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[2017] ZASCA 129
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eThekwini Municipality v Moutnhaven (Pty) Ltd (1068/2016) [2017] ZASCA 129; 2018 (1) SA 384 (SCA) (29 September 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No: 1068/2016
In the matter between:
eTHEKWINI
MUNICIPALITY
APPELLANT
and
MOUNTHAVEN
(PTY) LTD
RESPONDENT
Neutral
citation:
eThekwini
Municipality v Mounthaven
(Pty)
Ltd (1068/2016)
[2017] ZASCA 129
(29 September 2017)
Coram:
Tshiqi,
Seriti and Saldulker JJA and Gorven and Ploos van Amstel AJJA
Heard:
21
August 2017
Delivered:
29
September 2017
Summary:
Claim
for re-transfer of property – a debt as contemplated in Chapter
III of the Prescription Act – whether reversionary
clause
creates a limited real right or a personal right – right not
absolute but a relative one and only enforceable against
a class of
individuals – prescription affects the contractual right to
claim re-transfer – claim prescribed.
ORDER
On
appeal from:
KwaZulu-Natal
Local Division, Durban (Mbatha J sitting as a court of first
instance):
The
appeal is dismissed with costs.
JUDGMENT
Tshiqi
JA (Seriti and Saldulker JJA and Govern and Ploos van Amstel AJJA
concurring):
[1]
The
issue in this appeal is whether a claim for the re-transfer of
property from the respondent, Mounthaven (Pty) Ltd (Mounthaven)
to
the appellant, eThekwini Municipality
[1]
(the Municipality) constitutes a debt as contemplated in Chapter III
of the Prescription Act 68 of 1969 (the
Prescription Act).
[2
]
On
24 May 1985 the Municipality sold vacant immovable property described
as Lot 2678 Verulam (Extension 25), situated at 6 Magpie
Place
Verulam, KwaZulu-Natal measuring 771 square meters (the property), to
Mounthaven at a public auction for an amount of R60
000. The
following special conditions were contained in the Deed of Sale and
were in due course incorporated in the Deed Of Transfer:
‘
Subject
to the following special conditions in favour of the Town Council of
the Borough of Verulam as Local Authority:
(1)
The Purchaser shall erect, or cause to be erected on the property,
buildings to the value of not less than ONE HUNDRED THOUSAND
RAND
(R100 000, 00) and failing the erection of buildings to that
value within two (2) years from date of sale, then, for
the purpose
of levying the general rate and sewer rate payable to the Verulam
Town Council by the Purchaser or his successors in
title, there shall
be deemed to be buildings to such required value on the property and
all valuation and rating provisions of
Section 157
of Ordinance 25 of
1974 or any amendment thereof shall apply to the property and be
binding upon the Purchaser or his successors
in title.
(2)
If at the expiry of a period of three (3) years from the date of sale
the Purchaser has failed to complete buildings to the
value of not
less than ONE HUNDRED THOUSAND RAND (R100 000, 00) on the
property, ownership of the property shall revert to
the Seller which
shall be entitled to demand re-transfer thereof to it from the
Purchaser who shall be obliged to effect transfer
thereof to the
Seller against payment by the Seller to the Purchaser of all payments
made on account of the purchase price less
any costs incurred by the
Seller in obtaining re-transfer of the property into its name,
including costs as between attorney and
client, all costs of
transfer, transfer duty, stamp duty and the like.
(3)
The Seller shall have a pre-emptive right to re-purchase the property
at the price paid by the Purchaser, if the Purchaser desires
to sell
the property within five (5) years from the date of sale, provided
that this condition shall not apply where buildings
to the value of
not less than ONE HUNDRED THOUSAND RAND (R100 000, 00) shall
have been erected on the Lot within three (3)
years from the date of
sale.’
[3]
Mounthaven
failed to develop the land within the stipulated period of three
years and it still remains undeveloped. It cites the
unresolved
dispute with the Municipality concerning a 750mm diameter storm water
pipe that runs under the property as the reason
preventing the
effective development of the property. On 23 May 2012, the
Municipality wrote a letter to Mounthaven in which it
invoked the
terms of the conditions in Clause C.2 of the Deed of Transfer (the
reversion clause) and demanded re-transfer of the
property.
