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[2013] ZASCA 98
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Nedbank Ltd v Mendelow NO and Another (686/12) [2013] ZASCA 98; 2013 (6) SA 130 (SCA) (5 September 2013)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
REPORTABLE
Case No: 686/12
In the matter between:
NEDBANK LIMITED
....................................................................................
APPELLANT
and
RONALD MENDELOW NO
..........................................................
FIRST
RESPONDENT
LAZARUS LEDWABA NO
......................................................
SECOND
RESPONDENT
Neutral
citation:
Nedbank Limited v Mendelow NO
(686/12)
[2013]
ZASCA 98
(5 September 2013)
Coram:
LEWIS,
MAYA, MALAN AND SHONGWE JJA AND ZONDI AJA
Heard:
16
August 2013
Delivered: 5 September
2013
Summary:
Where the
Master of the High Court and the Registrar of Deeds perform clerical
acts that result in the registration of transfer
of immovable
property pursuant to a fraud, and there is no intention on the part
of a beneficiary of a deceased estate to transfer
ownership,
registration does not effect a transfer of ownership; the person in
whose name the property is registered is not the
owner and cannot
grant a valid mortgage bond over the property. Purely clerical acts
do not amount to administrative action reviewable
under the
Promotion
of Administrative Justice Act 3 of 2000
.
ORDER
On appeal from
North
Gauteng High Court, Pretoria (Baqwa AJ sitting as court of first
instance):
The appeal is dismissed
with costs including those of two counsel where so employed.
JUDGMENT
Lewis JA
(
Maya,
Malan and Shongwe JJA and Zondi AJA concurring
):
[1] Mrs Emily Valente
owned immovable property in Gauteng. She executed and signed a will
in 1994, leaving her estate in equal shares
to her two sons, Evan
Valente and Riccardo Valente, the eighth respondent in the high
court. At that stage the property formed
part of the estate. Some
three years later she signed a codicil, bequeathing money to each of
her grandchildren.
[2] On 23 January 2001,
the property was sold to a company, U Valente Africa (Pty) Ltd (the
company), in liquidation at the time
of the proceedings before the
high court. Mrs Valente’s signature on the deed of sale was
forged by Riccardo. A week later
Mrs Valente died. An attorney (the
seventh respondent a quo) and Riccardo were appointed as co-executors
of the will and as administrators
of the estate. Although nominated
as an executor and administrator Evan declined the appointments since
he was living in the United
Kingdom at the time. The attorney
resigned as an executor of the estate in May 2007.
[3] At the time of Mrs
Valente’s death her estate comprised shares in the company, the
property, cash and miscellaneous movable
items. The directors of the
company before her death were Mrs Valente, Evan and Riccardo. The
respondents, Mr R Mendelow and Mr
L Ledwaba NNO (to whom I shall
refer as the executors), in their capacities as the joint executors
of Mrs Valente’s deceased
estate (appointed in 2009), applied
to the North Gauteng High Court, Pretoria for an order in effect
setting aside a purported
transfer of the property to the company,
and the registration of a bond over the property in favour of
Imperial Bank Ltd, registered
in October 2008. That bank was acquired
by the appellant, Nedbank Ltd (Nedbank), in 2010.
[4] In their application
the executors alleged that the sale and transfer of the property to
the company, and the registration of
the bond in favour of Nedbank,
had been vitiated by fraud: Riccardo had forged Mrs Valente’s
signature on the deed of sale
and forged Evan’s signature on a
document entitled ‘consent to sale’. Riccardo had also
had Evan removed as a
director of the company and obtained a mortgage
bond over the property first from BoE Bank Ltd (cancelled when the
subsequent bond
was registered) against a loan of some R2 million and
later the mortgage bond in favour of Nedbank, the cancellation of
which the
executors sought. It should be noted that the bond in
question (granted as security for a loan advanced to the company of
R6 million)
was registered over the property shortly before the
provisional winding-up order was granted. I shall return to the
allegations
of fraud and forgery later in the judgment, but should
note at this point that in my view they are central to and decisive
of the
dispute.
[5] The basis of the
application was initially s 341(2) of the Companies Act 61 of 1973
and
s 42(2)
of the
Administration of Estates Act 66 of 1965
,
the executors arguing that the company had mortgaged its property
when in the process of being wound up and unable to pay its
debts,
and that the provisions of
s 42(2)
had not been complied with since
the Master had signed a certificate permitting the transfer of the
property as a result of the
fraudulent misrepresentation by Riccardo
that the deed of sale of the property was genuine.
