of
sec. 2
of
Act 40 of 1949. The Commissioner for Inland Revenue claimed
£57,826 6s. 6d. as transfer duty on the basis that
the duty had
to be calculated on the total values of all the erven and not on the
value of each individual erf. The respondent
contended that the
transfer duty payable was £43,950 16s. 9d. on the basis that
the duty had to be calculated on the value
of each individual erf. On
that basis the duty would be 3 per cent on so much of the value of
each erf as does not exceed £5,000
and 4 per cent thereafter.
The Commissioner contended that duty was payable at 3 per cent on
£5,000 of £730,695 and
£717,463 respectively and at
4 per cent thereafter. In order to obtain transfer of the erven into
its name the respondent
paid the amount claimed by the Commissioner.
It first paid £43,950 16s. 9d. and thereafter paid under
protest the balance
demanded by the Commissioner, viz. the sum of
£13,875 9s. 9d.
The
Appellate Division, overruling a decision to the opposite effect of
the Transvaal Provincial Division, upheld the Commissioner’s
assessment. It did so primarily on the basis that the sale of
the several units of land listed separately on the annexures
to each
of the agreements had in each case formed an integral part of a
single indivisible transaction. Centlivres CJ reasoned
the
court’s finding as follows (at
311 SALR, 347
All SA): ‘
In
the present case the respondent by virtue of the two contracts
entered into by it acquired the right to acquire the ownership
of the
property mentioned in those contracts. In the case of each contract
that right was acquired
by way of one “transaction”
and it seems to me that that right was indivisible. And in each
contract the consideration for the acquisition of that right is
stated: that consideration is, therefore, in terms of sec. 5(1)(a),
the value upon which the duty must be calculated, …
’.
(My underlining.)
[13]
It also seems to me not to matter that in the
current case there were two purchasers, each of which was to acquire
different rights
in the property. The principle still applies
if they were to do so in terms of ‘a unitary transaction’.
[4]
[14]
It is therefore necessary to examine the agreement
in more detail to determine whether it does indeed establish that the
rights
of the respondents to acquire property thereunder involved an
integral transaction. The rules of interpretation are
so
well-established that it would be a supererogation to set them out in
detail. Suffice it to say that central to the exercise
of
interpreting a written contract is construing the language used in
the deed with appropriate regard to the particular context.
Context in this respect is not limited only to the immediate context
of the words used within the four corners of the contract,
but also
involves having regard to its apparent nature and purpose; all of
that to be judged against the relevant factual matrix
in which the
contract was concluded.
[5]
Within the limits of the language used by the
parties read in its context in the sense aforementioned it is also
necessary to approach
the construction of the contract with sensible
regard to the business or practical result the parties
apparently sought to
achieve thereby.
[6]
‘
Sophisticated semantic analysis’
should not be permitted to negate an evident commercial or practical
object that the parties
clearly sought to achieve by entering into
the contract.
[7]
[15]
The deed of agreement, which was executed using a
pro forma ‘
Offer to Purchase
(Sectional Title)
’
contract
document used by the seller’s estate agents, identified the
parties to the agreement and the
res
vendita
as follows (the italicised
words or information were inserted in the pro forma template in
handwriting):
OFFER TO PURCHASE (SECTIONAL TITLE)
To
Morrow Inv No. 252 CC
….the Seller/s
Resident at…………………….(Address)
I/We [
the second respondent
] and [
the first
respondent
] …the Purchaser/s
Resident at
to/of the right of habitatio and
the bare dominium respectively
…
(Address)
but jointly
offer to purchase the Unit/s being
unit/s as defined in the Sectional Titles Act 95 of 1986 (“the
Act”) and exclusive
use areas (If any recorded below (“the
units”) consisting of the following:
of 309 South Seas
EXCLUSIVE USE AREAS
FLAT/ TOWN HOUSE
GARAGE
STORE
ROOM
SERVANT’S
ROOM
COVERED
PARKING
BAY
OPEN
PARKING
BAY
OTHER
KNOWN AS
108
1
PB
112
PB 113
SECTION NO/S
108
ESTIMATED MONTHLY LEVIES
And more fully described on the
sectional plan of the building or buildings known as
SS
South Seas
Scheme No
492/2004
situate at
Green
Point Cape Town
and subject to all
terms and servitudes mentioned or referred to in the aforesaid
Sectional Plan and to all such other conditions
and servitudes which
may exist in regard thereto and as mentioned in the Title Deeds of
the Rules governing the scheme thereof
and in the condition and to
the extent such as it now lies VOETSTOOTS.
