CONSTITUTIONAL COURT OF SOUTH AFRICA


Case CCT 295/24

In the matter between:


RICHARD TIMOTHY HARRIS N.O. First Applicant

CHRISTOPHER ALEXANDER SCAIFE N.O. Second Applicant

STEPHEN JOHN EARLY N.O. Third Applicant

OSCAR WALTER N.O. Fourth Applicant

ALAN LEONARD HARVEY BROADHURST N.O. Fifth Applicant

ANNELISE JANSEN VAN RENSBURG-HATTINGH N.O. Sixth Applicant

CLIFFORD OWEN KEET N.O. Seventh Applicant

MICHELLE ANN WALLIS N.O. Eighth Applicant

EDGAR GRONDEL Ninth Applicant

and

HEROLD GIE AND BROADHEAD INCORPORATED Respondent



Neutral citation: Harris N.O. and Others v Herold Gie and Broadhead Inc. [2026]
ZACC 6

Coram: Madlanga ADCJ, Goosen AJ, Kollapen J, Majiedt J, Mhlantla J,
Opperman AJ, Theron J and Tshiqi J


Judgments: Goosen AJ (minority): [1] to [65]

2

Majiedt J (majority): [66] to [106]

Heard on: 13 May 2025

Decided on: 13 February 2026

Summary: Housing Development Scheme s Act 65 of 1988 — section 6 —
repayment of entrusted funds — remedy against errant attorneys




ORDER



On application for leave to appeal from the Supreme Court of Appeal (hearing an
appeal from the High Court of South Africa, Western Cape Division, Cape Town):

1. Leave to appeal is granted.
2. The appeal is upheld to the extent set out in paragraph 3 below.
3. The order of the Supreme Court of Appeal is set aside and replaced with
the following:
“1. The appeal is dismissed with costs.
2. Save for the decision on the second question, the order of the
High Court is set aside and replaced with the following:
‘2.1 The first question is decided in favour of the plaintiffs.
2.2 The third question is referred back to the High Court for
determination.
2.3 The costs stand over for determinati on together with the
remaining issues.’”
4. The matter is remitted to the High Court for further hearing on the
remaining issues.
5. The respondent must pay the costs in this Court.

GOOSEN AJ
3



JUDGMENT




GOOSEN AJ (Kollapen J and Theron J concurring):

[1] The crisp issue raised in this application for leave to appeal concerns the
meaning and effect of section 6 of the Housing Development Schemes for Retired
Persons Act1 (HDSA). Crisp though it may be, it brings into focus the vulnerability of
elderly retired persons to the vagaries of the financial failure of housing schemes
developed to cater for their housing needs.

[2] The first to eighth applicants are, respectively, the executors of the deceased
estates of five retired persons who purchased rights of occupation in a housing scheme
developed in terms of the HDSA. The ninth applicant is one of these purchasers. I
shall, for the sake of clarity, refer to them all throughout as purchasers. The developer
of the housing scheme, the St Leger Retirement Hotel in Muizenberg, Cape Town,
was the St Leger Trust (SLT). It was sequestrated prior to fulfilling certain statutory
obligations imposed by the HDSA. The respondent i s Herold Gie and Broadhead
Incorporated (HGB), a firm of attorneys into whose trust account the purchasers paid
the purchase consideration due to SLT . The entrusted funds were paid over to SLT
prior to its insolvency. The purchasers instituted action against HGB for repayment of
the funds entrusted with HGB. The present application for leave to appeal arises in
the context of that litigation.

Background
[3] In the period between 2009 and 2011 e ach purchaser entered into a written
contract with SLT to acquire a right of occupation of a designated suite in the St Leger
Retirement Hotel. The right of occupation entitled them to lifelong occupation of the

1 65 of 1988.

GOOSEN AJ
4

suite and the provision of a range of services to be provided by the management of the
scheme. In exchange the purchasers were required to pay a determined purchase
consideration in addition to certain fixed monthly levies. The purchase agreements
stipulated that the purchase consideration be paid into the trust account of SLT’s
attorneys, HGB, in terms of section 3(a) of the HDSA. It is common cause that HGB
subsequently released the funds to SLT.

[4] On 24 October 2014, the purchasers cancelled their “life rights ” agreements
and demanded a refund of the purchase consideration, alleging that they had not been
furnished with the certificates of compliance contemplated by section 6(1)(a) of the
HDSA. On 17 February 2016, SLT was placed under provisional sequestration . A
final order was issued on 9 March 2016. The purchasers thereafter lodged claims
against the insolvent estate for repayment of the purchase consideration paid to the
developer. They were, in due course, each paid a concurrent dividend.

High Court
[5] In October 2017, the purchasers each commenced separate actions in the
High Court of South Africa, Western Cape Division, Cape Town (High Court) against
HGB for payment of the purchase consideration they had entrusted with HGB. They
founded their claims on section 6(4) of the HDSA. HGB raised several defences to
the claims. They pleaded that the purchasers had authorised payment by HGB of the
amounts entrusted to it; that the purchasers had been furnished with certificates
contemplated by section 6(1)(a) of the HD SA; and that HGB held no funds in trust at
the time of SLT’s insolvency.2 HGB also raised a special plea of prescription on the
basis that HGB had paid away the entrusted funds to SLT, to the knowledge of the
purchasers, more than three years prior to the institution of the actions for recovery.

2 These defences were pleaded by way of a series of amendments to the pleas. For present purposes the
sequence of amendments is not relevant. It suffices to record the nature of the defences.

GOOSEN AJ
5

[6] The separate actio ns were consolidated for the purposes of the trial.3 HGB
abandoned its pleaded reliance upon an alleged authorisation to release the entrusted
funds to SLT and the alleged provision of a certificate in compliance with
section 6(1)(a) of the HDSA. Pursuant hereto, the parties agreed to separate three
questions for determination by the High Court.

[7] The three questions, as formulated by the parties, read as follows:
(a) Whether section 6(4) of the HDSA can found an action by a purchaser
(or executor of the estate of a deceased purchaser) of a housing interest
from a developer for repayment by a practitioner of an amount
contemplated in section 6(3)(a) by a purchaser to a practitioner by virtue
of a contract in the absence of compliance with section 6(1) and prior to
the developer having become an insolvent (as it did), the practitioner
disbursed from its trust account to the account of the developer an
amount equivalent to the amount entrusted to the practitioner as
purported release to the developer of the amount.4
(b) Whether section 6(4) of the HDSA can found an action by a purchaser
of a housing interest from a developer of an amount entrusted as
contemplated in section 6(3)(a) of the HDSA by the purchaser to such
practitioner by virtue of a contract where prior to the developer having
become insolvent (as it did), the purchaser cancelled the contract.
(c) Whether, if section 6(4) of the HDSA does not apply, the averments in
the particulars of claim and those averments in HGB ’s plea admitted by
the purchasers are sufficient to sustain an action.


3 There were seven separate actions. The date of conclusion of each contract, the consideration paid and the
date of occupation of the designated suite was agreed. So too was the date of termination of the agreements
consequent upon the death of the person or persons entitled to exercise the lifelong right of occupa tion. The

parties also agreed on the quantum of the concurrent dividend paid to each of the applicants. Save for what is
set out later in this judgment it is not necessary to set out these agreed facts and details.
4 This first question reads awkwardly. In essence the High Court was called to decide whether section 6(4) of
the HDSA creates a cause of action against HGB who paid entrusted funds to SLT when the latter had not
complied with its obligation to deliver certain certificates to the purchasers.

GOOSEN AJ
6

[8] The High Court answered each of the questions in the affirmative . It held that
the purpose of the HDSA is to protect vulnerable retired persons from exploitation by
a developer or the financial misfortune of the developer. The High C ourt reasoned
that to construe section 6(4) of the HDSA as applying only to funds kept in trust at the
time of the insolvency would be manifestly contrary to the purpose of the HDSA. It
accepted that the “entrustment” of funds with an attorney in terms of section 6(3)(a)
placed an obligation upon the attorney to retain sufficient funds in trust to meet the
claims of trust creditors. The High Court held that a purchaser who entrusts funds
with an attorney, in terms of section 6(3)(a) of the HDSA, is to be regarded as the trust
creditor.

[9] The High Court further held that section 6(4) of the HDSA confers upon a
purchaser a right of action to recover the purchase consideration notwithstanding that
the attorney has paid awa y the entrusted funds. The High Court granted leave to
appeal to the Supreme Court of Appeal.

Supreme Court of Appeal
[10] The Supreme Court of Appeal upheld HGB’s appeal with costs . It held that
section 6(4) did not create a cause of action against the atto rneys for repayment of
entrusted funds which were no longer held in trust by the attorneys. The second
question was not before it on appeal, since HGB had not pursued that appeal. It found
that determination of the third question required consideration o f relevant evidence. It
therefore set aside the High Court’s determination and remitted the latter issue to the
High Court for determination in conjunction with all remaining issues.

In this Court
Jurisdiction and leave to appeal
[11] The purchasers assert that this Court has jurisdiction to entertain the appeal on
both jurisdictional bases. In relation to the Court’s constitutional jurisdiction, they
assert that the HDSA is in the nature of social security legislation enacted to protect

GOOSEN AJ
7

the proprietary, housing and social welfare interests of a vulnerable class of persons.
Its interpretation therefore implicates the purchasers’ rights to equality, dignity and
access to housing. They contend that the interpretation favoured by the Supreme
Court of Appeal increases the vulnerability of the persons the legislation seeks to
protect. The Supreme Court of Appeal’s choice of interpretation is, so they contend, a
constitutional issue.

[12] In relation to this Court’s general jurisdiction, the purchasers contend that the
interpretation necessarily involves a question of law. In this instance the
interpretation preferred by the Supreme Court of Appeal is not the only interpretation
open to a court. An interpretation which extends the protection of retired persons as a
class of vulnerable persons is available and is, therefore, an arguable point of law.
Such interpretation raises a matter of general public importance, since the availability
of a remedy i n circumstances such as the present will impact a class of vulnerable
persons.

[13] In opposing the application for leave to appeal, HGB denies that this Court’s
constitutional jurisdiction is engaged. It point s out that the purchasers eschewed
reliance upon any constitutional issue arising before the Supreme Court of Appeal.
HGB also denies that this Court’s general jurisdiction is engaged, contending that the
interpretation does not involve an arguable point of law of general public importance.
In oral argument before this Court this latter opposition was not pursued.

[14] I am not persuaded that this matter engages our constitutional jurisdiction. I
take this view because the fact that legislation provides protection for a vulnerable
class of consumers, even if it implicates access to housing, does not mean that a
constitutional matter is necessarily raised in the interpretation of that legislation. As
this Court observed in Tembisa Hospital:

this Court observed in Tembisa Hospital:

“To a greater or lesser extent, the righ ts guaranteed in the Bill of Rights cover the
whole field of human existence. Almost any case could be framed as touching on one

GOOSEN AJ
8

or other fundamental right. This is not enough to make the case a constitutional
matter.”5

[15] In this instance the interpretation of section 6(4) of the HDSA does not require
consideration of a constitutional rule or principle .6 In light of my conclusion
regarding general jurisdiction, it is not necessary to decide definitively that this matter
does not raise a constitutional issue.