Mounthaven failed to comply with the demand and on 19 February 2014
the Municipality launched an application invoking
the conditions and
claiming re-transfer of the property. Mounthaven took the point that
that the claim to re-transfer constituted
a “debt” as
contemplated in Chapter III of the
Prescription Act and
that it had
prescribed. The Municipality submitted that the
Prescription Act was
not applicable as the claim did not constitute a debt. The court
decided to consider a further ground of defense raised by the
Municipality for the first time in its heads of argument: that the
claim was founded on the
rei
vindicatio,
was simply a mechanism to perfect the Municipality’s ownership
of the property and that it did not prescribe.
[4]
The
high court found that the claim constitutes a debt and concluded that
it had prescribed after a period of three years. Regarding
whether
the claim was a vindication of a real right the high court held that
‘property can only be transferred by registration
thereof and
does not occur automatically’. It then concluded that the
Municipality did not have an absolute real right to
the property and
that it lost its right of action when it prescribed after three
years.
[5]
In
this appeal the Municipality relies on four grounds for its
contention that the claim has not prescribed:
a)
That
its claim for re-transfer of the property is not a claim for payment
of money, goods or services, or an obligation to render
something and
thus does not constitute a ‘debt’, as contemplated in
Chapter III of the
Prescription Act;
b
)
That the reversion clause constitutes a real right, and thus not a
debt;
c)
Alternatively, if the claim is a debt, it is secured by a mortgage
bond and is not extinguished by prescription for a period
of thirty
years;
d)
Further alternatively, if the claim is a debt, then the respondent’s
failure to develop the property constitutes a continuing
wrong.
[6]
The
Prescription Act does
not define what a debt is. In
Electricity
Supply Commission v Stewarts and Lloyds
of SA (Pty) Ltd
1981 (3) SA 340
(A) at 344G-H this court said:
‘
[A]
debt is –
“
that
which is owed or due; anything (as money, goods or services) which
one person is under obligation to pay or render to another.
”
In
a subsequent decision in
Desai NO v Desai & others
1996
(1) SA)141 (A) at 146G-H the court was called upon to decide whether
an obligation to effect transfer of individual shares
in two
immovable properties had prescribed. The application was for an order
directing the appellant, an executor in a deceased
estate, to take
all steps to sign all the necessary documents. The court said:
‘
For
the reasons which follow I am of the opinion that the appellant's
“debt”, ie the obligation to procure registration
of
transfer in terms of clause 13
(d)
,
was indeed extinguished by prescription
.’
The
court went further and said at 146H- 147A:
‘
The
term "debt" is not defined in the Act, but in the context
of s 10(1) it has a wide and general meaning, and includes
an
obligation to do something or refrain from doing something . . . . It
follows that the undertaking in clause 13
(d)
to procure registration of transfer was a "debt" as
envisaged in s 10(1).’
[7]
Recently
in
Makate
v Vodacom Ltd
2016 (4) SA 121
(CC) and
Makate
v Vodacom
(Pty) Ltd [2014] ZAGPJHC 135 Mr Makate, the plaintiff, a former
employee of Vodacom, instituted a high court action to enforce
an
agreement with Vodacom which, according to his undisputed evidence,
was that the parties would enter into bona fide negotiations
for
determining reasonable compensation for the profitable use of his
idea in developing the ‘Please Call Me’ service.
Vodacom
raised two special pleas, including a plea of prescription. The high
court, whilst accepting that Mr Makate had proved
the compensation
agreement between himself and Vodacom, upheld the special pleas.
Regarding prescription, the high court held that
the word ‘debt’
had to be widely interpreted to include a claim that Vodacom comply
with its obligations under a contract
and it dismissed his claim.
[8]
The
Constitutional Court said in paras 83-85:
‘
For
the conclusion that a debt contemplated in
section 10(1)
of the
Prescription Act includes
a claim to negotiate terms of an agreement,
the trial Court relied on
Desai
,
a judgment of the Appellate Division (now the Supreme Court of
Appeal) and
LTA
Construction
,
a decision of the Cape of Good Hope Division (now the Western Cape
Division of the High Court) . . .