[16]
The following numbered clauses of the contract are
also pertinent to the question under consideration:
1. PURCHASE PRICE
The purchase price R
Four Million two hundred
thousand and nil cents (R4 200 000,00)
payable as follows:
(a)
A
deposit of
R250 000
5
days of
acceptance of the offer (sic) to be deposited with the Seller’s
conveyancers and held by them in trust in an interest
bearing
account, for the Purchaser’s benefit pending registration of
transfer;
(b)
The
balance to be paid in cash against transfer of the property into the
name of the Purchaser. When requested by the Seller’s
conveyancers, the purchaser shall furnish a banker’s or other
approved guarantee covering payment of such balance within
14 days of
the request.
2. RISK
On registration of transfer the risk of ownership shall
pass to the Purchaser from which date the Purchaser shall receive all
benefits
from the property. The Seller shall, however, remain
responsible for the maintenance, good order and repair of the
interior of
the Unit until registration of transfer and undertakes to
abide by the said Rules until transfer is registered.
3. OCCUPATION
(a) Vacant occupation shall be given to the Purchaser on
Transfer
. If the date of occupation does not
coincide with the date of registration of transfer, the party in
occupation of
the property, while it is registered in the name of the
other party shall pay to the other party a rental of
R15 000,00
per month payable from date of occupation monthly in advance at the
conveyancer’s office. In addition, the Purchaser
shall
bear all liability for the levies determined by the Body Corporate in
terms of Section 37 of the Act, with effect from the
date of
occupation.
(b) All amounts payable to the Body Corporate in terms
of Section 37(1) of the Sectional Title Act of 1986 (commonly known
as “LEVIES”)
shall be payable by the Purchaser as from
date of occupation, and where appropriate, a pro rata share in
relation to a given month.
(c) In particular, it is recorded that a special levy
(over and above the monthly levies) has been raised by the Body
Corporate
and in respect of the property sold is payable at the rate
of R ………………. per month.
(i) The Purchaser assumes liability for such special
levy with effect from the date of occupation and will discharge the
full balance
owing in respect thereof as at date of occupation in
accordance with the payment schedule as agreed upon by the Body
Corporate.
OR
(ii) …[Deleted]
4. TRANSFER
Transfer of the property shall be effected by the
Purchaser’s
Seller’s
conveyancer on
1/11/2009
or as soon as possible thereafter.
The Purchaser shall on demand sign all transfer and bond documents
and pay transfer costs,
registration of bond costs, transfer duty,
stamp duty, Value Added Tax (V.A.T) if applicable and all incidental
charges.
5. FIXTURES
… …
6. MORTGAGE BONDS
… …
7. BROKERAGE
On acceptance of this offer or if it is subject to any
suspensive condition(s), upon fulfilment thereof, the seller shall be
liable
to Sotheby’s for
7,5%
3.5%
commission plus V.A.T. In the event of this sale being
cancelled through a breach of contract on the part of the Purchaser,
Sotheby’s shall be entitled, but not obliged, to claim such
commission and V.A.T. from the Purchaser without prejudice to
Sotheby’s rights against the Seller. Both parties hereby
irrevocably authorise and instruct the conveyancer to pay,
upon
registration of transfer the commission and V.A.T. to Sotheby’s
from any deposit and/or other amount/s paid by the Purchaser,
such
payment to rank as first charge against any monies due, owing and
payable to the Seller or his nominee.
8. BREACH
(a) If the Purchaser commits any breach of any term of
this offer and does not remedy it within 7 days of receipt by
pre-paid registered
post, or delivery by hand, of a letter requiring
the breach to be remedied, the Seller shall be entitled without
prejudice to any
other rights which he may have under this agreement,
to:
(i) cancel this agreement and claim damages and
interest, or
(ii) cancel this agreement and retain all monies already
paid by the Purchaser in terms thereof, as agreed pre-estimated
liquidated
damages, or
(iii) sue for the full purchase price and interest
thereon and damages.
(b)
For all purposes arising from this
agreement the Seller and Purchaser choose Domicilium Citandi et
Executandi at the respective
addresses set out in this agreement.