[16] As far as general jurisdiction is concerned, the interpretation of section 6(4) is
undoubtedly a question of law which must necessarily be decided to resolve the issue
before the Court. 7 In my view the matter is arguable in light of the judgment i n
Cierenberg,8 upon which the High Court relied, and the contrary finding of the
Supreme Court of Appeal in this matter. The matter is arguable in the sense that it
enjoys some prospect of success. 9 The meaning and effect of section 6(4) of the
HDSA is of general public importance in the sense that it transcends the narrow
interests of the litigants involved. The interpretation may bear upon comparable
provisions which employ similar language in section 26 of the Alienation of Land
Act,10 section 5A of the Share Blocks Control Act 11 and section 7 of the Property

5 NVM obo VKM v Tembisa Hospital [2022] ZACC 11; 2022 (6) BCLR 707 (CC) at para 92.
6 General Council of the Bar of South Africa v Jiba [2019] ZACC 23; 2019 (8) BCLR 919 (CC) at paras 38 and
44.
7 Big G Restaurants (Pty) Ltd v Commissioner for the South African Revenue Service [2020] ZACC 16; 2020 (6)
SA 1 (CC); 2020 (11) BCLR 1297 (CC) and Clicks Retailers (Pty) Ltd v Commissioner for the South African
Revenue Service [2021] ZACC 11; 2021 (4) SA 390 (CC); 2021 (10) BCLR 1102 (CC).
8 Cierenberg v Rorich, Wolmarans and Luderitz and Van Wyk v Lamprecht 2003 (1) SA 40 (T).
9 Paulsen v Slip Knot Investments 777 (Pty) Ltd [2015] ZACC 5; 2015 (3) SA 479 (CC); 2015 (5) BCLR 509
(CC) at paras 21-2.

(CC) at paras 21-2.
10 68 of 1981. The relevant portions of the section read as follows:
“(1) No person shall by virtue of a deed of alienation relating to an erf or a unit receive
any consideration until—
. . .
(3) The provisions of subsection (1) shall not apply to any amount paid by way of
consideration which—
(a) the alienee, by virtue of a deed of alienation, entrusts to a practitioner or an
estate agent in his capacity as such, to keep, for the benefit of the alienator
in terms of that deed of alienation, in the trust account of the practitioner or
estate agent; or

GOOSEN AJ
9

Time-sharing Control Act.12 It is, accordingly, in the interests of justice that the

. . .
(4) If, in the ci rcumstances contemplated in subsection (3), the alienator becomes an
insolvent before the erf or unit has become registrable or the relevant contract has
been recorded in terms of section 20, any amount kept in a trust account in terms of
paragraph (a) of that subsection or the repayment of which was guaranteed in terms
of paragraph (b) of that subsection, shall immediately become payable to the alienee
concerned by the practitioner, estate agent, banking institution, building society or
insurer concerned.”
11 59 of 1980. The relevant portions of the section read as follows:
“(1) If shares in a company which is to be formed will in any manner whatsoever confer a
right to or an interest in the use of immovable property, no person shall, before the
company has been incorporated under the Companies Act as a share block company,
receive any consideration in respect of any right to a share in the company from any
person other than a person who will be a share block developer in relation to the
company.
(2) The provisions of subsection (1) shall not apply to any amount paid by way of
consideration as contemplated therein, which—
(a) the person so paying it entrusts to a practitioner or an estate agent in his
capacity as such, to keep, for the benefit of the perso n entitled to the amount
as such consideration, in the trust account of the practitioner or estate agent;
or
(b) is paid to the person entitled thereto as such consideration if, before the
payment, the person who has paid it is furnished with an irrevocabl e and
unconditional guarantee by a bank or building society registered otherwise
than provisionally or a registered insurer as defined in section 1 of the

than provisionally or a registered insurer as defined in section 1 of the
Insurance Act, 1943 (Act 27 of 1943), in terms of which that bank, building
society or insurer undertakes to repay the said amount to the person who has
paid it if the company has not been incorporated as contemplated in that
subsection within a period stated in the said guarantee.
(3) If, in the circumstances contemplated in subsection (2), the person en titled to the
amount as consideration becomes an insolvent before the company has been
incorporated, any amount kept in a trust account in terms of paragraph (a) of that
subsection or the repayment of which was guaranteed in terms of paragraph (b) of
that subsection, shall immediately become payable to the person concerned who paid
it as contemplated in that subsection, by the practitioner, estate agent, bank, building
society or insurer concerned.”
12 75 of 1983. The relevant portions of the section read as follows:
“(1) No person shall by virtue of any contract relating to accommodation consisting of
any building or improvements, or any portion or part thereof, receive any
consideration or part thereof, unless a n architect has issued a certificate that the
relevant accommodation, as erected, is substantially in accordance with any
applicable and relevant officially approved building plans and town planning scheme
and applicable local authority by -laws, and is suf ficiently complete for the purposes
of utili zation of the relevant time -sharing interest, and unless a copy of such
certificate has been delivered to the purchaser concerned.
. . .
(3) The provisions of subsection (1) shall not apply to the receipt of any amount—
(a) which the purchaser, by virtue of a contract, entrusts to a practitioner or an
estate agent in his capacity as such, to keep, for the benefit of the seller in
terms of that contract, in the trust account of the practitioner or estate agent

GOOSEN AJ
10

interpretation be resolved. 13 This Court therefore has jurisdiction to adjudicate the
case.

[17] Whether leave to appeal ought to be granted need not be belaboured. It follows
from what I have said above that t he appeal enjoys some prospects of success and that
the interests of justice favour the granting of leave to appeal.

The merits of the appeal
[18] It is appropriate to set out the full text of section 6 of the HDSA. It reads as
follows:

“(1) Subject to subsection (3) and notwithstanding any other law, no developer
may by virtue of a contract receive any consideration or any part thereof,
unless—
(a) an architect or a quantity surveyor has issued a certificate that the
housing development scheme concerned has been erected
substantially in accordance with any applicable officially approved
building plans and town -planning scheme and applicable local
authority by-laws, and is sufficiently completed for the purposes of
utilization of the housing interest concerned;

until the certificate referred to in subsection (1) has been issued and a copy
thereof has been delivered to the purchaser; or
(b) which by virtue of a contract is paid to the seller if, before such payment,
the purchaser is furnished with an irrevocable and u nconditional guarantee
by a banking institution registered otherwise than provisionally under the
Banks Act, 1965 (Act 23 of 1965), a building society registered otherwise
than provisionally under the Building Societies Act, 1965 (Act 24 of 1965),
or a reg istered insurer as defined in section 1 of the Insurance Act, 1943
(Act 27 of 1943), in terms of which the said banking institution, building
society or insurer undertakes to repay the said amount to the purchaser if the
certificate referred to in subsecti on (1) is not issued within the period
referred to in section 4(1)(k).

referred to in section 4(1)(k).
(4) If, in the circumstances contemplated in subsection (3), the seller becomes an
insolvent before the certificate referred to in subsection (1) is issued, any amount
kept in a trust account in terms of paragraph (a) of subsection (3) or the repayment of
which was guaranteed in terms of paragraph (b) of that subsection, shall immediately
become payable to the purchaser concerned by the practitioner, estate agent, banking
institution, building society or insurer concerned.”
13 Paulsen above n 9 at para 17.

GOOSEN AJ
11

(b) a copy of that certificate and a copy of the contract have been
furnished to the purchaser concerned; and
(c) in the case where a housing interest include s a right of occupation, a
practitioner has issued a certificate that the title deed of the land to
which the right of occupation relates, has been endorsed as
contemplated in section 4C, in so far as endorsement is required by
that section, and a copy of that certificate has been furnished to the
purchaser concerned.
(2) Any person who contravenes any provision of subsection (1) shall be guilty
of an offence and liable on conviction to a fine not exceeding R20 000 or to
imprisonment for a period not exceed ing five years or to both that fine and
that imprisonment.
(3) Subsection (1) shall not apply to the receipt of any amount—
(a) which the purchaser by virtue of a contract entrusts to a practitioner
or an estate agent in his capacity as such, to be kept, for the benefit of
the developer, in the trust account of the practitioner or estate agent
until the provisions of subsection (1) have been complied with; or
(b) which by virtue of a contract is paid to the developer if, before such
payment, the purchaser was furnished with an irrevocable and
unconditional guarantee by a banking institution registered otherwise
than provisionally under the Banks Act, 1965 (Act 23 of 1965), a
mutual building society registered otherwise than provisionally under
the Mutual Building Societies Act, 1965 (Act 24 of 1965), a building
society registered otherwise than provisionally under the Building
Societies Act, 1986 (Act 82 of 1986), or a registered insurer as
defined in section 1 of the Insurance Act, 1943 (Act 27 of 1943), in
terms of which the banking institution, mutual building society,
building society or insurer undertakes to repay the said amount to the
purchaser, if the provisions of subsection (1) are not being complied
with.
(4) If, in the circumstances contemplated i n subsection (3), the developer

with.
(4) If, in the circumstances contemplated i n subsection (3), the developer
becomes an insolvent before the provisions of subsection (1) have been
complied with, any amount kept in a trust account in terms of paragraph (a)
of subsection (3) or the repayment of which was guaranteed in terms of
paragraph (b) of that subsection, shall immediately become payable to the

GOOSEN AJ
12

purchaser concerned by the practitioner, estate agent, banking institution,
mutual building society, building society or insurer concerned.”

[19] The approach to the interpretation of a statut ory provision is well -settled. It
involves a unitary exercise in which careful attention is paid to the language of the
enactment, the context in which that language is used and the purpose of the
provision(s) so as to come to a proper understanding of th e meaning, and effect, of the
provision(s).14 The unitary exercise is undertaken in a manner that seeks to give effect
to the purport , objects and values of the Constitution and, in particular, the rights
conferred by it.

[20] The purchasers do not suggest tha t the S upreme Court of Appeal did not
appreciate or apply these principles of interpretation. Their critique is confined to the
consequences of the interpretation adopted by the Supreme Court of Appeal. They
say that the Supreme Court of Appeal’s finding that section 6(4) of the HDSA does
not establish a cause of action for the repayment of funds not kept in trust at the time
of the insolvency, renders retired persons “more vulnerable ” to the financial risk of
insolvency of the developer. This finding, they argue, is contrary to the overall
purpose of the legislation.

[21] In developing their argument, the purchasers suggest that section 6(3)(a)
contemplates the payment of the purchase consideration into trust so that the
practitioner holds the funds as an agent of the purchaser. Emphasis is placed on the
word “entrustment” used in subsection (3)(a). Since the purchaser “entrusts” the
funds with the attorney (or estate agent), the funds are held at the instance of the
purchaser albeit “for the benefit ” of the seller. Upon this basis the purchaser is the
“trust creditor” in relation to the entrusted funds. Accordingly, so the argument goes,
upon the occurrence of the intervening insolvency, the practitioner is obliged to repay

upon the occurrence of the intervening insolvency, the practitioner is obliged to repay
the funds to the purchaser as the trust creditor. In the event that the entrusted funds,

14 Chisuse v Director-General, Department of Home Affairs [2020] ZACC 20; 2020 (6) SA 14 (CC ); 2020 (10)
BCLR 1173 (CC) at paras 47-52 and University of Johannesburg v Auckland Park Theological Seminary [2021]
ZACC 13; 2021 (6) SA 1 (CC); 2021 (8) BCLR 807 (CC) at para 65.

