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[2007] ZASCA 80
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Bowring NO v Vrededorp Properties CC (271/2006) [2007] ZASCA 80; 2007 (5) SA 391 (SCA) (31 May 2007)
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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
Case number : 271/2006
In the
matter between :
FRANCIS
LESLIE BOWRING NO
...............................
APPELLANT
and
VREDEDORP PROPERTIES CC
...............................
FIRST RESPONDENT
THE REGISTRAR OF DEEDS
...............................
SECOND RESPONDENT
CORAM : STREICHER, BRAND, HEHER, VAN HEERDEN
et
MAYA JJA
HEARD : 21 MAY 2007
DELIVERED : 31 MAY 2007
Summary
:
Doctrine of notice – application in areas of both unregistered
servitudes and of successive sales – in latter instance
no
reason in principle why first purchaser cannot claim transfer of
thing sold directly from subsequent purchaser – question
whether subsequent purchasers should be joined as parties –
dependent on whether they can be said to have a direct and
substantial
interest in the outcome of the litigation.
Neutral citation: This judgment
may be referred to as
Bowring
NO v Vrededorp Properties CC
[2007]
SCA 80 (RSA)
JUDGMENT
_____________________________________________________
BRAND JA
/
BRAND JA
:
[1] The appellant is the sole trustee of the F L B Trust
('the Trust'). The Trust is the registered owner of an immovable
property
in Loveday Street South, Selby, Johannesburg. The property
was formerly used as a railway siding and it still bears that name.
Proceedings
commenced when the first respondent ('Vrededorp'), as the
plaintiff, instituted an action against the Trust, as the first
defendant,
in the Johannesburg High Court. Broadly stated, Vrededorp
claimed an order in two parts, namely, that the Trust be directed,
first,
to subdivide the railway siding and to transfer a defined
subdivided portion to Vrededorp; and, secondly, to register a
servitude
of way – giving access to Loveday Street – in
favour of Vrededorp over the remainder of the property. The Registrar
of
Deeds, who was cited as the second defendant in the court
a
quo
and as the second respondent in this
court, did not participate in any of the proceedings.
[2] In a diagram attached to Vrededorp's particulars of
claim, the undivided portion of the railway siding which was the
subject of
its claim for transfer was depicted in blue, while the
remainder of the property over which it claimed the servitude was
coloured
green. For ease of reference I propose to distinguish
between the two portions involved with reference to these colours.
The Trust
resisted Vrededorp's claim and filed a counterclaim for an
order that would constitute the converse of the order contemplated in
the main claim, namely, that Vrededorp be ejected from the blue
portion and refused access over the green portion of the railway
siding. In the event, the court
a quo
(Blieden
J) granted the main claim and refused the counterclaim, in both
instances with costs. The appeal against that order is with
the leave
of the court
a quo.
[3] At the commencement of the trial in the court below,
the parties agreed that the matter should be decided on the basis
that the
allegations in Vrededorp's particulars of claim were
factually correct. Because of this agreement, no evidence was led.
The background
facts, which thus became common cause, appear from
what follows. On 13 October 1994 Vrededorp purchased two immovable
properties
from a company called Stand 160 Selby (Pty) Ltd ('Stand
160') for a purchase price of R1,27m. The properties which formed the
subject
matter of the sale were collectively described as 'Erf 358
Selby, plus the subdivided portion of the railway siding on the east
side
of [erf 358]', ie the blue portion. Further terms of the
agreement of sale that are of relevance appear from clause 17. They
read
as follows:
'17.
Subdivision
and Servitude costs
17.1 The seller [Stand 160] shall prior
to the registration of transfer . . . subdivide at its own costs the
portion of the railway
siding that lies to the east of Stand 358
Selby [ie the blue portion] . . .
17.2 The seller records that the
purchaser [Vrededorp] shall have the right, at his own cost, to
establish a servitude over the remaining
[ie the green] portion of
the railway siding. The servitude is to ensure shared use of the
land, giving the purchaser's vehicles
access to the east side of the
property [ie erf 358 Selby].'
[4] On 11 May 1995 Stand 160 and Vrededorp agreed to
amend their agreement of 13 October 1994 in terms of what was called
an 'addendum'
to that agreement. The pertinent provisions of the
addendum appear from clauses 2 and 4. They read as follows:
'2. The parties agree that Erf 358 Selby
shall be transferred into the name of the Purchaser immediately,
against payment of R1 220 000
of the purchase price.
