Brief Summary

Property Law — Transfer of ownership — Fraudulent transfer — Plaintiff, as executor of deceased estate, sought restoration of ownership of property unlawfully transferred to first and second defendants without valid deed of alienation — Evidence established that transfer was based on invalid signatures and lacked requisite legal formalities under the Alienation of Land Act 68 of 1981 — Court held that the transfer was unlawful and ordered restoration of ownership to the estate.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were a trial action for vindicatory-type relief in which the plaintiff sought to set aside the registration of transfer of immovable property and to have ownership restored to the late owner’s estate. The matter concerned a farm that had been transferred into the names of the first and second defendants pursuant to what the plaintiff alleged was an unlawful and fraudulent transaction.

The plaintiff was Johann de Witt Oosthuizen N.O., acting in his capacity as executor in the estate of JSJ Uijs (the original plaintiff). The principal defendants for purposes of the trial were Pieter Ernst du Preez and Engelize du Preez (a married couple). Although several other defendants were originally joined (including the conveyancer and a firm of attorneys, and the Registrar of Deeds), the action was ultimately pursued only against the first and second defendants. The first and second defendants, in turn, invoked third-party procedure against Elizabeth Venter (the conveyancer) and Botha, Willemse & Wilkinson (a firm of attorneys).

Procedurally, the action had been instituted by Mrs Uijs during her lifetime. After litis contestatio, she died, and her executor was substituted as plaintiff in terms of Rule 15. Shortly before trial, the plaintiff withdrew the action against the third, fourth, fifth and sixth defendants, and proceeded only with a claim to restore ownership against the first and second defendants. The first and second defendants had delivered a Rule 13 notice citing the fifth and sixth defendants as third parties, seeking indemnity or contribution.

The subject-matter of the dispute was whether the property—Portion 3 of the Farm Uitkyk No 114, Registration Division H.S. Mpumalanga, district of Volksrust—had been lawfully alienated and transferred to the first and second defendants, and whether the late owner’s estate was entitled to restoration of ownership notwithstanding defences of estoppel and the in pari delicto rule raised by the defendants.

2. Material Facts

Mrs Uijs had been the registered owner of the property. The case turned on the manner in which an intended sale and transfer of the property was handled, and on whether any valid deed of alienation existed in compliance with statutory formalities. A central undisputed feature at trial (ultimately conceded by the first and second defendants in light of expert evidence) was that no valid deed of alienation existed that could lawfully support the transfer of ownership into the first and second defendants’ names.

It was common cause on the evidence accepted by the court that an initial offer to purchase was signed by Mrs Uijs as seller and Marianne Coetzee as the intended purchaser, but that at the time of signature the purchase price was not recorded in the original document. The evidence further established that the original document remained without a purchase price recorded even when it was produced at trial. The court accepted evidence that Mrs Uijs intended to sell the property to Mrs Coetzee for a substantially different consideration, namely R340 000 plus a 4x4 Land Cruiser motor vehicle, and that she expressed dissatisfaction when asked to sign a document that did not reflect that consideration.

The conveyancer, Mrs Bets Venter, testified (and her evidence was corroborated in material respects) that she initially received the signed document reflecting the seller and Mrs Coetzee as purchaser and prepared transfer documentation for transfer to Mrs Coetzee. Thereafter, Mr Danie Coetzee and the first defendant approached her and indicated the transfer to Mrs Coetzee would not proceed. A decision was then made (outside her office) that the transfer would be done into the name of the first defendant.

Instead of preparing a new contract, the conveyancer photocopied the existing document and used tippex to remove the name and signature of the original purchaser. She then requested the first defendant to insert his and his wife’s particulars as purchasers, which he did in collaboration with her. The first defendant admitted in evidence that he did participate in effecting these alterations, and that he did so despite being uneasy about the “danger signs”, after being assured by Mrs Venter that it was in order.

The court accepted unchallenged expert handwriting evidence that purported signatures of Mrs Uijs appearing on certain transfer-related documents—specifically a receipt acknowledgment, an attorney letter, and a power of attorney to pass transfer—were not her signatures. On that basis, the court treated the transfer as having been effected through, inter alia, an invalid power of attorney.

Several additional objective features were treated as material. The first defendant conceded that he never negotiated with, met, or saw Mrs Uijs; never negotiated with her grandson (who had facilitated signature); and never negotiated with Mrs Coetzee. He also conceded that he had not paid any purchase consideration to Mrs Uijs or to her grandson, and that he knew of no written authorisation for payment of the purchase price to anyone other than Mrs Uijs.

The court also accepted valuation evidence that the market value of the farm at the relevant time was substantially higher than the purported sale price recorded on altered documentation, which supported the inference that the transaction was not concluded at arm’s length and was irregular in nature.