[6] Those causes of
action were transformed at the hearing in the high court to a review
in terms of the Promotion of Administrative
Justice Act 3 of 2000
(PAJA). The high court (Baqwa AJ) characterized the relief sought as
follows: the executors sought to review
and set aside the certificate
issued by the Master in terms of
s 42(2)
of the
Administration of
Estates Act since
his action had been induced by the fraud of
Riccardo; the property should be returned ‘at administrative
law’; and
the bond should be cancelled. The high court ordered
that the property should be returned to the deceased estate, not by
virtue
of a condictio or rei vindicatio, since the former remedy was
not pursued at the hearing and the latter was mistakenly considered
by the legal representatives of the executors to be unavailable to
the estate, but by virtue of ‘administrative law’.
The
‘decision’ of the Master in signing a certificate
authorizing the transfer and (by implication) the ensuing act
of the
Registrar of Deeds in registering the property in the name of the
company constituted ‘administrative action’
reviewable
under the PAJA. I shall deal with this finding in due course.
[7] As the high court
pointed out, Nedbank did not dispute that Riccardo’s conduct
was fraudulent. It raised various other
defences, principally that s
341(2) of the Companies Act did not entitle the executors to set
aside the bond, and that the executors
did not have locus standi. It
argued that, in the event of those contentions failing, the court was
not required to set aside the
bond as being void since the only
person who would derive any benefit from the relief sought was Evan
who, despite being aware
of the sale of the property to the company,
and the registration of the bond, had taken no action to set the
transactions aside.
He was content, Nedbank argued, to ignore the
fraud and asked only for equal representation on the board of the
company. He had
known of the fraudulent transactions at least since
July 2007, and had applied for the winding-up of the company in 2008.
[8] In December 2008 the
company was placed under provisional winding-up at the instance of
Evan. The winding-up order was made
final in April 2009. The
application for winding-up was premised on s 344(h) of the Companies
Act: that it would be just and equitable
to wind up the company.
[9] The grounds for the
review, said the high court, were Riccardo’s forgeries of the
signature of his mother (on the deed
of sale of the property) and of
Evan on the consent to sale: the Master had been fraudulently induced
to sign a certificate permitting
the transfer of the property to the
company. The Registrar of Deeds had registered the bond in favour of
Imperial Bank as a result
of Riccardo’s fraudulent scheme. The
Master’s certificate was thus set aside and the Registrar was
ordered to transfer
the property to the estate and to cancel the
bond. A number of ancillary orders were also made by the high court.
Nedbank, the
only respondent to oppose the application and the only
appellant before this court, appeals against the decision with the
leave
of the high court.
[10] Nedbank argued on
appeal that the high court misconceived the relief granted: the PAJA
does not make provision for vindicatory
relief. A prior question, I
would have thought, is whether the PAJA is applicable at all and I
shall deal with that briefly. But
first I shall deal with the
principal issue which seems to me to form the nub of the relief that
the executors have asked for.
[11] It is common cause
that Riccardo forged his mother’s signature on the deed of sale
of the property to the company and
that he forged his brother Evan’s
signature on a document entitled ‘consent to sale’ that
was used to induce
the Master of the high court to sign a certificate
that no objection to the sale was made by any beneficiary. This was
necessary
to enable the Registrar of Deeds to effect the transfer of
the property to the company.
[12] It is trite that
where registration of a transfer of immovable property is effected
pursuant to fraud or a forged document
ownership of the property does
not pass to the person in whose name the property is registered after
the purported transfer. Our
system of deeds registration is negative:
it does not guarantee the title that appears in the deeds register.
Registration is ‘intended
to protect the real rights of those
persons in whose names such rights are registered in the Deeds
Office’.
1
And it is a source of
information about those rights.
2
But registration does not
guarantee title, and if it is effected as a result of a forged power
of attorney or of fraud, then the
right apparently created is no
right at all.
[13] This court has
recently reaffirmed the principle that where there is no real
intention to transfer ownership on the part of
the owner or one of
the owners, then a purported registration of transfer (and likewise
the registration of any other real right,
such as a mortgage bond)
has no effect. In
Legator
McKenna Inc v Shea
3
Brand JA confirmed,
first, that the abstract theory of transfer of ownership applies to
immovable property, and, second, that if
there is any defect in what
he termed the ‘real agreement’ – that is, the
intention on the part of the transferor
and the transferee to
transfer and to acquire ownership of a thing respectively –
then ownership will not pass despite registration.
