Dream Supreme Properties 11CC v Nedcor Bank Ltd. and Others (490/05) [2007] ZASCA 8; 2007 (4) SA 380 (SCA) (13 March 2007)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2007
>>
[2007] ZASCA 8
|

|

Dream Supreme Properties 11CC v Nedcor Bank Ltd. and Others (490/05) [2007] ZASCA 8; 2007 (4) SA 380 (SCA) (13 March 2007)

Links to summary

THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
CASE NO
: 490/05
In the matter between:
DREAM SUPREME PROPERTIES 11CC ................
Appellant
and
NEDCOR BANK LIMITED
.........................................
First Respondent
TANJA MICHELLE KIRKHAM
.................................
Second Respondent
CHRISTOS COSTAS
......................................................
Third
Respondent
_________________________________________________________________________
Before: STREICHER, FARLAM, MTHIYANE, MLAMBO JJA & MALAN AJA
Heard: 16 NOVEMBER 2006
Delivered: 13 MARCH 2007
Summary: Doctrine of notice – does not apply to attachment of
property belonging to judgment debtor but sold by judgment debtor
prior to attachment.
Neutral citation: This judgment may be referred to as Dream
Supreme Properties 11CC v Nedcor Bank [2007] SCA 8
(RSA).
______________________________________________________________________
J U D G M E N T
______________________________________________________________________
STREICHER JA
STREICHER JA:
[1] The Cape High Court dismissed an application by the
appellant, alleged to be a prior purchaser of a property, for the
setting
aside of an attachment of the property; the setting aside of
the sale in execution of the property to the second respondent; and
for an order directing the third respondent to transfer the property
to the appellant. An application for leave to appeal was dismissed
by
the court a quo but a further application to this court for leave to
appeal was referred for oral argument in terms of s 21(3)(c)(ii)
of
the Supreme Court Act 59 of 1959. In the event the parties addressed
us as if the matter was on appeal, it being common cause
that should
it be held that the court below correctly dismissed the initial
application, leave to appeal should be refused.
[2] The third respondent is the owner of the property
being Sections 6, 13 and 64 in a sectional title scheme known as Glen
Waters
situated at Camps Bay, City of Cape Town. The property
consists of an apartment and two garages. According to Mrs
Theodosiou, the
mother in law of the third respondent, who is a
member of the appellant and the deponent to the appellant’s
founding affidavit,
the property was purchased by the third
respondent during or about 1993 and has since then been used as a
holiday home by his family
and relatives.
[3] The Johannesburg High Court, on 8 June 2000, granted
judgment by default against the third respondent for payment of the
sum of
R1 144 409, 21 plus interest and costs. On 1 March
2001 Standard Bank Financial Nominees (Pty) Ltd also obtained
judgment
against the third respondent for the payment of R720 441,18.
[4] Mrs Theodosiou states that the third respondent
confided in her during 2001 that he was in financial difficulties and
that he
wanted to sell the property since he could no longer afford
it. As she did not want their family to lose the use of the property
she proposed to the third respondent that he should sell the property
to her daughter ie to his wife to whom she undertook to provide
the
necessary funds. She adds: ‘Since I did not want to exploit his
financial difficulties, I proposed to the third respondent
that we
conduct the sale through an estate agent and that he obtains advice
as to the fair and reasonable market value of the property.’
The
third respondent did so. In a letter dated 26 November 2001 an estate
agent responded: ‘Under existing market conditions, it
is our
opinion that your property should be marketed at R900 000 to
expect offers between R850 000 and R880 000.’
[5] According to Mrs Theodosiou a written agreement of
sale was, pursuant to her advice, concluded between the third
respondent and
his wife Mrs Elizabeth Costas. In this regard she
relies on a document in terms of which the third respondent on 15
November 2001
sold the property to ‘Mrs Elizabeth Costas or such
nominees appointed within 30 days’ for a purchase price of
R860 000.
It provides for the payment of a deposit of R210 000
in cash upon signature and for the payment of the balance of R650 000
upon registration of transfer of the property into the name of the
purchaser. The third respondent agreed to pay ‘agent sales
commission
in an amount of 7.5% including VAT of the purchase price .