GOOSEN AJ
13

comixed with other funds held in trust, have been paid away by the practitioner, the
practitioner is obliged to make good the funds to the trust creditor , in accordance with
well-established principles.15

Purpose
[22] It is appropriate to begin by examining the purpose of the HDSA. This was
described in Eden Village as follows:

“The Act falls within the category of what might be termed ‘social’ or ‘consumer
protection’ legislation. Its object is to protect elderly or retired persons investing
their
savings in a housing development scheme from possible exploitation by a developer.
As an example of this one may have regard to s ections 2-4 of the Act, which provide
in considerable detail what a contr act for the acquisition of a housing interest by a
retired person should contain: details as to exactly what he is acquiring and what his
obligations will be, and also what other facilities or services will be provided. These
sections also bind the develo per to provide the facilities promised; if the landed
property is unencumbered to keep it unencumbered; and to give an estimate, for a
period of three years in advance, of what the upkeep of the scheme is likely to cost.
So, too, s ections 4A, 4B and 4C gi ve the holder of a right of occupation very
considerable security by requiring the endorsement of that right against the title deed,
and according that right priority over any other right, whether or not such other right
has been registered or endorsed aga inst the title deed, and irrespective of the time
when such other right was registered and endorsed. The whole Act is designed to
protect the rights and the interests of the retired persons, and recognises the fact that
the residents have a vested interest in the housing development scheme in which they
have chosen to stay.”16

15 See Fuhri v Geyser N.O . 1979 (1) SA 747 (N); [1979] 3 All SA 374 (N) at 749G-H where it was explained
that:

that:
“It is immaterial that the money has or has not been deposited in the trust account or, if so
deposited, that it has or has not been unlawfully withdrawn. In short, the availability of the
money in the trust account is wholly immaterial to the client’s right to payment of the full
amount due to him. Naturally, amounts unlawfully withdrawn from the account may be
recovered on the grounds of the very unlawfulness of their withdrawal, but that does not in
any way affect th e right to recover the full amount, i.e., the amount withdrawn as well as the
amount not withdrawn, which exists in any event.”
16 Eden Village (Meadowbrook) (Pty) Ltd v Edwards [1995] ZASCA 47; 1995 (4) SA (A) at 44A-E.

GOOSEN AJ
14


[23] This description was endorsed in Flower Foundation.17 The HDSA regulates a
particular form of housing for retired persons. In essence, it provides for the
acquisition of a “housing interest” in a collective development which does not involve
the transfer of ownership of a portion of the property concerned. A retired person may
“purchase” a right to occupy a designated housing unit on the property “for life ”.
Such right is not transferable but, upon the death of the principal purchaser, the spouse
of the purchaser may exercise the right for their natural life.

[24] The “life right” terminates upon the death of the occupier. The grantor of the
life right may then sell the housing interes t to another purchaser. The HDSA
envisages that the right of occupation may be alienated in a variety of ways. It may be
sold, or provided by rental, or even acquired in exchange for the provision of a loan to
the developer. The term “consideration” is defined by the HD SA.18 It does not
include “occupational interest” payable in relation to the occupation of a unit which is
subject to the “life right” (or housing interest) to be acquired.19

[25] The contract in terms of which the housing interest is acquired must conform to
certain formalities20 and must comply with the provisions of section 4 of the HDSA.21
It may provide that u pon termination of the life right the purchase consideration paid

17 Flower Foundation Pretoria Homes for the Aged NPC v Registrar of Deeds, Pretoria [2022] ZASCA 8; 2022
(6) SA 99 (SCA) at para 17. See also Boland Bank Bpk v Engelbrecht [1996] ZASCA 42; [1996] 2 All SA 273
(A); 1996 (3) SA 537 (A) (Boland Bank) at 547E.
18 The term is defined to mean “ the purchase price and interest thereon (but excluding occupational interest),
rent or other consideration which is payable or must be rendered in terms of the contract concerned ”.

Consideration is so defined because the HDSA contemplates a variety of legal bases upon which a housing
interest or right of occupation may be acquired. It may be purchased, rented, obtained by exchange or against
provision of a loan to the grantor. See in this regard the definition of “right of o ccupation” and consider Boland
Bank id at 544E -F where the transactions involved interest free loans which would be repayable upon
termination of the life rights.
19 The exclusion of occupational interest from the definition of consideration, when read with section 4(1)(m)
(which permits the production of the certificates contemplated in section 6(1) within a period of two years from
the date of signature of the contract), suggests that the scheme of the HD SA contemplates the exercise of
occupation in accord ance with a life right or housing interest after conclusion of the contract of purchase but
before the certificates are produced . In the present case the facts establish that each of the purchasers exercised
their rights of occupation notwithstanding the developer’s failure to provide a valid certificate of occupation.
20 Section 3 of the HDSA.
21 The section sets out in considerable detail the required contents of the contract.

GOOSEN AJ
15

for the life right will be repaid to the estate of the purchaser . I n the present case the
contracts provided for repayment of the purchase consideration discounted by agreed
percentages for each year of exercise of the right of occupation. This was subject to a
maximum deduction of 30%, thus entitling each of the purchas ers to repayment of
70% of the purchase consideration, less any costs to make good the property upon
termination of the life right.

[26] The HD SA seeks to protect persons who purchase a “life right ” in several
ways. First, it confers statutory protection of t he right of occupation as against other
persons or parties who have or may acquire rights in relation to the property
concerned. Thus, s ection 4A confers upon holders of a right of occupation the
protection afforded by a registered lease. 22 Second, s ection 4B imposes restrictions
upon the alienation of the property which is subject to a housing development scheme
authorised by the HDSA. The property may not be alienated free of the rights of
occupation unless 75% of the holders of rights of occupation consent thereto. In any
event it confers on the holders of such rights of occupation preferent claims in relation
to the proceeds of such alienation.23 Third, section 4C requires that a registrable
housing interest must be endorsed upon the title deed of the property. Its effect is to
confer upon the purchaser a real right enforceable against subsequent title holders.

22 Section 4A provides:
“The holder of a right of occupation shall for the purpos es of any law have the same rights as
those conferred on a lessee in terms of a lease as contemplated in section 1(2) of the
Formalities in respect of Leases of Land Act, 1969 (Act 18 of 1969), registered against the
title deed of the leased land, and such rights shall rank in priority over any other right whether

or not such other right has been registered or endorsed against the title deed and irrespective of
the time when such other right was registered or endorsed.”
23 Section 4B provides:
“(1) Unless at least 75 per cent of the holders of rights of occupation in a housing
development scheme consent thereto the land concerned may not be alienated free
from such rights: Provided that the holders of the rights of occupation shall in the
case of such an alienation have preferent claims in respect of the proceeds of the sale
of land, which claims shall, notwithstanding the provisions of any other law—
(a) rank in priority over the claim of any mortgagee; and
(b) be equal to the amount paid in terms of para graph (a) of the definition of
right of occupation.
(2) Any alienation taking place without the consent of the holders as contemplated in
subsection (1) shall be null and void.”

GOOSEN AJ
16

The endorsement on the title deed serves to “lock-in” the value of the life right and to
secure its exercise for the duration of the life of the holder. 24 These protections are
designed to provide security for the exercise of the rights of occupation and to protect
the investment made by retired persons in such development schemes.

[27] The HDSA, however, also provides for the protection of the financial interests
of retired persons during the process of acquisition of their housing interest s and for
the protection of their substantive right of occupation . These protections arise out of
the obvious need to provide financial security to this vulnerable class of persons at a
stage when the housing scheme is being developed. Here, a significant risk factor is
the financial fa ilure of the scheme and the consequences of the insolvency of the
developer prior to the realisation of the right of occupation.

Text and context
[28] Section 6 is concerned with this latter form of protection. Section 6(1)
prohibits the receipt of any “consideration” to be paid for the acquisition of a “housing
interest” by the developer (or grantor) until the developer furnishes to the purchaser
the certificates contemplated by section 6(1) . The receipt of any amount of such
consideration payable in terms o f a contract is visited with criminal sanction in terms
of section 6(2).

[29] Section 6(1) provides for two certificates. Section 6(1)(a) requires a certificate
issued by an architect which certifies that the development complies with building
regulations and that it is fit for the exercise of the right of occupation. In the present
matter, it is the failure to furnish this certificate which gave rise to the cancellation of
the agreements. The second certificate, that required by section 6(1)(c), is one issu ed
by a practitioner which certifies that the title deed of the property which is the subject

by a practitioner which certifies that the title deed of the property which is the subject
of the development scheme has been endorsed where such endorsement is required by
section 4C of the HD SA. The purchasers averred in their particulars of claim that the

24 For a discussion of the interaction and effect of these measures, see Boland Bank and Flower Foundation
above n 17.

GOOSEN AJ
17

provisions of section 4C had been complied with. The purchase contracts record that
the title deed of the property concerned has been endorsed in terms of section 4C.25

[30] The section 6(1)(a) certificate serves , as the language plainly indicates, to
provide professional assurance that the right to occupy may be lawfully exercised and
that the development “is sufficiently completed for the purposes of utilization of the
housing interest concerned”. This is not merely a “certificate of occupancy”. As was
stated in Eden Village ,26 the HDSA “recognises the fact that the residents have a
vested interest in the housing development scheme in which they have chosen to
stay”. In Flower Foundation , the Supreme Court of Appeal gave expression to this
when it observed, in the context of that case, that:

“The respondents . . . bought into [a] scheme retirement village which offered peace
and tranquillity on a large property consisting of open lawns, with a sense of
community for the elderly people residing in the flats and cottages. [They] . . .
invested their hard-earned money in a lifelong right not only in the units they occupy,
but also in the lifestyle which the housing scheme offered. They never ant icipated
that they were to spend a portion of what remained of their lives on the porch of a
large commercial building site.”27

[31] It is this vested interest in the scheme, embodied in the right of occupation for
which the purchaser has bargained , that the provision of the section 6(1)(a) certificate
seeks to protect. The prohibition upon receipt of any consideration until the certificate
is provided serves to ensure that the developer performs its obligation to deliver a
right of occupation which accords with the substance of the bargain.

[32] Subsection (3) , however, provides for two exceptions to th e prohibition
contained in section 6(1) of the HDSA . The first, envisaged by subsection 3(a),

25 Not every right of occupation granted in terms of the HDSA is registrable against the title deeds of the
property. Sect ion 4C, however, makes provision for the voluntary registration of such housing interest by the
grantor. In that event the protection provided by sections 4A, 4B and 4C are available to the holder of the right
of occupation. In this case, the endorsement of the title deeds occurred voluntarily.
26 Eden Village above n 16 at 44D-E.
27 Flower Foundation above n 17 at para 16.

GOOSEN AJ
18

permits receipt of consideration by the developer in the form of entrustment of the
funds with an attorney or estate agent to be kept for the benefit of the developer. I
shall refer to this as the entrustment -exception. The second, envisaged by
subsection (3)(b), involves payment of consideration to the developer against the
provision of a guarantee issued by a bank or other financial institution. I shall refer to
this as the guarantee -exception. In both instances the permitted transaction involves
the receipt of consideration which is otherwise prohibited.