Thus while a valid
underlying agreement to pass ownership, such as a sale or donation,
is not required, there must nonetheless
be a genuine intention to
transfer ownership. This principle was unanimously approved in
Commissioner
of Customs and Excise v Randles, Brothers and Hudson Ltd
4
and has been followed
consistently since then.
[14] However, if the
underlying agreement is tainted by fraud or obtained by some other
means that vitiates consent (such as duress
or undue influence) then
ownership does not pass:
Preller
v Jordaan
.
5
That principle was
applied recently by this court in
Meintjies
NO v Coetzer
6
and
Gainsford
& others NNO v Tiffski Property Investments (Pty) Ltd.
7
[15] It is clear,
therefore, that when Riccardo forged his mother’s signature on
the deed of sale of the property and the
signature by a beneficiary
of her will, Evan, on the consent to the sale, Evan did not intend to
transfer ownership of the property
and that the power of attorney
signed by the Master to permit the registration of transfer was
vitiated by the fraud and the forgery.
Ownership did not pass to the
company. And accordingly the bonds registered first in favour of BoE
and then Imperial Bank were
not valid: the company was not the owner
of the property mortgaged. Nedbank cannot resist the claim of the
executors for cancellation
of the registration of the bond. And the
executors are entitled to reregistration of the property in the name
of the deceased estate.
[16] Nedbank nonetheless
argued that the executors had not based their claim on ownership of
the property: they had not instituted
the rei vindicatio. And Evan,
it contended, complained of the fraud and forgery only when precluded
from having any say in the
company. The elements of a rei vindicatio
had not been pleaded or proved. The executors, Nedbank argued, could
not deviate from
the case which they had brought before the high
court, and with which they had persisted before the hearing of the
appeal when
the principles relating to transfer were brought to their
attention by this court.
[17] Nedbank argued that
the executors were not entitled to rely on principles raised by the
court mero motu. The argument ignores
the authorities in this court
that state that where the facts to which those principles apply are
squarely raised in the papers
before the court (and that were before
the high court) a court should not allow the continuation of a wrong
because the legal representatives
of the parties did not appreciate
the correct legal principles. That proposition was reiterated by
Brand JA in
Cuninghame
v First Ready Development 249 (Association Incorporated under section
21),
8
relying on
Thompson
v South African Broadcasting Corporation
9
where Harms JA said:
‘
The function
of oral argument, especially in a Court of appeal, is supplementary
to the written argument. If a party chooses not
to raise an obvious
issue in his heads, he does so at his peril. The Court is entitled to
base its judgment and to make findings
in relation to any matter
flowing fairly from the record, the judgment, the heads of argument
or the oral argument itself. If the
parties have to be forewarned of
each and every finding, the Court will not be able to function.’
[18] This principle was
expressed as follows by the Constitutional Court in
CUSA
v Tao Ying Metal Industries:
10
‘
Where a
point of law is apparent on the papers, but the common approach of
the parties proceeds on a wrong perception of what the
law is, a
court is not only entitled, but is in fact also obliged,
mero
motu,
to
raise the point of law and require the parties to deal therewith.
Otherwise the result would be a decision premised on an incorrect
application of the law. That would infringe the principle of
legality.’
[19] The elements of the
rei vindicatio appear clearly in the papers and are not disputed. The
executors alleged that the estate
acquired ownership of the property
on the death of Mrs Valente; that registration in the name of the
company was procured through
the fraud and forgery of Riccardo, and
that it was entitled to the return (the reregistration in the name of
the estate) of the
property. No more needed to have been pleaded.
[20] Nedbank argued
nonetheless that the application was a sham: that the executors were
the alter ego of Evan who should have instituted
action himself to
set aside the various transactions. Evan, it contended, had been
aware of the fraud and forgery committed by
his brother and had been
content to ignore it for several years. That he sought to liquidate
the company was not any indication
that he wished to claim return of
his share of the property. But Nedbank has not shown that the
executors are mala fide or that
they wish to condone the unlawful
conduct of Riccardo.
[21] Nor can this court
condone the fraud in the exercise of some discretion that Nedbank
urges that we have. That is clear from
the dictum of the
Constitutional Court set out above, as well as from this court’s
decision in
Meintjies
NO v Coetzer
11
where Shongwe JA said
that where the ‘real agreement’ was falsified and the
defendants effectively asked the court to
countenance the fraud (by
recognizing a waiver of the right to rely on it) such conduct would
be contrary to public policy. He
said, referring to the request to
recognize the waiver, that the parties were asking this court ‘to
give life to an illegal
and fraudulently obtained right’, which
would be contrary to the values enshrined in the Constitution and to
public policy.