. . on the date of signature’. On 4 December 2001 Mrs Costas
nominated
the appellant as the purchaser. Mrs Theodosiou and Mrs
Drakopoulos’ members’ interest in the appellant was registered on
29 January
2002 and they immediately thereafter ‘ratified and
adopted the sale’.
[6] The first respondent became aware of the aforesaid
transaction and its attorneys, in a letter to the third respondent’s
attorneys
advised them of the judgment against the third respondent
and of the first respondent’s intention to attach the property. The
first
respondent thereafter caused a writ of execution against
immovable property to be issued by the registrar of the court a quo
and
on 14 March 2002 the property was attached in execution. Pursuant
to the attachment the sheriff arranged for the sale to take place
on
12 November 2002. On 6 September 2002 Standard Bank Financial
Nominees (Pty) Ltd also attached the property in execution of the
judgment it had obtained against the third respondent.
[7] Notwithstanding the provision in ‘the agreement of
sale’ that the deposit had to be paid upon signature (15 November
2001),
such deposit was only paid in October 2002 by way of a payment
of R100 000 on 14 October 2002 and a payment of R200 000
on
16 October 2002. Mrs Theodosiou instructed the third respondent’s
attorneys to apply an amount of R10 000, which they were
holding
in trust on her behalf, in payment of the balance of the deposit. The
third respondent never requested payment of the costs
incidental to
the transfer and it was only in the founding affidavit in the
application to the court a quo that the appellant tendered
payment of
these costs.
[8] The appellant’s attorneys, on 1 November 2002,
advised the first respondent’s attorneys that the appellant had
purchased the
property, that Mrs Theodosiou was intent on pursuing
the sale, that she had paid certain amounts to give effect to the
transfer of
the property and that such payments were obviously
refundable to her in the event of the sale in execution proceeding.
On 4 November
2002 the appellant’s attorneys again wrote to first
respondent’s attorneys. They recorded that Standard Bank Financial
Nominees
(Pty) Ltd had also attached the property in terms of a
warrant of execution for a debt of R720 041,18 and that the
property
had in terms of an agreement of lease dated 21 May 2002 been
leased to JE Conroy. On 7 November 2002 the appellant’s attorneys
wrote yet another letter to the first respondents’ attorneys. They
demanded the postponement or withdrawal of the sale in execution
alternatively the acceptance of a settlement proposal and stated:
‘
Unless we receive [your agreement to any of the
proposals] at our office, by the time appointed, we will have no
alternative but to
approach the court for urgent relief preventing
the sale in execution . . .’
[9] The appellants’ attorneys also wrote to the
sheriff. They said that the property had been purchased by the
appellant, that the
appellant had performed fully in terms of the
agreement, that the sale of the property could for that reason not
proceed, that the
prospective purchaser should be advised that a
pre-existing sale had been concluded, that any attempt to obtain
transfer would be
resisted and that an application would be brought
to set aside the sale. The first respondent’s attorneys responded
that the sale
would proceed as the first respondent was of the view
that the property’s value exceeded the ‘current purchase price’.
[10] The second respondent purchased the property,
subject to the lease, at the sale in execution for a purchase price
of R1 175 000.
It is this sale that the appellant sought to
have set aside in the court a quo. It alleges in the founding
affidavit that in the
light of the first respondent’s knowledge of
‘the agreement of sale’ between the appellant and the third
respondent the second
respondent’s right to obtain transfer cannot
prevail against the appellant’s earlier right to transfer.
[11] The first respondent contends in its answering
affidavit that the ‘agreement of sale’ amounts to nothing more
than a sham.
In this regard the first respondent refers to the fact
that in terms of the agreement of sale commission in an amount
R64 500
was payable to an estate agent who was not instrumental
in causing the sale, states that the sale was done in an effort to
prejudice
the third respondent’s creditors and to dissipate the
third respondent’s assets at a stage when judgment had been granted
against
the third respondent and that the value of the property was
well in excess of R860 000. For these reasons the first respondent
applied
for the agreement of sale to be set aside.
