Brief Summary

Property — Sale and transfer of property — Validity of sale — Dispute regarding representation of seller — Appellants sought to set aside sale of erf 546, claiming the respondent did not represent the Reformed Presbyterian Church in Southern Africa — Court found no real agreement to transfer ownership due to material error in persona — Sale and transfer of erf 546 set aside and interdict issued against the City of Cape Town regarding erf 547 until the Langa Congregation's application is considered.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an appeal to the Supreme Court of Appeal against an order of the Western Cape Division of the High Court, Cape Town. The appeal concerned whether a municipal sale and subsequent transfer of immovable property were valid where the purchaser (or those acting in the purchaser’s name) had materially misrepresented its identity, and whether ownership nonetheless passed upon registration.

The appellants were the Uniting Presbyterian Church in Southern Africa (a voluntary association with legal personality) and the Uniting Presbyterian Church in Southern Africa: Western Cape Presbytery (Tiyo Soga Memorial Congregation), which was common cause a legal person in its own right. The first respondent was cited as the Reformed Presbyterian Church in Southern Africa (Tiyo Soga Memorial Congregation), although a central dispute was whether the persons acting in that name in fact represented the RPCSA. The City of Cape Town (the second respondent) was the owner of one of the properties and the seller of the other, and the Registrar of Deeds, Cape Town (the third respondent) was cited due to the relief sought implicating the registration of title.

In the High Court, the appellants had sought relief aimed at setting aside the sale and transfer of one property and securing an opportunity for the Langa Congregation to pursue the acquisition of the adjacent property. The High Court (Thulare AJ) dismissed the application with costs but granted leave to appeal. Before the Supreme Court of Appeal, the appellants narrowed the relief sought to setting aside the sale and transfer of erf 546 and interdicting the City from considering the respondent’s application to buy erf 547 pending the Langa Congregation’s opportunity to apply.

The subject-matter of the dispute concerned two adjoining erven in Langa, Cape Town, used for many decades as a church hall (erf 546) and a manse (erf 547). The appeal required the court to determine the legal consequences of material error as to the other contracting party (error in persona) and the requirements for a valid transfer of ownership under South African property law’s abstract theory.

2. Material Facts

The dispute related to erven 546 and 547, Washington Street, Langa. It was common cause that, at the time of the proceedings, erf 546 was registered in the name of the RPCSA (pursuant to the impugned transfer), while erf 547 remained registered in the name of the City of Cape Town.

The properties had been occupied and used for church purposes for decades, and the respondent alleged that a 99-year lease had been entered into in about 1940 between the church body (or its congregation) and the City’s predecessor. Neither the respondent nor the City could produce the lease, but the City did not dispute its existence. The court treated this historical occupation and the lease allegation as background, rather than as the decisive legal basis for the outcome.

A decisive and largely undisputed feature of the factual matrix concerned church unification. The RPCSA (previously the Bantu Presbyterian Church in Southern Africa) and the Presbyterian Church of Southern Africa embarked on a process that culminated in the adoption of the Basis of Union in 1998. The UPCSA was constituted on 26 September 1999, and the congregations of both negotiating churches, including the Tiyo Soga Memorial Congregation, became part of the UPCSA. The court noted that this was not only supported by the documentary record (including the minutes of the constituting session), but was also admitted in the answering affidavit of the respondent’s deponent, Reverend Futshane, who further admitted he was inducted as a minister of the UPCSA and led the Tiyo Soga Congregation under its auspices.

The Basis of Union regulated property consequences. It contemplated that certain fixed property formerly held by the RPCSA and certain township sites leased or permissively occupied would be re-registered in the name of the UPCSA. The implementation of the union required administrative steps after 1999, and it was accepted that the RPCSA continued to exist in a technical legal sense for limited purposes while outstanding property transfers and related matters were finalised.

In June 2004, a substantial number of members of the Tiyo Soga Congregation resolved to withdraw from the UPCSA. The breakaway group remained in occupation of the properties and took the position that it had “returned” to the RPCSA and that it represented the RPCSA in relation to rights in the properties. The court treated this assertion as incorrect in law and fact, given the established integration of RPCSA congregations into the UPCSA and the limited continued existence of the RPCSA for implementation purposes.