(c)
A letter sent by Prepaid Registered
Post shall be deemed to have been received by the Addressee/s 7 days
after posting.
9. LIABILITY/WARRANTIES
(a) In the event of there being more than one Purchaser
then they be jointly and severally liable for all obligations in
terms thereof;
(b) This document contains the entire agreement between
the parties. Neither party relies nor may rely upon any
representations,
warranties, undertakings or expressions of opinion
which have not been incorporated into this agreement.
(c) ….
10. ELECTRICAL INSTALLATION.
…
.
11. The parties undertake to do all things as may be
necessary for the fulfilment of the terms and conditions of this
agreement.
12. … .
13. SOLD BOARD
With the consent of the Body Corporate, Sotheby’s
may display a “SOLD” board on the property from the date
of
acceptance of this offer until three months after the date of
occupation.
14. THE PARTIES CONFIRM
(a).
(b) that Sotheby’s was the effective cause of this
sale being concluded.
(c) that the meaning and consequences of all the clauses
of this document have been explained to each party.
…
18. This offer is irrevocable until [
illegible
]
12H00 on 6/8/2009
and is binding upon acceptance hereof
without
only if
having
has
been notified of the Seller’s acceptance.
(The
handwritten wording has been italicised.)
[17]
In my view there
are a great number of salient pointers in the deed of agreement to
there having been only a single indivisible
transaction in
contemplation by the contracting parties. So many, in fact,
that it would unnecessarily extend the length
of this judgment to
spell each of them out. I shall confine myself to those that I
consider especially significant.
Their effect is overwhelming.
1.
The agreement expressly refers to the purchasers
as acting ‘jointly’ as parties to the contract; whereas
the construction
contended for by the respondents requires accepting
that they acted severally. They could not jointly in a single
contract
acquire the right of
habitatio
and discretely jointly acquire the bare dominium
against payment of a single consideration, for they would then
automatically obtain
joint full ownership of the property. The
peculiar use of the word ‘jointly’ in the given context
denoted the
offerors’ intention that the respective rights to
be acquired by them in the property were to be acquired together in
one
transaction – an all or nothing situation.
2.
The undertaking by the purchasers of joint and
several liability ‘for all obligations in terms [of the
agreement]’ is
irreconcilable with the respondents’
contention that the intention was to enter into two divisible
transactions. What
purpose would be served by each of them
undertaking several liability for the full purchase consideration of
R4,2 million if the
whole contract did not fall to be performed
integrally and indivisibly?
3.
Only a single purchase price is given; there is no
indication that separate prices had been agreed upon between the
seller and the
purchasers for the right of
habitatio
and the bare dominium. Compare in this
regard
Modder East Orchards Ltd v
Receiver of Revenue
1 SATC 40
,
1924 TPD
14
, where Stratford J observed ‘
The
appropriation of separate considerations is a crucial point in
deciding upon the divisibility of a contract. The parties have
not
divided the consideration and there is nothing to show what
consideration should go to one portion of the subject matter and
what
should go to the other. Therefore I have very little doubt on the
construction of this particular agreement that the contract
is not
divisible and that what was really sold was the improved plot at the
end of three years
’
.
[8]
I accept that the appropriation of separate
considerations might not be determinate in every case,
[9]
but it seems to me to be a material consideration
in the current case. This may be illustrated by asking the
question what
the consideration payable for the right of
habitatio
would be if the second respondent were to
repudiate her undertaking in terms of the contract to take transfer
of registered title
to the property. The second respondent used
the calculation of value formula given in the Revenue Service’s
handbook
for the purpose of determining the declared value, but it is
by no means evident, and the agreement itself gives no indication,
that the seller had bound himself to partial performance of the
contract at that consideration. On the contrary, the
indications
in the contract are that the seller wanted to dispose of
its ownership rights in the apartment entirely in return for payment
of
the stipulated R4,2 million consideration.
4.
Another feature that weighs in this regard is that
the contract would fail to comply with the formalities prescribed in
terms of
the Alienation of Land Act if it were characterised as
giving rise to two discrete transactions. In order to comply,
the
agreed price for each sale would have had to be expressed in the
deed of alienation. Any interpretation of the deed should
prefer a construction upholding its effectiveness over one that would
result in it having been unenforceable.
5.
Transfer was to be given only against payment of
the agreed consideration of R4,2 million; the agreement gives no
indication that
either of the purchasers would be entitled to part
performance against payment of a lesser amount than the full
stipulated price.
