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[2008] ZASCA 144
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Legator McKenna INC and Another v Shea and Others (143/08) [2008] ZASCA 144; 2010 (1) SA 35 (SCA) ; [2009] 2 All SA 45 (SCA) (27 November 2008)
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THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case number: 143/08
In the matter between:
LEGATOR McKENNA INC FIRST APPELLANT
M H G McKENNA SECOND APPELLANT
And
CLARE VERONICA SHEA FIRST RESPONDENT
JAMIE ERSKINE SECOND RESPONDENT
THE MASTER OF THE HIGH COURT
(NATAL PROVINCIAL DIVISION) THIRD RESPONDENT
THE REGISTRAR OF DEEDS
(PIETERMARITZBURG) FOURTH RESPONDENT
ABSA BANK LIMITED FIFTH RESPONDENT
Neutral citation:
Legator McKenna
Inc v Shea
(143/2008)
[2008] ZASCA 144
(27
November 2008)
CORAM: HARMS ADP, BRAND, CLOETE, PONNAN JJA
et
LEACH AJA
HEARD: 17 NOVEMBER 2008
DELIVERED: 27 NOVEMBER 2008
CORRECTED:
SUMMARY
: Act 66 of 1965 –
sale of estate property by
curator bonis
prior
to issue of letters of curatorship under s 72
of the Act – subsequent transfer of property pursuant to sale –
abstract
theory of transfer – validity of real agreement
notwithstanding invalidity of sale – non-availability of
enrichment
claim.
ORDER
On appeal from
: High Court,
Durban (Motala AJ)
sitting as court of first instance
1. The appeal is upheld with costs, including the costs
of two counsel where employed.
2. The order of the court a quo is set aside and
substituted with the following:
'The plaintiff's claim 1 is dismissed with costs.'
JUDGMENT
BRAND JA (Harms ADP, Cloete, Ponnan
JJA
et
Leach AJ A concurring)
[1] The first appellant, Legator McKenna Inc, is an
incorporated firm of attorneys in Durban. The second appellant, Mr
Michael McKenna
('McKenna'), is an attorney in that firm. On 8 March
2002 McKenna was appointed as
curator bonis
to
the estate of the first respondent, Ms Clare Shea ('Shea'), by order
of the Durban High Court. The reason for his appointment
was that
Shea had been found incapable of managing her own affairs as a result
of brain injuries she sustained in a motor vehicle
accident on 5
February 2002. At the time, Shea was the registered owner of a house
in Berea, Durban. On 22 April 2002 McKenna,
in his capacity as
curator bonis,
purported
to sell the house to a married couple, Mr and Mrs Erskine ('the
Erskines') – who are the joint second respondents
in these
proceedings – for R540 000. The reason why I refer to the
transaction as 'a purported sale' will soon appear.
In the interest
of brevity and without prejudicing any issues, however, I will
henceforth refer to the transaction simply as 'a
sale'. Pursuant to
the sale, the house was subsequently transferred to the Erskines by
registration in the Pietermaritzburg Deeds
Office.
[2] Contrary to medical expectations, so it seems, Shea
then recovered from the consequences of her brain injuries, to the
extent
that the Durban High Court declared her capable of managing
her own affairs. This happened on 10 March 2003. Slightly more than
a
year later she instituted an action in the same court for the return
of her house, which eventually led to the present proceedings.
The
first three defendants in the action were the two appellants and the
Erskines. Other defendants, who abided the decision of
the court,
were the Master of the High Court, the Registrar of Deeds and the
bondholder over the house who advanced the purchase
price to the
Erskines. Litigation thus proceeded between Shea, the two appellants
and the Erskines.
[3] Shea's main claim in the action, referred to as
claim 1, was essentially, as I have indicated, that the transfer of
her house
to the Erskines be declared invalid and that the house be
returned to her against repayment of the purchase price. I shall
return
later in more detail to the cause of action advanced in
support of this claim. Broadly stated, however, she contended that
the
contract of sale between McKenna and the Erskines, which gave
rise to the transfer, was invalid in that it was concluded by McKenna
before the Master had issued him with letters of curatorship in terms
of s 72(1)(d) of the Administration of Estates Act 66
of 1965
('the Act').