Against that background, on 22 March 2005, the respondent (acting in the name of the RPCSA) applied to the City to purchase erf 546. The City approved the application through its standard processes and concluded a written agreement of sale in terms of which the City sold erf 546 for R22 500. On 17 July 2007, the Registrar registered erf 546 in the name of the RPCSA pursuant to that transaction.

On 26 June 2008, the respondent (again acting in the name of the RPCSA) applied to purchase erf 547. The City published the application for public comment. The Langa Congregation objected, asserting in substance that the respondent neither constituted nor represented the RPCSA. Around this time, the appellants became aware that erf 546 had already been sold and transferred as described.

The court accepted that the respondent’s conduct had led the City to believe that the respondent represented the RPCSA, and that the City would not have sold public property to a party that materially misrepresented its identity.

3. Legal Issues

The central legal questions were whether a valid contract of sale came into existence between the City and the respondent in respect of erf 546, given the City’s material mistake about the identity of the counterparty; and, if the underlying contract was defective or non-existent, whether ownership nonetheless passed to the registered transferee upon registration under South Africa’s abstract system of transfer of ownership.

A further legal question was whether there existed a valid real agreement (a meeting of minds to transfer and receive ownership) supporting the transfer, where the City intended to transfer to the RPCSA as an entity, but the persons dealing with the City did not represent that entity. This required applying principles of contract and property law to the established facts, rather than resolving contested factual disputes on credibility.

In addition, the court had to determine whether the appellants had standing to seek the relief relating to the sale and transfer, and to seek an interdict affecting the City’s consideration of the application to purchase erf 547. A procedural issue also arose regarding condonation for the late filing of the notice of appeal and the record.

Overall, the dispute required determination of legal questions and the application of settled legal principles to largely common-cause facts, with particular emphasis on the legal consequences of error in persona and the requirements for the passing of ownership under the abstract theory of transfer.

4. Court’s Reasoning

The court first addressed the church union context to clarify the status of the institutions involved. It held that the UPCSA was duly constituted on 26 September 1999 and that the congregations of both negotiating churches, including the Tiyo Soga Congregation, became part of it. The court considered the High Court’s contrary conclusion to be clearly wrong, particularly because the respondent’s own deponent had admitted the union and his ministry under the UPCSA. From this, the court reasoned that the RPCSA’s continued existence thereafter was only technical and limited, directed at completing transfers and administrative implementation, and did not mean that breakaway members of a congregation could thereby become the RPCSA or represent it.

On the validity of the sale, the court relied on the principle that where one party’s representation causes a fundamental or material mistake in the other party (an error in persona), there is no consensus and therefore no contract comes into existence. The court emphasised that, properly understood, the position is not that a valid contract exists and must be rescinded; rather, no contract is formed at all (void ab initio in the sense of non-formation). The court accepted that the respondent had led the City to believe it was dealing with the RPCSA, and that this identity was material to the City as an organ of state obliged to act transparently and accountably in disposing of public property. The court held that it could not be doubted that the City would not have sold erf 546 had it known the truth, so the mistake was material and induced by the respondent’s conduct.

Turning to the transfer of ownership, the court applied South African law’s abstract theory of transfer. It explained that registration can pass ownership even if the underlying contract is defective, but only where registration gives effect to a valid real agreement: a meeting of minds to transfer and receive ownership. The court held that the same principles governing agreements generally apply to real agreements, and that a real agreement may be defective or may not exist at all.

Applying these principles, the court found that the City had no intention to transfer ownership to the respondent as a breakaway group; it intended to transfer ownership to the RPCSA as an entity, which the respondent did not represent. This meant there was dissensus as to the identity of the intended owner, and therefore no real agreement to transfer and receive ownership. As a result, despite registration in the name of the RPCSA, ownership of erf 546 did not pass and remained vested in the City.

On standing, the court reasoned that by adopting the Basis of Union, the RPCSA (as holder of the relevant occupation rights under the historical lease arrangement) had relinquished rights to obtain ownership in favour of the UPCSA, giving the UPCSA a direct and substantial interest in the impugned sale and transfer. The court held that the UPCSA chose to exercise its rights through the Langa Congregation, and that, additionally, as a resident within the City’s jurisdiction, the Langa Congregation had standing to hold the City accountable for the unlawful alienation of public property.

