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[2013] ZASCA 150
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Quartermark Investments (Pty) Ltd v Mkhwanazi and Another (768/2012) [2013] ZASCA 150; [2014] 1 All SA 22 (SCA); 2014 (3) SA 96 (SCA) (1 November 2013)
THE SUPREME COURT
OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case no
:
768/2012
Reportable
In
the matter between:
QUARTERMARK
INVESTMENTS (PTY) LTD
................................
Appellant
and
PINKY MKHWANAZI
..............................................................
First
Respondent
THE REGISTRAR OF
DEEDS, JOHANNESBURG
.........
Second
Respondent
Neutral citation:
Quartermark Investments (Pty) Ltd v Mkhwanazi & another
(768/2012)
[2013] ZASCA 150
(01/11/2013)
Coram:
Maya,
Bosielo, Theron, Pillay and Petse JJA
Heard:
20 August 2013
Delivered:
1 November
2013
Summary:
Contract
– Sale of immovable property – induced by fraud –
null and void – no intention on the part of the
owner to
transfer ownership – ownership does not pass despite
registration – rei vindicatio available even if raised
mero
motu by the court if facts in support thereof appear in the papers –
accords with the principle of legality.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
South Gauteng High Court, Johannesburg (Spilg J sitting as court
of first instance):
The appeal is
dismissed with costs.
________________________________________________________________
JUDGMENT
________________________________________________________________
Theron
JA (Maya, Bosielo, Pillay and Petse
JJA
concurring):
[1] The first
respondent, Ms Pinky Mkhwanazi (Ms Mkhwanazi), instituted application
proceedings against the appellant, Quartermark
Investments (Pty) Ltd
(Quartermark),
a
property investment company, claiming that it had fraudulently
induced her into signing certain sale and lease agreements in respect
of her immovable property. In the South Gauteng High Court, Ms
Mkhwanazi sought and obtained an order setting aside the transfer
of
the property to Quartermark; declaring the sale agreements that led
to the transfer null and void; directing that the second
respondent
transfer the property into her name and other ancillary relief.
1
Quartermark appeals
against the decision of the high court (Spilg J) with the leave of
that court. The second respondent, the Registrar
of Deeds,
Johannesburg, has not taken part in the proceedings and abides the
decision of this court.
[2] In 2004, Ms
Mkhwanazi purchased the immovable property known as Erf 1795
Klipfontein (the property) with a loan obtained from
Nedbank Limited
(Nedbank), which was secured by registering a mortgage bond over the
property. Subsequently, Ms Mkhwanazi fell
into substantial arrears in
respect of her loan obligations to Nedbank as well as her obligations
to another financier in respect
of her motor vehicle. Nedbank
obtained default judgment against Ms Mkhwanazi some time prior to 13
March 2007, when the property
was judicially attached by it.
[3] During 2007, Ms
Mkhwanazi approached Mr George Mthebe (Mr Mthebe), an agent of
Quartermark, for financial assistance. She explained
to Mthebe that
she required a loan in the amount of R30 000. To this end she
signed documents presented to her for signature
by Mr Mthebe. Ms
Mkhwanazi said she did not read the documents prior to signing them
because Mr Mthebe did not give her an opportunity
to do so. On the
assurance given to her by Mr Mthebe, she assumed they related to her
loan application. Shortly after signing the
documents, a portion of
the loan amount, R12 000, was paid into her bank account. This
amount represented the arrears due
in respect of her motor vehicle
instalments. Mr Mthebe advised her that the arrears in respect of the
mortgage bond would be paid
directly to Nedbank and thereafter
Quartermark would continue paying the monthly instalments directly to
Nedbank.
[4] On the
instructions of Mr Mthebe, Ms Mkhwanazi paid monthly instalments of
between R2 500 and R3 000 to Quartermark. She understood
that in
doing so she was repaying the loan she had received from Quartermark.
It was also her understanding that a portion of the
instalments would
be paid by Quartermark to Nedbank in respect of her bond instalments.
She made these monthly payments to Quartermark
for a period of two
years and nine months.
[5] During 2009, Ms
Mkhwanazi received a municipal utility bill in respect of the
property reflecting Quartermark as the account
holder. She contacted
Mr Mthebe who told her not to be concerned as that was done for
‘convenience’ and to create the
impression that
Quartermark was paying the utility bill. In August 2009, she was
visited by a police officer, Inspector Ngobeni
and another male
person identified as Mr Calisto Mutayi (Mr Mutayi). Mr Mutayi
informed her that he used to ‘work with’
Mr Mthebe and
that it was possible that the transactions concluded between herself
and Quartermark were tainted with fraud.