3. Legal Issues

The central legal questions requiring determination were whether the purported sale and transfer complied with the formal requirements for a valid alienation of land, and if not, whether the registration of transfer should be set aside with restoration of ownership to the estate.

The principal issues were mixed questions of law and application of law to fact. First, the court had to determine whether there was a valid and enforceable deed of alienation in terms of section 2(1) of the Alienation of Land Act 68 of 1981, given the absence of a recorded purchase price in the original document and the subsequent alterations and substitution of purchasers. Second, the court had to determine whether the transfer was unlawful due to the lack of a valid underlying causa and the use of a forged power of attorney.

A further legal issue concerned whether the first and second defendants could defeat or limit the plaintiff’s claim through estoppel and the in pari delicto rule, including the specific request that the court should not order their eviction (though the pleaded relief was framed in terms of restoration of ownership). This required evaluation of whether, in principle and on the facts, estoppel could operate to prevent restoration where statutory formalities were not met and where the defendants had knowledge of the true facts.

Ancillary issues included whether the first and second defendants could obtain indemnity or contribution from the third parties under Rule 13, and what costs order was appropriate, including whether a punitive costs order (attorney and client scale) was justified, and whether the second third party should recover its costs from the defendants.

4. Court’s Reasoning

The court approached the matter on the basis that the transaction was governed by the Alienation of Land Act and that compliance with section 2(1) is required for a valid sale of land. It applied the principle that all material terms of the contract must be contained in the written deed of alienation. Because the original offer to purchase (produced as an exhibit) lacked a purchase price, it did not meet the statutory requirement and was invalid and of no force or effect. The court relied on authority that absence of a material term such as price results in non-compliance with the statute and thus invalidity.

The court further reasoned that later attempts to record a purchase price did not cure the defect where the evidence showed that a price was inserted on a photocopy and was not the price agreed between the original parties (Mrs Uijs and Mrs Coetzee). The court treated the altered documentation as incapable of constituting a valid contract between the seller and the first and second defendants because the substitution of purchasers was done without the consent of the seller and without a concluded sale between those parties. In this regard the court applied the principle that an offer directed to a specific person, accepted by that person and another as joint purchasers, does not necessarily result in a concluded contract, and a fortiori where the purchaser is substituted without the seller’s consent.

On the transfer itself, the court accepted the unchallenged handwriting evidence establishing that Mrs Uijs’s signature had been forged on the power of attorney to pass transfer and certain ancillary documents. This supported the conclusion that transfer occurred wrongfully and unlawfully, independently of the statutory invalidity of the underlying deed of alienation. The court treated the combination of an invalid deed of alienation and an invalid power of attorney as decisive in establishing that there was no lawful basis for registration into the defendants’ names.

In evaluating the defendants’ reliance on estoppel and the in pari delicto rule, the court rejected the factual premise that Mrs Uijs knowingly left the purchase price blank to evade transfer duty. It found that the evidence did not support the contention that she was complicit in any such scheme. Beyond this factual finding, the court held that estoppel could not succeed as a matter of law and principle. It reasoned, first, that the first defendant had conceded that he was aware of the true facts and circumstances, which undermined any attempt to rely on estoppel. Second, and more broadly, the court applied the principle that estoppel cannot be used to confer legal validity on what the law treats as a nullity, particularly where statutory formalities are required in the public interest. The court applied authority holding that a state of affairs prohibited by law cannot be perpetuated by estoppel.

The court also made an evaluative finding on the defendants’ conduct. It concluded that the sale and transfer were tainted by moral turpitude and were unlawful, illegal, and in fact fraudulent, and that the first defendant knowingly participated and benefited. This evaluative conclusion influenced both the rejection of defences and the costs order.

On costs, the court exercised a discretion to award attorney-and-client costs against the first and second defendants. It reasoned that the defendants had knowingly participated in the fraudulent transaction, resisted restoration, only conceded a critical aspect late in the trial, and raised an estoppel defence lacking merit, thereby putting the plaintiff to unnecessary trouble and expense. The court applied the principle that punitive costs may be appropriate where proceedings are vexatious in effect or where a party’s conduct warrants censure.

Regarding the Rule 13 third-party claims, the court held that because the first defendant was found to be a party to the fraud, he could not, in principle, claim indemnity or contribution that would allow him to benefit from unlawful conduct. Even if the first third party (the conveyancer) was implicated in the fraudulent transfer, the court treated the defendants as equally culpable, barring such relief. As to the second third party (the attorneys’ firm), the court accepted a legal point that the defendants’ case depended on an alleged transfer or cession of a mandate, which amounted to reliance on delegation. It applied the principle that delegation of contractual obligations requires the consent of the creditor/principal, and found that such consent was not alleged or established. On that basis, the claim against the second third party was unsustainable.