Finally, on condonation, the court considered the explanations for the late filing of the notice of appeal and the record. It accepted that the delay stemmed from the remissness of the appellants’ former attorneys, the late awareness of the granting of leave to appeal, and the time taken to secure litigation funding. It also took into account the excellent prospects of success. The court granted condonation and held that the respondent’s opposition to condonation was unreasonable, warranting a costs order differentiating between the unopposed costs of the application and the costs attributable to opposition.

5. Outcome and Relief

The Supreme Court of Appeal granted condonation for the late lodging of the notice of appeal and the appeal record. The appellants were directed to pay the costs of the condonation application on an unopposed basis, and the first respondent was directed to pay the costs occasioned by its opposition to condonation.

The appeal was upheld with costs, and the order of the High Court was set aside and replaced. The substituted order set aside the sale, transfer and registration of erf 546 held by the first respondent under Deed of Transfer T00056121/2007.

The City was interdicted from considering the first respondent’s application to purchase erf 547 until the second appellant submitted its own application to purchase erf 547, which application had to be submitted within a reasonable time after the date of the order. The first respondent was directed to pay the costs of the application in the court below (as reflected in the substituted order). The appellants did not seek the costs of two counsel.

Cases Cited

Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA)

North East Finance (Pty) Ltd v Standard Bank of South Africa Ltd [2013] ZASCA 76; 2013 (5) SA 1 (SCA)

Spenmac (Pty) Ltd v Tatrim CC [2014] ZASCA 225; 2015 (3) SA 46 (SCA)

Cape Explosive Works Ltd & another v Denel (Pty) Ltd & others 2001 (3) SA 560 (SCA)

Legator Mckenna Inc & another v Shea & others [2008] ZASCA 144; 2010 (1) SA 35 (SCA)

Absa Ltd v Moore & another [2015] ZASCA 171; 2016 (3) SA 97 (SCA)

Jacobs en ’n ander v Waks en andere [1991] ZASCA 152; 1992 (1) SA 521 (A)

Legislation Cited

Constitution of the Republic of South Africa, 1996, section 195

Rules of Court Cited

No specific rules of court were cited by number in the judgment in relation to the condonation application and the late filing of the notice of appeal and record.

Held

The court held that the respondent’s conduct caused a material error in persona on the part of the City, with the result that no contract of sale came into existence in respect of erf 546. It further held that, under the abstract theory of transfer, registration of transfer does not pass ownership absent a valid real agreement, and that the City lacked the intention to transfer ownership to the respondent (as opposed to the RPCSA as an entity). Consequently, there was no real agreement and ownership of erf 546 did not pass, remaining vested in the City despite registration in the RPCSA’s name.

The court also held that the appellants had standing to seek the relief, and that a proper case had been made out for condonation, with the respondent’s opposition to condonation being unreasonable. The sale, transfer and registration of erf 546 were set aside, and the City was interdicted from considering the respondent’s application to purchase erf 547 until the Langa Congregation had been afforded an opportunity to submit its own application within a reasonable time.

LEGAL PRINCIPLES

A representation by one party that induces a fundamental or material mistake by the other party regarding the identity of the contracting party (error in persona) results in no consensus, and accordingly no contract comes into existence. In such circumstances, the legal consequence is not the rescission of an existing contract but the non-formation of a contract, making cancellation unnecessary.

Under South African property law’s abstract theory of transfer, the passing of ownership upon registration is not dependent on the validity of the underlying contract, but it does require a valid real agreement (a meeting of minds to transfer and receive ownership). Where there is dissensus concerning the identity of the intended transferee, the real agreement is absent or defective, and registration does not effect transfer of ownership.

An applicant has standing where it has a direct and substantial interest in the subject-matter, including where institutional arrangements governing property rights confer a substantive interest in impugned transactions, and where accountability considerations arise in relation to a municipality’s disposal of public property.

Condonation for non-compliance with procedural time limits depends on the adequacy of the explanation for delay and the prospects of success, and unreasonable opposition to condonation may justify an adverse costs order limited to the costs of opposition.

Uniting Presbyterian Church in SA and Another v Reformed Presbyterian Church in Southern Africa and Others (1438/2018) [2019] ZASCA 129 (30 September 2019)