[6] Ms Mkhwanazi’s
subsequent enquiries revealed that the property had been purchased by
Quartermark for R157 000. She
obtained copies of the documents
Mr Mthebe had presented to her for signature. These were a sale of
land agreement, an agreement
of lease and a power of attorney
authorising transfer of the property. In terms of the purported sale
agreement, Ms Mkhwanazi sold
the property to Quartermark for the sum
of R157 000, payable in monthly instalments of R1 570 from
1 May 2007. The instalments
were to be paid directly to Nedbank. It
was stipulated that Quartermark would pay a deposit of R12 398
and would take occupation
and possession of the property on 3 April
2007. In terms of the purported lease agreement, Ms Mkhwanazi leased
the property from
Quartermark for a monthly rental of R 2 500,
escalating by ten per cent annually. The lease was to commence on 3
April 2007 and
continue ‘indefinitely on a month to month basis
until validly terminated by either party’. In terms of the
power of
attorney signed by Ms Mkhwanazi on 12 June 2007, she
purportedly confirmed having sold the property to Quartermark on 3
April 2007
and authorised transfer thereof to Quartermark.
[7] According to Ms
Mkhwanazi, this was the first time she realised the import and
implications of the documents she had signed.
She had been under the
impression that the documents related to her loan application with
Quartermark. According to her, at no
stage was she advised by Mr
Mthebe that the documents related to the sale and lease of the
property.
[8] The appellant’s
answering affidavit in the high court was deposed to by Mr Brett
Provan (Mr Provan), an employee of Quartermark.
It was alleged that
Ms Mkhwanazi had voluntarily and without undue influence entered into
the sale and lease agreements with Quartermark.
It was further
alleged that Ms Mkhwanazi had at the time been in dire financial
trouble, to the extent that the property was about
to be sold in
execution and the purchase of the property by Quartermark and the
leasing of it to her afforded her the opportunity
to remain in
occupation thereof. Quartermark denied that it provided loans or was
a registered credit provider. Quartermark asserted
that the monthly
payments made by Ms Mkhwanazi constituted rental due to it.
[9] Quartermark also
raised the lack of a tender by Ms Mkhwanazi to restore the benefit
she had received under the agreements to
Quartermark as an impediment
to her obtaining relief in the high court. This is stated as follows:
‘
I
further draw the court’s attention to the fact that the
applicant seeks relief for the reversal of the transfer of the
property but she does not even tender repayment of the loan amount
that [Quartermark] paid towards the cancellation of the then
existing
bond over the property.
’
[10] In its
answering affidavit, Quartermark denied that Mr Mutayi had ‘worked
for’ Mr Mthebe and stated that it had
merely instructed him (Mr
Mutayi) ‘to attend the property and to offer’ it to Ms
Mkhwanazi for repurchase. It was common
cause that Quartermark had
offered to sell the property back to Ms Mkhwanazi for R440
000.
[11] Ms Mkhwanazi,
in reply, put up an affidavit deposed to by Mr Mutayi in which he
states that he had been employed by Quartermark
from June 2008 to the
latter part of 2009. He states that he was initially employed ‘to
evict people in the properties that
[Mr Provan] claimed are his’
and later to collect money from certain occupants on behalf of
Quartermark. He goes on to state
that:
‘
We
were always briefed to lie to people about the nature of contracts
they have signed and I know as a fact that people would never
have
signed any of those documents if they knew that they are selling
their properties to Brett Provan.’
[12] The two main
issues on appeal are whether the respondent has made out a case of
fraudulent misrepresentation and whether the
high court was correct
in directing that the property be transferred to Ms Mkhwanazi despite
her failure to tender restoration
of the benefit she received under
the agreements.
[13] I deal first
with the question whether Ms Mkhwanazi has established a case of
fraudulent misrepresentation entitling her to
cancel the two
agreements. It is trite that in motion proceedings affidavits fulfil
the dual role of pleadings and evidence.
2
They serve to define
not only the issues between the parties, but also to place the
essential evidence before the court.
3
They must therefore
contain the factual averments that are sufficient to support the
cause of action or defence sought to be made
out.
4
Furthermore, an
applicant must raise the issues as well as the evidence upon which it
relies to discharge the onus of proof resting
on it, in the founding
affidavit.
