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[2011] ZASCA 19
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Bonheur 76 General Trading (Pty) Ltd and Others v Caribbean Estates (Pty) Ltd and Others (116/10) [2011] ZASCA 19 (17 March 2011)
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THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
No precedential significance
Case no
:
116/10
In the
matter between:
BONHEUR
76 GENERAL TRADING (PTY) LTD
................................................
First
Appellant
THE
MORNINGSIDE WEDGE OFFICE PARK OWNERS
ASSOCIATION
(ASSOCIATION INCORPORATED
UNDER
SECTION 21)
.....................................................................................
Second
Appellant
LESLIE
WILLIAM LOB
......................................................................................
.Third
Appellant
and
CARIBBEAN ESTATES (PTY) LTD
................................................................
First
Respondent
WEDGEPORT (PTY) LTD
..........................................................................
Second
Respondent
MARTIN ETTIN
...............................................................................................
Third
Respondent
DEREK GREENBERG
.................................................................................
Fourth
Respondent
GREGORY FRANCIS PORTEOUS
.................................................................
Fifth
Respondent
DOUGLAS WILLIAM PORTEOUS
.................................................................
Sixth
Respondent
REGISTRAR OF DEEDS, PRETORIA
......................................................
Seventh
Respondent
Neutral citation:
Bonheur v Caribbean
(116/10)
[2011] ZASCA 19
(17 March 2011)
Coram:
HARMS DP, LEWIS, PONNAN, MALAN and THERON JJA
Heard:
8 March 2011
Delivered 17 March 2011
Summary: Right of pre-emption to share in immovable property not
created through unsigned agreement: party with no right to share
cannot prevent its alienation.
_________________________________________________________________________
ORDER
_________________________________________________________________________
On appeal from:
South Gauteng High Court
(Johannesburg) (Van Eeden AJ sitting as court of first instance).
The appeal is dismissed with costs including those of
two counsel.
________________________________________________________________________
JUDGMENT
________________________________________________________________________
LEWIS JA (HARMS DP and PONNAN, MALAN and THERON JJA
concurring)
[1] This dispute concerns an undivided share in
residential property in Morningside, Johannesburg. The property is
adjacent to an
office park and a shopping centre developed by the
first appellant, Bonheur 76 General Trading (Pty) Ltd (Bonheur), and
governed
by the second appellant, Morningside Wedge Office Park
Owners Association (the Association), of which all the owners of the
office
park and the centre are members. The third appellant is Mr
Leslie Lob, who is also a director of Bonheur and who deposed to the
founding affidavit.
[2] The appellants sought an order in
the South Gauteng High Court setting aside the sale by the first
respondent, Caribbean Estates
(Pty) Ltd (Caribbean), to the second
respondent, Wedgeport (Pty) Ltd (Wedgeport), of its 46 per cent
undivided share in the property;
setting aside a mortgage bond
registered over that share of the property in favour of the third and
fourth respondents, Mr Martin
Ettin and Mr Derek Greenberg, and
interdicting the respondents (the fifth and sixth respondents being
respectively Mr Gregory Porteous
and Mr Douglas Porteous, members of
Caribbean and authorized to represent it) from alienating the share
other than in terms of
various contracts, and the memorandum and
articles of association of the Association, to all of which the
appellants asserted the
respondents were party. The seventh
respondent is the Registrar of Deeds, who played no role in the
litigation. Van Eeden AJ dismissed
the application with costs on the
attorney and client scale
1
but granted leave to appeal to this
court.
[3] The property was created on 16 November 2005 by
virtue of a subdivision. A 46 per cent share was acquired by
Riverbend Trade
and Investment 4 (Pty) Ltd (Riverbend) and a 54 per
cent share was acquired by Vinella Investments (Pty) Ltd (Vinella).
Shortly
thereafter, in January 2006, Riverbend sold its 46 per cent
share to Caribbean and Vinella sold its 54 per cent share to Bonheur.
It is the share acquired by Caribbean that is in dispute. I shall
refer to it for convenience as the Caribbean share.
[4] On 25 September 2008 Caribbean sold its share to
Wedgeport. Transfer was effected on 1 December 2008 and on the same
day a mortgage
bond was registered over the Caribbean share in favour
of Ettin and Greenberg as security for a loan made to Wedgeport.
[5] The grounds on which the appellants initially
claimed relief were that Bonheur had what they termed a ‘de
facto’
right of pre-emption in respect of the Caribbean share,
and that Wedgeport was precluded from buying or taking transfer of
the
share without first becoming a member of the Association. The
second ground was founded in the supposed principle that co-owners
of
undivided shares in property cannot alienate their shares without the
approval of other co-owners. This ground was extended
during the
hearing of the appeal to encompass an oral agreement of partnership
between Bonheur and Caribbean which precluded the
sale or mortgaging
of the Caribbean share without the consent of Bonheur. And in its
reply to Caribbean’s founding affidavit
Bonheur had raised a
further ground: that the sale by Caribbean to Wedgeport, a loan to it
by Ettin and Greenberg, and a mortgage
securing payment of the loan,
were ‘sham transactions’.