[33] The guarantee -exception does not occasion any conceptual difficulty. An
amount paid over by a purchaser to the developer, in exchange for a right of
occupation, would plainly amount to a transfer of ownership of the funds by the
purchaser to the de veloper. Such payment would discharge the purchaser’s
contractual obligation to pay the purchase price (or pay over the funds constituting a
loan should that be the agreed form of consideration). In exchange the developer
would be obliged to furnish the certificate within a time period stipulated in the
agreement and to permit the exercise of the right of occupation. Upon payment in this
manner, the funds would fall within the estate of the developer and the developer
would be entitled to exercise full dominium or ownership of those funds and could, as
matter of law, do with the funds as it pleases.

[34] It is worth observing that the guarantee -exception plainly balances the interests
of parties to the purchase agreement. A receipt of funds under the exception would
provide the developer with access to capital with which to undertake the development ,
while protecting the purchaser’s interests by way of a third -party guarantee of
repayment should the developer not meet or be able to meet its obligations. The
language employed in subsection 3(b) is noteworthy. It stipulates that the guarantee

language employed in subsection 3(b) is noteworthy. It stipulates that the guarantee
must be an unconditional and irrevocable undertaking “to repay the [consideration] to
the purchaser, if the provisions of subsection (1) are no t being complied with”28. This
suggests that the guarantee may serve to secure recovery of consideration paid to the
developer even in the absence of the occurrence of insolvency. For present purposes

28 Emphasis added.

GOOSEN AJ
19

what is relevant is the occurrence of insolvency of th e developer prior to delivery of
the certificate. In that event section 6(4) provides that the guarantee is immediately
payable to the purchaser by the guarantor. I shall return, hereunder, to section 6(4)
and its effect.

[35] The entrustment -exception stand s upon a different footing to the guarantee -
exception. The purchase consideration is entrusted to a practitioner “to be kept ” for
the benefit of the developer, until the provisions of subsection (1) have been complied
with. The developer does not “receive” the consideration in the sense that it may
apply those funds to the development or otherwise utili se the funds. Nevertheless,
section 6 treats the entrusted funds as a receipt by the developer. Payment of funds to
a third party cannot in law qualify as a receipt by the person who is entitled to receive
payment, unless that third party is authorised to receive the funds on their behalf. This
is a basic principle of agency. If the developer does not authorise a third party (the
practitioner) to receive payment of the purchase consideration, then the purchaser’s
act of paying the consideration to the practitioner does not constitute payment to the
developer. In such case s the developer does not receive any consideration at all, an d
is not in breach of the subsection (1) prohibition.

[36] Thus, for subsection (3)(a) to make any sense at all, the entrustment must be
understood to be a payment to the developer, save that the developer may only claim
payment from the attorney upon discharg e of the obligation to provide the required
certificate. In this instance, that is what the contract s required, namely that the full
purchase consideration be paid to the developer by entrustment with HGB for the
benefit of SLT . It is common cause that upon payment of the consideration to HGB,
occupation of the respective suites was given to the purchasers. They accordingly

occupation of the respective suites was given to the purchasers. They accordingly
exercised their rights to occupation notwithstanding that the required certificates were
still to be provided.29

29 It is important to bear in mind that section 4(m) contemplates that occupation may in fact be given prior to the
provision of a section 6(1)(a) certificate. So too does the definition of “consideration”, which permits the
developer to receive “occupational interest” prior to provision of the section 6(1 )(a) certificate.

GOOSEN AJ
20


[37] Upon payment into the trust account, the purchaser transfers to the developer
the right to claim payment of the funds so deposited from the attorney. That is the
legal effect of entrustment on behalf of the developer, as provided by
subsection (3)(a). The funds paid into the attorney’s trust account are owned by the
bank. The attorney has the right to transact upon the trust account in accordance with
duties owed to the trust creditor . That right to transact on the account is regulated by,
amongst other statutes, the Tru st Property Control Act 57 of 1988 and the Legal
Practice Act 28 of 2014 .30 These statutory provisions define the ambit of the
attorney’s fiduciary duties owed to the trust creditor, on whose behalf and for whose
benefit the entrusted funds are held.

[38] In this respect, the entrustment -exception also serves to balance the interests of
parties to the purchase agreement. On one hand, t he developer is placed in the
position of a trust creditor to funds which in law accrue to it thereby guaranteeing
immediate payment upon production of the required certificates. On the other hand,
the purchaser is assured that the funds kept in trust will become repayable upon
insolvency of the developer.

[39] The protection of the purchaser involves the interposition of a third par ty. The
attorney or estate agent is subject to a statutory obligation to keep the funds in trust
until the provisions of section 6(1)(a) have been complied with . Once that event
occurs, the entrusted funds may be paid over to the trust creditor, for whose benefit
the attorney holds the funds in trust. The purchaser has no claim against the
practitioner for repayment of the funds kept in trust , pursuant to the section, except in
the event of insolvency, as provided by subsection (4). In the absence o f insolvency,
any claim that a purchaser may have, arising from non-compliance with section 6(1)

30 In the case of payment to an estate agent, the provisions of the Estate Agents Act 112 of 1976 would apply.

GOOSEN AJ
21

or any other breach of the terms of the purchase contract, is a claim that lies against
the developer.31

[40] The operation of subsection (3)(a) may be illustrated in two examples. Assume
a practitioner who is required to keep the consideration in trust, pays away the funds
or misappropriates the funds prior to the developer complying with section 6(1) and
there is no insolvency. At that point, the purchaser’s cont ractual entitlement is for
delivery of the section 6(1) certificate which might be claimed from the developer. In
the event that the certificate can be provided and occupation thereby given, the
developer would not be entitled to withhold it because of th e attorney’s malfeasance.
The developer would have to pursue the attorney for the loss of the entrusted funds.
Should the developer not be able to produce the certificate, the purchaser may cancel
the agreement and claim repayment of the purchase consideration from the developer
and the developer would be obliged to meet that claim.

[41] In such instance, it is the developer who suffers the loss arising from the
practitioner’s breach of their fiduciary duties , since the developer is obliged to deliver
occupation but without actual receipt of the entrusted funds or to repay the purchase
consideration upon cancellation. The claim for recovery of such loss lies at the
instance of the developer.

[42] In the second ex ample, assume that the practitioner pays away the funds to the
developer prior to expiry of the period allowed for delivery of the certificates and
there is (at that stage) no insolvency. The purchaser still only has a claim for delivery
of the certificat e from the developer when it is due . The purchaser cannot claim
repayment of the entrusted funds from the practitioner. If the developer fails to
deliver the certificates, the purchaser can cancel the agreement and claim repayment

31 It is here that the difference in language between subsections (3)(a) and (b) is significant. As indicated in [34]
above, the language employed in the former suggests that the guarantee is not confined to the occurrence of
insolvency.

GOOSEN AJ
22

of the purchase conside ration32 in terms of section 8 of the HD SA. No claim would
lie against the attorney for such repayment despite the fact that the attorney paid away
the entrusted funds. The developer, on the other hand, will have been paid the
entrusted funds and is no lo nger in the position of a trust creditor in relation to those
funds.

[43] In this scenario it is certainly the case that the practitioner would have breached
subsection (3) since they had not kept the consideration paid by the purchaser until
subsection (1) was complied with. Both the practitioner and the developer may also
have contravened subsection (2) and be liable to criminal prosecution. The purchaser,
in this latter scenario, may very well be in a precarious situation because of the
misconduct of the practitioner and the developer but will, at that stage, have suffered
no cognisable loss recoverable from the attorney . The loss may only arise if the
developer is unable to satisfy the claim for repayment by reason of insolvency.

The effect of section 6(4)
[44] Section 6(4) reads:

“If, in the circumstances contemplated in subsection (3), the developer becomes an
insolvent before the provisions of subsection (1) have been complied with, any
amount kept in a trust account in terms of paragraph (a) of subsection (3) or the
repayment of which was guaranteed in terms of paragraph (b) of that subsection, shall
immediately become payable to the purchaser concerned by the practitioner, estate
agent, banking institution, mutual building society, building society or insurer
concerned.” (Emphasis added.)

[45] The occurrence of insolvency of the developer prior to compliance with
section 6(1) triggers repayment of the purchase consideration to the purchaser. Its
manifest purpose is to protect the purchaser in the event of the developer’s insolvency.
Insolvency, by its nature , implies that the insolvent is unable to meet its ordinary

Insolvency, by its nature , implies that the insolvent is unable to meet its ordinary

32 That is, in fact, what occurred in this case. The applicants cancelled their agreements because of SLT’s
failure to deliver the required certificates. The cancellation occurred prior to the insolvency of SLT.

GOOSEN AJ
23

financial obligations and that creditors are likely to suffer some financial loss. The
process of liquidation of the estate is both costly and time-consuming. It occurs on the
basis of ranked claims and, in relation to the general body of creditors, in accordance
with a balancing of competing interests, the concursus creditorum (coming together of
creditors). Retired persons who will have invested their hard -earned capital to secure
a lifelong right of occupation of a housing unit in a scheme are especially vulnerable
to the consequences of financial loss and the time-consuming process by which they
might recover or mitigate such loss. When section 6(4) is read purposively within the
context of the HDSA as a whole, it is apparent that this is the mischief it seeks to
avoid.

[46] As indicated earlier, the provision of a section 6(1)(a) certificate provides
independent professional assurance that the right of occupati on may lawfully be
exercised and that the substantive right of occupation may be exercised . Until that
occurs the developer has not yet performed its essential contractual obligation.
Insolvency at that stage means that, on balance, the developer is no l onger capable of
delivering that which it undertook to deliver. Insolvency does not bring about the
termination of all contractual obligations to which the insolvent has bound itself.
However, it precludes enforcement of such obligations by orders of spe cific
performance.33 It is against this legal background that the effect of section 6(4) must
be viewed.

[47] The question to be answered is what the phrase “any amount kept in a trust
account in terms of paragraph (a) of subsection (3) ” means. In argument, counsel for
the purchasers placed emphasis on the first part of the phrase , suggesting that the
words “kept in a trust account” might denote funds which were kept (or were meant to
be kept) and not only funds “still kept ”. In my view the whol e phrase must be

be kept) and not only funds “still kept ”. In my view the whol e phrase must be
considered. This is so because the reference to paragraph (a) of subsection (3) serves
to qualify the earlier phrase. Thus the amount kept is that kept “for the benefit of the
developer”. The ordinary grammatical meaning of the phrase suggests that only the

33 Lucas’ Trustee v Ismail and Amod 1905 TS 239 at 251.

GOOSEN AJ
24

amount which is kept or still kept in trust for the benefit of the developer at the time of
insolvency shall be immediately payable. If it had been intended to refer to the
amount that had been entrusted , the legislature would have p rovided for this in clear
terms. It could have referred to the amount entrusted in terms of paragraph (a) of
subsection (3) and taken the matter beyond doubt.

[48] A person or entity “becomes insolvent ” upon the issuing of an order of
insolvency. It is the date and time of the order of insolvency which serves to “lay the
hand of the law upon the estate ” and to fix the rights and interests of parties in the
insolvent estate. The order of insolvency establishes the concursus creditorum and
ensures that the affairs of the insolvent are from that moment managed and wound up,
in the interests of the general body of creditors.34

[49] If, as I suggest, the entrustment is a sanctioned payment to the developer so that
the developer acquires a right to claim paym ent of the funds as trust creditor when the
certificate is provided, then upon insolvency the trustee would acquire the same right.
The trustee could only receive the trust funds if the trustee could honour the obligation
to deliver the certificate and ho nour the ongoing obligation to provide lifelong
occupation rights. The insolvency of the developer renders it improbable that such
rights could be honoured. For this reason, in order to protect the financial interests of
the purchaser, insolvency terminates the entrustment-exception, making the funds kept
in trust immediately repayable to the purchaser. But if the trust funds had already
been paid to the developer prior to insolvency, the trustee would be obliged to meet a
claim for repayment of the purchase price in accordance with the principles applicable
to the concursus creditorum. Seen in this light the effect of section 6(4) is to
terminate the entrustment in terms of section 6(3)(a) upon the occurrence of

terminate the entrustment in terms of section 6(3)(a) upon the occurrence of
insolvency.