[12] It is not in dispute that the second respondent did
not know of the agreement of sale when she purchased the property at
the
sale in execution. She only became aware of the alleged sale when
the application in the court a quo was instituted. She contends
that
even if the alleged sale by the third respondent was bona fide,
whatever rights the appellant may have had to the transfer of
the
property terminated on the sale of the property to her at the sale in
execution. She contends, furthermore, that the appellant
waived
whatever rights it might have had to interfere with the transfer of
the property by the sheriff pursuant to the sale in execution.
She
also denies that the agreement of sale was a bona fide transaction.
[13] The court a quo referred to the
maxim
‘
qui prior
est tempore potior est jure’
(‘the
priority rule’) ie the rule that a prior personal right is stronger
than a later personal right but stated that the rule
was subject to
equities and that the competing personal right must have been created
by the same person. It considered that the equities
were against the
appellant in that the agreement of sale was not a bona fide agreement
to sell but that it was entered into in order
to frustrate a later
sale and also in that the appellant failed to stop the later sale.
For this reason there was in the view of
the court a quo no reason to
extend the priority rule to this case where the two competing
personal rights had been created by different
persons namely the
third respondent and the sheriff. In regard to the doctrine of notice
which is to the effect that a real right
1
acquired with knowledge of an
existing personal right may have to yield to the personal right
2
the court a quo held that it appeared
that the appellant acquiesced in the execution sale and allowed it to
proceed, that the inescapable
inference from the papers was that in
an attempt to shield the property from judgment creditors there was
some degree of collusion
which places doubt on the genuineness of the
sale and that undue hardship will be caused to the second respondent
as the bona fide
purchaser of the property, if effect was not given
to the sale in execution. For these reasons the court a quo held that
the prior
personal right should not prevail over the subsequently
acquired real right.
[14] By attaching the property in
execution the first respondent acquired a real right, known as a
pignus judiciale
,
to the property. That real right entitled the first respondent,
subject to certain qualifications, to proceed with the sale in
execution
and to an entitlement to the proceeds of the sale of the
property. However, relying on the doctrine of notice the appellant
submits
that in the light of the fact that the attachment took place
with the knowledge on the part of the first respondent that the
appellant
had purchased the property from the third respondent and
had acquired a personal right against the third respondent for the
delivery
of the property against performance by the appellant of its
obligations, the appellant was entitled to have the attachment set
aside.
In this regard the appellant relies heavily on
Hassam
v Shaboodien
1996
(2) 720 (C) in which Friedman JP with whom Traverso J concurred
disagreed with the following conclusion reached by Nestadt J
in
Reynders v Rand Bank
Bpk
1978 (2) SA 630
(T) at 641G-H:
‘
I am unpersuaded that either in principle or on
authority there is any warrant for extending the rule or applying the
principle, that
knowledge of a prior personal right in respect of
property will destroy the validity of a subsequently acquired real
right in it,
to the case of a judgment creditor levying execution
against the property of his debtor. My conclusion is that such
creditor is entitled
to attach and have sold in execution the
property of his debtor notwithstanding that a third party has a
personal right against such
debtor to the ownership or possession of
such property which right arose prior to the attachment of even the
judgment creditor’s
cause of action and of which the judgment
creditor had notice when the attachment was made.’
[15] In
Reynders
the applicant applied for the setting
aside of an attachment by Rand Bank of a property which in terms of a
prior court order had
to be transferred by her ex-husband to her
minor children, custody of whom had been awarded to her. Nestadt J
referred to ‘the
basic principle of our law that a real right
generally prevails against a personal right (even if it is prior in
time) where they
are in competition with each other in relation to an
asset of a common debtor’
3
and noted that ‘it was clear that
the rule . . . is not of general application where the holder of the
real right had, before he
acquired it, knowledge of such personal
right’.
4
He accepted that the basis of the
principle was that ‘it is a species of fraud to attempt to acquire
a
res
which is known to have been promised
to another’.