[4] Shea also formulated two claims for damages, claims
2 and 3, against the two appellants; one in addition, and the other
in the
alternative, to her main claim. These claims are not material
to the appeal. Of some consequence, however, albeit indirectly, is
a
conditional third party claim by the Erskines against the two
appellants. It is formulated on the supposition that Shea would
be
successful in her claim for return of the house. In this event, the
Erskines claimed damages from the appellants in the amount
of about
R1,7 million, for the loss they would allegedly suffer through
McKenna's breach of an implied warranty that he was authorised
to
sell Shea's house.
[5] At the commencement of the trial the parties asked
the court a quo (Motala AJ) to order a separation of issues. In terms
of
the separation order the issues relating to Shea's main claim for
return of the house were to be decided first. The remaining issues
concerning Shea's two claims for damages, as well as the Erskine's
conditional third party claim, stood over for later determination.
The parties also agreed that the issues surrounding the main claim
were to be decided on the factual basis set out in a document
entitled 'Admitted Facts' and the supporting documents attached
thereto. Despite an additional term of the agreement that any party
would be free to lead further evidence, no-one elected to do so at
the trial.
[6] In the event, the preliminary issues were decided
in favour of Shea. Hence the court a quo declared the contract of
sale concluded
between McKenna and the Erskines both illegal and
void, and directed the Registrar of Deeds to cancel the registration
of transfer
of the house to the Erskines, against repayment of the
purchase price by Shea. In addition, the two appellants and the
Erskines
were ordered, jointly and severally, to pay the costs of the
preliminary proceedings. The two appellants then sought and obtained
the court a quo's leave to appeal to this court. The Erskines, on the
other hand, sought no such leave. That is why they were joined
as
joint second respondents on appeal. On the face of it, the court a
quo's order seems to have an immediate impact on the Erskines
only.
But in the light of the outstanding issues, and particularly the
Erskine's conditional third party claim for damages against
the
appellants, it is apparent that the appellants have a very real
interest in the outcome of the appeal.
[7] Central to an appreciation of the issues on appeal
is the sequence of material events. Resulting from the way in which
the facts
were presented at the trial, these events were not in
dispute. A convenient date to start the sequence is 8 March 2002.
That, as
we know, was the date upon which McKenna was appointed as
curator bonis
to
Shea's estate. On 27 March 2002, he instructed Wakefields Estate
Agents, who had valued Shea's house at R525 000, to find
a
purchaser for R550 000. On 19 April 2002, Wakefields presented
him with an offer, signed by the Erskines, for R520 000
which
they increased at McKenna's request to R540 000. On 22 April
2002 McKenna signed the amended offer as seller. Alongside
his
signature he wrote the word 'curator' and below all that he added,
again in his own handwriting and in parenthesis '(subject
to approval
of Master of High Court)'.
[8] On 3 June 2002 the Master issued McKenna with
letters of curatorship in terms of s 72(1)(d) of the Act. At
first sight
the sale of the house by McKenna before he obtained his
letters of curatorship appears to have occurred with unseemly haste.
One's
instinctive reaction is that, as an attorney, he should have
known better than to do so. But his reasons for doing so appear from
the documents attached to the 'Admitted Facts'. Essentially they
amounted to this: while the house was Shea's only asset worthy
of
note, she had a number of pressing debts. Some of these debts, such
as the insurance premiums and rates and taxes on the house,
could be
avoided by the sale. Others, like the premiums on her life policies
and her children's school fees, were in need of urgent
settlement
from the proceeds of the sale. In the circumstances, McKenna
obviously thought that it was in Shea's best interests
to sell the
house as soon as possible. What McKenna also knew was that Shea had
herself attempted to sell the house for the greater
part of the
previous year for R500 000, but that she had been unsuccessful
in obtaining a buyer at that price. He therefore
considered R540 000
a good price.
[9] To complete the chronological picture: on 17 July
2002 the Master granted his consent for the sale of Shea's house.