34 Walker v Syfret N.O. 1911 AD 141 at 160.

GOOSEN AJ
25

[50] The purchasers placed great reliance upon the judgment in Cierenberg35 which
dealt with a comparable factual situation. Although the judgment addresses the
import and effect of section 6(4), its finding that section 6(4) provides a statutory
causa (reason) for immediate repayment of what was entrusted, was not based upon a
detailed analysis and interpretation of the section. In Cierenberg it was suggested ,
though not expressly found, that the attorney with whom the purchase consideration
has been entrusted may be regard ed as a stakeholder, rather than as an agent for the
seller.

[51] Subsection (3)(a) envisages that entrustment occurs pursuant to the contract of
purchase concluded between the developer and purchaser . The section does not
exhaustively deal with the nature of the entrustment . It provides only an essential
form. The parties to the purchase contract may specify the terms of the entrustment ,
thereby placing the attorney or estate agent in the position of a stakeholder. Equally,
the purchaser and the attorney, in giving effect to the requirement of entrustment of
the purchase consideration, may conclude an agreement to regulate the entrustment.
Whether that has occurred will depend upon the facts . If such a contract, ex press or
tacit, is established , it may well justify a claim for immediate repayment of entrusted
funds even if such funds are no longer kept in trust at the time of insolvency. 36

[52] In this case, however, there is no question that the attorney acted as a
stakeholder in relation to the entrusted funds. The purchase contracts which were
concluded between the purchasers and the developer do not provide for the
appointment of HGB as a stakeholder. The purchasers, understandably, did not rely
upon a stakeholder agreement. Nor did the purchasers contend for any other form of
contractual relationship between them and HGB. At best, they contend for a

contractual relationship between them and HGB. At best, they contend for a
“statutory stakeholder ” interpretation of the section. To the extent that Cierenberg
suggests that this is what section s 6(3)(a) and 6(4) mean, it did so with reference to

35 Cierenberg above n 8.
36 EDS South Africa (Pty) Ltd v Nationwide Airlines (Pty) Ltd [2011] ZASCA 16; 2 011 (5) SA 158 (SCA) at
para 14.

GOOSEN AJ
26

Sadie,37 in which it was held that a stakeholder holds property as agent for neither
party. However, in Baker38 the Supreme Court of Appeal disagreed with the approach
to stakeholding in Sadie. The Court explained it as follows:

“The foregoing discussion of authorities relating to stakeholding leads me to the
conclusion that nothing is to be found in them that militates against my view,
expressed earlier, that the prima facie [(at first sight)] effect of clause 3 of the
contract between the plaintiff and the defendant was to constitute York Estate the
defendant’s agent for receiving payment of the purchase price. I accordingly reject
the contention on behalf of the defendant that York Estate was a stakeholder and not
the agent of the defendant, to the extent that I hold that the second part of the
contention is wrong. As to the first part, it seems to me that whet her or not York
Estate can aptly be described as a stakeholder is perhaps more a question of semantics
than a matter of principle. If the word ‘stakeholder’ is used in a narrow sense, as
being confined to a third party who receives and holds something not as the agent of
either one of the two persons who have an interest in it, then it would be wrong to
categorise York Estate in the present case as a stakeholder. On the other hand, if the
word ‘stakeholder’ is used in a loose sense, without excluding the notion of agency,
there would be no objection to calling York Estate a stakeholder. My personal
preference is not to call a person in the position of York Estate in this case a
stakeholder, but there is no need to pronounce a final judgment on the point.
It is to be observed that in Verbeek’s case supra Milne J did not decide that the third
party in the position of York Estate here was not the agent of the seller (that was
merely assumed), nor that it was a stakeholder (see at 68D -E). However, in a
subsequent case, Sadie v Currie ’s City (Pty) Ltd and Others 1979 (1) SA 363 (T) ,

subsequent case, Sadie v Currie ’s City (Pty) Ltd and Others 1979 (1) SA 363 (T) ,
Margo J said (at 365H), with reference to the cases of Verbeek, Sorrell and Burt
(supra):
‘In recent decisions, both in this country and in England, it has been
pointed out that a stakeholder is not the agent of either of the parties,
and it seems that his position is sui generis [(of its own kind)].’
The contract in that case contained a clause similar in tenor to that in Verbeek’s case
and clause 3 in the present case. To the extent that Margo J held that the

37 Sadie v Currie’s City (Pty) Ltd 1979 (1) SA 363 (T).
38 Baker v Probert [1985] ZASCA 22; [1985] 2 All SA 263 (A); 1985 (3) SA 429 (A).

GOOSEN AJ
27

‘stakeholder’ receiving the purchase price in terms of such a clause is not the agent of
the seller, I respectfully disagree, for the reasons already given.”39

[53] The plain language of section 6(3)(a) accords with the princip le enunciated in
Baker. This does not mean that section 6(3)(a) does not impose upon the practitioner
an obligation to keep the funds entrusted under pain of a criminal sanction. Nor does
it mean that the section does not give rise to a statutory duty of care which the
practitioner owes to the purchaser which, if breached , may found a claim for delictual
damages. What the section does not do is to create a tacit contractual relationship
between the purchaser and the practitioner.

[54] The suggestion, in Cierenberg, that upon insolvency section 6(4) imposes an
obligation upon the attorney to pay the purchaser as trust creditor, was made in the
context of the view expressed regarding the “stakeholder” status of the attorney. It
accords with the concept of a stakeholder. 40 Some support for this conception of the
payment mechanism is to be found in Baker where Botha JA said the following:

“There is accordingly a fundamental difference between the position of York Estate
in this case and the position of the s takeholder in the two contexts referred to above.
It is true, of course, that if (as happened in this case) the contract was cancelled
because of the defendant's breach, the defendant would cease to be a creditor vis-à-vis
both the plaintiff and York Estate, and the plaintiff would possibly become a creditor
as against York Estate for repayment to her of the purchase price, but I do not
consider that such a possibility can serve to equate York Estate with the stakeholder
in the instances referred to above.”41

[55] In my view the simple effect of section 6(4) is to terminate the entrustment -
exception provided by section 6(3)(a). Such statutory termination renders the funds

exception provided by section 6(3)(a). Such statutory termination renders the funds
kept in trust at the time of insolvency immediately payable to the purchaser. My
reason for restricting the operation of s ection 6(4) to that which is kept in trust at the

39 Id at 443F-444B.
40 Cierenberg above n 8 at 50A-C.
41 Baker above n 38 at 441H-I.

GOOSEN AJ
28

time of insolvency is based on the language of the section as understood in its proper
context. It may be illustrated with reference to the second scenario example discussed
above. In that instance, the practitioner’s unlawful payment of the entrusted funds to
the developer terminates the trust relationship between the practitioner and the trust
creditor because there is no amount then kept in trust for the benefit of the developer.
The attorney’s breach of section 6(3) of the HD SA may render the practitioner liable
to the purchaser upon a cause of action framed in terms of that section. Once the
funds which were to be kept in trust are no longer kept in tr ust at the time of
insolvency of the developer, th ere are no funds which can immediately be paid in
terms of section 6(4). The purchaser’s entitlement to claim payment from the attorney
arises from the failure to keep the funds in trust pending fulfilment of the developer’s
obligation to provide the section 6(1) certificates. That is a claim based upon a breach
of the terms of section 6(3)(a). It might be either delictual in nature or contractual,
depending upon the particular circumstances of the entrustment.

[56] I have read the judgment of my B rother, Majiedt J, (second judgment) and I
briefly deal with the approach favoured by him . He contends for the creation of a
statutory “escrow agreement ” by section 6(3). It is not immediately apparent what
such an agreement might entail which is not otherwise explicable by the concepts and
principles that apply to familiar features of our law, such as stakeholding and agency.
An escrow typically refers to a bond or deed o f grant or like -document which confers
upon the grantee certain rights but which is held in the possession of a third party until
the occurrence of some future specified event. 42 The relationship between the grantor,
grantee and the third party who holds t he escrow is regulated by principles which

grantee and the third party who holds t he escrow is regulated by principles which
regulate the delivery of a tangible instrument. We are not here dealing with such a
relationship. In this case money is entrusted with a third party. That is a transaction
to which well-established legal principles of the law of trust apply.


42 Onions et al “Shorter Oxford English Dictionary on Historical Principles” 3 ed (Claredon Press, Oxford 1944)
gives the meaning of escrow as “a deed, bond, or other engagement delivered to a third party to take effect upon
a future condition, and not till then to be delivered to the grantee”.

GOOSEN AJ
29

[57] It seems to me that the reference to an “escrow agreement” adds no value to the
meaning and effect of section 6(3). If the reference is intended to convey that the
section creates a form of statutory stakeholder, then the contention is not supported by
the jurisprudence which specifically addresses the concept of stakeholder agreements.
If it was intended to suggest that section 6(3) must be read to create a tacit statutory
agreement between the purchaser and the attorney, the n the second judgment does not
explain why my contrary interpretation of the text of the section is wrong.

[58] The purchasers argued that the interpretation adopted by the Supreme Court of
Appeal renders retired persons more vulnerable than the statutory scheme envisages .
It is not at all clear how this can be so. Section 6 serves to protect retired persons
from the in solvency of a developer which occurs prior to the delivery of the security
provided by the section 6(1) certificates. It does so by providing for repayment of the
amount of consideration paid to the developer in the circumstances provided by
subsection (3)(a).

[59] The second judgment contends that the purpose of section 6(4) is not to protect
the purchasers from the concursus creditorum . Instead it is to make plain that the
financial relationship between the developer and the purchaser comes to an end upon
insolvency. I have some difficulty appreciating how this might differ from the effect I
attach to section 6(4). 43 The ending of the “financial relationship” presumably does
not mean that the contractual relationship between the purchaser and developer come s
to an end. That is a matter which is regulated by the law of insolvency as it applies to
the nature of the contract, which may be an executory contract partially fulfilled. 44 As
I understand it, the second judgment suggests a termination of the “escrow agreement”

43 See [55].

43 See [55].
44 Ellerine Brothers (Pty) Ltd v McCarthy Ltd [2014] ZASCA 46; 2014 (4) SA 22 (SCA) at para 12 where the
Court approved the dictum in Smith v Parton N.O. 1980 (3) SA 724 (D) at 728H-729A that—
“there is nothing in the law of insolvency which affects uncompleted contracts in general; the
contract is neither terminated nor modified nor in any way altered by the insolvency of one of
the parties . . . except in one respect, and that is, because of the supervening concursus, the
trustee cannot be compelled to perform the contract.” (Footnote omitted.)
In the present case each of the purchasers had occupation and exercised those rights for a period prior to
cancellation of their agreements and prior to the insolvency of the developer.