5
In this regard he referred to
De
Jager v Sisana
1930
AD 71
at 74 where Curlewis JA referred to the fact that it had been
laid down in various decisions of the courts that a purchaser of
property
‘who buys with the knowledge of the rights of a third
party to or in such property, is bound thereby, and that it would be
a species
of fraud on his part if he attempted to defeat such third
party’s rights’. He also referred, amongst others, to
Ridler
v Gartner
1920 TPD
249
at 259-260 where it was said by Wessels J that there ‘must be
an element of deceit, an element of chicanery in the transaction
before the Court will set it aside on the ground of knowledge’.
6
[16] Nestadt J was, however, of the
view that the conduct of a purchaser with knowledge of the prior sale
of the property to another
could not be equated with that of a
judgment creditor who attached the property in execution of the
judgment debt. In the case of
a double sale, so he reasoned, the
purchaser and the seller voluntarily enter into a type of fraudulent
conspiracy the result of
which is to deprive the first purchaser of
his contractual claim to the property. In the case of an attachment
there is no question
of the debtor and the creditor acting
fraudulently or dishonestly. He added that the debtor presumably
cannot avoid it and the creditor
‘has or might have no option in
order to obtain payment of its debt but to execute against the
property’.
7
For these reasons Nestadt J failed to
see how Rand Bank’s (the creditor’s) knowledge could avail
Reynders (the third party with
a prior personal right).
[17] At the time when
Reynders
was decided there were two earlier
judgments in which the court came to a different conclusion. In
Meyer
v Botha and Hergenroder
1882
Kotze 47
Meyer attached movable property which belonged to Botha but
which had been pledged by notarial deed to a bank but had not been
delivered
to the bank. Meyer was aware of the pledge to the bank and
advanced money to Botha notwithstanding such knowledge. Kotze CJ held
that the right of the bank prevailed. In this regard he referred to
the fact that it was quite clear ‘that knowledge, or notice,
of the
existence of a pledge places a person, who purchases or otherwise
obtains possession of the property pledged, in no better
position
than the debtor and pledgor himself’. However, the same judge
subsequently, in
Van
Niekerk v Fortuin
1913
CPD 457
, held in respect of an application for an order for the
attachment of immovable property belonging to the judgment debtor but
previously
donated to a third party:
‘
It seems to me that the plaintiff being a
judgment creditor, and the property being still registered in the
name of the defendant,
prima facie
the plaintiff has the right to ask that the
property shall be seized in execution unless the party interested can
show that there
are special circumstances why such an order should
not be granted. Here there was an alleged donation prior to the debt,
and there
is nothing to lead me to consider that it was not bona
fide; but under the circumstances of the case that does not seem
sufficient
to deprive the judgement creditor of his right to seize
the property in execution.’
[18] It should be added that in terms of the uniform
rules not even a real right such as a pledge precludes attachment of
a property
subject to that real right. Rule 45 (10) provides that
property subject to a real right of any third person is sold subject
to the
rights of such third person unless he otherwise agrees.
[19] The only other case, pre
Reynders
,
to which we were referred as authority for the proposition that a
judgment creditor may not attach a property in relation to which,
to
his knowledge, a third party has a personal right, is
Hodgson
v Emery
(1902) 23
NLR 360.
Hodgson had attached a horse in execution of a judgment debt
against a third party after having been advised by letter that the
horse,
which belonged to the judgment debtor, had been sold by the
debtor to Mrs Emery. The court held:
‘
It is true that Hodgson was not a purchaser,
but can he be in a better position than a purchaser? If good faith is
required in the
second purchaser, surely it should also be required
in the case of an execution creditor.
So long as the property remained in the possession of the vendor, the
plaintiff would have been entitled to specific performance
and it
seems contrary to right principle that Hodgson should be allowed to
defeat that right with Mr Emery’s letter in his possession.’
[20] Some academic writers criticised
the
Reynders
judgment and expressed the view that
it was wrong.