Transfer
to the Erskines was registered in the Deeds Office on 27
July 2002. In both the power of attorney authorising the transfer,
signed
by McKenna, as well as the transfer deed itself, the
causa
for the transfer is described as a sale which was concluded between
McKenna and the Erskines on 22 April 2002.
[10] The court a quo's reasons as to why, on these
facts, Shea was entitled to the return of the house can be summarised
thus:
The agreement between McKenna and the Erskines was
illegal and invalid because it was concluded at a time when McKenna
had not
yet received his letters of curatorship. In consequence, so
the court held, the sale constituted a contravention of
s 71(1)
of the
Administration of Estates Act and
indeed rendered McKenna
guilty of a criminal offence under s 102(1)(g) of the Act.
Because the agreement of sale, which formed the
causa
of the transfer to the Erskines, was invalid, Shea was entitled to
the return of her property.
The jurisprudential basis for the return of the
property to her is dependent upon whether or not ownership passed
notwithstanding
the void underlying
causa
for
transfer.
If ownership did not pass, Shea had a real right to
vindicate the property as owner.
If, on the other hand, ownership did pass to the
Erskines, Shea had a personal right to claim the return of the
property from
them – as immediate parties to the transaction –
on the basis of the
condictio ob turpem vel
iniustam causam
.
[11] The appellants' answers to the court a quo's line
of reasoning were manifold. First among these was the contention that
the
court a quo erred in finding that the sale agreement, which led
to the transfer, constituted a contravention of s 71(1) of
the
Act. In considering this contention, it seems appropriate to start
with the wording of s 71(1). In so far as relevant,
the section
provides:
'(1) No person who has been . .
. appointed . . . as provided in section
seventy
two
shall take care
of or administer any property belonging to the minor or other person
concerned, or carry on any business or undertaking
of the minor or
other person, unless he is authorized to do so under letters of
tutorship or curatorship as the case may be, granted
. . . under this
Act . . ..'
[12] Section 72, to which reference is made in s 71(1),
covers a wide range of tutors and curators for minors and other
persons.
The position of a
curator bonis
,
like McKenna, who was appointed by order of court, is governed by
s 72(1)(d). It provides as follows:
'(1) The Master shall . . . on
the written application of any person-
(d) who has been appointed by
the Court or a judge to administer the property of any minor or other
person as tutor or curator .
. .
grant letters of tutorship or
curatorship, as the case may be, to such person.'
To complete the legislative matrix, there is s 102(1)(g)
of the Act. It provides inter alia that:
'Any person who . . .
contravenes or fails to comply with the provisions of section . . .
71 . . . shall be guilty of an offence
and liable on conviction . . .
to a fine or to imprisonment for a period not exceeding twelve
months.'
[13] The appellants' contention that the agreement of
sale between McKenna and the Erskines did not contravene s 71(1)
was
based on the premise that it was not a final agreement, but
conditional upon the Master's approval of the transaction. As the
factual
basis for this premise they relied, of course, on the words
'subject to approval of Master of High Court' which McKenna inserted
below his signature on the Deed of Sale when he purported to accept
the Erskines' offer on 22 April 2002. Because of this condition,
so
the argument went, the sale would only become final and binding if
and when the Master's approval to the transaction had been
obtained.
And, so the argument proceeded, because the Master would never give
his approval to a transaction unless and until he
had issued letters
of curatorship to the
curator bonis,
the
agreement would, as a matter of course, only become final and binding
after the requirement of s 71(1) had been fulfilled.
This, so
the appellants argued, is exactly what eventually happened. The
Master only gave his approval to the sale on 17 July 2002.
Then and
only then did the sale become binding. But by then McKenna's letters
of a curatorship had been issued. Thus, the appellants'
argument
concluded, nothing was done by McKenna which could in any way impact
on the property of Shea before his letters of curatorship
had been
issued.
[14] The court a quo considered this line of argument
and found it wanting. The flaw in the argument, so the court held,
was that
the sale was entered into by McKenna was not conditional,
but from the outset final and enforceable. The court's reasoning
behind
this conclusion went as follows: The Master's consent to the
transaction was required by s 80(1) of the Act. The 'condition'
imposed by McKenna was therefore already implied by law. Since it was
not an additional requirement, it could not in itself render
the
agreement conditional.