GOOSEN AJ
30

resulting in the “escrowed funds” being repaid. If this is so, then its effect is to protect
the purchaser from having to compete within the concursus creditorum, as I suggest.
Where we differ, plainly, is that I hold that only those funds kep t in trust at the time of
insolvency are immediately payable in terms of section 6(4).

[60] Section 6 (4) proceeds upon the supposition that practitioners and developers
will comply with the obligations and proscriptions imposed by the legislation. This is
not an unreasonable supposition. Attorneys and estate agents, it must be accepted,
will ordinarily act in accordance with statutory obligations and their fiduciary duties
as befits the professional office they occupy. Remedies for the breach of these duties
are to be found , amongst other places, in the legislation which applies to these
professions.

[61] Section 6(4) was not intended to protect retired persons from breaches of the
protective measures created by section 6( 3). Had that been an adjunct purpose of the
section, it would, no doubt, have said so in clear and unambiguous language. It is
significant that the protective mechanisms employed by section 6 of the HDSA are
mirrored in the Alienation of Land Act, the Share B locks Control Act and the
Property Time-sharing Control Act. In each instance insolvency renders the amount
kept in trust immediately payable to the party in the position of the purchaser. In none
of these Acts is express provision made for repayment in the event that the funds
which were required to be kept were paid away.

Conclusion
[62] I accept that this case highlights the risks which retired persons continue to face
despite the legislative attempts to mitigate or protect against those risks . In each
instance the purchasers were given and exercised their rights of occupation
notwithstanding that a valid section 6(1)(a) certificate was not provided. They
continued to do so until the agreements were cancelled. We do not know what

continued to do so until the agreements were cancelled. We do not know what
occurred thereafter, sav e that SLT was subsequently liquidated. The applicants
pursued claims in the liquidation of SLT. They received a dividend payment.

GOOSEN AJ
31

Assessed globally, the total of the dividend paid to the purchasers is substantially less
than the total purchase consideration paid by them. We do not know what the value of
each of the claims would have been upon application of the repayment formula
provided in the contracts and the reasonable compensation which might have been
payable in terms of section 8 of the HD SA. Even so, we must accept that the
applicants suffered significant losses.

[63] They are, however, not without a remedy in relation to such losses. HGB has
admitted that its payment of the entrusted funds to SLT was in breach of
section 6(3)(a) of the HDSA. As I have already stated, the statutory obligation to keep
the funds in trust until section 6(1)(a) is complied with, imposes a duty to protect the
interests of the purchaser. Its breach, therefore, may justify a damages claim at the
instance of the aggrieved purchasers.

[64] In the circumstances, the Supreme Court of Appeal was correct in its
determination of the first of the three separated questions. The answer provided by
the High Court in relation to the second question was not before the Supreme Court
of Appeal and is also not before this Court. Contrary to the second judgment I would
express no view regarding the merits of the High Court order. The High Court
provided an answer to the third question without any engagement with the issues
relevant to the question, nor upon any explained reasoning. The Supreme Court of
Appeal correctly considered that the question could not be answered without reference
to relevant evidence. It therefore set aside the High Court’s order and referred that
issue back to the High Court. That order is not subject to challenge before this Court.
It follows that the appeal must succeed. There is no reason why the costs of the
appeal should not follow the result.

[65] Had I commanded the majority, I would have made the following order:
1. Leave to appeal is granted.

1. Leave to appeal is granted.
2. The appeal is dismissed with costs.

MAJIEDT J
32



MAJIEDT J (Madlanga ADCJ, Mhlantla J, Opperman AJ and Tshiqi J concurring):


[66] I have had the pleasure of reading the strongly reasoned judgment of my
Colleague Goosen AJ (first judgment). I agree that we have jurisdiction, although, in
my view, both our general and constitutional jurisdiction are engaged (my Colleague
holds a different view in respect of constitutional jurisdiction 45). It is well-established
that we must interpret a statute so that it is constitutionally compliant. 46 As will
presently appear, in this instance we are required to have regard to the social aspect of
the HDSA and give effect to its constitutional objective. That engages our
constitutional jurisdiction.

[67] I agree that the interests of justice require us to hear this matter and that leave
to appeal ought to be granted. On the merit s, however, I disagree with Goosen AJ on
his interpretation of section 6(4) read with section 6(3) of the HDSA and with the
outcome proposed by him.

[68] I adopt the comprehensive narration of my Colleague and will repeat aspects
thereof only insofar as it may be necessary to elucidate my divergent reasoning or for
emphasis. While Goosen AJ does recognise that the HDSA is social legislation aimed
at protecting vulnerable elderly people, his interpretation of the impugned provision
does not lend credence to that recognition.

[69] Where I part ways with my Colleague’s reasoning on the merits is that in my
view, section 6(4) of the HDSA does establish a cause of action against a practitioner
for the payment of funds, entrusted as contemplated in section 6(3)(a) of the HDSA,

45 See the first judgment at paras [14] to [15].
46 Investigating Directorate: Serious Economic Offences v Hyundai Motor Distributors (Pty) Ltd In re: Hyundai
Motor Distributors (Pty) Ltd v Smit N.O . [2000] ZACC 12; 2000 (10) BCLR 1079 (CC); 2001 (1) SA 545 (CC)

at para 23 and Independent Institute of Education (Pty) Ltd v KwaZulu -Natal Law Society [2019] ZACC 47;
2020 (2) SA 325 (CC); 2020 (4) BCLR 495 (CC) at para 45. See also South African Police Service v Public
Servants Association [2006] ZACC 18; 2007 (3) SA 521 (CC); [2007] 5 BLLR 383 (CC) at para 20.

MAJIEDT J
33

not kept in trust at the time of the insolvency. I reach this conclusion on the basis that,
in my understanding of the HDSA, the provisions of the Act operate differently before
and after the developer’s insolvency.

[70] First, it is important to under stand what exactly is before this Court in the
application for leave to appeal against the judgment of the Supreme Court of Appeal.
That enquiry, in turn, requires an anterior assessment of how the parties litigated in the
High Court. In this regard, it is noteworthy that, pursuant to a request by the parties,
the High Court had separated three questions for anterior determination as points of
law in terms of rule 33(4) of the Uniform Rules of Court.47

[71] The first point of law was formulated as follows:

“Whether section 6(4) of the [HDSA] can found an action by a purchaser of a
‘housing interest’ from a ‘developer’ for repayment by a ‘ practitioner’ of an amount
entrusted as contemplated in section 6(3)(a) of the HDSA, by the purchaser to such
‘practitioner’ by virtue of a ‘ contract’, where, in the absence of compliance with the
provisions of section 6(1) of the HDSA and prior to the ‘ developer’ having become
an insolvent, as it subsequently did, the ‘ practitioner’ disbursed, to or for the account
of the ‘developer’, from the trust account of such ‘practitioner’, an amount equivalent
to the amount so entrusted to the ‘ practitioner’, as purported released to the
‘developer’ of the amount so entrusted to the ‘practitioner’.”

[72] The second point of law was:

“Whether section 6(4) of the HDSA can found an action by a purchaser of [a]
‘housing interest ’ from a ‘ developer’ of an amount entrusted as contemplated in
section 6(3)(a) of the HDSA, by the purchaser to such ‘ practitioner’ by virtue of [a]
‘contract’ where, prior to the ‘developer’ having become insolvent, as it subsequently
did, the purchaser cancelled the ‘contract’.”

[73] The third question read thus:

did, the purchaser cancelled the ‘contract’.”

[73] The third question read thus:

47 Herold Gie and Broadhead Inc v Harris N O [2024] ZASCA 125; [2024] 4 All SA 333 (SCA).

MAJIEDT J
34


“Whether, if section 6(4) of the HDSA does not apply, the averments in the
particulars of claim, read with the averments in the defendant’s plea that are admitted
by the plaintiff(s), are sufficient to sustain an action.”

[74] The High Court found for the applicants on all three of these questions and, as
the Supreme Court of Appeal remarked, HGB’s special plea of pr escription and the
non-reliance on the authorisations to release the purchase price to repel the claim for
repayment, as well as the applicants’ pleaded cancellation of the life rights agreements
were issues that all remained undecided in the High Court. 48 The Supreme Court of
Appeal was right in expressing its reservations about the litigation choice of the
parties to separate the three questions for anterior determination in terms of rule 33(4).
The Court observed:

“It seems to me that the separated que stions might be inextricably linked to these
issues. Furthermore, the first question is framed in a complicated manner. Apart
from this, the factual context and the legal framework within which the identified
points of law arise in this case are complex, and have not received much
consideration by our courts. It would have been more convenient to have all the
issues fully ventilated in the same hearing.”49 (Emphasis added.)

[75] Rule 33(4) must be used with circumspection by litigants. This case illustrates
why that is necessary. In Denel,50 the Supreme Court of Appeal cautioned:

“Rule 33(4) of the Uniform Rules which entitles a Court to try issues separately in
appropriate circ umstances – is aimed at facilitating the convenient and expeditious
disposal of litigation. It should not be assumed that that result is always achieved by
separating the issues. In many cases, once properly considered, the issues will be
found to be ine xtricably linked, even though, at first sight, they might appear to be
discrete. And even where the issues are discrete, the expeditious disposal of the

discrete. And even where the issues are discrete, the expeditious disposal of the
litigation is often best served by ventilating all the issues at one hearing, particularly

48 Id at para 19.
49 Id.
50 Denel (Pty) Ltd v Vorster [2004] ZASCA 4; 2004 (4) SA 481 (SCA); [2005] 4 BLLR 313 (SCA).

MAJIEDT J
35

where there is more than one issue that might be readily dispositive of the matter. It
is only after careful thought has been given to the anticipated course of the litigation
as a whole that it will be possible properly to determine whether it is convenient to try
an issue separately. But where the trial court is satisfied that it is proper to make such
an order – and in all cases it must be so satisfied before it does so – it is the duty of
that court to ensure that the issues to be tried are clearly circumscribed in its order so
as to avoid confusion. The ambit of terms like the ‘merits’ and the ‘quantum’ is often
thought by all the parties to be self -evident at the outset of a trial but in my
experience it is only in the simplest of cases that the initial consen sus survives. Both
when making rulings in terms of rule 33(4) and when issuing its orders a trial court
should ensure that the issues are circumscribed with clarity and precision.”51

[76] This separation of issues, the outcome in the Supreme Court of Appeal and the
applicants’ limited application for leave to appeal in this Court all have repercussions
for the outcome in this matter. Let me explain. In their application in this Court, the
applicants state that they want to appeal against only a part of the judgment of the
Supreme Court of Appeal.52 Thus, only one question is in dispute before this Court –
the first question above, regarding the meaning of section 6(4) of the HDSA where
there is no cancellation of the contract. That is the issue on which Goosen AJ and I
differ.

[77] A finding in favour of the applicants on that first question (which is the
question on which the applicants base their entire application for leave to appeal) does
not require a further determination of the question whether the applicants can sue
HGB for the funds they had deposited into the trust account. This is because the
Supreme Court of Appeal referred that issue back to the High Court for determination.

Supreme Court of Appeal referred that issue back to the High Court for determination.