Van der
Merwe and Olivier
Die
Onregmatige Daad in die Suid-Afrikaanse Reg
4
ed p 277 said:
8
‘
Waar C weet van die bestaan van B se
vorderingsreg, maar nietemin beslaglegging verkry, is sy optrede nie
minder regskrenkend of minder
verwytbaar as in die geval waar hy met
volle kennis die saak wat reeds aan B verkoop is, van A koop en
transport ontvang nie. Daar
die effek van die kennisleer by `n
dubbele verkoping is dat die tweede koper wat transport verkry het,
se eiendomsreg eventueel moet
swig voor die vorderingsreg van die
eerste koper, is dit anomalies dat `n vonnisskuldeiser wat, met
kennis van die bestaan van `n
vroeëre vorderingsreg ten opsigte van
`n saak, op daardie saak beslag gelê het en slegs `n beperkte
saaklike reg aldus verkry het,
in `n sterker posisie verkeer as die
eienaar in die eerste geval.’
[21] Muller ‘Die Kennisleer: Waarom
die Dubbele Standaarde’ 1979
De
Jure
p 284
said at p 288:
‘
[I]ndien `n tweede koper bedrieglik handel
indien hy `n kontrak aangaan in stryd met die eerste koper se
persoonlike reg waarvan hy
bewus is, kan ek moeilik insien hoe die
skuldeiser eerbaar kan handel indien hy beslag lê op die eiendom wat
hy weet reeds verkoop
is aan `n derde persoon. Sal dit enige verskil
maak indien die skuldeiser se beslagleggingsbevel gebaseer is op `n
vonnisskuld wat
spruit uit `n koopkontrak met die skuldenaar wat
aangegaan is nadat die skuldenaar die saak reeds verkoop het aan `n
derde?’
[22] In
Kazazis
v Georghiades
1979
(3) SA 886
(T) at 893 Spoelstra AJ with reference to the passage from
De Jager v Sisana
and certain common-law authorities,
stated that the inference of fraud is drawn from the mere fact of
knowledge on the part of the
second purchaser of the prior
purchaser’s right. No purpose or motive that the subsequent
purchaser intended to frustrate the first
purchaser’s right need be
proved. In
Associated
South African Bakeries (Pty) Ltd v Oryx & Vereinigte Bäckereien
(Pty) Ltd
1982 (3)
893 (A) at 910E-G Van Heerden JA agreed and stated: ‘Bedrog word
dus uit blote kennis regtens gekonstrueer.’ Nestadt
J, in so far as
he held that a type of fraudulent conspiracy is a requirement for the
operation of the doctrine of notice, was therefore
authoritatively
held to have been wrong.
[23] In
Hassam
v Shaboodien
1996
(2) SA 720
(C) at 728D-F Friedman JP, referring to the abovementioned
authorities, disagreed with the conclusion reached by Nestadt J. In
line
with the criticism of the academic writers and the judgment in
Hodgson v Emery
he added that there did not appear to
be any justification for the limitation on the doctrine of notice
suggested by
Reynders
and for excluding a sale in execution
from its operation. In dealing with the argument that when a judgment
creditor causes a judgment
debtor’s property to be attached and
sold in execution, he is doing something that the law allows him to
do, Friedman JP said:
‘
It is correct that the law allows a judgment
creditor to attach the judgment debtor’s property and to have it
sold in execution.
Non constat
,
however, that the judgment creditor is entitled to do so if his
action in so doing amounts to what the law regards as a species
of
fraud.’
[24] However, it does not follow that
because an inference of fraud on the part of a second purchaser is
drawn from the mere fact
of knowledge of a prior sale that an
inference of fraud likewise has to be drawn from such knowledge on
the part of an execution
creditor who attaches property which his
debtor has sold in execution of a judgment. In terms of the common
law such an execution
creditor could, with some exceptions, attach
the assets of which his debtor was the owner in order to obtain
satisfaction of his
debt.
