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[2016] ZAGPPHC 140
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Otto v Scholtz and Others (3259/2015) [2016] ZAGPPHC 140 (23 February 2016)
REPUBLIC
OF SOUTH AFRICA
I
N
THE
HIGH
COURT
OF
SOUTH
AFRICA
GAUTENG
D
I
VISION,
PRETORIA
CASE
NO:
3259/2015
DATE:
23/2/2016
HARDUS
OT
TO
Applicant
and
JOHANN
CHRISTO FREDERICK OTTO
SCHOLTZ
First
Respondent
ALFEUS
CHRISTO
SCHOLTZ
NO
Second
Respondent
JOHANNES
VOS
N.O
Third
Respondent
FARMACRES
25
(PTY)
LTD
Fourth
Respondent
JUDGMENT
AC
BASSON, J
[1]
The applicant is an elderly farmer. He approached this court for an
order declaring that he is the owner of the entire issued
share
capital in the fourth respondent (Farmacres 25 (Pty) Ltd) being 100
fully paid up shares. The applicant further seeks an
order declaring
that the share certificates dated 4 December 2003 reflecting the
first respondent (Mr Johann Scholz) and the Casee
Trust to be the
register proprietors of 10 and 15 ordinary shares respectively in the
fourth respondent to be cancelled and that
the fourth respondent be
directed to reflect in its share register that the applicant (as a
member of the fourth respondent) is
the holder of 100 shares in the
fourth respondent. The applicant is the sole director of the fourth
respondent.
[2]
The deciding issue in this case is whether or not ownership in the
shares had passed to the first respondent and the Casee Trust.
[3]
The first respondent is the brother of the second respondent and both
are the nephews of the applicant. The second respondent
(the deponent
to the founding affidavit) was married to the applicants' late
daughter who during her lifetime was a co-trustee
of the Casee trust.
The second respondent deposed to the answering affidavit in his
capacity as a trustee of the Casee Trust.
[4]
For reasons that will become clear herein below, Ido not
intend summarizing the facts in detail. Suffice to
point
out that the applicant bought
three immovable properties in the Western Cape from which farming
operations
are being conducted. A written agreement of sale was
concluded pursuant whereto the applicant sold and transferred to the
fourth
respondent the three immovable properties. After this
transaction 100 shares were transferred to the applicant's daughter
who held
the 100 shares as the applicant's nominee.
[5]
On 29 January 2004 three security transfer forms were executed
reflecting that the applicant's daughter transferred 10% of the
shares to the first respondent and 15
%
of the shares to the Casee Trust. The applicant is the
registered proprietor of 75% of the shares. Three share certificates
were
issued reflecting the shareholding as aforementioned.
[6]
It is the applicant's contention that notwithstanding the existence
of the two share certificates indicating that the first
respondent
and the Casee Trust are the registered proprietors of 10% and 15% of
the shares respectively, there is no basis in law
pursuant whereto
they acquired ownership of the shares which fall to be cancelled.
According to the applicant the security transfer
forms and the
issuing of the two share certificates were done pursuant to informal
negotiations which took place between the applicant
and the first
respondent and the trustees of the trust. The issuing of the shares
was, according to the applicant, done in anticipation
of concluding
an agreement of sale in relation to the said shares and in
anticipation of being paid the purchase price to be agreed
for the
shares.
[7]
The applicant states that neither prior to the date reflected on the
share certificates nor thereafter did he conclude a written
or oral
agreement with the first respondent and/or with the Casee Trust.
According to him no agreement of sale was therefore concluded
whether
written or oral. In this regard the Court was referred to the draft
sale of shares agreement drafted on 5 December 2008
between the first
respondent, the Casee Trust and the applicant. In this agreement
provision is made for the sale of 10% and 15%
respectively of the
shares in the fourth respondent for an amount of R 2 786
537.50. The draft agreement was signed by the
applicant. This
agreement was never signed by the first respondent and/or the
trustees of the Casee Trust. Consequently, so it
was submitted on
behalf of the applicant, no agreement has come about relating to the
sales of the shares in the fourth respondent.