The parties further agree that [the blue
portion of] the Siding shall be transferred into the name of the
Purchaser as soon as possible
thereafter, against payment of R50 000
being the balance of the purchase price.
3. . . .
4. The Purchaser acknowledges that the
fact that the Seller is not able to give transfer of [the blue
portion of] the Siding at this
stage, shall not constitute a basis to
cancel the Agreement of Sale, and the Purchaser shall proceed with
the Agreement of Sale in
accordance [t]herewith as read with the
Addendum . . . '
[5] Pursuant to the addendum, Erf 358 Selby was
transferred to Vrededorp during July 1995. Subdivision and transfer
of the blue portion
of the railway siding were, however, overtaken by
the liquidation of Stand 160. On 12 March 1997, the liquidator of
Stand 160 sold
the railway siding to Investec Bank Limited. Though
the blue portion had not yet been subdivided and therefore still
formed part
of the property, the deed of sale made it clear that that
portion had to be transferred to Vrededorp 'and thus does not form
part
of this agreement'. In addition, clause 17 of the deed of sale
provided:
'
Subdivision
and Servitudes
The Purchaser [Investec] acknowledges and
accepts that the Seller [Stand 160 in liquidation] will subdivide at
its own cost the [blue]
portion of [the railway siding] that lies to
the east of stand 358 Selby . . . ., further that the owners of Stand
358 Selby, ie
Vrededorp Properties CC will, at their own expense
establish a servitude over the remaining [green] portion . . . [of
the railway
siding] to ensure shared use of the land giving access to
vehicles requiring such access to stand 358 Selby.'
[6] On 25 June 1998 Investec sold and subsequently
transferred the whole of the railway siding, including both the blue
and green
portions, to the Trust. Unlike the deed of sale between the
liquidator of Stand 160 and Investec, the subsequent agreement
between
Investec and the Trust made no reference to Vrededorp's right
to procure transfer of the blue portion, nor of its right to a
servitude
over the green portion. Nonetheless, one of the allegations
in Vrededorp's particulars of claim which was formally admitted was
that
at all relevant times, and particularly when Investec and
thereafter the Trust purchased the railway siding, both purchasers
were
aware that Vrededorp had the right to take transfer of the blue
portion and to register a servitude of right of way in its favour
over the green portion of that property.
[7] It is this knowledge on the part of the Trust which
constitutes the factual foundation of Vrededorp's case. For the legal
basis
of its case it relies on what has become known as the doctrine
of notice. This doctrine has found application in a number of
instances
in the law of property. (For a succinct summary of the
various applications, see eg Badenhorst, Pienaar & Mostert
Silberberg and Schoeman's The Law of Property
4 ed (2004) p 88.) I will first deal with its
application in relation to unregistered servitudes, which has by now
become settled
law. In this instance the doctrine operates in the
following way: if A and B enter into an agreement which entitles A to
have a servitude
registered over the land of B, A has a personal
right to claim that B should cooperate in procuring registration of
the servitude,
as this is a requirement for the creation of the real
right that A has bargained for. Once registration has taken place any
subsequent
purchaser of the land will be bound by the servitude.
[8] If, however, B should sell his land and transfer
ownership to C before registration has occurred, C would normally not
be bound
to give effect to the servitude. But, if C had knowledge of
A's unregistered servitude at the time the contract of sale was
entered
into between B and C, C will be bound, not only to give
effect to the servitude, but also to cooperate in having the
servitude registered.
(See eg
Richards v Nash
(1881) 1 SC 312
at 318;
De
Jager v Sisana
1930 AD 71
at 84;
Grant
v Stonestreet
1968 (4) SA 1
(A) at 20A-B;
Wahloo Sand BK v Trustees, Hambly Parker Trust
2002 (2) SA 776
(SCA) paras 8-10 at
782G-783E; Badenhorst, Pienaar & Mostert
op
cit
p 89; Van der Merwe
Sakereg
(1989) 2ed p 526
et seq
.
As in
Wahloo Sand
(para
9), the thus far unresolved question of whether knowledge of A's
right, acquired by C after the date of purchase, but prior
to the
date of transfer will suffice to set the doctrine in motion, does not
arise on the facts of this case.)
[9] Without more, this application of the doctrine of
notice would seem to render Vrededorp's claim for registration of a
servitude
over the green portion, unanswerable. It had a contractual
right for claiming registration of the servitude against the
erstwhile
owner, Stand 160, of which the Trust and its predecessor,
Investec, admittedly had knowledge when they purchased the dominant
property.
