Brief Summary

Property Law — Transfer of immovable property — Application to set aside transfer based on alleged fraud and lack of intention to sell — Applicant, Zatu, sought to cancel a sale agreement after the property was registered in the name of Madikane — Zatu claimed her signature was forged and that she never intended to transfer the property — Court held that Zatu had demonstrated an intention to sell and complied with necessary formalities, thus the transfer was valid despite her later claims of cancellation and fraud.

Comprehensive Summary

Summary of Judgment

Introduction

The matter concerned an application in the Western Cape High Court, Cape Town, in which the applicant sought final relief on motion to set aside the transfer of an immovable property (Erf 2[…], Khayelitsha, City of Cape Town). The relief was framed as the cancellation of the title deed registered in the first respondent’s name, the cancellation of a registered mortgage bond, and the registration of a title deed in the applicant’s name.

The applicant was Ms L[…] P Zatu, the surviving spouse of the late registered owner and the executor of his deceased estate. The first respondent was Ms Nosipho Caroline Madikane, the purchaser and registered owner of the property following transfer. Additional respondents included Absa Bank Limited (bondholder), the Registrar of Deeds, Cape Town, National Pride Properties (estate agency), and Thabo Qoko N.O. (estate agent involved in the transaction).

Procedurally, the court dealt with the matter as a motion application seeking final relief. The court also recorded that the applicant attempted to file an amended notice of motion without delivering a notice in terms of Rule 28, and the court therefore confined itself to the relief in the main application. The first respondent opposed the relief and indicated that, if the applicant succeeded, the first respondent would pursue a counter-application for repayment of the purchase price plus interest.

The dispute concerned the validity and reversibility of a completed sale-and-transfer transaction of land, where the applicant alleged (among other things) that there was forgery/fraud in the signing of the offer to purchase and related finance documentation, and that the agreement did not comply with statutory formalities.

Material Facts

It was common cause that the applicant was married in community of property to the deceased, and that she was appointed executor of his estate on 20 March 2017. It was also common cause that, on 10 October 2016, following contact from the fifth respondent (an estate agent), the applicant met him and gave him a mandate to market the property and find a buyer, with a commission arrangement. The property was marketed and a buyer (the first respondent) was found during mid-2017.

It was further common cause that an offer to purchase was signed by the first respondent together with a person who signed as “Zatu”, and that on 8 August 2017 the applicant attended the offices of the conveyancing attorneys, Velile Tinto Cape Inc, met with a representative (Jody-Lee Harrington), had the terms explained to her, and signed the required documents to pass transfer. During August 2017 the applicant corresponded with the conveyancers about documentation required to cancel the existing bond, and forwarded a copy of her marriage certificate. The court also recorded that an application in terms of section 45(1) of the Deeds Registries Act 47 of 1937 was made, granting the applicant (as executor) permission to deal with the property.

The applicant’s case included that she later changed her mind and communicated a cancellation telephonically to the first respondent, who did not accept it. After this, there were further events relied upon by the first respondent to show that the cancellation was not communicated to all involved parties in the transfer process, including communications between attorneys about progress, enquiries from the conveyancers, arrangements for compliance certification, and information provided regarding occupation. The property was in fact registered in the first respondent’s name on 18 April 2018.

After registration, it was common cause that the purchase price was paid to the conveyancing attorneys (funded by a bond), the first respondent continued paying the bond instalments, and yet the applicant and her children remained in occupation. In July 2020 the first respondent instituted eviction proceedings against the occupants.

The applicant disputed the validity of the underlying agreement on the basis that her signature on the offer to purchase had been forged, and that her signature had also been forged on an application for bridging finance. She further contended that the sale agreement did not comply with statutory formalities and that the offer to purchase had not been properly accepted. The court, however, treated the fact of registration, the signing of transfer documents by both parties, and the parties’ matching intentions reflected in the transfer documentation as central and largely common cause. The court regarded certain disputed issues as not material to the dispositive questions.