[22] I conclude therefore
that the executors must succeed in their claim for the registration
of the property in the name of the
deceased estate and for the
cancellation of the bond in favour of Nedbank. There is thus no need
to deal with the other defences
raised by Nedbank. But I do wish to
say something more about the finding of the high court that the
conduct of the Master and of
the Registrar of Deeds amounted to
administrative action which was subject to review.
[23] The executors argued
in the high court that the conduct of the Master and of the Registrar
of Deeds amounted to administrative
action reviewable under the PAJA.
And the basis of the orders granted by the high court was indeed that
because the action of the
state officials was induced by the fraud of
Riccardo, the Master’s certificate, the transfer of the
property to the company
and the registration of the bond in favour of
Nedbank should be set aside by virtue of sections 6 and 7 of the
PAJA.
[24] As I said in
Kuzwayo
v Estate Late Masilela
,
12
not ‘every act of
an official amounts to administrative action that is reviewable under
PAJA or otherwise’. I found
there that the act of signing a
declaration by a Director-General of the Department of Housing to the
effect that a site permit
be converted into the right of ownership,
and the signing of the deed of transfer giving effect to that
declaration, were simply
clerical acts.
[25] Administrative
action entails a decision, or a failure to make a decision, by a
functionary, and which has a direct legal effect
on an individual.
13
A decision must entail
some form of choice or evaluation. Thus while both the Master and the
Registrar of Deeds may perform administrative
acts in the course of
their statutory duties, where they have no decision-making function
but perform acts that are purely clerical
and which they are required
to do in terms of the statute that so empowers them, they are not
performing administrative acts within
the definition of the PAJA or
even under the common law. As Nugent JA said in
Grey’s
Marine
‘
[w]hether
particular conduct constitutes administrative action depends
primarily on the nature of the power that is being exercised
rather
than upon the identity of the person who does so . . .’.
14
[26] A distinction must
thus be drawn between discretionary powers and mechanical powers.
Professor Hoexter points out
15
that a mechanical power
involves no choice on the part of the holder of the power. A
discretionary power, on the other hand, does
impose such a choice.
Whether the Master or the Registrar exercises a mechanical power or
one that is discretionary involves an
enquiry as to what he or she is
called upon to do. There may be situations where the functionary is
required to make genuine decisions
whether to perform a duty. But
where the requirements for registration have been met no choice is
given to the Registrar.
Section 3(1)
of the
Deeds Registries Act 47
of 1937
imposes a duty on a Registrar of Deeds to, inter alia,
‘
(
d
)
attest or execute and register deeds of transfer of land, and execute
and register certificates of title to land;
. . .
(
r
)
register any real right, not specifically referred to in this
subsection, and any cession, modification or extinction of any such
registered right; . . .’
[27] In
The
Cape of Good Hope Bank v Fischer
16
De Villiers CJ said:
‘
The
Registrar of Deeds in this Colony is entrusted with the formal duties
formerly performed by judicial officers, but
his
chief duties are of a ministerial nature, and consist in registering
deeds and bonds duly passed before him
. . .’
(My emphasis.)
The Chief Justice also
stated that if a properly executed mortgage bond were presented to
the Registrar for registration ‘it
is his duty to register it
in the manner required by law’.
17
[28] It may be that the
Master and the Registrar are called upon from time to time to make
evaluations of the documents presented
to them and to exercise some
judgement or choice.
18
In that event their
functions are quasi-judicial and have been so regarded by our courts
over decades. In
Jones:
Conveyancing in South Africa
H S
Nel states:
‘
Although . .
. the office of registrar of deeds is descended from that of a
judge’s . . . today he is not considered a judicial
officer.
His duties have been described as semi-judicial. Nevertheless,
although a registrar naturally dare not usurp the functions
of the
courts in determining the rights and obligations of parties in
dispute on registered matters, on matters about to be registered
it
seems to be a different story, for there is no doubt that his
opinions carry a good deal of weight and in the execution of his
duties it is no exaggeration to say that he and his examiners are
called upon . . . to solve exactly similar legal problems as
occupy
counsel and judges for hours if not days on end . . . A registrar is
not an ordinary public servant performing statutory
duties.’
19
Accordingly ‘[l]ike
a judicial officer, a registrar of deeds must weigh the evidence
submitted to him and determine whether
to allow registration or to
force the parties to the court . . .’
20
If that occurs the
conduct of the Registrar would be quasi-judicial and no doubt
reviewable under the PAJA. But we are not concerned
in this matter
with any decision that has required the assessment of evidence or the
exercise of a discretion or the making of
a choice.