[8]
Although the draft sales agreement was never signed, it appears from
some of the correspondence attached to the papers that
at some point
in time it was placed on record that an amount of R 2 786 53750 was
placed on trust with the attorneys representing
the first respondent
and the Casee Trust. In a letter the attorneys on behalf of the
respondents, the following is recorded:
"Ons
het opdrag om hierdie bedrag tesame met die rente aan u oar te betaal
sodra ans klient 'n aandeelhouersooreenkoms van
u ontvang het en
hulle tevrede is met die ooreenkoms."
[9]
In response to this letter, a letter was sent by the attorneys
acting on behalf of the applicant placing the first respondent and
the Casee Trust on terms to sign the contract of sale within seven
days. This letter further records that should the agreement
not be
signed -
"is
dit ons opdrag dat ons klient dan sal ag dat u kliiinte nie
belangstel om die aandele te koop op die terme en voorwaardes
soos
uitgeengesit in die koopkontrak nie.... In die alternatief sal ons
kliiint die ooreenkoms met u kliiinte kanselleer vanweii
u kliiinte
se kontrakbreuk."
[10]
Correspondence was thereafter exchanged regarding the conclusion of a
shareholding agreement. It is common cause that no shareholders'
agreement was concluded.
[11]
As already pointed out, the crux of the applicant's case is that no
written or oral agreement has come about pursuant whereto
the shares
were sold: No amount of money was agreed upon and no amount of money
has been paid to the applicant in respect of the
shares.
[12]
The second respondent states in his answering affidavit that
that ownership in the shares has in fact been validly been
ceded to
the first respondent and the Casee Trust pursuant to an oral,
alternatively tacit agreement concluded during the latter
part of
2003. With reference to certain facts, the second respondent sets out
in detail why he is of the view that such an agreement
did in fact
come into existence and concludes by stating that:
"I
accordingly submit that there can be no question that an oral
alternatively
tacit agreement, with the terms as set out above, had come into
existence between the parties (hereinafter referred to as "the
2003 agreement")."
[13]
More in particular, the second respondent alleged that during the
period 2009 to 2010, the Trust had make contributions to
the fourth
respondent on loan account in excess of R 3.4 million rand. Further
according to the second respondent, it was never
the intention of the
parties that the applicant would be paid anything other than the
nominal value of the shareholding that was
transferred to the first
respondent and the Trust. This amounted to R1 per share in 2003. The
second respondent, with reference
to the history leading up to this
dispute, submitted that the applicant had at all material times
actively recognised the first
respondent and the Casee Trust as
shareholders.
[14]
In September 2014 the applicant approached the first respondent and
the Trust with a proposed resolution that the farms be
sold.
Provision is made on the second page of the resolution for the first
respondent and the trust representatives to sign. At
that stage the
second respondent made it clear that it was not prepared to consent
to the sale without a firm guarantee that the
Casee Trust would at
least be reimbursed for the expenditures relating to the renovation
of the house from the proceeds of the
sale. With reference to these
facts the second respondent submitted that it is apparent that he and
the Casee Trust were at all
relevant times recognised by the
applicant as shareholders in the fourth respondent.
[15]
On behalf of the applicant it was submitted that a dispute of fact
has arisen on the papers as to whether or not a valid and
binding
agreement was concluded between the parties pursuant whereto the
shares were transferred to the first respondent and the
Casee Trust.
It is to be noted that the second respondent also - at least on the
papers - appears to be of the opinion that a "real
and bona fide
dispute of fact between the Applicant and the Respondents [exists]
and to the extent that it cannot be resolved on
these papers, the
application falls to be dismissed on that ground alone".
[16]
I
n
essence
the
applicant
contends
that
ownership
did
not
pass to
the
first respondent and the
Cassee Trust because of the absence of an underlying
agreement
or
justa
causa.