Transfer of what the first respondent had
contracted to acquire could only be given if attended by registered
reservation of the
right of
habitatio
in favour of the second respondent and payment of
the full stipulated price. The agreement provides for the
payment of a single
deposit on the purchase price and contemplates a
single payment in respect of the balance following the furnishing of
a single
guarantee. The seller is under no obligation to
transfer any right in the property save as against payment of the
full balance
of the R4,2 million purchase price. That is
indeed what happened. The notarial deed of right of
habitatio
in favour of the second respondent was registered
immediately before, and on the same day as the deed of transfer of
title of the
property. The terms of the notarial deed expressly
cross-referenced the intended transfer of the ‘bare dominium’
in the property to the first respondent and made no reference to any
consideration for the right of
habitatio
.
The contemporaneously registered deed of transfer on the other hand
refers to the cession of transfer of the sectional title
unit
‘in full and free property’ to the first respondent
subject to the right of
habitatio
in favour of the second respondent in terms of the
aforementioned notarial deed in furtherance of the sale of the
property for R4,2
million.
6.
Commission calculated at 3,5% of the stipulated
R4,2 million purchase price was payable by the seller to the estate
agent upon conclusion
of the agreement. In clause 14(b) the
parties agree that the estate agent was the effective cause of ‘this
sale’.
The wording sensibly relates to only one, not two,
transactions, having been involved
7.
Whilst it is plain that the seller’s object
was to achieve payment of a contract price in the full amount of R4,2
million
out of the transaction, it is equally evident that the scheme
of the respondents to protect their intended home against the second
respondent’s potential creditors could not be realised, other
than incidentally, if the contract were not implemented as
‘a
unitary transaction’.
8.
The content of the concept of ‘bare
dominium’, which is an imprecise term in the abstract, is
informed by the extent
of the derogation from the full bundle of
ownership rights of the right of
habitatio
to be conferred under the contract
on
the second respondent
. The
content of the bare dominium would be different, for example, if the
right of
habitatio
were
to be given to someone younger or older than the second respondent,
for that person’s life expectancy would impact on
the length of
time that might be expected to pass before the derogation from the
first respondent’s ownership rights as title
holder would
lapse. That in turn would impact, adversely or beneficially as
the case might be, on the value of the bare dominium
to be acquired
by the first respondent. It would be singularly unbusinesslike
for the first respondent to purchase the bare
title of a property
subject to the reservation of a right of
habitatio
to be reserved in favour of some as yet
undetermined third party to be identified in a separate contract yet
to be concluded by
the seller in the event of the second respondent
not taking it up.
9.
Furthermore, the nature of the ‘bare
dominium’ to be acquired by the first respondent in terms of
the contract is actually
defined by that of the right of
habitatio
to be acquired by the second respondent.
‘Bare dominium’ is sometimes referred to as ‘defective
dominium’
(
dominium minus plenum
),
which is anything less than ‘full dominium’ (
dominium
plenum
). The distinction is
succinctly elucidated in Claassen,
Dictionary
of Legal Words and Phrases
, 2 ed., s.v.
‘
Dominium Plenum
’
as follows:
…
Ownership is of two kinds.
The owner may be entitled to use the thing (
jus
utendi
), to enjoy
its fruits (
jus
fruendi
), to
consume it entirely where it is capable of consumption (
jus
abutendi
) and to
alienate or dispose of it as he pleases (
jus
disponendi
).
On the other hand, the ownership may be wanting in any of those
rights owing to a real burden by way of servitude (real
or personal)
or
fideicommissum
or mortgage. In the former
case, where all the rights of ownership are present, the dominium is
said to be
plenum
;
in the latter case,
minus
plenum
(Van Leeuwen
Comm
2.2.1).
In
the current case the ownership to be acquired by the first respondent
was
dominium minus plenum
because it was to be subject to a personal
servitude of
habitatio
in
favour
of the second respondent
.
The character of the burden on the ownership to be acquired by her –
in other words, what made it the ‘bare
dominium’ that she
had contracted to acquire – was defined by the agreed conferral
of servitutal rights to be registered
in favour
of
the second respondent
simultaneously
with transfer of registered title in her name. There are any
number of other types of servitude that could
have been imposed on
the property with derogating effect on the extent of first
respondent’s ownership. The extent
of the derogation in
each case would depend on the nature of the servitude that was
involved. It is the nature of the servitude
in point that
defines the content of the so-called ‘bare dominium’.
