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[2011] ZASCA 27
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Croxford Trading 7 (Pty) Ltd and Another v The Body Corporate of the Inyoni Rocks Cabanas Scheme no ss1/1978 (174/10) [2011] ZASCA 27 (18 March 2011)
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THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
Case No: 174/10
In
the matter between:
CROXFORD TRADING 7 (PTY) LTD
.....................................................
First
Appellant
ERROL JOHN HENTY SENEKAL
.....................................................
Second
Appellant
v
THE BODY CORPORATE OF THE INYONI
ROCKS
CABANAS SCHEME NO SS1/1978
............................................................
Respondent
Neutral citation:
Croxford
Trading 7 v The Body Corporate of the Inyoni Rocks Cabanas Scheme no
ss1/1978
(174/2010)
[2011] ZASCA 27
(18 March 2011).
Coram:
Brand, Maya, Cachalia,
Shongwe JJA and Petse AJA
Heard:
24 February 2011
Delivered: 18 March 2011
Summary:
A developer who owned
an interest in the common property of a sectional title scheme under
the Sectional Titles Act 66 of 1971,
and subsequently disposes of the
interest, has no ‘right of extension’ that is
transferable. The 1993 Amendment to
the
Sectional Titles Act 95 of
1986
, which repealed the 1971 Act, but dispensed with the requirement
for the developer to retain an interest in the common property
did
not remove this requirement in respect of the 1971 Act.
________________________________________________________________
ORDER
________________________________________________________________
On appeal from:
KwaZulu-Natal
High Court (Pietermaritzburg) (Steyn J sitting as court of first
instance).
The appeal is dismissed with costs.
________________________________________________________________
JUDGMENT
________________________________________________________________
CACHALIA JA (Brand, Maya, Shongwe JJA,
Petse AJA concurring):
[1] This is an appeal from the
KwaZulu-Natal High Court, Pietermaritzburg granting an application
for a declaratory order against
the appellant and dismissing a
counter-application, also for declaratory relief, against the
respondents. With leave of the high
court the appellants appeal to
this court. The appeal concerns a developer’s ‘right of
extension’ under a sectional
titles scheme.
[2] The
Sectional Titles Act 95 of
1986
, like its predecessor, the Sectional Titles Act 66 of 1971,
sanctions the construction of a scheme in stages. A developer
intending
to add a further phase or phases to a sectional title
development must, when applying to the local authority for the
sectional
plan to be registered, reserve a right to extend the
scheme. This right is known as the developer’s ‘right of
extension’.
Where the developer does not reserve the right, or
the reservation has lapsed, the right to extend the scheme vests in
the body
corporate.
[3] Under s 18 read
with s 26 of the 1971 Act, a developer could exercise a right of
extension only if it owned at least one unit
in the scheme. Moreover,
because the right in favour of the developer was akin to a personal
servitude, it was not transferrable.
1
The 1986 Act
repealed the 1971 Act, but s 60(1)(b), which is a saving and
transitional provision, preserved a right of extension
acquired under
the rescinded Act. In terms of s 25(5) the 1986 Act also created
a new dispensation with regard to the developer’s
right of
extension which differed from the previous position in two respects.
First, it deemed the right of extension to be ‘a
right to urban
immovable property which admits of being mortgaged’,
2
which is
transferable by the registration of a notarial deed of cession.
3
Secondly, it
removed the requirement for the developer or its successor-in-title
to have an interest in the common property. The
right of extension
under s 25 of the 1986 Act thus became wider in its scope than the
content of the right recognized in the repealed
Act.
4
It must, however,
be emphasized that a right acquired or exercised under the repealed
Act did not bestow any new right under the
1986 Act, but did not
prevent the acquisition or exercise of rights under the
1986 Act.
5
[4] On 26 February 1993 the 1986 Act
was amended, in the words of the preamble to, among other things,
‘provide for the alienation
and mortgaging of a right to extend
a building in terms of the Sectional Tiles Act, 1971’.
Section
4
of the
Sectional Titles Amendment Act 15 of 1993
amended
s 60(1)(b)
of 1986 Act to read thus:
‘
Amendment
of section 60 of Act 95 of 1986, as amended by section 25 of Act 63
of 1991
4.