On
this construction of
Desai
, every obligation, irrespective of
whether it is positive or negative, constitutes a debt as envisaged
in
section 10(1).
This in turn meant that any claim that required a
party to do something or refrain from doing something, irrespective
of the nature
of that something, amounted to a debt that prescribed
in terms of
section 10(1).
Under this interpretation, a claim for an
interdict would amount to a debt. However, the Appellate Division in
Desai
did not spell out anything in
section 10(1)
that
demonstrated that “debt” was used in that sense…
The
absence of any explanation for so broad a construction of the word
“debt” is significant because it is inconsistent
with
earlier decisions of the same court that gave the word a more
circumscribed meaning . . .’
The
Constitutional Court then referred to the meaning ascribed to the
word ‘debt’ in
Escom and Desai
and said the
following in para 86:
‘
It
is unclear whether the court in
Desai
intended
to extend the meaning of the word “debt” beyond the
meaning given to it in
Escom.
If it did, it does not appear that this followed either from any
submissions made to the court by the parties or any issue arising
in
the case. Nor, if that was the intention, did the court give
consideration to the constitutional imperatives in regard to the
interpretation of statutes in section 39(2) of the Constitution.’
It
then concluded:
‘
However,
in present circumstances it is not necessary to determine the exact
meaning of “debt” as envisaged in section
10. This is
because the claim we are concerned with falls beyond the scope of the
word as determined in cases like
Escom
which held that a debt is an obligation to pay money, deliver goods,
or render services. Here the applicant did not ask to enforce
any of
these obligations. Instead, he requested an order forcing Vodacom to
commence negotiations with him for determining compensation
for the
profitable use of his idea.
To
the extent that
Desai
went beyond what was said in
Escom
it was decided in error. There is nothing in
Escom
that remotely suggests that “debt” includes every
obligation to do something or refrain from doing something, apart
from payment or delivery. It follows that the trial court attached an
incorrect meaning to the word “debt”. A debt
contemplated
in
section 10
of the
Prescription Act does
not cover the present
claim. Therefore, the section does not apply to the present claim,
which did not prescribe.’ (Paras
92 and 93).
[9]
In
a subsequent decision in
Myathaza
v Johannesburg Metropolitan Bus Services (SOC) Limited t/a Metrobus &
others
2017 (4) BCLR 473
(CC) the Constitutional Court said:
‘
Desai
,
on which the Labour Appeal Court relied for holding that “debt”
means an obligation to do something or refrain from
doing something,
was overruled by this court in
Makate
.’
[10]
In
this appeal the Municipality contends that the Constitutional Court
in
Makate
and
in
Myathaza
effectively rejected what it submits was a wider meaning this court
ascribed to the word ‘debt’ in
Desai
.
That the Constitutional Court endorsed the narrower one in
Escom
,
in terms of which debt is confined to an obligation ‘to pay
money or deliver goods or render services’. The Municipality
submits therefore that the right to demand re-transfer is not an
obligation ‘to pay money, deliver goods, or render services
and
[is] thus not a debt’.
[11]
In
reading the Constitutional Court decision in
Makate
one should not overlook what the court did not say. It did not say
that
Desai
was incorrect in its finding that a claim for transfer is a debt. It
simply said that
Desai
was decided in error ‘[t]o the extent that [it] went beyond
what was said in
Escom
’.
Had the court wished to overrule
Desai
in the manner contended for by the Municipality, it would have said
so explicitly. As the Constitutional Court said, it is inconceivable
that every obligation to do or refrain from doing something can be
described as a debt. The example of an interdict postulated
by that
court illustrates this absurdity.
[12]
Earlier,
the Constitutional Court in
Road
Accident Fund & another v Mdeyide
2011 (2) SA 26
para 11 expressed doubt on whether an obligation is
indeed a debt in terms of the Act. In
Njongi
v MEC, Department of Welfare, Eastern Cape
[2008] ZACC 4
;
2008 (4) SA 237
(CC) it raised, but left open, the question whether a
constitutional obligation could be considered a debt. An
interpretation that
restricts the meaning of ‘debt’ to
‘delivery of goods’ confines it to the delivery of
movables to the exclusion
of all immovable property. This would
create a baseless distinction between movable property and immovable
property for the purposes
of prescription. In cases where the
legislature has sought to make this distinction, ie in cases of
prescription of debts by mortgage
bond, it has done so expressly. The
dictum in
Myathaza
must thus be understood in this context.