[10]
The character and substance of what the parties
contemplated by ‘bare dominium’ in the contract under
consideration
are defined by the
particular
nature of the derogation from full ownership
provided for in the agreement (i.e. the right of
habitatio
to be vested
in the
second respondent
). What falls to
be acquired
by the first respondent
under the contract under the descriptor ‘the
bare dominium’ is amorphous if it is not integrally related to
that which
falls to be acquired
by the
second respondent
thereunder.
[11]
This highlights the integral character of the
transaction by which the respective property rights fell to be
acquired. The
first part has no meaning contextually if it is
divorced from the second.
[18]
The ordinary import of the language of the
contract, when it is read as a whole, goes against the meaning
contended for by the respondents.
The respondents’
contention also flies in the face of any commercial sense as between
themselves and the seller. In
my judgment, it cannot prevail.
[19]
In upholding the respondents’ appeal the Tax
Court led itself into error in my respectful view by being distracted
by the
fact that each of the purchasers stood to acquire separate and
distinctive rights in the property under the agreement. The
fact begged the question whether the acquisitions were in terms of a
single integral (or unitary) transaction or two transactions.
The court a quo also allowed itself to be misled by the
Commissioner’s acceptance that the right of
habitatio
,
separately assessed, had been correctly valued in accordance with the
SARS handbook for transfer duty purposes. That was
not the
question for decision, however. The Commissioner contested the
validity of a separate valuation of the
habitatio
in the circumstances. The notional value of
the right of
habitatio
assessed independently of the transaction value
was irrelevant if only one transaction was involved. The point
is illustrated
by the judgment in
Freddies
Consolidated Mines
supra, in which, it
will be recalled, the Commissioner did not contest the values of the
individual erven that were sold, but argued
successfully that because
two composite transactions rather than a divisible sale of each
individual erf had been involved transfer
duty fell to be paid on the
transactional consideration, and not the value of each erf assessed
separately. The Tax Court
gave no consideration to the effect
of the respondents having undertaken joint and several liability for
the whole purchase price.
The judgment of the court a quo also
did not address the issues identified above (at paragraph [17]); in
particular the matter
of the character of the bare dominium to be
acquired by the first respondent having been defined in the contract
by that of the
right of
habitatio
to be acquired by the second respondent.
[20]
It follows that the appeal must succeed. We
were informed that the parties have come to an arrangement on costs.
The
respondents have abandoned the costs order made by the Tax Court,
and no order as to costs is sought by either side in this court.
The following order is made:
1.
The appeal from the
Tax Court is upheld.
2.
The order of the Tax
Court is set aside and replaced by an order:
(a)
Dismissing the appeal; and
(b)
Confirming the Commissioner’s assessment of
transfer duty on the contractually stipulated consideration of R4,2
million.
A.G. BINNS-WARD
Judge of the High Court
B. WAGLAY
Judge of the High Court
L. NUKU
Judge of the High Court
APPEARANCES
Appellant’s
counsel:
M.W. Janisch SC
Shafia Mahomed
Appellant’s
attorneys:
The State Attorney
Cape Town
Respondents’
attorneys:
Cliffe Dekker Hofmeyr
Cape Town
[1]
Insofar as relevant, the Act defines ‘
date
of acquisition
’
to mean ‘(
a)
in the case of the acquisition of property (…) by way of a
transaction, the date on which the transaction was entered
into,
irrespective of whether the transaction was conditional or not …
’
.
[2]
In terms of s 3(1) of the Act.
[3]
Section 14(1) of the Act provided as follows at the relevant time
(prior to its substitution in terms of the Voluntary Disclosure
Programme And Taxation Laws Second Amendment Act 8 of 2010)
(underling supplied):
Declarations
appropriate to the manner of the acquisition of property in any
particular case shall, in substance as near as possible
to the
wording of the forms prescribed by the Commissioner, be completed
and submitted in such manner (including electronically)
and at such
place as may be prescribed by the Commissioner, by the parties to
the transaction
whereby the property has been acquired and,
if the Commissioner so directs, also by the agent, auctioneer,
broker or other person
who acted for or on behalf of either party to
the transaction
or, if the property has been acquired
otherwise than by way of a transaction, by the person who acquired
the property.