Finally, the court considered whether the second third party was entitled to recover its costs from the first and second defendants. It drew an inference from the firm’s pleaded position and the objective evidence that the firm had at least assisted the first third party in the lodgement and execution of transfer using its resources. While expressly declining to find that the firm was party to fraud, the court held that it should have implemented measures preventing the first third party from acting as she did under the firm’s auspices. Exercising its discretion, the court deprived the firm of a costs order against the first and second defendants.

5. Outcome and Relief

The court set aside the registration of transfer of the property into the names of the first and second defendants and ordered that ownership be restored to the plaintiff (in his representative capacity as executor). It further directed the defendants to do all things necessary and sign all documents required to effect re-registration into the plaintiff’s name, failing which the Sheriff could do so, and authorised the Registrar of Deeds to take the necessary steps to reflect the plaintiff as registered owner.

The first and second defendants were ordered, jointly and severally, to pay costs occasioned by the setting aside of transfer and re-registration, and they were ordered to pay the plaintiff’s costs of action on the attorney-and-client scale, including the costs of senior counsel.

The first and second defendants’ third-party claims against the first and second third parties were dismissed, and the court ordered that, as between those parties in the third-party proceedings, each party should pay its own legal costs.

Cases Cited

Johnston v Leal 1980 (3) SA 635 (AD).

Bird v Summerville and Another 1961 (3) SA 194 (AD).

Eastern Cape Provincial Government and Others v Contractprops 25 (Pty) Ltd 2001 (4) SA 142 (SCA).

In Re Alluvial Creek Ltd 1929 CPD 532.

Belonje v African Electric (Pty) Ltd 1949 (1) SA 592 (E).

Legislation Cited

Alienation of Land Act 68 of 1981, section 2(1).

Rules of Court Cited

Uniform Rules of Court, Rule 15.

Uniform Rules of Court, Rule 13.

Held

The court held that the purported sale transaction did not comply with the formal requirements of section 2(1) of the Alienation of Land Act 68 of 1981 because the written deed of alienation lacked a recorded purchase price and the documentation relied upon had been irregularly altered to substitute purchasers without the seller’s consent. It further held that the transfer was unlawful because it was not supported by a valid underlying causa and was effected on the strength of a power of attorney bearing a forged signature.

The court held that the first and second defendants could not rely on estoppel to resist restoration of ownership, both because the factual foundation for the defence was not supported by the evidence and because, as a matter of law, estoppel cannot validate a transaction rendered a nullity by statute. The court also found the first defendant to have knowingly participated in a fraudulent scheme and to have benefited from it, justifying both restoration of ownership and a punitive costs order.

The court held that the first and second defendants’ third-party claims for indemnity or contribution could not succeed where the defendants themselves were parties to the fraud. It additionally held that the claim against the second third party was unsustainable on the pleaded basis of delegation/cession of a mandate absent the required consent. While not finding the second third party to have been complicit in fraud, the court exercised its discretion to deprive it of a costs order against the defendants due to its assistance in the transfer process and failure to prevent misuse of its facilities.

LEGAL PRINCIPLES

A deed of alienation for the sale of land must comply with the formalities in section 2(1) of the Alienation of Land Act 68 of 1981, which requires the material terms of the contract to be reduced to writing and signed; absence of a material term such as the purchase price renders the purported contract invalid and of no force or effect.

The substitution of purchasers on sale documentation without the seller’s consent, particularly where the original offer was directed to a specific purchaser, is inconsistent with the formation of a valid and concluded contract of sale with the substituted purchaser(s).

A transfer of immovable property effected without a valid underlying causa, and/or pursuant to documentation bearing a forged signature (including a forged power of attorney to pass transfer), is unlawful and may be set aside with restoration of ownership to the original owner or the owner’s estate.

Estoppel cannot be used to clothe with legal efficacy that which the law declares to be a nullity, and cannot be used to circumvent or replace statutory requirements for validity; a state of affairs prohibited by law in the public interest cannot be perpetuated by reliance on estoppel.

A party who knowingly participates in an unlawful or fraudulent transaction cannot obtain relief that would allow that party to benefit from the unlawful conduct, including claims framed as indemnity or contribution against others involved in the transaction.

Punitive costs on the attorney-and-client scale may be awarded where a party’s conduct justifies censure or where proceedings are vexatious in effect by putting the other party to unnecessary trouble and expense.

Delegation of an agent’s obligations (or transfer of a mandate amounting to delegation) is not effective without the required consent; an agent must perform the mandate personally unless the principal consents or recognised exceptions apply.

Oosthuizen NO v Du Preez and Others (29116/2006) [2009] ZAGPPHC 138 (6 November 2009)