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[2015] ZAGPPHC 259
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Rigacraft CC v Ramachela and Another (6967/2014) [2015] ZAGPPHC 259 (8 May 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
/ES
(
GAUTENG
DIVISION, PRETORIA
)
CASE
NO: 6967/2014
DATE:
8/5/2015
IN
THE MATTER BETWEEN
RIGACRAFT
CC
............................................................................................................
APPLICANT
(Registration
number 2009/184891/23)
AND
PHOLOSO
JASON
RAMACHELA
....................................................................
1
ST
RESPONDENT
CITY
OF TSHWANE METROPOLITAN
MUNICIPALITY
AUTHORITY
..........................................................................
2
ND
RESPONDENT
JUDGMENT
PRINSLOO,
J
[1] The
applicant applies for the eviction of the first respondent, and
whoever occupies the property known as 12 Flatcrown Street,
Heuweloord, Extension 2 ("the property") through him, from
the property.
[2] The
applicant is the owner of the property and relies,
inter
alia
, on the provisions of the
Prevention of Illegal Eviction from and Unlawful Occupation of Land
Act no 19 of 1998 ("the Act")
and also commonly known as
"PIE".
[3] The
second respondent municipality was joined because of its interest in
the matter by virtue of the provisions of PIE, but
did not take an
active part in the proceedings. The applicant has complied with
the requirements of section 4(2) of PIE,
in that proper notice of the
eviction was given.
[4]
Before me, Mr Vorster appeared for the applicant and Mr Ben-zeev
appeared for the first respondent.
[5] A
counter-application instituted by the first respondent, aimed at
joining certain parties to the proceedings and at obtaining
certain
declaratory relief, was not proceeded with.
Brief
synopsis: an eviction application with a difference
[6] The
first respondent's case is that the applicant is not the true owner
of the property, despite the fact that it was registered
in the
applicant's name, because of an earlier involvement of the so called
"Brusson scheme".
[7] The
first respondent therefore argues that the applicant failed to
discharge the
onus
of proving that it is entitled to evict the first respondent and
those who occupy with him, and to show that it is just and equitable,
in the circumstances, and in the interests of justice, for the
eviction to be granted.
Background
and chronological sequence of events, and more about the Brusson
scheme
[8] The
undisputed evidence of the first respondent, a 25 year old male, is
that he has been living on the property since 1996,
a period of some
19 years. Until recently, his 63 year old mother and his
older sister of 29 and two younger brothers
of 17 and 14 as well as a
younger stepsister of 10 also lived on the property.
His late
father, Mohale Rufus Ramachela ("the father") also lived on
the property until his death in 2012. It is the first
respondent's
case that the deceased estate of the father is still the true owner
of the property.
The 10
year old stepsister was staying with her grandmother in Vereeniging
at the time when the opposing affidavit was signed on
25 May 2014 and
the mother and three siblings had temporarily moved away from the
property because the electricity had been cut
off, but were planning
to return to the property in June 2014. It is not clear whether
this in fact happened.
[9] What
follows is a brief account by the son (the first respondent) of how
the father got involved with the Brusson scheme and
how that
involvement impacted on the family's undisturbed possession and use
of the property. The property had been registered
in the name of the
father until he got involved with the Brusson scheme.
[10] It
must be recorded right away that the first respondent's evidence in
this regard is largely hearsay evidence based on what
the father told
him during the course of many discussions and also on information,
based on notes and other documents, the first
respondent obtained
from a number of attorneys, attached to the Legal Resources Centre in
Johannesburg, who represented the father
during the course of his
involvement with the Brusson scheme. In this regard, no less
than three attorneys, attached at the
relevant period to the Legal
Resources Centre, deposed to confirmatory affidavits, stating that
they agree with the contents of
the opposing affidavit.
[11] It
should also be recorded that the first respondent's evidence on this
subject is, by and large, undisputed. The best the
applicant could
do, was to offer arguments about the hearsay nature of the evidence
and to make submissions about the authenticity,
or lack thereof, of
documents signifying the father's involvement with the Brusson
scheme.