[15] I do not agree with the court a quo's reasoning.
First, I am not aware of any rule that a contract cannot be rendered
subject
to compliance with a condition imposed by statute. In fact, I
can think of many examples which would support a contention to the
contrary. But be that as it may, as I see it, the Master's consent
was not directly required by s 80(1). According to this
section:
'
no curator shall alienate or mortgage any
immovable property which he has been appointed to administer, unless
he is authorised
thereto by the [High] Court or by the Master
'.
In terms of s 80(2) the Master's jurisdiction to grant
permission under s 80(1) is, however, limited to immovable
property of which the value does not exceed the amount determined by
the Minister of Justice in the Government Gazette. At all relevant
times that amount was fixed at R100 000 (see GN 2333 in GG
15 308 of 1 December 1993). Because the value of Shea's house
exceeded that amount, the Master had no authority to authorise the
sale under s 80(1). McKenna required the permission of
the High
Court. That permission had, however, been granted beforehand in terms
of para 2(g) of the order appointing McKenna as
curator
bonis
to the estate of Shea, but subject to
the following proviso in para 6 of the order:
'The powers conferred upon the
curator bonis
in
terms of paragraphs (a) to (j) of paragraph 2 hereof shall be
exercised subject to the approval of the Master of the High Court.'
[16] McKenna was therefore obliged to acquire the
Master's consent to the transaction, not because of s 80(1) of
the Act, but
because of the provisions of the court order. Thus
understood, no reason has been suggested – and I can think of
none –
why McKenna could not competently make his acceptance of
the Erskine's offer subject to the condition that there be compliance
with a requirement imposed by the order from which he derived his
authority to sell the property. On the contrary, because the offerors
could not be expected to have been aware of the terms of the court
order, it was necessary for McKenna to add this condition. Absent
such condition, he ran the risk of personal liability on the basis of
an implied warranty of authority if the Master's consent
could
ultimately not be obtained.
[17] The words inserted by McKenna would therefore
render any agreement between him and the Erskines subject to the
suspensive condition
of the Master's approval. The question that
immediately arises is whether in these circumstances a conditional
agreement of sale
had been concluded between McKenna and the
Erskines, or whether there was no agreement at all. What gives rise
to the question
is of course the trite principle that a binding
contract can only be brought about by an acceptance which corresponds
with the
offer in all material aspects. 'Yes, but' does not signify
agreement. At best it is a counter-offer (see eg
Jones
v Reynolds
1913 AD 366
at 370-371;
Pretoria
East Builders CC v Basson
2004 (6) SA 15
(SCA) para 9; R H Christie
The Law of Contract
in South Africa
5 ed at 62-3 and the cases
there cited). Since the Erskines offered an unconditional agreement
while McKenna agreed to a conditional
one, I think the difference
between offer and acceptance is clear. It follows that in my view
McKenna did not accept the offer
by the Erskines, even though they
may all have thought that he did. As a matter of law, this purported
acceptance constituted no
more than a counter-offer.
[18] An inevitable consequence of these conclusions is
that a valid agreement of sale could only come into existence if the
Erskines
subsequently accepted McKenna's counter-offer. It was
contended in argument that the Erskines did so when they executed the
conveyancing
documents. Apart from the fact that it does not appear
from the agreed facts what conveyancing documents, if any, the
Erskines
had executed, I have a more fundamental difficulty with this
contention. It arises from the requirement in
s 2(1)