5
[14] A
misrepresentation has been described as a false statement of fact,
not law or opinion, made by one party to another before
or at the
time of the contract concerning some matter or circumstance relating
to it.
6
A party seeking to
avoid a contract on the ground of misrepresentation must prove that:
(a) the representation relied upon was made;
(b) it was a
representation as to a fact; (c) the representation was false; (d) it
was material, in the sense that it would have
influenced a reasonable
person to enter into the contract; and (e) it was intended to induce
the person to whom it was made to
enter into the transaction sought
to be avoided.
7
[15] In her founding
affidavit, Ms Mkhwanazi states that Mr Mthebe visited her at home,
discussed her loan application with her
and ‘promised to come
back with documents [for her] to sign [in] order to get the loan’.
She states that:
‘
George
came back a couple of days later and told me to sign. He indicated
that he was in a hurry and he won't explain the process
and documents
again as he had done so on his first visit, rather he will later come
back to give me a copy. He hurriedly made me
sign without affording
me an opportunity to read. I trusted him, probably because I was
desperate and vulnerable. I just couldn't
afford to lose the
opportunity to pay off my arrears as I knew that this was probably my
last chance to save my house and car from
being repossessed.’
The further
averments made by Ms Mkhwanazi are summarised in paras 3-7 above.
These relate to her understanding as to the mechanism
of her loan
agreement with Quartermark, and in particular,
the
terms of repayment of the loan.
[16] Quartermark did
not challenge the allegations of fraud made by Ms Mkhwanazi. Mr
Mthebe, who represented Quartermark in its
negotiations with Ms
Mkhwanazi, did not depose to an affidavit, when the circumstances
clearly called for a response from him.
There is also no explanation
from Quartermark as to why he did not do so. There is therefore no
evidence to gainsay that of Ms
Mkhwanazi regarding the
representations made to her by Mr Mthebe and the circumstances that
led to her signing the two agreements.
[17] There can be no
doubt that the misrepresentations made by Mr Mthebe were material. I
am satisfied that Ms Mkhwanazi was induced
by these fraudulent
misrepresentations to sign the contract documents. It follows that
she was entitled to rescind the contracts.
[18] This brings me
to the next inquiry. What relief is Ms Mkhwanazi entitled to
following her election to rescind the contracts?
She has claimed
retransfer of the property into her name. The high court identified
her remedy as
restitutio
in integrum
8
- a remedy designed
to restore her to the position she was in before she ‘entered
into the contracts’.
The
high court held that Ms Mkhwanazi was entitled to retransfer of the
property despite no reciprocal tender by her to restore
the benefit
she received. I agree with the conclusion reached by the high court,
but for different reasons. The high court’s
reasoning was
flawed. Briefly stated, in terms of the
restitutio
remedy, a court will
not set aside a contract and grant consequential relief for
fraudulent misrepresentation unless the innocent
party is able and
willing to restore what he or she has received under the contract.
9
This rule is founded
on equitable considerations and can been departed from in the
interests of justice.
10
The high court
misapplied the general principles applicable to
restitutio
.
In light of the approach of this court, it is not necessary to deal
further with the reasoning of the high court.
[19] At the hearing
of this appeal, the court raised a ‘new issue’ with
counsel, namely, whether Ms Mkhwanazi’s
claim ought to have
been based on the rei vindication. It does not appear that this issue
was dealt with by the parties in the
high court. It certainly was not
addressed in the judgment of the high court. After the hearing of the
matter, the parties were
invited to make further submissions on
whether the claim was vindicatory in nature and whether this ‘new
issue’ could
be raised at this stage of the proceedings.
[20] In considering
the role of the court, it is appropriate to have regard to the
well-known dictum of Curlewis JA in
R v Hepworth
11
to the effect that a criminal trial is not a game and a judge’s
position is not merely that of an umpire to ensure that the
rules of
the game are observed by both sides. The learned judge added that a
‘judge is an administrator of justice’
who has to see
that justice is done. While these remarks were made in the context of
a criminal trial they are equally applicable
in civil proceedings and
in my view, accord with the principle of legality.
12
The essential function of an appeal court is to determine whether the
court below came to a correct conclusion.
13
For this reason the raising of a new point of law on appeal is not
precluded, provided the point is covered by the pleadings and
its
consideration on appeal involves no unfairness to the party against
whom it is directed. In fact, in such a situation the appeal
court is
bound to deal with it as to ignore it may ‘amount to the
confirmation by it of a decision clearly wrong’,
14
and not performing its essential function. This in turn would
infringe upon the principle of legality which was explained by Ngcobo
J in
CUSA v Tao Ying Metal Industries
15
as follows:
‘
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.’