[13]
This
then leads me to whether the reversionary clause constitutes a
limited real right or a personal right. In
Absa
Bank Ltd v Keet
2015 (4) SA 474
SCA the court explained the distinction between a
real right and a personal right as follows in para 20:
‘
[R]eal
rights are primarily concerned with the relationship between a person
and a thing and personal rights are concerned with
a relationship
between two persons. The person who is entitled to a real right over
a thing can, by way of vindicatory action,
claim that thing from any
individual who interferes with his right. Such a right is the right
of ownership. If, however, the right
is not an absolute, but a
relative right to a thing, so that it can only be enforced against a
determined individual or a class
of individuals, then it is a
personal right.’
[14]
It
then continued in paras 23-25:
‘
The
obligation which the law imposes on a debtor does not create a real
right (
jus
in rem
),
but gives rise to a personal right (
jus
in personam
).
In other words, an obligation does not consist in causing something
to become the creditor’s property, but in the fact
that the
debtor may be compelled to give the creditor something or to do
something for the creditor or to make good something in
favor of the
creditor.
[I]n
the case of extinctive prescription one is more specifically
concerned with the relationship between creditor and debtor and
prescription serves in the first instance to protect the debtor
against claims that perhaps never came into existence or had already
been extinguished. The obligation is by its nature and substance a
temporary relationship that is destined to terminate through
performance and moreover a relationship between creditor and debtor
in which third parties are only indirectly involved. A real
right, by
contrast, is a relationship of a durable nature, that can be
maintained against anyone and everyone, and which can impede
commerce
if outsiders cannot with confidence rely on the appearance thereof.
[I]n
the case of acquisitive prescription one has to do with real rights.
In the case of extinctive prescription one has to do with
the
relationship between a creditor and a debtor. The effect of
extinctive prescription is that a right of action vested in the
creditor, which is a corollary of a “debt”, becomes
extinguished simultaneously with that debt. In other words, what
the
creditor loses as a result of operation of extinctive prescription is
his right of action against the debtor, which is a personal
right.
The creditor does not lose a right to a thing . . .’
(See
also
National
Stadium South Africa (Pty) Ltd & others v Firstrand Bank Ltd
2011 (2) SA 157
SCA para 31).
[15]
In
this matter
the
right to claim re-transfer required Mounthaven to do something in
favour of the Municipality. The right is not absolute but
a relative
one because it can only be enforced against a determined individual
or a class of individuals, ie Mounthaven or its
successors in title,
and not against the whole world. One is concerned with the
relationship between the two parties and their
successors in title
and this is akin to a relationship between a creditor and a debtor.
In the event of prescription what is extinguished
through the
effluxion of time is the contractual right to claim re-transfer
against Mounthaven. It follows that the Municipality’s
right of
action against Mounthaven is a personal right and not a limited real
right.
[16]
The
two alternative grounds of appeal raised by the appellant have no
merit. The reversionary clause is not a security clause and
is thus
not a mortgage bond. The other alternative contention that the
failure to develop the property is a continuing wrong and
that it
cannot prescribe suggests that every debt, as long as it remains
unpaid, would constitute a continuing wrong and would
not be
extinguished by prescription. This cannot be so. For all these
reasons it follows that the claim for re-transfer constitutes
a debt,
and it prescribed after the effluxion of the three year period. The
appeal must thus fail.
[17]
I
make the following order:
The
appeal is dismissed with costs.
___________________
Z L L Tshiqi
Judge
of Appeal
APPEARANCES
For
the Appellant:
G D Goddard SC with S Mahabeer
Instructed
by:
Berkowitz Cohen Wartski, Durban
McIntyre
& Van der Post Attorneys,
Bloemfontein
For
the Respondent:
D D Naidoo
Instructed
by:
Mervyn Gounden & Associates, Verulam
Webbers
Attorneys, Bloemfontein
[1]
It is the successor-in-law to the town council of the Borough of
Verulam.