Section 60
of the
Sectional Titles Act, 1986
, is hereby amended by
the substitution for subsection (1) of the following subsection:
(1)
(a) . . .
(b)
a right of extension of a building acquired in terms of section 18 of
the Sectional Titles Act, 1971,
shall
be completed or exercised in terms of the provisions of the Sectional
Titles Act, 1971, as if it has not been so repealed:
Provided that a
right as referred to in paragraph (b) in respect of which a
certificate of real right has been issued –
(i)
shall for all purposes be deemed to be a right to urban immovable
property which admits of being mortgaged; and
(ii)
may be transferred by the registration of a notarial deed of
cession . . .’
[5] The proviso to
the amendment introduced language identical to s 25(4) of the 1986
Act. Its effect was that a right of extension
under s 18 of the
repealed Act would for ‘all purposes’ be deemed to be a
right to urban immovable property which admitted
of being mortgaged,
which was transferable by registration of a notarial deed of cession.
The purpose of amendment was to deal
with the problem that arose
after this court’s holding in
Erlax
Properties (Pty) Ltd v Registrar of Deeds & others
6
that s 60(1) of the
1986 Act did not render the developer’s rights under the 1971
Act transferrable. The amendment solved
this problem by pertinently
permitting the transfer of a right acquired under the 1971 Act. The
appellants’ contention is,
however, that the amendment went
further by allowing a right of extension acquired under the repealed
1971 Act to be exercised
even though the developer or its
successor-in-title has no other interest in the common property. I
will revert to this contention
in due course.
[6] But first I must turn to the facts
of this case. A sectional title scheme, known as Inyoni Rocks
Cabanas, was registered 1978.
The 1971 Act applied at the time.
Inyoni Beach Apartments (Pty) Ltd, the developer, owned a unit –
unit 64 – in the
scheme and reserved to itself the right, which
it had recorded in a conveyancer’s certificate, to extend the
development.
The certificate was registered in the developer’s
name on 13 October 2003, after the 1993 Amendment had taken effect.
The
relevant part of the certificate provides:
‘
No
person whose consent is required in terms of Section 18 of the Act
shall be entitled to withhold his written consent to INYONI
BEACH
APARTMENTS (PROPRIETARY) LIMITED, being the developer of this Scheme
as owner of Section No 64 or its successors in title
(hereinafter
referred to as the developer), preparing and submitting for its own
benefit a scheme to the Local Authority in terms
of Section 18 of the
Act for approval, and upon such approval taking all necessary steps
to erect extensions and additional buildings
on the land in terms of
and as indicated on the sketch plan filed of record in my Sectional
Titles Protocol . . .’
[7] In 2003 the developer transferred
unit 64 to a third party and, in 2007, that party, in turn,
transferred the unit to a Trust
– the Mahlangu Trust. The Deed
of Cession, in terms of which the developer purported to transfer the
right of extension to
the first appellant, was registered on 16 July
2004. So, at the time of registration, the developer no longer owned
the unit and
thus had no interest in the common property of the
scheme. Neither did the first appellant.
[8] The Body Corporate of the Inyoni
Scheme, the respondent in this appeal, took the view that because the
developer’s right
had been acquired under the 1971 Act, it had
lost that right when it disposed of the unit. At the time of the Deed
of Cession to
Coxford Trading 7 (Pty) Ltd, the developer therefore
had no right to transfer. The Body Corporate thus sought a declarator
in the
Kwazulu-Natal High Court directing the Registrar of Deeds to
cancel the Deed of Cession. The first appellant in this appeal and
the purported holder of the right of extension under the Deed, by
counter-application, asked for a declaration that the right vested
in
it. The second appellant, Mr Errol John Henty Senekal, was cited in
his capacity as a director of and beneficial shareholder
in the first
appellant. They maintained that once the certificate was registered
in October 1993 the developer’s right of
extension became a
real right, which was capable of being mortgaged and transferred to a
third party.
[9] As I mentioned at the beginning of
this judgment, the high court (Steyn J) granted the relief that the
respondent asked for
and dismissed the appellants’ case. The
Trustees of the Mahlangu Trust, Inyoni Beach Apartments (Pty)Ltd and
the Registrar
of Deeds, KwaZulu-Natal, were respectively the third,
fourth and fifth respondents in the court below. They took no part in
those
proceedings and have informed us that they shall abide this
court’s decision on appeal.