of the
Alienation of Land Act 68 of 1981
, namely that a sale of land can
only be valid if contained in a written deed of alienation, signed by
both parties or their agents
acting on their authority. Although the
execution of conveyancing documents could conceivably constitute an
implied acceptance
by conduct, such acceptance would not satisfy the
requirements of this Act. That much was expressly held in
Jackson
v Weilbach's Executrix
1907 TS 212.
In that
case there was no written agreement of sale. Nonetheless it was
argued that the declarations signed by both the purchaser
and the
seller for transfer duty purposes constituted a written agreement
within the meaning of s 30 of Proc 8 of 1902, which
was the
predecessor to s 2(1). To this argument Innes CJ gave the
following answer (at 216):
'But do these declarations of
purchaser and seller constitute such a contract? In form they
certainly do not; the declaration of
the seller is not an offer, and
the declaration of the purchaser is not an acceptance. Nor is there
anything to show that the parties,
when they signed these
declarations, intended to enter into any contract. The declarations
were signed for revenue purposes, and
they purport not to embody a
contract constituted in terms of the documents themselves, but to
record that a prior contract had
been entered into at a date therein
mentioned.'
(See also eg
Van Zyl v Potgieter
1944 TPD 294
at 296;
Meyer
v Kirner
1974 (4) SA 90
(N) at 102D-H.)
[19] The finding that the purported sale between McKenna
and the Erskines was never properly concluded, renders it unnecessary
to
decide whether a conditional agreement of sale, subject to the
approval of the Master, would constitute a contravention of
s 71(1)
of the
Administration of Estates Act. The
appellants' argument that
it did not rested on the proposition that such agreement was in fact
aimed at compliance, as opposed
to a contravention, of the section.
Moreover, so the argument went, an agreement subject to such
condition would never put the
estate of the ward at risk of an
alienation without the sanction of the Master. On a proper
construction of
s 71(1)
, so it was argued, the acts of
administration and taking care of the ward's property that are
prohibited by the section must be
confined to transactions involving
a risk of prejudice to the estate of the ward. If it were otherwise,
so it was argued, appointed
curators would commit a crime if, prior
to the issue of their letters of curatorship, they performed an act
in the interest of
their wards in circumstances where everybody else
would qualify as a
negotiorum gestor.
(As to these circumstances, see eg
Standard
Bank Financial Services Ltd v Taylam (Pty) Ltd
1979
(2) SA 383
(C); Daniel Visser
Unjustified
Enrichment
136.) Even though these arguments
may have merit, they relate to an issue which, for the reasons I have
given, requires no determination
in this case and I would therefore
prefer not to commit myself either way.
[20] This brings me to the next enquiry. Should the
transfer of the house to the Erskines be regarded as valid despite
the invalidity
of the underlying sale which was the
causa
for the transfer? The appellants' contention that it should, was
rooted in the assumption that the abstract theory – as opposed
to the causal theory – of transfer has been adopted as part of
our law. According to the abstract theory the validity of
the
transfer of ownership is not dependent upon the validity of the
underlying transaction such as, in this case, the contract
of sale.
The causal theory, on the other hand, requires a valid underlying
legal transaction or
iusta causa
as
a prerequisite for the valid transfer of ownership (see eg
Trust
Bank van Afrika Bpk v Western Bank Bpk en Andere NNO
1978
(4) SA 281
(A) 301H-302H, Van der Merwe,
Sakereg,
2 ed at 305-306). With regard to the transfer of movables our courts,
including this court, have long ago opted for the abstract
theory in
preference to the causal theory (see eg
Commissioner
of Customs and Excise v Randles Brothers and Hudson Ltd
1941
AD 369
at 398-9;
Dreyer and Another NNO v AXZS
Industries (Pty) Ltd
2006 (5) SA 548
(SCA)
para 17).
[21] Some uncertainty remained, however, with regard to
the transfer of immovable property. In the High Courts that
uncertainty
has been eliminated in a number of recent decisions where
it was accepted that the abstract system applies to movables and
immovables
alike (see eg
Brits v Eaton NO
1984
(4) SA 728
(T) at 735E;
Klerck NO v Van Zyl
and Maritz NNO and Related Cases
1989 (4) SA
263
(SE) 273D-274C;
Kriel v Terblanche NO
2002
(6) SA 132
(NC) paras 28-49). These decisions are supported by
academic authors advancing well-reasoned arguments (see eg D L
Carey-Miller
The Acquisition and Protection of
Ownership
128-130 and 168; C G van der Merwe
Sakereg
op
cit
at 305-310; C G van der Merwe and J M
Pienaar
2002 Annual Survey
466 at 481; Silberberg and Schoeman's
The Law
of Property
, 5 ed (by Badenhorst, Pienaar and
Mostert, 76). In view of this body of authority I believe that the
time has come for this court
to add its stamp of approval to the
viewpoint that the abstract theory of transfer applies to immovable
property as well.