[21] The main
argument raised on behalf of Quartermark,
in
the further submissions, as to why Ms Mkhwanazi could not rely on the
rei vindicatio was that she ‘at no point contended
that she
continued to be the owner of the property’ and had ‘approached
the court for declaratory relief, the effect
of which would be to
restore her ownership of the property’.
This
argument cannot be sustained. The undisputed facts disclosed by Ms
Mkhwanazi lead to the legal conclusion that she did not
lose
ownership of the property. This is discussed in greater detail below.
Ms Mkhwanazi’s failure to record this legal position
in her
affidavits, or the failure of her legal representatives to properly
formulate her claim both in the high court and in this
court does not
preclude this court from considering the correct legal principles.
Lewis JA,
in
the recent judgment of
Nedbank
Limited v Mendelow NO & another
,
16
confirmed that the
court could raise matters mero motu ‘where the facts to which
those principles apply are squarely raised
in the papers before the
court (and that were before the high court)’, and that ‘a
court should not allow the continuation
of a wrong because the legal
representatives of the parties did not appreciate the correct legal
principles’
.
17
[22] The elements of
the rei vindicatio are set out in the papers and are not disputed.
18
In her affidavit, Ms
Mkhwanazi makes the following averments in this regard:
‘
8.24
I wish to state that I cringed when I discovered that my property was
now owned by [Quartermark]. I was told that [it] “bought”
the property from me for about R157 000. …
8.25 I requested
Nedbank to investigate how my property was sold without my
involvement in the whole process.
…
9.1 I wish to state
that I had no reason whatsoever to sell the property that I occupy;
the whole thing was done fraudulently and
by underhand tactics.’
[23] It is clear
from Ms Mkhwanazi’s evidence, which stands uncontradicted, that
she had no intention to transfer ownership
of the property to
Quartermark. She was fraudulently induced to sign the sale agreement
as well as the documents authorising transfer
of the property to
Quartermark.
[24] This court, in
Legator
McKenna Inc & another v Shea & others
,
19
confirmed that the
abstract theory of transfer applies to movable as well as immovable
property. According to that theory the validity
of the transfer of
ownership is not dependent upon the validity of the underlying
transaction.
20
However, the passing
of ownership only takes place when there has been delivery effected
by registration of transfer coupled with
what Brand JA, writing for
the court in
Legator
McKenna
,
referred to as a ‘real agreement’. The learned judge
explained that ‘the essential elements of the real agreement
are an intention on the part of the transferor to transfer ownership
and the intention of the transferee to become the owner of
the
property’.
21
[25] As has already
been mentioned, a valid underlying agreement to pass ownership, such
as in this instance, a contract of sale,
is not required. However,
where such underlying transaction is tainted by fraud, ownership will
not pass despite registration of
transfer.
22
The high court
correctly found that the contract of sale between Ms Mkhwanazi and
Quartermark was tainted by fraud. It follows from
this and the fact
that Ms Mkhwanazi had no intention to transfer ownership to
Quartermark that the purported registration of transfer
to
Quartermark has no effect and Ms Mkhwanazi remained the owner of the
property.
[26] A party that
proceeds by way of the rei vindicatio need not tender restitution of
what has been received pursuant to a contract
sought to be set aside,
because the cause of action is complete without such tender.
Restoration of the
benefit received may be the subject of a separate claim for unjust
enrichment.
23
In
Rhoode
v De Kock & another
,
24
Cloete JA contrasted
this with a situation where the rei vindicatio was not available. In
the latter instance, the party is obliged
to sue for restitution
and
tender restitution
of the benefit received under the impugned contract.
25
[27] For these
reasons Ms Mkhwanazi is entitled to vindicatory relief – the
reregistration of the property in her name and
a declaration that the
agreements she entered into with Quartermark are null and void.
26
This was the relief
granted by the high court. As was stated by the high court,
Quartermark, if so advised, may pursue a claim against
Ms Mkhwanazi
for the return of any benefit she may have received under the
agreements.
[28] In the result,
the appeal is dismissed with costs.