[4]
The term used in
Chrysalis
v Katsapas
1988 (4) SA 818
(A), at
825F.
[5]
See, amongst other pertinent authority,
Joubert v Enslin
1910
AD 6
at 37-8;
Swart en ’n Ander v Cape Fabrix (Pty) Ltd
1979 (1) SA 195
(A) at 202;
KPMG v Securefin Ltd
[2009]
ZASCA 7
,
[2009] 2 All SA 523
(SCA),
2009 (4) SA 399
, at para. 39;
Natal Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
,
[2012] 2 All SA 262
(SCA),
2012 (4) SA 593
, at para
18;
Bothma-Batho Transport (Edms) Bpk v S Bothma & Seun
Transport (Edms) Bpk
[2013] ZASCA 176
,
[2014] 1 All SA 517
(SCA),
2014 2 SA 494
at para 12; and
Novartis v Maphil
[2015] ZASCA 111
,
[2015] 4 All SA 417
(SCA),
2016 (1) SA 518
; at
para. 24- 31.
[6]
See
Picardi Hotels
Ltd v Thekwini Properties (Pty) Ltd
[2008] ZASCA 128
;
2009
(1) SA 493
(SCA) at para.
[5]
.
[7]
Cf.
Lloyds of London Underwriting Syndicates 969, 48, 1183 and
2183 v Skilya Property Investments (Pty) Ltd
[2004] 1 All
SA 386 (SCA) at para. [14]. In
Bothma-Batho Transport
supra (in fn. 7), the observation by Lord Steyn in
Society of
Lloyd’s v Robinson
[1999] 1 All ER (Comm) 545
(HL) at 551:
Loyalty to the
text of a commercial contract, instrument, or document read in its
contextual setting is the paramount principle
of interpretation. But
in the process of interpreting the meaning of the language of a
commercial document the court ought generally
to favour a
commercially sensible construction. The reason for this approach is
that a commercial construction is likely to give
effect to the
intention of the parties. Words ought therefore to be interpreted in
the way in which a reasonable commercial person
would construe them.
And the reasonable commercial person can safely be assumed to be
unimpressed with technical interpretations
and undue emphasis on
niceties of language
was cited with
approval. See also
Rainy Sky S.A. and Others v Kookmin Bank
[2011] UKSC 50
,
[2012] 1 All ER 1137
(SC) at para. 21.
[8]
At p. 19 of the 1924 TPD law reports.
[9]
Cf.
Minister of
Finance v Gin Bros and Goldblatt
19
SATC 248
,
1954 (3) SA 881(A)
,
[1954] 3 All SA 100
, in which the
purchase of two adjoining plots of land was characterised for
transfer duty purposes as having involved a single
transaction
notwithstanding the allocation of separate prices to each of them in
the contract of sale. In arriving at that
decision the
majority judgment had regard in the particular factual context of
the agreement to the evident substance of the
transaction rather
than the form in which it was expressed in the contract.
[10]
Cf.
Estate Smuts v Commissioner for Inland Revenue
1929 TPD
961
, (a succession duty case) in which Feetham J held that bare
dominium’ in the context of s 12(6)(a) of Act 29 of
1922
(as amended), which provided insofar as relevant:
Where the
succession consists of the accrual of full ownership in any property
to the holder of the bare dominium therein by reason
of the
cessation of any usufructuary or other like interest held in such
property by the predecessor the value of the succession
shall be the
difference between the fair market value of the full ownership of
the property as at the date of such cessation
and the value of the
bare dominium as at the date of …
had been used ‘
not
in the sense of
dominium
which confers no
beneficial ownership, but in the sense of
dominium
which confers something less than full ownership
’.
It is evident from the further discussion by the learned judge on
the same page that he conceived of ‘bare
dominium’ as
the difference between ‘
less than
full ownership and
the additional rights necessary to constitute full ownership
’
which he conceived might in a given case even be accrued from
different sources. This serves to highlight that what
constitutes ‘bare dominium’ in any case is the
difference between
dominium plenum
and whatever else is
required
in that particular case
to convert the bare dominium
into full ownership. A wide range of possibilities is
notionally conceivable; what it actually
involves depends on the
nature of the other rights that give rise to the derogation from
full ownership in the particular case.
[11]
English words italicised for emphasis.