51 Id at para 3. See also Molotlegi v Mokwalase [2010] ZASCA 59; [2010] 4 All SA 258 (SCA) at paras 20
and 24.
52 At paragraph 1 of their Notice of Application for Leave to Appeal, the applicants state:
“The applicants seek an order in the following terms: The applicants a re granted leave to appeal
against part of the judgment and order of the Supreme Court of Appeal in Case 602/2023 per
Dambuza JA (Nicholls and Mabindla-Boqwana JJA and Tolmay & Mbhele AJJA concurring)
dated 13 September 2024, namely the answering in favour of the respondent of the first of three
questions separated in terms of Uniform Rule 33(4) for prior determination by the Western Cape
Division of the High Court in consolidated Cases 17698/2017, 17711/2017, 17738/2017,
17753/2017(b), 17757/2017 and 17765 /2017 and, ancillary thereto, the award of the costs of
appeal in favour of the respondent.” (Emphasis added).

MAJIEDT J
36

The applicants ask this Court to do the same in the event that it upholds the
applicants’ argument on section 6(4). Against that backdrop, I proceed to discuss that
central (and only) issue.

[78] I accept the first judgment’s reasoning that the attorney or estate agent is
subject to a statutory obligation to keep the funds in trust until the provisions of
section 6(1)(a) have been complied with, and, when that occurs, the entrusted funds
may be paid over to the trust creditor, for whose benefit the attorney or est ate agent
holds the funds in trust. 53 It is also correct that the purchaser has no claim against the
practitioner for repayment of the funds kept in trust, pursuant to the section, except in
the event of insolvency, as provided by subsection (4). I accept further that, absent
insolvency, any claim that a purchaser may have, arising from non -compliance with
section 6(1) or any other breach of the terms of the purchase contract, is a claim that
lies against the developer. This is so because the contract is concluded between the
purchaser and the developer, and it is the developer’s obligation to deliver a
section 6(1)(a) certificate to the purchaser.

[79] Goosen AJ provides two examples to illustrate the operation of
subsection (3)(a).54 I do not agree with my C olleague’s conclusion in the first
example about the purchaser suffering no loss prior to the developer’s insolvency. In
the first example, my own view is that upon the developer’s failure to meet the
obligation, the developer commits the breach of mora debitoris (a debtor’s culpable,
unjustified delay to perform contractually) or repudiation. The purchaser would then
be able to sue the developer for breach of contract. The purchaser can claim specific
performance and damages (if any). Cancellation coul d also be claimed depending on
the extent of the breach and the terms of the contract. Return of performance flows

the extent of the breach and the terms of the contract. Return of performance flows
naturally from cancellation. This means that the developer must return the purchase
price which had been paid by the purchaser restoring th e status quo ante. This is what
section 8 of the HDSA provides.

53 See the first judgment at [39].
54 Id at [40] to [42].

MAJIEDT J
37


[80] In the case of cancellation, and concomitant return of performance, the funds
unlawfully paid away by the practitioner become relevant. Failure to restore these
funds would invariably resul t in loss to the purchaser. However, in that case, given
that there is no insolvency, the purchaser would not be able to claim the
misappropriated funds from the practitioner through section 6(4) of the HDSA.
Alternative remedies may, however, be availab le to the purchaser in other areas of the
law such as the law of delict. Even in the absence of insolvency, the purchaser cannot
be left without recourse against a practitioner who has misappropriated funds kept in
trust pursuant to a contract that has be en cancelled. The upshot is that until the
fulfilment of the conditions under section 6 of the HDSA, the entrusted funds can
lawfully flow only in a single direction; that is back to the purchaser.

[81] Courts must interpret legislation in a manner which, whe re possible, favours
constitutionality over unconstitutionality. 55 In that regard the social aspect of the
legislation under consideration here is of paramount importance. Effect must be given
to the HDSA’s constitutional objective.

[82] The first judgment holds that if the trust funds had already been paid to the
developer prior to insolvency, the trustee would be obliged to meet a claim for
repayment of the purchase price in accordance with the principles applicable to the
concursus cred itorum.56 I do not see the matter being quite so straightforward.
Payment of the purchase price to the developer prior to their insolvency, and in
contravention of the provisions of the HDSA, cannot mean that the purchasers must
compete in the concursus creditorum upon the developer’s insolvency. They cannot,
as a class of vulnerable persons, supposedly protected by social legislation, be
expected to “join the queue”, as it were, of concurrent creditors. That approach

expected to “join the queue”, as it were, of concurrent creditors. That approach
appears to me to be grossly inequita ble to purchasers, inasmuch as it exposes them to
the risk of loss that comes with competing in the concursus creditorum. This denies a

55 See cases cited at fn 46.
56 See the first judgment at [49].

MAJIEDT J
38

purchaser of the protection given under section 6(4) solely because there has been an
unlawful pay away by the attorney . It is inconceivable to think that the legislature
would have intended that an attorney’s theft or wrongful payment would strip an
elderly and vulnerable purchaser of the protection afforded by section 6(4).

[83] The first judgment makes light of my approach to the true purpose of the
HDSA as social legislation.57 It strikes me that it would serve no purpose to engage in
a debate where the fundamental point of departure is as stark as it is here. The core
difficulty I have with the approach in the first judgment is that it interprets the relevant
section such that the supposed vulnerable beneficiaries of specially enacted social
legislation for their protection must look outside of that legislation for relief. That can
never be. As I see this matter, the pu rchaser should be able to proceed against the
attorney for repayment of the funds pursuant to section 6(4). Any funds that should
have been kept in trust when insolvency occurs, are plainly expected to be there. If
not in trust at that time, it must be t he attorney’s responsibility to recoup the funds
from elsewhere and reimburse the purchaser. It bears emphasis that HGB had in each
instance pleaded that it had, on behalf of, but without authority from , the purchaser
concerned made a request to Mr Dealtry Pickford, a trustee of the SLT, to issue a
certificate as contemplated in section 6(1)(a) of the HDSA. It pleaded further that it
had, in response, been provided with the certificates. There is no dispute that these
certificates were defective.

[84] The entire scheme of section 6 rests on the regulation of the developer’s receipt
of consideration. While section 6(3) creates an exception which allows the developer
to receive consideration prior to the fulfilment of the conditions set out in section 6(1),

to receive consideration prior to the fulfilment of the conditions set out in section 6(1),
the section does not create an automatic right to claim the consideration received.
Statutory conditions precedent must be fulfilled prior to entitlement.


57 See the first judgment at [59] to [61] amongst others.

MAJIEDT J
39

[85] The wording in section 6(1) is peremptory – “no developer may by virtue of a
contract receive any consideration or any part thereof”.58 The inclusion of a criminal
sanction (including imprisonment) under section 6(2) also illustrates the seriousness
with which the Legislature views the prohibition against the premature receipt of the
consideration by the developer.

[86] The use of the word “entrusts” in section 6(3)(a) is significant. It is strongly
indicative of a special relationship, one built on fidelity and trust. Its dictionary
meaning as used in “entrust” as a transitive verb is “t o give someone a thi ng or a duty
for which they are responsible”;59 “to put into the care or protection of someone”;60
“to give a task, duty, or responsibility to”.61 Thus, a high level of care must be
exercised by the attorney or estate agent who receives the purchasers’ money. This
duty of care carries with it the responsibility not to unlawfully pay away entrusted
funds and to make good any misappropriated funds. To require anything less would
be to vitiate the very essence of what it means to “entrust”.

[87] Prior to fulfilment of the conditions, the purchasers (or their estates) retain the
right to lay claim to the funds entrusted if the contract is cancelled or the developer
becomes insolvent. Section 6(3), in my view, creates a statutory escrow agreement
between the practitioner and the purchaser. The funds paid over by the purchaser are
escrowed until the conditions under section 6(1) have been met. That is the true
nature of the carveout under section 6(3). Lawful payment to the developer can only
take place upon the fulfilment of the statutory conditions.

[88] The statutory escrow agreement terminates upon insolvency of the developer
prior to fulfilment of the conditions. It may also terminate upon agreement by all

58 Emphasis added.

58 Emphasis added.
59 Cambridge Dictionary “entrust” (2026), available at https://dictionary.cambridge.org/dictionary
/english/entrust?q=entrust+to at the first definition (emphasis added).
60 Collins Dictionary “Definition of ‘entrust’” (2026) , available at https://www.collinsdictionary.com/dictionary
/english/entrust at the second definition (emphasis added).
61 Merriam-Webster “entrust” (2026), available at https://www.merriam-webster.com/thesaurus/entrust at the
first definition (emphasis added).

MAJIEDT J
40

parties concerned that the deal envisaged is no longer to conti nue for any agreed
reason. Termination in these circumstances would presumably require an instruction
to the practitioner from both the purchaser and the developer, indicating that the deal
necessitating the escrow has collapsed. In the latter case, howe ver, the funds held in
trust can only legally flow in one direction: back to their rightful owner, the purchaser.

[89] My Colleague criticises my analogy with an escrow agreement and says that it
is inapposite, because it is “not otherwise explicable by the concepts and principles
that apply to familiar features of our law, such as stakeholding and agency”. 62 The
criticism is ill -founded. The authorities show that the way in which modern day
“escrow” is understood has expanded. It includes not only deeds or documents but
money and a whole range of items of property. It is therefore not wrong to describe
this structure as an escrow arrangement.

[90] In Kerr’s The Law of Agency, the nature of agency is described thus:

“The aim of the appointment of an agent is the performance of a service for the
principal: what the principal finds it impracticable, inconvenient or difficult to do for
himself he proposes to do through another. In legal contexts, the word ‘agent’ is most
commonly used of a person whose activitie s are concerned with the formation,
variation or termination of contractual obligations, and ‘agency’ has a corresponding
meaning.”63

[91] This does not seem to fit the role played by the practitioner pursuant to
section 6(3)(a) of the HDSA. The practitioner r eceives money for the benefit of the
developer but nothing in the section suggests that the practitioner is authorised to act
on behalf of the developer as their agent. The word “stakeholder” could be a fitting
description if it is used in the narrow sens e as explained by the Court in Baker “being

62 See the first judgment at [56].

62 See the first judgment at [56].
63 Kerr The Law of Agency 4 ed (LexisNexis, 2006) at 3.

MAJIEDT J
41

confined to a third party who receives and holds something not as the agent of either
one of the two persons who have an interest in it”.64

[92] South Africa is no stranger to the concept of “escrow”. Here, attorneys often
play a pivotal role as escrow agents, ensuring that complex transactions are conducted
with utmost integrity. The concept of “escrow” has been described thus:

“In simple terms, an escrow is a financial arrangement where a third party (the
escrow a gent) temporarily holds and regulates payment of funds required for two
parties involved in a given transaction. It ensures that the transaction is completed
smoothly, with both parties meeting their obligations.
. . .
In South Africa, while there are dedicated escrow services, attorneys are often chosen
as escrow agents due to:
(1) trustworthiness: attorneys are bound by strict ethical standards and a code of
conduct, ensuring credibility in the process.
(2) legal expertise: being well -versed in the law, attorneys can seamlessly
navigate the legal intricacies of transactions.
(3) neutral standpoint: as a neutral third party, attorneys can impartially handle
disputes should they arise.
. . .
In the intricate web of transactions, trust is paramount. In South Africa, attorneys,
with their legal prowess and ethical standing, have emerged as trusted escrow agents,
safeguarding interests and ensuring that transactions are concluded harmoniously.
Whether you’re diving into the world of real estate, mergers and acquisitions, or any
transaction requiring an escrow, considering an attorney as your escrow agent in
South Africa is a step towards security and peace of mind.” 65

[93] The High Court in Klerck provided a definition for what an “escrow”
arrangement is. The Court described the term thus:


64 See the first judgment at [52], quoting Baker above n 38.

64 See the first judgment at [52], quoting Baker above n 38.
65 Barter “ Attorneys as escrow agents in South Africa: a crucial intermediary” Commercial Law Explained ,
available at https://www.bartermckellar.law/commercial-law-explained/attorneys-as-escrow-agents-in-south-
africa-a-crucial-intermediary.