Legal Issues

The central questions were whether, despite completed registration of transfer, the applicant could obtain an order setting aside the transfer and cancelling the title deed and mortgage bond, on the basis that the deed of alienation allegedly did not comply with section 2(1) of the Alienation of Land Act 68 of 1981 and/or was tainted by fraud (including alleged forgery by the estate agent).

The dispute involved the application of law to facts and, in particular, how the statutory framework in sections 2(1) and 28(2) of the Alienation of Land Act operated where (i) transfer had already been registered, (ii) the purchase price had been paid, and (iii) allegations of fraud related to the conclusion of the underlying sale documentation. It also implicated the doctrinal requirements for the passing of ownership of immovable property, namely registration (delivery) and a real agreement, as well as the proper approach to factual disputes in motion proceedings under the Plascon-Evans rule.

A further issue concerned whether the absence of witness signatures on the deed of sale affected validity, and whether public policy considerations justified setting the agreement aside.

Court’s Reasoning

The court located the dispute within the statutory scheme of the Alienation of Land Act 68 of 1981, noting that section 2(1) prescribes formalities for an alienation of land and that section 28(2) provides that non-compliant alienations are nevertheless valid ab initio where the alienee has performed in full and transfer has occurred. The court further relied on the well-established principle that ownership of immovable property passes only upon two requirements: registration in the Deeds Office and the existence of a real agreement between the parties.

A key analytical step in the court’s reasoning was distinguishing between the underlying deed of sale and the “real agreement” operative at the stage of transfer. The court considered whether the real agreement was constituted by the deed of sale or rather by the transfer documentation (excluding the deed of sale). On the facts before it, the court treated the transfer documentation as reflecting the parties’ common intention, and reasoned that the deed of sale was not part of the real agreement in the sense relevant to the completed transfer.

The court rejected the applicant’s attempt to align the matter with decisions where transfer had not yet occurred or where the seller never intended to permanently sell. It distinguished Burger v Edenglo on the basis that, in that case, the sellers never intended permanent alienation and the court found the real agreement defective, whereas in the present matter the applicant had instructed the agent to sell, the property was advertised, and the applicant signed the documents necessary to give effect to transfer. The court also distinguished Fraser v Viljoen and Rockbreakers and Parts (Pty) Ltd v Rolag Property Trading (Pty) Ltd, noting that those matters involved circumstances where transfer had not yet been registered.

In addressing the applicant’s allegations of forgery/fraud, the court accepted that the only fraud alleged on the papers was fraud by the agent, Qoko, and not by the purchaser. The court reasoned that such alleged fraud did not vitiate the real agreement between the buyer and seller reflected in the transfer documents, and therefore did not affect the validity of the completed sale-and-transfer in circumstances where transfer had occurred and the purchase price had been paid. In this connection the court referred to the Constitutional Court’s caution in Absa Bank Ltd v Moore that the maxim “fraud unravels all” does not operate as a universal solvent, and that fraud unravels matters within its compass, particularly between victim and perpetrator at the instance of the victim. The court therefore treated the alleged fraud as bearing upon the relationship between the applicant (as victim) and the agent (as alleged perpetrator), rather than undoing the transfer vis-à-vis the purchaser in the circumstances presented.

On the formalities point, the court agreed with the first respondent that section 2(1) does not require witness signatures on the agreement, and therefore the absence of witnesses did not render the agreement invalid for purposes of the dispute.

The court also dealt with the motion-proceedings posture. Because the applicant sought final relief on affidavit, the Plascon-Evans rule applied. The court held that disputes raised were not material to the dispositive issues, and in any event the first respondent’s version was not so implausible or untenable as to be rejected on the papers, consistent with National Director of Public Prosecutions v Zuma.

As to public policy, the court did not accept that the deed of sale should be set aside on that basis. It referred to the principle (noted in Burger and Another v Edenglo Holdings (Pty) Ltd and Others) that contracts freely and voluntarily entered into may be found unenforceable if contrary to public policy, but held that the parties’ intentions were clear and aligned across the deed of sale and transfer documents (same parties and purchase price), and found no indication of contra bonos mores.