[12] In
2007 the father needed financial assistance to repair and renovate
his house on the property. A friend advised him
to approach a
company Brusson Finance (Pty) Ltd ("Brusson") and he did
so, seeking a loan of R300 000,00 which he
would repay in
instalments of R5 000,00 per month, the monies being debited
against his account directly by Brusson.
[13]
Brusson faxed the father three documents: an offer to purchase, an
instalment sale agreement and a memorandum of agreement
for him to
sign. While he was concerned about completing blank documents
he had no other option if he was to obtain a loan.
Ultimately
he received a loan amount of R222 000,00.
[14] At
this point it is convenient to make a few remarks about the Brusson
scheme which, as I will point out, has been held to
amount to a
simulated transaction which is fraudulent, and also void for
non compliance with the provisions of the National
Credit Act,
no 34 of 2005 ("the NCA"). Brusson took advantage of
home owners who did not have the financial muscle
or credit record to
obtain their own finance.
[15]
Broadly speaking, the following can be said about the Brusson scheme:
Brusson
perpetrated a mortgage fraud scheme in which it provided loans to
individuals (the "
clients
")
by taking their property for security and using the good name of a
third party (the "
investor
")
to obtain a mortgage bond from a financial institution.
The
scheme operated on the basis of three documents that the clients were
required to sign:
(i)
an offer to purchase in which the client's property was sold to the
investor;
(ii) a deed of sale in which the client's property was
sold back to the client on an instalment sale agreement; and
(iii)
the memorandum of agreement which governed the entire scheme.
Brusson
obtained the signatures of clients in order to have the property
transferred to the investor by misleading its clients as
to the
nature of the documents. At any rate the documents that the
clients signed were only a simulation and the true intention
is
belied in a reading of all three of the documents together, and
especially upon a reading of the memorandum of agreement, as
was
explained in the opposing affidavit and as was neatly summarised by
Mr Ben-zeev in his comprehensive heads of argument.
It is
useful to add that, according to what the first respondent says in
his opposing affidavit, supported by the confirmatory affidavits
of
his attorneys, that the latter are inundated with queries from
clients who faced the prospect of eviction as a result of their
participation in the Brusson scheme. The attorneys estimate
that there are approximately 900 homes throughout the country
that
are affected by the scheme. This translates to thousands of
people that potentially face eviction as a result of the
actions of
the Brusson scheme. The attorneys, themselves, are handling
many claims flowing from the Brusson scheme and at
least three of
them have been before the courts.
On 22
July 2010, the Free State High Court, in an unreported judgment of
Ditshego and others v Brusson Finance
(Pty) Ltd and others
, case no
5144/2009, analysed the Brusson scheme and found it to be
representative of a simulated transaction and declared it to
be
illegal and void. The analysis of the transaction in
Ditshego
materially corresponds with the facts of the present case.
[16] It
is to these facts which I now return briefly:
Brusson
misled the father into signing the documents mentioned above which
the father believed he needed to sign in order to obtain
a loan from
Brusson.
The
investor, who obviously worked in collaboration with Brusson, and who
was at that stage one T K F Shadung, or
Brusson on
behalf of the investor, would then apply to the financial institution
for a loan, which is paid immediately to Brusson.
Upon
obtaining this loan, Brusson would pay over a portion of the amount
to the client after taking a share for itself. The
client would
then repay to Brusson the monthly amount set out in the written
agreements (here R5 000,00 per month initially).
In the
event of the client defaulting with the monthly payments, Brusson
would take ownership of the property from the investor
and require
the clients to vacate the property. This portion of the scheme
was held by the Free State court, in my respectful
view quite
correctly, to amount to nothing less than an unlawful
pactum
commissorium
.
[17] As was
held by the Free State court, and as was submitted by counsel for the
first respondent before me, the entire transaction
is simulated.