The right of pre-emption
[6] The ‘de facto’ right of first refusal
was alleged to arise from three sources: the articles and memorandum
of association
of the Association; a co-owners’ agreement and a
joint venture development agreement (the JVD agreement). The high
court
found that there was no such right. Neither Bonheur nor
Caribbean was a member of the Association and had not been required
to
become such when they acquired their respective shares from
Riverbend and Vinella. They were thus not bound by the articles and
memorandum of association.
[7] The co-owners’ agreement relied on by Bonheur
was concluded on 12 August 2005, before the subdivision and before
the shares
in the property were transferred to Bonheur and Caribbean.
It created pre-emptive rights in respect of some of the properties,
but not the residential property the shares in which were acquired by
Bonheur and Caribbean. In any event, it was common cause that
this
agreement had not been signed on behalf of either Bonheur or
Caribbean. Thus it too did not confer on Bonheur any right of
pre-emption.
[8] The third agreement relied on was foreshadowed in a
letter of intent signed on 12 August on behalf of Bonheur and
Caribbean,
and also by Ettin and Greenberg. It referred to the
proposed co-ownership agreement, and also, inter alia, to the JVD
agreement.
That too was never concluded. Although a draft agreement
was attached to the founding affidavit of Lob it was not actually
agreed
to or signed. Since a right to purchase land must be in
writing, signed by the parties or their duly authorized agents
(s
2(1)
of the
Alienation of Land Act 68 of 1981
), no valid right of
pre-emption came into existence. The high court thus correctly found
that Bonheur had no right to demand that
the Caribbean share be sold
or transferred to it.
Oral agreement of partnership
[9] In argument at the hearing of the appeal Bonheur
conceded that it had no right of pre-emption given the requirements
of
s 2(1)
of the
Alienation of Land Act. Counsel
thus changed tack,
submitting that as a partner of Bonheur, Caribbean was precluded from
alienating partnership property without
the consent of Bonheur. He
argued that there was a partnership agreement, concluded orally, the
terms of which were to be found
in the draft of the JVD agreement
read with the letter of intent. The latter recorded that the parties
(in fact the predecessors
of Bonheur and Caribbean) would not make
material decisions about the common property without unanimous
agreement. And the former
provided for a ‘buy-out’
procedure and would have imposed a duty of good faith and an
obligation to share information
upon the parties.
[10] Bonheur argued that the letter of intent and the
unsigned draft of the JVD agreement proved that there was an
agreement, albeit
oral or tacit, that there would be a partnership
between it and Caribbean, precluding the alienation of the Caribbean
share. The
terms were exactly the same as those of the draft JVD
agreement and the date when the partnership came into existence was
the date
of the letter of intent – 12 August 2005.
[11] This was not the case made in the application. Nor
was it presaged in the heads of argument for Bonheur. There is
nothing to
support the contention. On the contrary, the founding and
subsequent affidavits deposed to on behalf of Bonheur were firmly
based
on the alleged de facto right of pre-emption arising inter alia
from the draft JVD agreement. Moreover, the parties to the latter
agreement would have included Lob and Vinella. The rabbit pulled out
of counsel’s hat bore no resemblance to a partnership
between
the co-owners. This argument too must fail.
Alienation of share without all co-owners’
consent
[12] The appellants argued, thirdly, that Caribbean is
precluded by the common law principles regulating co-ownership from
selling
the Caribbean share to Wedgeport; and that Wedgeport was
precluded by the same principles from mortgaging the Caribbean share
to
Ettin and Greenberg. However, as found by the high court,
s 34(1)
of the
Deeds Registries Act 47 of 1937
expressly allows for such
alienation. Should a co-owner wish to alienate only a fraction of his
share, a certificate of registered
title has to be furnished to the
Registrar. But should the full share be sold or mortgaged no such
certificate is required. The
conclusion to be drawn from this
provision alone is that such alienation is permitted. The section
does not require the consent
of the other co-owners. That is settled
common law as well.
[13] Each co-owner of property is
entitled to dispose of his share without the consent of the others.
2
The right of disposal is not fettered
unless by agreement. Of course one co-owner may not use or deal with
the common property as
a whole without the consent of all the
co-owners.
3
But the sale of a share, or its
hypothecation, does not affect the property as a whole. The sale to
Wedgeport, and the mortgage
of the Caribbean share in favour of Ettin
and Greenberg, did not in my view require the consent of Bonheur. The
application was
correctly refused on this ground as well.