______________
L V THERON
JUDGE OF APPEAL
APPEARANCES
For Appellant: AW
Pullinger
Instructed by:
Vermaak &
Partners Inc, Johannesburg
Claude Reid Inc,
Bloemfontein
For First
Respondent: N Mkhize
Instructed by:
Mkhize Attorneys,
Pretoria
T Hadebe Attorneys,
Bloemfontein
1
The
judgment of the high court is reported as
Mkhwanazi v Quarterback
Investment (Pty) Ltd & another
2013 (2) SA 549
(GSJ). The
correct citation of the appellant is Quartermark Investments (Pty)
Ltd.
2
Transnet
Ltd v Rubenstein
2006 (1) SA 591
(SCA) para 28.
3
Swissborough
Diamond Mines
(
Pty
)
Ltd & others v Government of
the Republic of South Africa & others
1999 (2) SA 279
(T) at 323F-G;
MEC for Health, Gauteng v 3P Consulting (Pty) Ltd
2012 (2) SA 542
(SCA) para 28.
4
Lecuona
v Property Emporium CC
[2010] JOL 25266
(GSJ) para 4;
Die
Dros
(
Pty
)
Ltd & another v Telefon Beverages CC &
others
2003 (4) SA 207 (C).
5
Swissborough
Diamond Mines
(
Pty
)
Ltd
at 323J-324A.
6
Dale
Hutchison (ed), Chris-James Pretorius (ed), Jacques du Plessis, Sieg
Eiselen, Tomas Floyd, Luanda Hawthorne, Birgit Kuschke,
Catherine
Maxwell Tjakie Naudé and Elizabeth de Stadler
The Law of
Contract in South Africa
2 ed (2012) at 116.
7
Novick
& another v Comair Holdings Ltd & others
1979 (2) SA 116
(W).
8
Para
35.
9
Van
Schalkwyk v Griesel
1948 (1) SA 460
(A) at 470-471;
Feinstein
v Niggli & another
1981 (2) SA 684
(A) at 700G-H;
North
West Provincial Government & another v Tswaing Consulting CC &
others
2007 (4) SA 452
(SCA) para 17.
10
Harper
v Webster
1956 (2) SA 495
(FC) at 500A-B;
Feinstein v Niggli
at 700H-701A; S
ithole v Ingwe Collieries & another
(2005) 26 ILJ 2136 (T) para 19;
North West Provincial Government
& another v Tswaing Consulting CC & others
2007 (4) SA
452
(SCA) para 17.
11
R
v Hepworth
1928 AD 265
at 277.
12
Greenfield
Manufacturers (Temba) (Pty) Ltd v Royton Electrical Engineering
(Pty) Ltd
1976 (2) SA 565
(A) at 70E-F;
Sager v Smith
2001
(3) SA 1004
(SCA) para 21;
Take and Save Trading CC & others
v Standard Bank of SA Ltd
2004 (4) SA 1
(SCA) para 3.
13
Cole
v Government of the Union of S.A.
1910 AD 263
at 272.
14
Ibid
at 273. See also in
Paddock Motors
(
Pty
)
Ltd v
Igesund
1976 (3) SA 16 (A) and
Van Rensburg v
Van Rensburg en andere
1963 (1) SA 505
(A) at 510A.
15
CUSA
v Tao Ying Metal Industries
[2008] ZACC 15
;
2009 (2) SA 204
(CC) para 68.
16
Nedbank
Limited v Mendelow NO & another
[2013] ZASCA 98
(SCA) (5
September 2013).
17
Para
17. See also
Thompson v South African Broadcasting Corporation
[2000] ZASCA 76
;
2001 (3) SA 746
para 7;
Cuninghame & another v First
Ready Development 249 (Association Incorporated under Section 21)
2010 (5) SA 325
(SCA) paras 29 and 30.
18
Paras
3-7 and 15 above.
19
Legator
McKenna Inc & another v Shea & others
2010 (1) SA 35
(SCA) paras 20-22.
20
Ibid
para 20.
21
Ibid
para 22.
22
Preller
& others v Jordaan
1956 (1) SA 483
(A) at 496;
Meintjes
NO v Coetzer
2010 (5) SA 186
(SCA);
Gainsford & others
NNO v Tiffski Property Investments (Pty) Ltd & others
2012
(3) SA 35
(SCA).
23
Rhoode
v De Kock & another
2013 (3) SA 123
(SCA) para 24.
24
Ibid.
25
The
high court dealt with the matter on the basis of this latter
scenario.
26
See
Meintjes NO v Coetzer
(supra) and
Nedbank Limited v
Mendelow NO
(supra) where similar relief was granted.