MAJIEDT J
42

“An escrow, a term derived from English law, is a deed or agreement delivered to a
disinterested third party in trust pending the fulfilment of a condition specified
therein in favour of one or other of the parties to the agreement. If the condition is
performed it becomes a binding obligation. Otherwise it fails.”66 (Emphasis added.)

[94] The Court in Klerck goes on to qu ote from the Canadian case of Toonton v
Atkinson67 in which the following was stated:

“In early times escrow may have been used exclusively when delivering deeds.
Today however, ‘escrow’, like many other words has acquired a much wider
application. It ma y apply to money, company stock, securities and other items of
property. The modern day application of the word is provided in Black’s Law
Dictionary, 5th ed, p. 489:
‘Escrow. A writing, deed, money, stock, or other property delivered
by the grantor or ob ligator into the hands of a third party, to be held
by the latter until the happening of a contingency or performance of a
condition, and then by him delivered to the grantee, promisee or
obligee. A system of document transfer in which a deed, bond, or
funds is delivered to a third person to hold until all the conditions in a
contract are fulfilled; e.g., delivery of deed to escrow agent under
instalment land sale contract until full payment of land is made.’
The Concise Oxford Dictionary states as follows:
‘Escrow. Written legal engagement to do something, kept in third
person’s custody until some condition has been fulfilled; money or
goods so kept.’”68

[95] This definition, to me, seems to accurately capture the arrangement envisaged
in section 6(3)(a) of the HDSA. We have a purchaser, a developer and an
independent/neutral party being the practitioner who holds the purchase price in trust
until the condition set out in section 6(1) has been fulfilled. If the condition is not

66 Klerck v SA Metal and Machinery (Pty) Ltd [2004] ZAECHC 12; [2009] 4 All SA 344 (E) at para 2.
67 Toonton v Atkinson (1985) 52 Nfld 8 PEIR 167, 174. See also the Zimbabwean case of Deputy Sheriff,
Harare v Metbank Zimbabwe & Anor HH-230-13.
68 Klerck above n 66.

MAJIEDT J
43

fulfilled, the underlying reason for which the funds are held in trust ends. This is the
position explained in paragraph 22 of this judgment. The understanding is that the
statutory escrow agreement lapses and is of no further force or effect, the escrow
account ceases to be operated a s an escrow account and the funds are thereafter held
by the bank at the disposal and for the sole benefit of the purchaser, who may then in
their sole discretion withdraw the full funds at any time.

[96] Section 6(4) provides a statutory remedy even where the practitioner has in the
meantime unlawfully paid over the proceeds of the relevant “entrustment” in
contravention of section 6(3)(a). Unlawful payment by the practitioner to the
developer (or any thir d party) does not change the fact that the entrustment remains,
de jure (by law), “kept” in the practitioner’s trust account. Thus, the practitioner is
under a legal obligation to retain the funds entrusted to it until the preconditions set
out in the sta tute have been met. An unlawful disbursement does not satisfy these
conditions and thus does not relieve the practitioner of their duty under section 6(4).
Instances of unlawful payment by the practitioner serve to create a deficit in the
practitioner’s trust account, but that does not mean that the funds entrusted are no
longer regarded as “kept” in the trust account.

[97] I agree with the applicants that the true purpose of section 6(4) is to provide for
immediate and unconditional reimbursement to a purcha ser of the proceeds of a
section 6(3)(a) entrustment in the event of the developer becoming insolvent without
having complied with the requirements of section 6(1). The purpose is not, as the
first judgment holds, simply to exclude the proceeds of a secti on 6(3)(a) entrustment
from the estate of a developer who becomes insolvent without having complied with
the provisions of section 6(1). Had that been the purpose of section 6(4), the

the provisions of section 6(1). Had that been the purpose of section 6(4), the
Legislature could simply have provided therefor expressly, in the same way as it has
provided for exclusion of funds in the trust account of an attorney from the estate of

MAJIEDT J
44

the attorney upon their insolvency under section 88 of the Legal Practice Act
(previously section 79 of the Attorneys Act69).

[98] It follows then that the inso lvency of the developer prior to fulfilment of the
conditions under section 6(1) does not entitle the developer (or the trustee of their
insolvent estate) to claim the consideration received. There is nothing in the
legislation that suggests this. The insolvency of the developer, prior to satisfaction of
the conditions under section 6(1), does not result in the proceeds falling into the
developer’s insolvent estate. The funds remain sealed off in protection of the
vulnerable purchaser. The only circumst ance in which a developer would ever be
entitled to the release of such proceeds would be upon compliance with the provisions
of section 6(1). Therefore, the trustee or liquidator of an insolvent developer company
is in no better position and is not entit led to untrammelled release of the escrowed
proceeds.

[99] The true purpose of section 6(4), in my view, is not to protect the purchasers
from the operation of the concursus creditorum. It is, instead, to make plain that the
financial relationship between the developer and the purchaser comes to an end upon
the insolvency of the developer prior to fulfilment of the conditions under
section 6(1). It makes clear that, at this point, there is no longer a legal reason for the
funds to remain entrusted for the ben efit of the developer because it is, at that point,
manifestly plain that the developer will not be able to satisfy its obligations to the
purchasers. It bears repetition that any payment of entrusted funds by the practitioner
will be unlawful. That unla wful payment by the practitioner cannot absolve the
practitioner of their duty to reimburse the purchasers.

[100] Thus viewed, the only sensible and constitutionally compliant interpretation of
the impugned provision is that advanced by the applicants. Interpreted holistically,

the impugned provision is that advanced by the applicants. Interpreted holistically,
the purpose of section 6(4) is to create a statutory provision which establishes an
unconditional right to repayment on the occurrence of a trigger event: the insolvency

69 53 of 1979.

MAJIEDT J
45

of the developer. The first judgment’s interpretation of the purpose adopts a narrow
view of the section which is unsustainable in light of the overall purpose of the
legislation. It also fails to promote the spirit, purport and objects of the Bill of Rights
as courts are enjoined to do by section 39(2) of the Constitution. Therefore, the words
“kept in a trust account” under section 6(4) of the HDSA do not have regard to the de
facto (factual) state of affairs. They entail a de jure (legal) analysis. Monies which
should have been kept in the trust account will be regarded as such.

[101] The purpose of the impugned provision is not, as the first judgment holds,
simply to exclude the proceeds of a section 6(3)(a) entrustment from the estate of a
developer who becomes insolvent without having complied with the provisions of
section 6(1). Had that been the purpose of section 6(4), the Legislature could simply
have provided therefor expressly, in the same way as it has provided for exclusion of
funds in the trust account of an attorney from the estate of the attorney upon their
insolvency.

[102] In sum then, section 6(4) of the HDSA does provide a statutory remedy for
repayment of funds e ntrusted by a purchaser in terms of section 6(3)(a) even where
the practitioner concerned has unlawfully paid away the proceeds of the relevant
entrustment prior to insolvency of the developer.

[103] For these reasons, I would grant leave to appeal and uphold t he appeal. That
would mean that the matter must be remitted for further hearing in the High Court. I
must add, though, that, unlike the High Court, I would decide the second question in
favour of HGB. I hold the view that the most suitable remedy for th ese (and other
similarly placed) applicants would have been under section 8 of the HDSA 70 instead

70 Section 8 of the HDSA reads:
“Consequences of contracts which are void or are cancelled

70 Section 8 of the HDSA reads:
“Consequences of contracts which are void or are cancelled
(1) Notwithstanding any other law, but subject to any power that a court may have and
subject to subsection (2), any person who has performed partially or in full in terms
of a contract which is of no force or effect in terms of secti on 2(1) or which has been
declared void or has been cancelled under this Act, is entitled to recover from the

MAJIEDT J
46

of section 6. This is for two reasons. First, as appears from my Colleague’s narration,
the funds entrusted were paid over to the developer, SLT, prior to it s insolvency.
After payment, the purchasers took occupation of the units and cancelled their “life
rights” agreements on 24 October 2014. The final sequestration order was only issued
on 9 March 2016. By then, there had been partial performance by both parties.

[104] Secondly, the purchasers lodged claims against the insolvent estate for
repayment of the purchase consideration paid to the developer. They were, in due
course, each paid a concurrent dividend. It is arguable, then, that they have accepted
falling within the concursus creditorum.

[105] Despite these potential findings for HGB, it did not appeal, qua (in the capacity
of) defendant in the High Court, against paragraph 2 of the
Supreme Court of Appeal’s order which confirms the High Court’s decision in respect
of the second question. That question is, therefore, not before this Court. As stated, it
is only the first question that is before us. In the absence of an appeal by HGB, this

other party what he has performed in terms of the contract, and, if the seller
concerned is a developer—
(a) the purchaser may in addition recover from the developer—
(i) interest at the rate prescribed by regulation on any payment that he
made in terms of the contract, from the date of the payment to the
date of recovery;
(ii) a reasonable compensation for—
(aa) necessary expenditure he had incurre d, with or without the
authority of the owner of the land concerned or of the developer, in
relation to the preservation of the land; or
(bb) any improvement which enhances the market value of the land and
was effected by him with the express or implied co nsent of the said
owner.

was effected by him with the express or implied co nsent of the said
owner.
(b) the developer may in addition recover from the purchaser—
(i) a reasonable compensation for the occupation or utilisation the
purchaser may have had of the land;
(ii) compensation for any damage caused intentionally or negligen tly
to the land by the purchaser or any person for whose actions the
purchaser may be liable.
(2) Any alienation which does not comply with section 2(1), sh all in all respects be valid
ab initio if the purchaser has in terms of the alienation rendered the full compensation
and the land concerned has been transferred to the purchaser or the housing interest
concerned has otherwise been vested in him.”

MAJIEDT J
47

Court does not have jurisdiction to decide the second question. That is an issue for the
High Court to decide on remittal. The first judgment holds the same view. 71 And, as
stated, the third question before the High Court is also not before us. This is because,
as I have said, the question whether the applicants can sue HGB for the funds they had
deposited into the trust account was referred back by the Supreme Court of Appeal to
the High Court for determination. The applicants ask this Court to do the same in the
event that it upholds the applicants’ argument on section 6(4), which is the case.

Order
[106] I make the following order:
1. Leave to appeal is granted.
2. The appeal is upheld to the extent set out in paragraph 3 below.
3. The order of the Supreme Court of Appeal is set aside and replaced with
the following:
“1. The appeal is dismissed with costs.
2. Save for the decision on the second question, the order of the
High Court is set aside and replaced with the following:
‘2.1 The first question is decided in favour of the plaintiffs.
2.2 The third question is referred back to the High Court for
determination.
2.3 The costs stand over for determination together with the
remaining issues.’”
4. The matter is remitted to the High Court for further hearing on the
remaining issues.
5. The respondent must pay the costs in this Court.


71 See the first judgment at [64].

For the Applicants:


For the Respondent:

J Rogers instructed by Biccari Bollo
Mariano Incorporated

S Olivier SC and JP White instructed
by Clyde and Company