What appears from the documents is a sale and reverse sale in
instalments of the property. However, it
is clear from a
reading of all the documents together that the true nature of the
transaction was to enter into a loan agreement
that was secured
against the property. The loan agreement was facilitated and
managed by Brusson. What appears from
the documentation is the
following:
1. the offer to purchase is abnormal in that the
investor (the "purchaser") in the offer to purchase does
not pay transfer
costs and the client (the "seller")
retains occupation of the property;
2. the deed of sale is abnormal in that:
2.1
the payments are made to Brusson and not to the seller;
2.2 the "purchaser" pays the relevant taxes
and other administrative costs to Brusson; and
2.3 Brusson obtains a copy of any notices exchanged
between the parties;
3. the memorandum of agreement has the following
indications of the true intention of the parties:
3.1 Brusson provides the investor with a guarantee on
the obligations relating to bond instalments, rates and taxes and
other amounts
and binds itself as "surety and co-principal
debtor" in favour of the client;
3.2 in the event of a "default" by the client,
the investor is required to sell the property to Brusson, as I have
pointed
out, and the client is required to "vacate" the
property; and
3.3
the client is permitted to sell the property where it has the prior
written consent of Brusson, subject to the conditions imposed
by
Brusson and only if the client mandates Brusson as its agent to sell
the property.
[18] As
a result of the scheme the clients are led to believe that they are
transacting with Brusson, when in fact their property
is held as
security by a party that they are unaware is a party to the
transaction at all. The mortgage loan agreement with
the bank
is equally tainted by the absence of the consensus of the client, in
this instance the father, who is the true owner of
the property.
[19]
Apart from the fact that the Free State court held that the
transaction amounts to an unlawful
pactum
commissorium
, it was also held by that
court, correctly, that the transaction is unlawful and void because
it flies in the face of the provisions
of section 89 of the NCA
because Brusson, which facilitated the scheme whereby it provided
credit to hundreds of consumers,
was not registered in terms of
section 40 of the NCA.
[20]
Moreover, the manner in which the transaction was structured,
rendered it unlawful in terms of the provisions of section 90
of the
NCA.
In terms
of section 90(3) of the NCA, in any credit agreement, a provision
that is unlawful in terms of section 90, is void as from
the date
that the provision purported to take effect.
[21]
Over the years, and fraudulently, agents of Brusson, from time to
time, informed the father that he had fallen in arrears with
his
payments (which Brusson was authorised to deduct from the father's
bank account on a monthly basis) and threatened that the
property
would be sold. The father, none the wiser, increased the
payments on a number of occasions. Ultimately, in
exasperation,
the father went to the attorneys aforementioned for assistance and
this is when the existence of the Brusson scheme
became known to him.
[22] In
the interim period, and after the 2010 liquidation of Brusson, this
court authorised the registration of a caveat over all
the affected
properties, or, perhaps, some of them, restraining interested parties
from alienating the properties pending the outcome
of the relevant
disputes.
On 27
February 2013, this court, at the instance of the liquidators of
Brusson, authorised the latter to cancel the caveats or interdicts
authorised earlier, on 30 August 2010.
The
property now under discussion was one of those in respect of which
the caveat was lifted. It was declared by the court
that those
particular properties do not form part of the insolvent estate of
Brusson. The court also stipulated that no order
was made in
respect of the validity of the mortgage bonds passed over the
properties and some of the related loan agreements.
[23]
When the caveat was lifted over the property, the creditor in terms
of the mortgage bond, First National Bank, proceeded to
execute.
By then,
Brusson, fraudulently in terms of the "transaction", had
already transferred the property to the aforesaid Shadung
in 2007
and, from Shadung, it was transferred to another "investor"
by the name of P J S van Eeden.
This happened in
2009.
While
the property was registered in the name of Van Eeden, and unbeknown
to the father's attorneys, or the father for that matter,
the
property was sold in execution to the applicant on 15 July
2013. This was after the passing of the father.
The
father died intestate, and it appears that no executor has as yet
been appointed to administer the estate.
[24]
When the father's attorneys got wind of the sale in execution, they
wrote a lengthy letter, on 30 July 2013, to the Sheriff
of
Centurion who conducted the execution sale. In the letter
they explained the background of the case including the
father's
unfortunate involvement with the Brusson scheme, the finding in the
Ditshego
judgment, details of other litigation that was pending as a result of
the activities of the Brusson scheme and other related facts.