Simply stated, the Trust's answer to this claim, was,
however, that a servitude over the green portion would only give
access to
the blue portion and that, because Vrededorp was not
entitled to claim transfer of the blue portion, the servitude claimed
would
only serve the Trust's own property, which was not competent in
law.
[10] Factually, the answer appears to be well-founded.
Vrededorp's property, erf 358 Selby, has no common boundary with the
green
portion. They are separated by the blue portion. Access to
Vrededorp's property can therefore only be gained by a servitude over
the green portion via the blue portion. As a matter of law, the
argument is equally well-founded. A praedial servitude – such
as the one claimed – can only exist if it provides some
permanent advantage to a dominant property (see eg
Lorentz
v Melle
1978 (3) SA 1044
(T) 1049C-G; Van der
Merwe
op cit
p
459). It thus became common cause during argument that
Vrededorp's claim for registration of a servitude over the green
portion is
entirely dependent on its right to claim transfer of the
blue portion.
[11] The legal basis advanced by Vrededorp for its claim
to the blue portion is again derived from the doctrine of notice.
This time
it relies on the application of the doctrine in the sphere
of successive sales. The usual operation of the doctrine in this
instance,
as explained in our case law, is essentially as follows: if
a seller, A, sells a thing – be it movable or immovable –
to B and subsequently sells the same thing to C, ownership is
acquired, not by the earlier purchaser, but by the purchaser who
first
obtains transfer of the thing sold. If the first purchaser, B,
is also the first transferee, his or her right is unassailable. If
the second purchaser, C, is the first transferee, his or her right of
ownership is equally unassailable if he or she had purchased
without
knowledge of the prior sale to B. But, if C had purchased with such
prior knowledge, B is entitled to claim that the transfer
to C be set
aside so that ownership of the thing sold can be transferred to B.
(See eg
Cohen v Shires, McHattie and King
(1882) 1 SAR 41 at 46;
McGregor v
Jordaan
1921 CPD 301
at 308;
Tiger-Eye
Investments (Pty) Ltd v Riverview Diamond Fields (Pty) Ltd
1971
(1) SA 351
(C) at 358F-G;
Kazazis v
Georghiades
1979 (3) SA 887
(T) at 894B-D;
Cussons v Kroon
2001
(4) SA 833
(SCA) at 839C-E; Badenhorst, Pienaar & Mostert
op
cit
p 89; Gerhard Lubbe 'A doctrine in search
of a theory: reflections on the so-called doctrine of notice in South
African Law',
1997 Acta Juridica 246
et seq. Again it is unnecessary
to enter into the unresolved debate referred to earlier, ie whether
knowledge acquired by C between
purchase and transfer would make any
difference.)
[12] It is not denied by the Trust that, in principle,
the doctrine of notice affords Vrededorp the right to claim transfer
of the
blue portion. Nonetheless the Trust raised a twofold defence
against the way in which this claim was brought. Its first contention
was that the doctrine of notice, as applied in the sphere of
successive sales, does not allow the first purchaser, B, to claim
transfer
directly
from
the second purchaser, C. Secondly, it raised a defence in the nature
of non-joinder which relied on the fact that Stand 160 and
Investec
had not been joined by Vrededorp as parties to the proceedings.
[13] In developing its first mentioned contention, the
Trust argued that the doctrine of notice only entitles the first
purchaser,
B, to set aside the transfer to the second purchaser, C,
which then opens the way for B to claim transfer from the original
seller,
A. B cannot claim transfer directly from C. To allow B to do
so, so the argument went, would amount to admitting a claim for
specific
performance of a contract between A and B against a stranger
to that contract, which would be irreconcilable with the basic
principles
of our law of contract.
[14] The Trust's argument seems to be supported by what
happens in practice when the doctrine of notice is applied to
successive sales.
More pertinently, there appears to be no decided
case in our law where the first purchaser's claim for transfer or
delivery has been
allowed directly against the second purchaser. On
the other hand, some academic writers hold the view that there is no
underlying
reason of principle why it should not be so allowed. In
fact, so they say, the possibility of a claim by B against C derives
support
from Roman-Dutch authorities. This appears, for example, from
the following exposition by R G McKerron 'Purchaser with Notice' 1935
SA Law Times
Vol 4 178
p180:
'It remains to consider the
position where transfer has been passed to the second purchaser. If
C
, when he bought, had
knowledge of the prior sale to
B
,
there is no doubt as to the position. The authorities, both ancient
and modern, are agreed that in such a case
C
is not entitled to retain the land as against
B
.