[14] However, the high court gave
leave to appeal to this court when referred to
Mazibuko
v DPP
4
which held that where co-ownership is
‘tied’ because it arises from a marriage in community of
property, and the husband’s
share should be forfeited in terms
of the Prevention of Organized Crime Act, the wife’s share had
also to be forfeited (although
she would share in the proceeds of the
realization of the property). But the court there distinguished this
type of co-ownership
from ordinary co-ownership.
5
Bonheur submitted (and the high court
in giving leave must have thought there was some merit in this
contention) that there might
be some jeopardy to Bonheur’s
share should Wedgeport’s share be realized in a similar way.
Its ‘constitutional’
right to property might (if I
understand the argument) be placed in jeopardy should the sale to
Wedgeport not be set aside.
[15] Bonheur, on appeal, argued that this was so because
various statutes regulating municipal affairs imposed taxes on
co-owners
jointly and severally. If Wedgeport failed to pay its pro
rata share then Bonheur might be deprived of its share in the
property.
The argument is entirely speculative. And it bears no
relation to the case made out in the application. No more need be
said of
it.
Were the sale, loan and mortgage sham transactions?
[16] In response to Caribbean’s
answering affidavit Bonheur alleged that the sale of its share to
Wedgeport, the loans to
Wedgeport of the purchase price by Ettin and
Greenberg, and the mortgage bond registered as security, were all
simulated transactions.
The high court rejected this ground as well,
finding that the submission was ‘far-fetched and speculative’.
6
The reason for the sham, Bonheur
contended, was to prevent Lob from enforcing any judgment that it
might obtain against Caribbean
in a counterclaim against it. The high
court found that there was no evidence of a sham.
[17] Bonheur nonetheless persists with the contention on
appeal. The argument is that the shareholders and directors of
Wedgeport
are also directors of Caribbean; the purchase price was not
actually paid by Wedgeport, but would be effected through ‘cash
advances and by way of loan account and book entries’, Ettin
and Greenberg retained control of the Caribbean share through
having
lent the purchase price to Wedgeport, and having secured a mortgage
bond over the share; the sale and loan agreements have
different
provisions as to the payment of the price; and Ettin and Greenberg
agreed to lend not only the price but also the funds
required to pay
rates, taxes and other expenses for a three-year period. Moreover,
Wedgeport undertook not to sell or alienate
the Caribbean share
without the written consent of Ettin and Greenberg. A genuine
purchaser would not, Bonheur argued, have accepted
such limitations
on its rights.
[18] The contention that the transactions are simulated
was supported, Bonheur argued, by the fact that Caribbean, or Ettin
and
Greenberg, paid the outstanding and future rates on the Caribbean
share to ensure transfer of the property. The payment included
the
amount owed by Bonheur yet was made without reference to Bonheur.
[19] As the high court found, Bonheur has not adduced
evidence of an intention on the part of any of the respondents to
disguise
their transactions. Nor was there evidence of any apparent
reason why they should have done so. And Caribbean had, shortly
before
selling its share to Wedgeport, offered it for sale to
Bonheur, which had declined. That there was no intention to avoid
paying
the fiscus is shown by the fact that VAT on the transaction
had been paid. Nor did Bonheur show any basis on which it was
entitled
to require that contracts between other parties be set
aside.
[20] As to the interdicts sought as an alternative to
the orders setting aside the contracts and transfers in question,
Bonheur
did not show any basis for anti-dissipatory relief. It sought
interim interdicts pending the referral of the dispute to oral
evidence.
It does not persist in asking for a referral. And it cannot
prevent the disposal of property to which it has no right. Such
relief
would thus not be competent.
[21] In the circumstances the appeal is dismissed with
costs including those of two counsel.
_______________
C H Lewis
Judge of Appeal
APPEARANCES:
APPELLANTS: M Nowitz
Instructed by Errol Goss Attorneys
Matsepes Inc
Bloemfontein
RESPONDENTS: D Fine SC (with him P M Cirone)
Instructed by Glyn Marais Inc
Lovius Block Attorneys
Bloemfontein
1
The
judgment is reported:
2010 (4) SA 298
(GSJ).
2
See
C G van der Merwe ‘Things’
Lawsa
vol 27 (First
reissue) paras 409 and 412 and P J Badenhorst, Juanita M Pienaar and
Hanri Mostert
Silberberg and Schoeman’s The Law of Property
5 ed (2006) p 133 ff.
3
See
generally, for example,
Erasmus v Afrikander Proprietary Mines
Ltd
1976 (1) SA 950
(W). The position is different where the
co-ownership is ‘tied’, as it is where the co-owners are
married to each
other in community of property:
Mazibuko &
another v National Director of Public Prosecutions
2009 (6) SA
479 (SCA).
4
Above.
5
Paras
47-48.
6
Note
1 above, para 17.