They requested the Sheriff not to proceed with the execution or any
eviction proceedings. They recorded that they were acting
for
the first respondent who was then the occupier of the property (and
still is) and that this was his primary residence.
They pointed
out that the lifting of the caveat by this court in February 2013 did
not represent any authority to sell the properties.
They
suggested that any efforts to evict the first respondent would have
to be in terms of the requirements and provisions of PIE.
There
was no answer to this letter.
On the
same date the first respondent's attorneys wrote a similar letter to
First National Bank's attorneys. This also went
unanswered.
On the
same date the first respondent's attorneys wrote a similar letter to
the applicant. In answer thereto, the applicant's
attorney, in
August 2013, responded by stating "please take note that our
client will proceed to take transfer of the property
mentioned".
On 6
September 2013 the first respondent's attorneys replied to the
applicant's attorney by means of a lengthy letter once again
dealing
with the background of the case. They pointed out that the
Brusson scheme was declared illegal in the
Ditshego
case and also listed the reasons for the finding by the Free State
court, including that the scheme was an illegal
pactum
commissorium
and also flew in the face
of the relevant provisions of the NCA. They pointed out that
there was pending litigation involving
other victims of the Brusson
scheme. They suggested that the first respondent had the right
to remain on the property pending
finalisation of the litigation and
also that any efforts to evict the first respondent ought to take
place in terms of PIE.
They made it clear that such proceedings
would be opposed.
It is
unfortunate that this reasonable and detailed letter went
unanswered. The applicant and its attorneys simply went ahead
and arranged for the applicant to take transfer of the property on
12 December 2013.
What is
worse, and to be frowned upon, is the fact that the applicant, in the
founding papers, did not mention a single word of
these involvements
featuring the Brusson scheme, its impact on the father and also on
the subsequent execution and sale of the
property.
What is
plain, is that the applicant and its attorneys were duly apprised of
the real facts of the case and so was the bond holder,
the First
National Bank. Any suggestion by the applicant that the first
respondent should have joined the latter as a party
to these
proceedings is, in my view, ill-founded. The first respondent
is simply opposing the eviction application.
If such a joinder
was required, it would have been up to the applicant to do so.
[25] In
concluding this introduction and chronological account of events, I
make the following further remarks:
1. I have no hesitation in exercising my discretion in
favour of allowing the hearsay evidence dealing, mainly, with the
father's
involvement with the Brusson scheme. I derive this
discretion from the provisions of
section 3(1)(c)
of the
Law of
Evidence Amendment Act no 45 of 1988
. It is not necessary to
revisit all those provisions. The father upon whose credibility
the probative value of the
evidence depends cannot testify.
Documentation is attached to the opposing affidavit, emanating from
Brusson, which clearly
illustrates the involvement of the father.
Like many other innocent home owners, the father fell victim to the
fraudulent
Brusson scheme. It is in the interest of justice to
allow the evidence, as I do.
2. The applicant chose to approach the court by way of
motion proceedings, well knowing the true history of the case after
having
received correspondence from the attorneys representing the
first respondent. The applicant chose not to deal with this in
the founding papers. This application for final relief must, in
any event, be decided on the version of the first respondent
together
with allegations by the applicant which are not disputed. See
the well-known principle laid down in
Plascon-Evans Paints v Van
Riebeeck Paints
[1984] ZASCA 51
;
1984 3 SA 623
(AD) at 634E-H and 635B-D.
The version of the first respondent is in any event, for practical
purposes, undisputed and ought
to be accepted for that reason as
well.
3. For purposes of its reliance on PIE, it was argued on
behalf of the applicant that its case was fortified by the provisions
of
section 4(7)
of PIE which read as follows:
"If an unlawful occupier has occupied the land in
question for more than six months at the time when the proceedings
are initiated,
a court may grant an order for eviction if it is of
the opinion that it is just and equitable to do so, after considering
all the
relevant circumstances, including,
except where the land
is sold in a sale of execution pursuant to a mortgage
, whether
land has been made available or can reasonably be made available by a
municipality or other organ of state or another
land owner for the
relocation of the unlawful occupier, and including the rights and
needs of the elderly, children, disabled persons
and households
headed by women." (Emphasis added.)