9
Effect is given to that right in s 36
of the Supreme Court Act 59 of 1959 read with rule 45 of the Uniform
Rules. Rule 45 provides
that a party in whose favour any judgment of
the court has been pronounced may, at his own risk, sue out of the
office of the registrar
one or more writs for execution thereof,
provided, subject to certain exceptions, that no such process may be
issued against the
immovable property of any person until execution
has been levied in respect of his movable property and the Registrar
is satisfied
that the debtor does not have sufficient movable
property to satisfy the writ. Section 45 of the Act provides that the
sheriff should
execute all writs of the court directed to him. There
are certain statutory exceptions to this general right of an
execution creditor
to execute against the assets of his debtor.
10
One such statutory exception is
contained in s 39 of the Act. It provides that the sheriff may not
seize in execution the items listed
in the section such as bedding
and wearing apparel, tools to a certain value, food or drink to a
specified extent, professional books
to a certain value and certain
arms and ammunition. Not surprisingly no mention is made of property
subject to a personal right of
which the judgment creditor is aware.
[25] The third respondent sold the property to the
appellant but has not transferred it. He is still the owner of the
property and
it is still an asset in his estate to which creditors
are entitled to look for the satisfaction of their claims. Should he
be sequestrated
the property will fall into his insolvent estate and
the trustee, on the instructions of the creditors, would be entitled
to either
enforce the agreement of sale or to cancel it and resell
the property.
[26] It follows that unlike the purchase of a property
with knowledge of a prior sale, the first respondent did what,
according to
the Uniform Rules, he was entitled to do. There can be
no question of regarding his actions as a species of fraud. To extend
the
doctrine of notice to situations such as the present would open
the door to unscrupulous debtors to fabricate personal rights which
would be difficult for a creditor to expose for what they are. It
will discourage prospective purchasers from taking part in sales
in
execution where a claim to a prior personal right is made by a third
party. Very few such prospective purchasers would be prepared
to
investigate the validity of such a claim by a third party and even
less will be prepared to involve themselves in litigation against
such a third party. In the result, to extend the doctrine of notice
to situations such as the present will create, to the detriment
of
the creditor as well as the debtor, uncertainty as to the title
obtained at a sale in execution and so reduce the effectiveness
of
such a sale, the purpose of which is to obtain satisfaction of a
judgment debt.
[27] For these reasons I am of the view that the
doctrine of notice should not be applied to the present situation and
thus that knowledge
on the part of the first respondent of the sale
of the property to the appellant did not affect the validity of the
subsequent attachment
and sale in execution thereof. The court a quo,
therefore, correctly dismissed the appellant’s application.
[28] The application for leave to appeal is dismissed
with costs.
____________________
P E STREICHER
JUDGE OF APPEAL
CONCUR
:
MTHIYANE JA)
MLAMBO JA)
MALAN AJA)
FARLAM JA
[29] I have had the advantage of reading the judgment
prepared by Streicher JA in this matter. As I am of the view that the
application
for leave to appeal should be allowed and the appeal in
so far as it is related to the first respondent upheld it is
necessary for
me to state my reasons for coming to this conclusion.
[30] I do not think that the court below was correct in
holding that the agreement of sale in terms of which the appellant
purchased
the property from the third respondent was not a
bona
fide
agreement because it was entered into in
order to ensure that the family would not lose the use of the
property. Nor do I think that
it can be said that the appellant
acquiesced in the execution sale because it did not apply to court to
stop it before it took place.
It had communicated its attitude to the
first respondent’s representatives before the execution sale took
place and there was no
basis for finding that its attitude had
changed thereafter. As far as the price at which the appellant
brought the property is concerned,
there is no basis for holding that
it was not an appropriate price when the contract upon which the
appellant relies was concluded.
[31] In view of the fact, however, that the execution
sale took place pursuant to two writs of execution, the second of
which was
issued by the registrar pursuant to a judgment obtained by
Standard Bank Financial Nominees (Pty) Ltd (which unlike the other
judgment
creditor, the first respondent, was not aware of the sale to
the appellant when it caused the property to be attached), I do not
think that any legal basis exists for setting aside the sale in
execution or for ordering the third respondent to transfer the
property
to the appellant against payment of the purchase price set
forth in the agreement of sale between them and the costs of
transfer.