21
[29] In my view, the
executors were entitled to vindicatory relief – the
reregistration of the property in the name of the
estate – and
to an order cancelling the bond in favour of Nedbank. The high court
granted that and ancillary relief and the
appeal must accordingly
fail.
[30] The appeal is
dismissed with costs including those of two counsel where so
employed.
_______________
C H Lewis
Judge of Appeal
APPEARANCES:
For the Appellant: J G
Wasserman SC
Instructed by:
Victor & Partners c/o
Petzer Du Toit Ramulifho, Pretoria
Symington & De Kok,
Bloemfontein
For the Respondent: A O
Cook SC (with him M Seape)
Instructed by:
G B Liebmann Behrmann &
Co, Edelstein
Bosman Inc Pretoria
Lovius Block,
Bloemfontein
1
Frye’s
(Pty) Ltd v Ries
1957 (3)
SA 575
(A) at 583E-F.
2
Ibid.
3
Legator
McKenna Inc v Shea
2010 (1) SA 35
(SCA) paras 21 and 22.
4
Commissioner
of Customs and Excise v Randles, Brothers and Hudson Ltd
1941 AD
369.
5
Preller
v
Jordaan 1956 (1) 483 (A) at 496. See P J Badenhorst, Juanita M
Pienaar and Hanri Mostert
Silberberg and Schoeman’s The Law
of Property
5 ed (2006) pp 222-224 and 230-232.
6
Meintjies
NO v Coetzer
2010 (5) SA 186
(SCA) para 9.
7
Gainsford
& others NNO v Tiffski Property Investments (Pty) Ltd
2012
(3) SA 35
(SCA) paras 38 and 39. See also
Knysna Hotel CC v
Coetzee NO
[1997] ZASCA 114
;
1998 (2) SA 743
(SCA) at 753A-I.
8
Cuninghame
v First Ready Development 249 (Association Incorporated under
section 21)
2010
(5) SA 325 (SCA) paras 29 and 30.
9
Thompson
v South African Broadcasting Corporation
[2000] ZASCA 76
;
2001 (3) SA 746
(SCA)
para 7.
10
CUSA
v Tao Ying Metal Industries
[2008] ZACC 15
;
2009 (2) SA 204
(CC) para 68.
11
Meintjies
NO v Coetzer
2010 (5) SA 186
(SCA) para 15.
12
Kuzwayo
v Estate Late Masilela
[2011] 2 All SA 599
(SCA) para 28. See
also
Seale v Van Rooyen NO: Provincial Government, North West
Province v Van Rooyen
2008 (4) SA 43
(SCA) para 12.
13
See
the definition in
s 1
of the PAJA: a decision made by an organ of
state under an empowering provision of a statute that ‘adversely
affects the
rights of any person and which has a direct, external
legal effect’. In
Grey’s Marine Hout Bay (Pty) Ltd v
Minister of Public Works
[2005] ZASCA 43
;
2005 (6) SA 313
(SCA) para 23 Nugent JA
suggested that ‘adversely affects’ means ‘has the
capacity to affect legal rights’.
14
Para
24. See also
President of the Republic of South Africa v South
African Rugby Football Union
2000 (2) SA 1
(CC) para 141.
15
C
Hoexter
Administrative Law in South Africa
2 ed (2012) pp
46-48.
16
The
Cape of Good Hope Bank v Fischer
(1885-1886) 4 SC 368
at 375.
17
At
375. See also
Boltman v Kotze Community Trust concerning Farm
Quisberg 805 District of Calvinia
[1999] JOL 5230
(LCC) para 29.
18
See
Oribel Properties 13 (Pty) Ltd v Blue Dot Properties 271 (Pty)
Ltd
[2009] JOL 24392:
[2010] 4 All SA 282
(SCA). The issue was
not considered by the court on appeal.
19
H
S Nel
Jones: Conveyancing in South Africa
4 ed (1991) p 13.
20
Ibid
p 14. See also P J Badenhorst, Juanita M Pienaar and Hanri Mostert
Silberberg and Schoeman’s The Law of Property
5 ed
(2006) 215-216
.
21
Section
95
of the
Administration of Estates Act provides
for the ‘review’
of, or appeal against, any appointment or decision made by the
Master. The signature of the certificate
by the Master was thus
reviewable under this Act, and the ground for review would have been
the fraud of Riccardo. But that does
not make the signature
‘administrative action’ in terms of the PAJA.