[10] The appellants contend that under
the amended legislation the developer’s transfer of its right
of extension to the first
appellant was valid despite the fact that
it no longer owned a unit in the scheme at the time. This is because,
so the contention
goes, s 25(5) of the 1986 Act says that the right
of extension may be exercised even though the developer or its
successor-in-title
has no other interest in the common property.
[11] To succeed in their contention
the appellants must overcome the difficulty that even though the 1993
Amendment, in s 60(1)(b)(i),
deemed the right of extension ‘for
all purposes . . . to be a right to urban immovable property’
which, when registered,
is not dependent upon the ownership of any
other property, it did not expressly dispense with the requirement
that the acquisition
or exercise of the right under s 18 of the 1971
Act is contingent on the developer’s ownership of a section of
the common
property. In addition it retained the language used in
s 60(1)(b) of the 1986 Act, which says that the right of
extension
acquired in terms of s 18 of the repealed Act shall be
completed or exercised in terms of that Act as if it has not been
repealed.
A plain reading of the amendment therefore suggests that by
disposing of its ownership in the unit the developer no longer
possessed
a right of extension that was capable of being transferred.
[12] But this interpretation, contends
the appellants, gives rise to an anomaly or inconsistency: the
requirement of ownership of
a unit would mean that the security
afforded to a mortgagee of the right of extension would be
compromised if the holder of the
certificate parted with ownership of
its section in the scheme and thus ceased to have a share in the
common property. Put another
way, if the developer or its
successor-in-title ceases to own a section in the scheme, the right
of extension would be lost and
would therefore no longer afford any
security to a mortgagee or be worthy of transfer. The ambit of the
right would then be uncertain
and could not properly be described
‘for all purposes’ as ‘a right to urban immovable
property’ –
a result, the appellants say, the legislature
could not have intended.
[13] The solution to the conundrum,
the appellants say, is that because the language used in the proviso
to the amendment in s 60(1)(b)
is identical to s 25(4) of the
original 1986 Act, which dealt with rights of extension under that
Act, the construction to
be placed upon the consequences of the right
of extension in the amendment should be the same as the consequences
for a right of
extension here. And because s 25(5) of the original
Act records that a right of extension described in s 25(4) may be
exercised
even though the developer or its successor-in-title has no
other interest in the common property, the same consequence should
follow
in regard to the interest in the common property in
s 60(1)(b). Therefore, the same words that appear in s 25(5), as
it read
in the original 1986 Act, should be read into s 60(1)(b)
following the amendment.
[14] Against the
background of this court’s reasoning in
Erlax
Properties
7
I do not think that
the appellants have met the problem regarding the language of the
1993 Amendment. In that case one of the declaratory
orders sought by
the developer was in effect, to enable it to enjoy the benefits
introduced by s 25 of the 1986 Act even though
the rights had been
acquired under s 18 of the repealed Act. However, in refusing the
relief this court concluded that s 60(1)(b)
of the 1986 Act did not
change or enlarge the content of the rights existing under the
repealed Act.
8
As I have said, the
lawmaker introduced the 1993 Amendment cognizant of this judgment. In
addition – and despite having dispensed
with the ownership
requirement in s 25(5) of the 1986 Act – it refrained from also
doing so in relation to rights acquired
under the repealed Act. And,
bearing in mind that s 25(5) was a substantial deviation from the
structure of the 1971 Act, this
could hardly have been an oversight.
[15] Concerning the
appellants’ submission that it is anomalous to subject the
right of a mortgagee or transferee of a real
right (in this case the
right of extension) to the ownership of another, it is not unusual
for the exercise of a registered real
right to be dependent upon the
ownership of another property – as is the case with a praedial
servitude. As far as mortgages
are concerned, nothing would prevent a
mortgagee from stipulating a term that precluded the mortgagor –
as holder of the
extension right – from divesting itself of its
whole interest in the common property and thereby trigger the
forfeiture of
its right of extension in favour of the body
corporate.
9
[16] The appellants have another
string to their bow. They contend that the matter may be approached
on a different basis, which
is this: a distinction must be drawn
between the existence of the right and its enforcement by either the
developer or its successor-in-title.