As I see the matter the execution sale was valid because of
the fact that it took place pursuant to the writ issued to the
Standard
Bank Financial Nominees (Pty) Ltd and the second respondent
is accordingly entitled to have the property transferred to her,
against
payment of the price realized at the execution sale and the
transfer costs. This means that the only question to be considered is
whether the appellant was entitled to an order setting aside the
attachment of the property at the instance of the first respondent.
[32] As appears from my colleague’s judgment the
question presently under consideration was answered in the negative
by Nestadt
J in
Reynders v Rand Bank Bpk
1978
(2) SA 630
(T) and in the affirmative by Friedman JP (with whom
Traverso J concurred) in
Hassam v Shaboodien
1996 (2) SA 720
(C).
[33] The reasoning in the
Reynders
case, appears from the following passage of
the judgment (at 637 F-H):
‘
I do not think that the argument of counsel for
the applicant founded on the double sales analogy is a good one. I
think, with respect
to the eminent author, that the statement of
Wille
[
Principles
of South African Law,
6 ed, at 169], to
which I have referred, is too widely worded and should not be applied
without qualification. In my view the situation
of someone purchasing
or taking delivery of an article which he knows has been sold to a
third party cannot be equated with that
of a judgment creditor. In
the case of a second sale, the seller and the
mala
fide
second purchaser having knowledge,
whether at the time he purchases or when he takes delivery,
voluntarily enter into a type of fraudulent
conspiracy, the necessary
and inevitable result whereof is to deprive the first purchaser of
his contractual claim to the property.
In the case of an attachment,
whilst the consequences to the first purchaser might be the same,
there is no question of the debtor
and judgment creditor in any way
acting fraudulently or dishonestly.’
[34] It was pointed out in the
Hassam
case (at 726 J – 727 C) that it is not
necessary, in a double sale case, to prove ‘a type of fraudulent
conspiracy’. All that
has to be proved is knowledge of the prior
sale. As was said by Van Heerden JA in the majority judgment in
Associated South African Bakeries (Pty) Ltd v
Oryx & Vereinigte Bäckereien (Pty) Ltd
1982
(3) SA 893
(A) at 910 G-H:
‘
Dit blyk dus dat om van bedrog of
mala
fides
binne die raamwerk van die
kennisleer te praat – altans vir sover dit ’n verkoop in stryd
met ’n voorkoopsreg aangaan – oorbodig
is en moontlik verwarring
kan skep. Die juiste siening na my mening is dat vanweë die
kennisleer aan ’n persoonlike reg beperkte
saaklike werking verleen
word.’
[35] It follows, in my view, that the main consideration
on which the
Reynders
judgment
was based has been shown to be erroneous.
[36] The judgment in the
Reynders
case was trenchantly criticised by Van der
Merwe and Olivier.
Die Onregmatige Daad in die
Suid-Afrikaanse Reg,
6 ed, at 274-276. After
the passage quoted by my colleague at para [20] of his judgment, the
learned authors said (at 275-6):
‘
Aangesien op die gebied van die privaatreg
beweeg word, kan die
ratio
vir
die kennisleer in ieder geval nooit bestraffing van bedrieglike of
oneerlike optrede wees nie,
maar wel die
beskerming van vroeër gevestigde vorderingsregte teen skuldige
inbreukmaking daarop.
Soos die regter
self toegee, is die benadeling van die draer van die eersgevestigde
vorderingsreg steeds dieselfde hetsy lewering
ingevolge ’n tweede
verkoping hetsy beslaglegging ter afdwinging van ’n latere
vorderingsreg plaasvind. Daarom gaan ook die volgende
stelling van
die regter nie op nie:
“
I would pause here to stress that different
considerations might well apply in a case where the judgment creditor
and judgment debtor
fraudulently conspire to defeat the prior
personal right of a third party to claim property of the debtor by,
for example, the fabrication
of an indebtedness.”
Of A en C nou “fraudulently conspire” om B se reg te verkort dan
wel of C in opsetlike miskenning van B se reg sy eie regsposisie
probeer verstewig, gaan dit telkens om ’
n skuldige inbreukmaking
op B se vorderingsreg en is aanwending van die beginsels van die
kennisleer gepas.