In
my view this argument is misplaced. On my understanding of this
case, the first respondent and, for that matter, his siblings
and
mother, are not unlawful occupiers as defined in PIE.
Consequently, the rider in
section 4(7)
, such as it is, does not
serve to fortify the case of the applicant.
The
onus
in eviction applications
[26] Counsel
for the first respondent referred me to the case of
City of
Johannesburg v Changing Tides 74
2012 6 SA 294
(SCA). At
314B-E the following is said:
"The
implication of this is that, in the first instance, it is for the
applicant to secure that the information placed before
the court is
sufficient, if unchallenged, to satisfy it that it would be just and
equitable to grant an eviction order. Both
the Constitution and
PIE require that the court must take into account all relevant facts
before granting an eviction order.
Whilst in some cases it may
suffice for an applicant to say that it is the owner and the
respondent is in occupation, because those
are the only relevant
facts, in others it will not. One cannot simply transpose the
former rules governing
onus
to a situation that is no longer governed only by the common law but
has statutory expression. In a situation governed
by
section 4(7) of PIE, the applicant must show that it has complied
with the notice requirements under section 4 and that the
occupiers
of the property are in unlawful occupation. On ordinary
principles governing
onus
it also has to demonstrate that the circumstances render it just and
equitable to grant the order it seeks. I see no reason
to
depart from this. There is nothing unusual in such an
onus
having to be discharged."
[27]
Given the circumstances of this case, and the approach to be adopted
when deciding an application for final relief on affidavit,
I am not
persuaded that the
onus
was discharged by the applicant. Where the father was deprived
of his property through a fraudulent scheme which was void
ab
initio
, as illustrated, I cannot see
how it can be considered to be just and equitable to evict the first
respondent, who has been staying
on the property for some 19 years,
and his siblings and mother.
[28]
More details about the legal position, under these circumstances,
will be set out hereunder.
[29]
Inasmuch as it was argued on behalf of the applicant that the first
respondent does not have the necessary
locus
standi
to resist this application (the
argument may have been aimed mainly at the launching of the
counter-application which has been
withdrawn) I am of the view
that the first respondent has a real and substantial interest in the
outcome of the case, for
obvious reasons, and, as such, has the
necessary
locus standi
to conduct the defence.
The
property was never validly transferred to the investors
[30] Counsel
for the first respondent argued, correctly in my view, that there are
two requirements for the passing of ownership
of immovable property:
first, at the moment of passing ownership, the transferor must have
the intention of transferring ownership,
and the transferee must have
the intention of taking transfer of ownership.
Second,
the passing of ownership must be registered in the Deeds office.
[31] The mere
registration of transfer is insufficient: ownership does not pass
without the requisite intention by both parties.
In
Legator
McKenna Incorporated and another v Shea and others
2010 1 SA 35
(SCA) the learned Judge of Appeal sets out this two fold test as
follows at 44G-J:
"In
accordance with the abstract theory (
my
note
: of transfer, including the
transfer of immovable property) the requirements for the passing of
ownership are two-fold, 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 (here
follows a reference to some reported judgments).
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 ..."
[32] In
this case, although the property was registered as transfered from
the father to the investor (and later, it seems, to a
second
"investor", Van Eeden), the father never intended to
transfer the property as repeatedly stated by the first respondent,
which version must be accepted, and, on the overwhelming
probabilities given the nature of this case, is the correct version.
Moreover, the "investor" never intended to take ownership
of the property. This much appears from the structure
of the
fraudulent scheme, to which I have referred in some detail. At
all relevant times the father believed that he was
simply entering
into a loan agreement. He never contemplated the transfer and
resale of the property which, as described,
was a simulation, and a
fraudulent, unlawful one at that.
[33] In
the result, so counsel for the applicant argued, in my view
correctly, the purported transfer to the "investors",
and
the mortgage bond that led to the execution against the property are
void, and every subsequent transfer of the property must
fall away.