[22] In accordance with the abstract theory the
requirements for the passing of ownership are twofold, namely
delivery – which
in the case of immovable property, is effected
by registration of transfer in the Deeds Office – coupled with
a so-called
real agreement or 'saaklike ooreenkoms'. 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 (see eg
Air-Kel
(Edms) Bpk h/a Merkel Motors v Bodenstein
1980
(3) SA 917
(A) at 922E-F;
Dreyer and Another
NNO v AXZS Industries (Pty) Ltd (supra)
para
17). Broadly stated, the principles applicable to agreements in
general also apply to real agreements. Although the abstract
theory
does not require a valid underlying contract, eg sale, ownership will
not pass – despite registration of transfer
– if there is
a defect in the real agreement (see eg
Preller
v Jordaan
1956 (1) SA 483
(A) 496;
Klerck
NO v Van Zyl and Maritz NNO (supra)
274A-B;
Silberberg and Schoeman
op cit,
79-80).
[23] The court a quo found that in this case ownership
did not pass because of two defects in the real agreement. The first
defect,
so the court held, was that McKenna's intention to transfer
ownership had been motivated by the mistaken belief that he had
entered
into a valid agreement of sale. In support of this finding
the court referred to the power of attorney to pass transfer signed
by McKenna, as well as the deed of transfer itself where the sale
agreement of 22 April 2002 was cited as the
causa
for McKenna's intention to transfer the property. In this light, so
the court held, it cannot be inferred that McKenna intended
to
transfer the property even if the sale agreement turned out to be
null and void. In the same way as the court a quo, I also
believe
that McKenna – as well as the Erskines, for that matter –
probably thought that the sale agreement of 22 April
2002 was valid
and enforceable. And, albeit for different reasons, I also share the
court a quo's view that the parties were mistaken
in that belief. But
I do not agree that a mistake of that kind could in itself render the
real agreement void. If that were the
position, we would effectively
revert to the causal theory of transfer which we have jettisoned in
favour of the abstract theory.
I say that because I believe that very
few parties (if any) to real agreements would deliberately give and
receive transfer pursuant
to an underlying transaction which, to
their knowledge, is void. If a mistaken belief of this kind –
whether unilateral or
common – were therefore to render the
real agreement invalid, there would not be much left of the abstract
theory of transfer.
[24] In any event, a mistaken assumption about the
validity of the underlying
causa
constitutes a mistake in motive. With regard to mistakes of this
kind, it was said in
Van Reenen Steel (Pty)
Ltd v Smith NO
2002 (4) SA 264
(SCA) para 9:
'A party cannot vitiate a
contract based upon a mistaken motive relating to an existing fact,
even if the motive is common, unless
the contract is made dependent
upon the motive, or if the requirements for a misrepresentation are
present.'
And in
African Realty Trust Ltd v
Holmes
1922 AD 389
at 403 it was said:
'But, as a Court, we are after
all not concerned with the motives which actuated the parties in
entering into the contract, except
insofar as they were expressly
made part and parcel of the contract or are part of the contract by
clear implication.'
In consequence, I find that McKenna's mistake about the
validity of the sale had no effect on the effectiveness of the real
agreement.
[25] The second defect in the real agreement found by
the court a quo essentially resulted from the following reasoning:
The legislature's
intention, so the court held, was to visit a sale
agreement in contravention of
s 71(1)
with invalidity. Since
that intention cannot be circumvented by application of the abstract
theory of transfer, the original non-compliance
with
s 71(1)
could not be cured by a real agreement. I do not agree with this line
of reasoning. For purposes of the argument, I assume, without
deciding, that the legislature intended any transaction in
contravention of
s 71(1)
to be void. On this assumption a sale
concluded by a curator without letters of curatorship would be
invalid; so would a real agreement;
and transfer by a curator without
letters of curatorship would therefore not pass ownership to the
transferee (cf
Mngadi NO v Ntuli
1981 (3) SA 478
(D); D L Carey- Miller
op cit
at 164). But in this case McKenna had
received his letters of curatorship before he concluded the real
agreement. This means that
he was properly authorised to enter into
that agreement when he did so. The real agreement therefore did not
contravene
s 71(1).