In
support
hereof
reference
was
made
to
the decision
In
Inland
Property
Development
Corporation
(Pty)
Ltd
v
Cilliers
[1]
where
Rumpf
JA
said
the
following
regarding
the
process
of
transferr
i
ng
shares:
"In
regard to
shares,
the word
'transfer',
in
i
ts
full
and
technical sense,
is
not a single act
but
consists
of
a
series
of
steps,
namely
an agreement
to
transfer, the execution
of
a
deed of transfer
and,
finally,
the
registration of the
transfer.
As
was put
by
Lord
REID
in
the House
of Lords in
Lyle
and
Scott
Ltd.
v
Scott's
Trustees
and
British
Investment Trust
Ltd.,
1959 A.C.
763
(a
case which dealt with the
word
'transfer'
in the
articles of
association
of
a company)
at
p.
778:
'The
word transfer can mean the whole of these steps. Moreover, the
ordinary meaning of 'transfer' is simply to
hand
over or part with something and a shareholder who
agrees to sell is parting with something. The context
must determine
in what sense the word is
used."'
With
reference
to this
case
(and various
cases that were
decided
subsequently), the
applicant submitted
that
the
court
cannot
disregard
the
clear
authority
and
that
this
court
must
accept
that
a
valid
contract
(a valid
justa
causa)
must exist
before shares
may
be transferred.
[17]
As
far as the transfer of ownership in
the
context of movable and immovable
property
is concerned,
i
t
appears that
i
t
i
s
accepted that the approach to the
justa
causa
principle
is
premised
on
the
abstract
theory
of
the
passing
of ownership
as
opposed
to
the
causal
theory.
In
this
regard
the
Supreme
Court
of Appeals
in
Legator
Mckenna
Inc
and Another
v
Shea and Others
[2]
held
the
following in the
context
of
the
passing
of ownership of
immovable
property:
"(20]
This brings me
to the next enquiry.
Should
the
transfer of the house to the Erskines be
regarded as
val
i
d
despite
the invalid
i
ty
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
l
aw.
Accord
i
ng
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)
at
301H
-
302H;
Van
der
Merwe
Sakereg
2
ed
at 305 - 6). 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
&
Hudson
Ltd
1941
AD
369
at
398
-
399;
Dreyer
and
Another NNO v
AXZS
Industries
(Ply)
Ltd
2006
(5)
SA
548
(SCA)
((200
6
]
3 All
SA
219)
i
n
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 and Another v
Eaton NO and Others
1984
(4) SA 728
(T) at 735E;
Klerck
NO v Van Zyl and Maritz NNO and Related
Cases
1
989
(4) SA 263
(SE) at 2730 - 274C; and
Kriel
v Terblanche NO
en
Andere
2002
(6) SA 132
(NC)
at paras 28 -
49).
These decisions are supported
by academic
authors advancing
well-reasoned
arguments
(see
eg
DL
Carey-Miller
The
Acquisition and
Protection
of
Ownership
at
128 - 30
and
168; CG van
der
Merwe Sakereg op cit
at 305 -
10;
CG
van der Merwe
&
JM Pienaar 2002
Annual
Survey
466 at
481;
Badenhorst, Pienaar &
Mostert
Silberberg
&
Schoeman's
The
Law
of
Property
5
ed at 76). In
view
of this body of a
u
thority
Ibel
i
eve
that the time has come
for
this court to add
i
ts
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-Ke/
(Edms) Bpk hla Merkel Motors v Bodenstein
en 'n Ander
1980 (3) SA 917
(A) at 922E - F;
Dreyer
and
Another
NNO
v AXZS Industries
(Pty) Ltd
supra at 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 and Others v Jordaan
1956 (1) SA 483
(A) at
496;
Klerck
NO
v
Van Zyl
and
Maritz
NNO
supra at
274A - B;
Silberberg
and Schoeman
op cit at 79 -
80)."
[18]
The
principles
as set out
in
Legator was
restated
by the Supreme
Court
in
Oriental Products
(Pty) Ltd
v Pegma
178 Investments
Trading Cc And
Others
[3]
The
Court further
remarked
that -
"Under
the abstract system the most important point is that there is no need
for
a
formally
valid underlying
transaction,
provided
that
the parties
are
ad idem regarding
the
passing
of ownership."