The old authorities allow
B
to
recover the
res vendita
direct
from
C
by a personal
action
in factum
[as
opposed to the
rei vindicatio,
only
available to the owner],
and there is no reason
why in a suitable case
B
should
not be allowed to adopt this course in the modern law. But in South
Africa the usual practice is for
B
to join
A
as
co-defendant, and claim as against him an order cancelling the
transfer, and as against
C
an
order to pass transfer into his (
B
's)
name.'
(See also Voet 6.1.20; J E Scholtens 'Double Sales'
1953
SALJ
22
p 34; Prof
Gerhard Lubbe
op cit
p
247.))
[15] The notion that B can be allowed to claim
performance against C of a contractual undertaking by A is clearly an
anomaly in that
it flies in the face of contractual privity. But I do
not think that this anomaly can, by itself, constitute a bar to
affording B
the right to claim transfer of the thing sold directly
from C. For as Prof McKerron puts it (
op cit
p 180):
'
Absence of privity is not a
sufficient reason for refusing to allow a remedy founded upon a
doctrine such as the doctrine of "purchaser
with notice,"
which is a purely equitable doctrine running counter to the rule of
the strict law that a real right takes preference
over a merely
personal right.'
[16] What is more, the same anomaly reveals itself in
the sphere of unregistered servitudes when a purchaser with knowledge
is compelled
to cooperate in procuring registration of a servitude
previously granted by the seller of immovable property. The nature of
the right
granted by the seller in this instance appears from the
following statement by Innes CJ in
Willoughby's
Consolidated Co v Copthall Stores Ltd
1918 AD
1
at 16:
'Now a servitude, like any other real right, may be
acquired by agreement. Such an agreement, however, though binding on
the contracting
parties, does not by itself vest the legal title to
the servitude in the beneficiary, any more than the contract of sale
of land
passes the
dominium
to
the buyer. The right of the beneficiary is to claim performance of
the contract by delivery of the servitude, which must be effected
coram lege loci
by an
entry made in the Register and endorsed upon the title deed of the
servient property.'
(See also
De Jager v Sisana
1930
AD 71
at 84;
Cape Explosive Works Ltd v Denel
(Pty) Ltd
2001 (3) SA 569
(SCA) at 580B-E)
.
[17] The essential quality of the right that the
purchaser acquires from a contract of sale is therefore no different
from the right
of the beneficiary under a servitude agreement. Both
rights are so-called
iura in personam ad rem
acquirendam
, ie personal rights to acquire a
real right (see eg Van der Merwe
op cit
p
86; Badenhorst, Pienaar & Mostert
op
cit
p 70). In the case of a servitude,
application of the doctrine of notice does not require that the
transfer of the property to the
purchaser be set aside so as to
enable the beneficiary under the servitude agreement first to claim
registration of the servitude
against the seller before the property
is re-transferred to the purchaser subject to a registered servitude.
The beneficiary's claim
is allowed directly against the purchaser
(see eg
Grant v Stonestreet (supra)
at
7). That there is no privity of contract between the beneficiary and
the purchaser is not seen as an insurmountable hurdle. Why
then, it
may in my view rightfully be asked, should the position be any
different when the same doctrine is applied in the instance
of double
sales?
[18] My suggestion is not that in the successive
purchaser situation B should always be allowed to claim transfer
directly from C.
The doctrine of notice is an equitable remedy and
its manner of application should be determined largely by what is
considered to
be equitable to all concerned in the circumstances of
the particular case. Where the whole property is first sold to B and
then to
C, the most equitable solution will probably be to restore A
and C to their former position – by ordering cancellation of
the
transfer and repayment of the purchase price – before A is
ordered to transfer the property to B. But in this case the position
is substantially different. Vrededorp claims transfer of the blue
portion of the railway siding only. Cancellation of the successive
transfers of the whole property to Investec and the Trust, will
therefore require that the remainder of the property be
re-transferred
first to Investec and then to the Trust, after the
blue portion had been separated and transferred to Vrededorp. No
reason has been
suggested, and I can think of none, why this
cumbersome and wasteful process would be in anybody's interest. For
these reasons I
conclude that the Trust's first defence, based on the
application of the doctrine of notice, cannot be sustained.
[19] This brings me to the second defence of
non-joinder. Though this defence was not formally raised by the Trust
in its pleadings,
it nevertheless argued that the relief sought and
obtained by Vrededorp should not have been granted without the
original seller,
Stand 160, and the intermediate second purchaser,
Investec, being joined as parties to the proceedings.