The fact that McKenna lacked authority when
he purported to enter into the prior agreement of sale, is of no
consequence. In view
of the abstract theory, it did not affect the
validity of the real agreement (se eg
Kriel v
Terblanche NO
2002 (6) SA 132
(NC) para 46).
To transpose McKenna's lack of authority when he concluded the sale
to the real agreement is to ignore the implications
of the abstract
theory. I therefore hold the view that the house was validly
transferred to the Erskines. In consequence I conclude
that the court
a quo erred in upholding Shea's claim for the restoration of her
property on the basis of the
rei vindicatio
.
[26] As I have said earlier, the court a quo further
held that even if ownership had duly passed to the Erskines, Shea was
entitled
to reclaim the house from them on the basis of the
condictio
ob turpem vel iniustam
causam
. Because of
that finding, the court held that a defence based on what has become
known as the 'rule in
Wilken v Kohler
',
was not available to the appellants. Succinctly stated, the rule
provides that, if both parties to an invalid agreement had performed
in full, neither party can recover his or her performance purely on
the basis that the agreement was invalid. The 'rule' has its
origin
in an
obiter dictum
by
Innes JA in
Wilken v Kohler
1913
AD 135.
In context, Innes JA was dealing with performance under sales
of land that were invalid for want of compliance with a statute
requiring
the contract to be in writing. In the course of his
judgment he then stated (at 144)
obiter
,
as it turned out, that:
‘
It by no means follows
that because a court cannot enforce a contract which the law says
shall have no force, it would therefore
be bound to upset the result
of such a contract which the parties had carried through in
accordance with its terms. Suppose, for
example, an . . . [oral]
agreement of sale of fixed property . . ., a payment of the purchase
price and due transfer of the land.
Neither party would be able to
upset the concluded transaction on the mere ground that . . . it was
in reality an agreement to
sell, invalid and unenforceable in law,
but which both seller and purchaser proposed to carry out.’
[27] This
obiter
statement has been criticised in
CD
Development Co (East Rand)(Pty) Ltd v Novick
1979
(2) SA 546
(C) at 550F-553G and by academic authors as a departure
from the accepted approach to enrichment liability (see eg De Vos
Verrykingsaanspreeklikheid in die
Suid-Afrikaanse Reg
3 ed 189; De Wet &
Van Wyk
Die Suid-Afrikaanse Kontraktereg en
Handelsreg
5 ed Vol 1 326).
Nonetheless it was referred to with apparent approval by this court
in
Wilkens NO v Bester
[1997] ZASCA 9
;
1997
(3) SA 347
(SCA) at 362F and endorsed by the legislature,
specifically with reference to contracts of the sale of land, invalid
for non-compliance
with formalities, in
s 28(2)
of the
Alienation of Land Act 68 of 1981
. I shall return to this section.
But, outside the sphere of cases concerning the sale of land, the
debate whether the rule in
Wilken v Kohler
represents good law, continues (see eg Visser
op cit
468; Eiselen en
Pienaar
Unjustified Enrichment – A
Casebook
2ed at 157; Wille's
Principles
of South African Law
9 ed (General editor
Francois du Bois) sv 'Unjustified Enrichment'
1068).
[28] Those who support the rule in
Wilken
v Kohler
find justification for its existence
in the consideration that where both parties have performed in
accordance with the provisions
of an agreement, albeit unenforceable,
the purpose of the transaction has been achieved and that there is
therefore no reason to
interfere with the existing state of affairs.
The underlying consideration of policy seems to be that those who
received exactly
what they bargained for should not be allowed to
escape the consequences of a bad bargain by means of an enrichment
action which
is intended to be an equitable remedy (see eg Helen
Scott
Unjust Enrichment by Transfer in South
African Law: Unjust Factors or Absence of Legal Ground?