Finally, the court rejected reliance on rei vindicatio by the applicant, because the first respondent, as registered owner, was never placed in occupation and had instituted eviction proceedings against the occupants. The court emphasised that, on the facts, the transaction had achieved its lawful purpose by registered transfer coupled with the parties’ real agreement, and that post-registration reversal was not available absent limited circumstances, which the court found were not present here.

Outcome and Relief

The court dismissed the application and refused the relief sought to set aside the transfer, cancel the title deed, and cancel the mortgage bond. The application was dismissed with costs.

The court also recorded that it did not condone the alleged fraudulent conduct attributed to the agent and advised the applicant to lodge a complaint with the Estate Agent’s Board, indicating that a copy of the judgment would be forwarded to the Board; however, the operative order made was the dismissal with costs.

Cases Cited

Du Plessis v Prophitius and Another 2010 (1) SA 49 (SCA)

Wilken v Kohler 1913 AD 135 at 144

Legator McKenna Inc v Shea 2010 (1) SA 35 (SCA)

Burger v Edenglo (6544/18) [2018] ZAWCHC 141 (14 October 2018)

Fraser v Viljoen 2008 (4) SA 106 (SCA)

Rockbreakers and Parts (Pty) Ltd v Rolag Property Trading (Pty) Ltd (498/08) [2009] ZASCA 102; 2010 (2) SA 400 (SCA); [2010] 1 All SA 291 (SCA) (18 September 2009)

Plascon–Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A)

National Director of Public Prosecutions v Zuma [2009] ZASCA 1; 2009 (2) SA 277 (SCA) at para 26

Absa Bank Ltd v Moore 2017 (1) SA 255 (CC) para 39

Burger and Another v Edenglo Holdings (Pty) Ltd and Others (6544/18) [2018] ZAWCHC 141 (14 October 2018)

Legislation Cited

Alienation of Land Act 68 of 1981, sections 2(1) and 28(2)

Deeds Registries Act 47 of 1937, section 45(1)

Rules of Court Cited

Uniform Rules of Court, Rule 28

Held

The court held that, on the common-cause facts, the parties intended a permanent sale at the agreed price, the transfer documents were signed, and ownership passed upon registration in the Deeds Office coupled with a valid real agreement reflected in the transfer documentation. Given that transfer had been registered and the purchase price paid, section 28(2) operated such that any non-compliance with section 2(1) became irrelevant to undoing the transaction in the circumstances, and the alleged fraud by the estate agent did not vitiate the real agreement between buyer and seller where no fraud by the purchaser was alleged. The court therefore refused to set aside the transfer and dismissed the application with costs.

LEGAL PRINCIPLES

A valid transfer of ownership of immovable property requires both registration (delivery) in the Deeds Office and a real agreement between the parties. In determining the existence and content of the real agreement, the court may consider the transfer documentation reflecting the parties’ meeting of minds.

In terms of section 28(2) of the Alienation of Land Act 68 of 1981, an alienation that does not comply with section 2(1) is nevertheless valid ab initio where the alienee has performed in full and transfer has occurred. In such circumstances, once the lawful purpose of the transaction has been achieved through transfer and performance, the underlying non-compliance does not ordinarily provide a basis to reverse the completed transfer.

Allegations of fraud do not automatically unravel an entire transaction in all respects. The effect of the maxim “fraud unravels all” is confined: fraud unravels what falls within its compass, typically as between the victim and perpetrator and at the instance of the victim, and does not necessarily invalidate completed transfer vis-à-vis an innocent party on the facts as framed.

In motion proceedings seeking final relief, factual disputes are approached in accordance with Plascon–Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A), and a respondent’s version will prevail unless it is palpably implausible, far-fetched, or clearly untenable, consistent with National Director of Public Prosecutions v Zuma [2009] ZASCA 1; 2009 (2) SA 277 (SCA).

Section 2(1) of the Alienation of Land Act does not, as treated by the court in this matter, require witness signatures on the agreement, and the absence of witnesses did not in itself affect validity for the purposes addressed.

Zato v Madikande and Others (349/21) [2022] ZAWCHC 276 (9 February 2022)