The 1993 Amendment concerns the
changed nature of a right of extension that arose under the 1971 Act.
It is no longer akin to a
personal servitude, incapable of transfer,
but the equivalent of a praedial servitude that is transferable.
Nothing is implied
about the nature of continued ownership of any
section in the scheme. Section 18(1) of the 1971 Act did not
characterize the right
of extension. It dealt only with who might
exercise it ie the developer or the body corporate. The 1993
Amendment then transformed
the nature of the old right of extension,
from one that was not transferable, to one that was. And because s
18(1) of the 1971
Act dealt with a different kind of non-transferable
right, that section is no longer relevant to identify who might
enforce a real
right of extension that was registered after the 1993
Amendment. The consequence of this approach is that the registration
of the
right of extension was valid and so is the subsequent transfer
of the right to the first appellant.
[17] In
Erlax
this
court was content to say that the s 18(1) right of extension is not
transferable, without describing it as personal servitude.
10
In S P & C
Catering Investments (Pty) Ltd v Body Corporate of Waterford Mews &
others
11
this court appeared
to accept that the right of extension under the 1986 Act was a
personal servitude.
12
Some writers have
suggested that it is now classifiable as a statutory real right sui
generis.
13
[18] I do not think it necessary for
present purposes to decide on the proper classification of the right
of extension. However
one chooses to classify the right in the 1971
Act or after the changes, it is clear that the retention in the 1993
Amendment of
the original provision in s 60(1)(b) (that the s 18(1)
right of extension shall be exercised as if the 1971 Act was not
repealed)
is an insuperable obstacle to the argument that it is no
longer relevant to identify who may enforce such a right of extension
registered after the 1993 Amendment. The appellants’
alternative contention therefore also has no merit.
[19] To conclude, the developer
disposed of its unit in the scheme after the 1993 Amendment took
effect and thus ceased to have
an interest in the common property.
Thereafter, it purported to transfer its right of extension to the
first appellant by notarial
Deed of Cession. But it could not do so
because the existence or exercise of a right of extension was
dependent upon its continued
ownership of the relevant unit. It
follows that the high court was correct to grant the declaratory
order to the respondent, and
refuse it in the case of the appellants.
[20] In the result the appeal must
fail.
The following order is made:
The appeal is dismissed with costs.
_______________
A CACHALIA
JUDGE OF APPEAL
APPEARANCES
APPELLANTS: J C King SC
Instructed by Francois Medalie &
Co, Pinetown
E G Cooper Majiedt Inc, Bloemfontein
RESPONDENT: C P Hunt SC
Instructed by E R Browne Inc,
Pietermaritzburg
Honey Attorneys, Bloemfontein
1
Erlax
v Properties (Pty) Ltd v Registrar of Deeds & others
[1991] ZASCA 187
;
1992
(1) SA 879
(A) at 887E-F and 893B-C;
S P Catering Investments v
Body Corporate of Waterfront Mews & others
2010 (4) SA 104
(SCA) at para 4.
2
Section
25(4)(a).
3
See
24
Lawsa
2 ed para 269. Before s 25(4)(b) of the 1986 Act was
amended by
s18(a)
of the
Sectional Titles Amendment Act 44 of 1997
the real right of extension could be transferred
in totality
and
with regard to the
whole land
affected by the registration of
a notarial deed of cession. After the amendment the, the developer
is allowed to cede the whole
or a
share
of the right or the
portion of the land affected. The distinction is not relevant in
this case.
4
Erlax
(above) (n.1) at 889H-890D.
5
See
above note 1 at 892D-F.
6
[1991] ZASCA 187
;
1992
(1) SA 879
(A).
7
See
above note 1.
8
Ibid
at 892I-893B.
9
Cf
Barclays Nasionale Bank Bpk v Registrateur van Aktes Transvaal &
‘n ander
1975 (4) SA 936
(T) 941E-942A.
10
Above
note 7 at 893B-C.
11
2010
(4) SA 104
(SCA).
12
Ibid
para 4.
13
P
J Badenhorst, J M Pienaar and H Mostert
Silberberg and Schoeman’s
The Law of Property
5 ed p 458; 24
Lawsa
2 ed para
270.