See
also Silberberg
and
Schoeman:
[4]
"If
a legal system makes the transfer of a real right dependent on a
valid underlying contract it is said to adhere to the
causal theory,
while the opposite
approach
is based on the so-called
abstract
theory.
The causal theory
l
ays
down that, if the cause for the transfer of a real right is
defective, the real right
will
not pass, notwithstanding
that there has been delivery or registration of a
thing. I
n
terms of the abstract
theory, provided that the agreement to transfer
a real right (the real
agreement) is
valid,
the real right
will,
in
general, pass in
the pursuance and
on
implementation thereof,
notwithstanding that
the
cause
(underlying
contract) is defective."
[19]
This
principle (in
the
context of movable property) was also confirmed by
the
Court
in
Trust
Bank
van
Africa
Bpk
v
Western
Bank
Bpk.
I
n
this
decision
the
court
gave a useful
exposition
of the principle
that
the validity of
a
transfer
of ownership
i
s
independent of the valid
i
ty
of the underlying contract:
[5]
"Hierdie
gevolgtrekking is, na my mening,
regtens ongegrond.
Selfs
al sou dit
aanvaar
word
dat
die
Reg er
a
quo
tereg
bevind
het dat
die
koopkontrak
nietig sou wees, as
gevolg van onmoontlikheid van prestasie met betrekking
tot 'n gedeelte van 'n
ondeelbare verpligting
('n standpunt waaroor ek
geen
mening
u
i
tspreek
n
i
e),
berus
sy
konklusie
dat
gedeeltel
i
ke
prestasie
nie eiendomsoordrag
tot gevolg kan he nie op 'n
wanopvatting - aangaande die
vereistes van die oordrag
van eiendomsreg op roerende goed.
Volgens ons
reg
gaan
die
eiendomsreg
op
'n
roerende
saak
op
'n
ander
oar
waar
die
eienaar daarvan dit aan
'n ander !ewer, met die bedoeling om eiendomsreg
aan
hom
oar
te
dra,
en
die
ander
die
saak
neem
met
die
bedoeling
om
eiendomsreg
daarvan
te
verkry.
Die
geldigheid
van
die
eiendomsoordrag
staan
las van
die geldigheid
van enige
onderliggende kontrak.
In die saak
Commissioner of
Customs
and
Excise
v
Randles, Brothers
&
Hudson
Ltd
1941 AA 369 het
WATERMEYER
AR
(met wie FEETHAM AR saamgestem het) in
verband met
eiendomsoordrag van roerende sake, op 397 - 398
gese:
"On
this
issue
the
plaintiff
contended
that
ownership
in
the
material
never
passed from
the
importer to the
manufacturer,
and the reasons which
he advanced
in support
of that
contention were,
inter
alia,
that
there was
no 'genuine sale' of the material and consequently ownership did not
pass; that the legal effect of what the parties did
was such that
ownership did not pass and that the Court must give to the
transaction the legal effects which the law gives it,
no matter what
the parties intended. Leaving aside for the moment the question of
what is meant by the word 'genuine', I have some
difficulty in
understanding these reasons. Ownership of movable property does not
in our law pass by the making of a contract.
It passes when delivery
of possession is given accompanied by an intention on the part of the
transferor to transfer ownership
and on the part of the transferee to
receive it."
Hy
se dan verder aan op 398 - 399:
"If
the
parties
desire
to
transfer
ownership
and
contemplate
that
ownership
will
pass
as
a
result
of
the
delivery,
then
they
in
fact
have
the
necessary
i
ntention
and
the
ownership
passes
by
delivery.
I
t
was
contended,
however,
on
behalf
of
the
appellant
that
delivery
accompanied
by
the necessary intention on the part of the parties to
the
delivery
i
s
not enough to pass ownership; that some recognised
form
of contract (a
causa
habilis,
as Voet
41.1.35 puts
i
t)
is
required
in
addition,
and reference
was made
to
certain
remarks
made in
the
case
of
McAdams v Fiander's
Trustee
1919
AD 207.