This was definitively established by the Supreme Court of Appeal in
the case of
Nedbank v Mendelow
2013 6 SA 130
(SCA) which involved the transfer of a fixed property,
and subsequent registration of a mortgage bond, on the strength of a
forged
signature on a deed of sale.
At
135E-136A, the following is said:
"This
court has recently re-affirmed the principle that where there is no
real intention to transfer ownership on the part
of the owner or one
of the owners, then a purported registration of transfer (and
likewise the registration of any other real right,
such as a mortgage
bond) has no effect. In
Legator
McKenna Incorporated and another v Shea and others
2010 1 SA 35
(SCA) at paras [21] and [22] Brand JA confirmed,
first, that the abstract theory of transfer of ownership applies to
immovable
property, and, second, that if there is any defect in what
he termed the 'real agreement' – that is, the intention on the
part of the transferor and the transferee to transfer and to acquire
ownership of a thing respectively – then ownership will
not
pass despite registration. Thus while a valid underlying
agreement to pass ownership, such as a sale or donation, is
not
required, there must none the less be a genuine intention to transfer
ownership. This principle was unanimously approved
in
Commissioner of Customs and Excise v
Randles Brothers and Hudson Ltd
1941 AD
369
and has been followed consistently since then.
However,
if the underlying agreement is tainted by fraud or obtained by some
other means that vitiates consent (such as duress or
undue influence)
then ownership does not pass:
Preller
and others v Jordaan
1956 1 SA 483
(A)
at 496. That principle was applied recently by this court in
Meintjes NO v Coetzer and others
2010 5 SA 186
(SCA) paragraph [9] and
Gainsford
and others NNO v Tiffski Property Investments (Pty) Ltd and others
2012 3 SA 35
(SCA) paras [38] and [39]."
Conclusion
[34] In
view of the aforegoing, it appears that the purported transfer of the
father's property to the "investor" (and
his successor, Van
Eeden) as well as the registration of the mortgage bond had no effect
and ownership did not pass to the "investors".
[35]
From this it must follow that the property still belongs to the
deceased estate of the father so that the executor of that
estate, if
and when appointed, should be entitled to vindicate the property in
these circumstances where, due to fraud and the
absence of a real
agreement to transfer, and non-compliance with the NCA, ownership did
not pass to the investors on whose behalf
the bond was registered.
The father never intended to pass ownership and his purported consent
to the transfer was vitiated
by Brusson's fraud.
[36] As
was held in
Mendelow
,
because ownership had not passed, the bond registered by the bank was
invalid. Similarly, the "investors" never
became the
true owner or owners of the property, and accordingly could not
mortgage the property. Nor could Brusson do so
on their
behalf. The applicant cannot vindicate property where it is not
the true owner thereof.
[37] Mr
Ben-zeev also referred me to the recent case of
Quartermark
Investments (Pty) Ltd v Mkhwanazi and another
2014 3 SA 96
(SCA) which also involved a case where the respondent
had been fraudulently misled into believing that she was applying for
a loan
whereas she was persuaded to sign papers leading to the sale
of the property. She had no intention to transfer the property.
It was
held, at 105B-D, that the aggrieved person was entitled to
vindicatory relief and was not required to tender restitution.
[38] In
this matter, I was not requested to deal with the issue of
restitution, and refrain from doing so.
[39] In
all the circumstances, I have come to the conclusion, and I find,
that the eviction application must fail.
The
costs
[40] I
see no reason why the costs should not follow the result of the case.
The
order
[41] I make
the following order:
1.
The application is dismissed.
2.
The applicant is ordered to pay the costs.
W
R C PRINSLOO
JUDGE
OF THE GAUTENG DIVISION, PRETORIA
6967-2014
HEARD
ON: 12 FEBRUARY 2015
FOR
THE APPLICANT: J VORSTER
INSTRUCTED
BY: M D MITCHELL ATTORNEYS
FOR
THE RESPONDENT: O BEN-ZEEV
INSTRUCTED
BY: LEGAL RESOURCES CENTRE, C/O GILFILLAN DU PLESSIS