Doctoral thesis Oxford 2005 296
et seq
;
J C Sonnekus ‘
Is die Ongegronde van
Afgesproke Prestasie Steeds Verryking?’
2008
TSAR
605
at
610-612; Daniel Visser
op cit
469-470). In the light of this explanation, which I find persuasive,
I believe the time has come for this court to express its
unequivocal
approval of the
Wilken v Kohler
rule.
Moreover, although on the facts of
Wilken v
Kohler
Innes JA was dealing with an agreement
which he described as void (at 142) for non-compliance with statutory
formalities, I can
see no reason why the rule should not apply in a
case where, despite the non-existence of any agreement, the parties'
intention
has been achieved. In both cases the
condictio
indebiti
would normally be available because
the transfer was motivated by a mistaken belief relating to the
validity or the existence of
the underlying agreement. And in both
cases
Wilken v Kohler
would
constitute an exception to the
condictio
indebiti
for the same reason, ie that the
purpose of the transaction had been achieved.
[29] From the 'achieved purpose' analysis it is clear,
however, that the
Wilken v Kohler
rule
cannot apply where the purpose of the transaction is prohibited by
law. The law cannot preserve a transaction which it has
prohibited.
It follows that a defence based on that rule is not available against
a claim brought under the
condictio ob turpem
vel in iustam causam
. That much was expressly
held by this court in
Afrisure CC v Watson NO
[2008] ZASCA 89
para 49 (see also
M
C C Bazaar v Harris & Jones (Pty) Ltd
1954
(3) SA 158
(T) at 162F; Daniel Visser
op cit
415 note 1 and 470).
[30] The court a quo therefore rightly departed from the
premise that if Shea could rely on the
condictio
ob turpem vel in iustam causam,
the
Wilken
v Kohler
defence would not be available to
the appellants. The question is thus whether Shea could rely on that
condictio
. I think
not. Illegality of the underlying transaction is an essential element
of the
condictio ob turpem vel in iustam
causam
. That much is trite (see eg
Afrisure
(supra)
para 5). On the facts I have found,
McKenna did not enter into any illegal agreement. He either entered
into an agreement which
was invalid for lack of compliance with the
formalities prescribed by
s 2(1)
of the
Alienation of Land Act
68 of 1981
– because the Erskines accepted his counter-offer by
implication, but not in writing – or – in the absence of
an implied acceptance – he entered into no agreement at all. In
the event of the former, the situation is governed by
s 28(2)
of
that Act which provides:
'Any alienation which does not
comply with the provisions of section 2(1) shall in all respects be
valid
ab
initio
if the alienee had performed in full terms of the deed of alienation
or contract and the land in question had been transferred
to the
alienee.'
[31] If, on the other hand, no agreement of sale came
into existence because there was not even an implied acceptance of
McKenna's
counter-offer, the principle, in accordance with
Wilken
v Kohler
, is that if both parties to an
invalid or purported agreement have performed in full, neither party
can recover where the lawful
purpose of their transaction, common to
them both, has been achieved. In either event, Shea could not succeed
with an enrichment
claim. It follows that, in my view, the court a
quo erred in finding that Shea was entitled to return of the house.
[32] In consequence it is ordered that:
(1) The appeal is upheld with costs, including the costs
of two counsel where employed.
(2) The order of the court a quo is set aside and
substituted with the following:
'The plaintiff's claim 1 is dismissed with costs.'
………………
.
F D J BRAND
JUDGE OF APPEAL
APPEARANCES:
FOR APPELLANT: D J SHAW QC
N SINGH SC
INSTRUCTED BY: WOODHEAD, BIGBY & IRVING INC
DURBAN
CORRESPONDENTS: CLAUDE REID
BLOEMFONTEIN
FOR RESPONDENT: M PILLEMER SC
INSTRUCTED BY: BERCOWITZ COHEN, WARTSKI ATTORNEYS
DURBAN
CORRESPONDENTS: LOVIUS BLOCK
BLOEMFONTEIN