I
do not agree
with
that
contention.
The
habilis
causa
referred to by
Voet
means
merely an
appropriate
causa,
that is,
either
an
appropriate
reason
for
the
transfer
or
a serious and deliberate agreement showing
an
i
ntention
to transfer."
Dit
was
ook
die
sienswyse
van
CENTLIVRES
AR
wat
op
411
van
sy
uitspraak
in hierdie saak, met
verwysing na die standpunt van sekere skrywers, die
posisie
soos
volg
stel:
"From
these passages
it
is
clear,
I
think
that
a
wide
meaning
must
be
given
to the
words
'justa
causa
'
or
'causa
habilis
'
(voet
41.1.35),
and
that
all
that
these
words
mean
in
the
context
I
am
at
present
considering
is
that the legal transaction preceding
the
traditio
may be
evidence of an intention
to pass and acquire
ownership.
But
there may
be
direct
evidence of an
intention
to pass
and
acquire ownership
and,
if
there is, there is no
need to rely on a preceding
l
egal
transaction in order to show that ownership has, as a
fact, passed. To put it
more
briefly,
it seems to me
that
the question whether ownership
passed
depends on the intention
of the parties and such
in
tention
may be proved in
various
ways".
[20]
Neither party
could
refer
this Court
to
any
authority
confirming
that
the
abstract
theory
(already appl
i
ed
to the
transfer
of
movable and
i
mmovable
property)
has also
been
extended
to
apply
to
the
transfer
of
ownership
in
shares.
In
this
regard
the
respondent has urged this Court to extend the now
widely
accepted abstract theory to
apply also to the transfer of ownership in
shares.
[21]
Ican
see
no
reason why
this
principle should
not also
apply
in the
context
of
the
transfer of
ownership
in
shares. Consequently
there is
no
need
for a
formally
valid underlying
transaction
pursuant
to
which
ownership
in
shares
may
pass
to
another.
What
does,
however,
still
needs
to
be
determined
is
what the
intention of the transferor was - in other words what the contents of
the real agreement was: Did the transferor intend
to transfer
ownership in the shares and was it the intention of the transferee to
become the owner of the shares? According to
the applicant it was his
intention that the shares would be sold to the first respondent and
the Casee Trust. In support of this
contention the applicant referred
to the correspondence between the attorneys confirming that an amount
of R 2786 537.50 was paid
into the trust account of the respondent's
attorneys. This amount, according to the applicant, was to be paid as
the selling price
of the shares and the loan account. The second
respondent's version is that the shares were sold in 2003 pursuant to
an oral agreement
for R 25.00.
[22]
In light of the fact that there appears to be a dispute on the papers
in respect of what the terms of the real agreement was,
the matter
should be referred to trail.
[23]
In the event, the following order is made:
1.
The matter is referred to trail.
2.
The Notice of Motion shall stand as a simple summons.
3.
The answering affidavit shall stand as a notice of intention to
defend.
4.
A declaration shall be delivered within 21 (twenty-one) days
whereafter the Rules of Court shall
govern the further conduct of the
matter.
5.
The costs of this application are reserved for the trail Court.
_____________________________
AC
BASSON
JUDGE
OF THE HIGH COURT
Appearances:
For
the
applicant
:
S L Joseph (SC)
I
nstructed
by :
Dadic Attorneys
For
the 1
st
,
2
nd
and 3
rd
Respondent : A
Janse van Vuuren
I
nstructed
by
:
W A Du Plessis Attorneys
[1]
1973
(3) SA 245
(A)
at
251.
[2]
2010
(1)
SA
35 (SCA).
[3]
2011
(2)
SA
508
(SCA)
at
par
[12].
[4]
The
Law
of
Property
(5
th
edition)
at
5.2.2.3.
[5]
1978(4)
SA
281
(A)
at
301G
-
302F.