Dus kan die benadering van ons howe in ’n
geval soos die onderhawige nie onderskryf word nie. Dit
verteenwoordig ’n onhoudbare
beperking op die aanwendingsterrein
van die kennisleer en is ’n negering van grondbeginsels.’
(The
italics are mine.)
This criticism of the reasoning in the
Reynders
case was expressly approved by Friedman JP in
the
Hassam
case at 728
D – E.
[37] In my view it is important to stress that it is not
suggested that the third respondent is insolvent and that if the
execution
effected at the instance of the first respondent is set
aside it will not be able to recover what it is owed by the third
respondent.
If he were to be sequestrated then, clearly, the
appellant would not be able to claim transfer of the property: see,
eg,
Harris v Buissine’s Trustee
(1840)
2 Menz 105.
It follows that the main consequence of dismissing the
appellant’s appeal in so far as it relates to the first respondent
would
be to hold that the appellant’s as yet unregistered
ius
in personam ad rem acquirendam
11
would be able to be defeated by a party who had prior
knowledge of it, with the result that it would lose the ‘beperkte
saaklike
werking’ against those with knowledge of the right (
cf
the
Amalgamated South African
Bakeries
case at 910 H). I do not think that
such a decision would be legally sound. I do not agree that such a
conclusion is a necessary inference
from Rule 45 of the Uniform
Rules: in any event the common law on the point cannot be overridden
by a rule of court.
[38] Furthermore I do not think it is correct to regard
this as a case where the court is called upon to
extend
the doctrine of notice to cases of execution
where the execution creditor had knowledge of the right. In my view
it is more accurate
to say that what the first respondent is asking
the court to do is to create an exception and to
exclude
its operation in such cases. I am not sure that this
court has the power to uphold such an exclusion but even if it has I
do not think
that the case in favour thereof has been made out. The
mere fact that some persons may fraudulently claim rights which would
enjoy
‘beperkte saaklike werking’ where the judgment creditor had
been told about them in advance cannot justify depriving someone
of
such rights where there is no fraud and he or she genuinely possesses
such rights.
[39] For these reasons I am of the view that the
following order should be made:
1. The applicant is granted leave to appeal against the
order of the court
a quo
in
so far as it relates to the first respondent.
2. The appeal in so far as it relates to the first
respondent is allowed.
3. The first respondent is ordered to pay one half of
the applicant’s costs on the application for leave to appeal.
4. The applicant is ordered to pay the costs on the
application for leave to appeal of the second respondent.
5. The order of the court
a quo
is altered to read:
‘
1. The attachment of the property
described in paragraph 7.1 of the applicant’s founding affidavit at
the instance of the first
respondent is set aside.
2. The first respondent is ordered to pay one half of
the applicant’s costs.
3. The relief sought by the applicant in prayers 2 and 3
of its notice of motion is refused,
4. The applicant is ordered to pay the costs of the
second respondent.’
___________________
IG FARLAM
JUDGE OF APPEAL
1
By
attaching the property the first respondent acquired a real right to
the property (see para [14] below).
2
Lubbe
‘A doctrine in search of a theory: reflections on the so-called
doctrine of notice in South African Law’
(1997)
Acta
Juridica
246
p 247.
3
Reynders
634F-G.
4
Reynders
636C.
5
Reynders
637A.
6
Reynders
637E.
7
Reynders
637H.
8
Repeated
in 6ed p 275.
9
The
South African Tattersall’s
Subscription Rooms v Myers Brothers
1905
TS 769
at 771; Van Zyl
The Judicial
Practice of South Africa
Vol 1 4 ed p
266.
10
Herbstein
and Van Winsen
The Civil Practice of
the Supreme Court of South Africa
4 ed
(1997) p 774-775.
11
For
a recent historic and comparative discussion of the
ius
ad rem
doctrine see R Michaels,
Sachzuordnung durch Kaufvertrag,
Berlin, 2002.