[20] Central to the argument in support of this defence,
was the contention that, although Vrededorp's claim for transfer was
brought
against the Trust only, it (a) effectively interfered with
the contractual relationship between Stand 160 and Investec, on the
one
hand, and between Investec and the Trust, on the other; and (b)
effectively amounted to an enforcement of Vrededorp's contractual
claim against Stand 160. In motivating contention (b) the Trust
referred, first, to Vrededorp's formal tender to pay, against
transfer
of the blue portion, the purchase price of R50 000 to
the liquidator of Stand 160, which obligation could only arise from
the
agreement between Vrededorp and Stand 160. Secondly, it referred
to the fact that Vrededorp sought and obtained an order from the
court
a quo
that the
Trust 'is to make payment of all costs and expenses pertaining to the
transfer of the subdivided portion to Vrededorp'. If
Vrededorp had
any right to payment of these expenses, so the Trust argued, this
right could only derive from its agreement with Stand
160.
[21] Though the Trust may well be right in its analysis
of the effect of Vrededorp's claim, the enquiry relating to
non-joinder remains
one of substance rather than the form of the
claim. (See eg
Amalgamated Engineering Union v
Minister of Labour
1949 (3) SA 637
(A) at
657.) The substantial test is whether the party that is alleged to be
a necessary party for purposes of joinder, has a legal
interest in
the subject matter of the litigation, which may be affected
prejudicially by the judgment of the court in the proceedings
concerned (see eg
Aquatur (Pty) Ltd v Sacks
1989 (1) SA 56
(A) at 62A-F;
Transvaal
Agricultural Union v Minister of Agriculture and Land Affairs
2005
(4) SA 212
(SCA) paras 64-66).
[22] During argument counsel for the Trust was invited
to indicate, with reference to the facts available to us, how the
order sought
and obtained by Vrededorp could prejudicially affect the
legal interests of either Investec or Stand 160. The only potential
prejudice
he referred to was that which could result from that part
of the court
a quo
's
order which directed the Trust to pay the expenses occasioned by the
subdivision of the blue portion and its subsequent transfer
to
Vrededorp. This part of the order, so counsel for the Trust
contended, may very well lead to an action by the Trust against
Investec
for recoupment of these expenses, which the latter may then
in turn seek to recover from Stand 160 (in liquidation).
[23] While conceding the validity of this contention,
Vrededorp's counsel responded by abandoning that part of the relief
granted
by the court
a quo
.
In the result, counsel for the Trust was not able to contemplate any
other prejudicial effect which the order, thus amended, may
have on
the legal interests of either Investec or Stand 160. In the absence
of any potential prejudice, the Trust's defence based
on non-joinder
must also fail.
[24] In the light of the concession by Vrededorp's
counsel, the court
a quo
's
order stands to be amended by deletion of the direction that the
Trust should pay the expenses occasioned by subdivision and transfer
of the blue portion. Another amendment I think advisable is to
incorporate Vrededorp's tender of R50 000 in favour of Stand
160, in the court's order.
[25] What remains to be considered is the costs of
appeal. Despite the argument to the contrary on behalf of Vrededorp,
I am of the
view that the Trust has achieved substantial success on
appeal. Though the exact amount of the expenses for which the Trust
will
no longer be liable is unknown, I have no reason to think that
it will be negligible, nor can I think of any reason why costs should
not follow this event.
[26] For these reasons it is ordered that:
1. The appeal is upheld with costs.
2. The order of the court
a quo
is amended to read as follows:
'1. The first defendant is directed to do all things
necessary to transfer into the name of the plaintiff the subdivided
portion of
the railway siding on the east side of Erf 358 Selby
depicted in blue on annexure VP-1 to the plaintiff's particulars of
claim, against
payment by the plaintiff of the amount of R50 000
to the liquidator of Stand 160 Selby (Pty) Ltd (in liquidation).
2. The plaintiff is to make payment of all costs and
expenses pertaining to the subdivision and transfer of the blue
portion referred
to in paragraph 1 above.
3. The first defendant is to do all things necessary to
facilitate the registration of the servitude by the plaintiff over
the remaining
portion of the remainder of the railway siding,
depicted in green on the said annexure VP-1.
4. The first defendant's counterclaim is dismissed with
costs.
5. The first defendant is to pay the plaintiff's costs
of suit.'
........................
F D J BRAND
JUDGE OF APPEAL
Concur
:
STREICHER
JA
HEHER JA
VAN
HEERDEN JA
MAYA JA