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[2018] ZACC 43
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eThekwini Municipality v Mounthaven (Pty) Limited (CCT05/18) [2018] ZACC 43; 2019 (2) BCLR 236 (CC) ; 2019 (4) SA 394 (CC) (31 October 2018)

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CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case CCT
05/18
In the matter
between:
eTHEKWINI
MUNICIPALITY
Applicant
and
MOUNTHAVEN (PTY)
LIMITED
Respondent
Neutral citation:
eThekwini Municipality v Mounthaven (Pty) Limited
[2018] ZACC
43
Coram:
Mogoeng CJ, Basson AJ Cameron J, Dlodlo AJ, Froneman J, Goliath AJ,
Khampepe J, Mhlantla J, Petse AJ and Theron J
Judgments:
Froneman J (unanimous)
Heard on:
28
August 2018
Decided on:
31 October 2018
Summary:
Meaning
of debt —
Prescription Act 68 of 1969
— Real rights —
Limited Real Rights — Personal rights — reversionary
clauses
Deeds Registries Act
47 of 1937
— Registration of Personal Rights
ORDER
On appeal from the
Supreme Court of Appeal:
1. Leave to appeal
is refused with costs.
JUDGMENT
FRONEMAN J
(Mogoeng CJ, Basson AJ Cameron J, Dlodlo AJ, Goliath AJ, Khampepe J,
Mhlantla J, Petse AJ and Theron J):
Introduction
[1] The applicant
(the Municipality) seeks leave to appeal against a decision of the
Supreme Court of Appeal.  That Court confirmed
the dismissal in
the High Court
[1]
of the Municipality’s application to compel the respondent
(Mounthaven) to re-transfer a property that it had earlier sold
to
Mounthaven.  The Municipality’s case rests on the proper
interpretation and effect of a reversionary clause in the
original
deed of sale and subsequent deed of transfer.  The Supreme Court
of Appeal upheld the decision of the High Court
that the registered
right contained in the clause constituted a “debt” that
had prescribed under the
Prescription Act
[2]
and that the application for a re-transfer thus had to be dismissed.
[2] Relying on this Court’s decision in
Makate
,
[3]
the Municipality contends that a constitutional issue arises, in that
prescription presents a possible bar to access to the courts
under
section 34 of the Constitution.  In addition, it says that the
Supreme Court  of  Appeal judgment has
created
uncertainty about standard reversionary clauses that advance
developmental purposes for many local authorities and that
this has
serious and potentially unknown ramifications for these organs of
state.  The legal issue is thus said to be also
an arguable one
of general public importance.
[4]
[3] The
Municipality’s argument before this Court is that: (1) its
claim is not a “debt” under the
Prescription Act; (2
) the
reversionary right under the deed of transfer is a limited real right
in the property, not subject to prescription; and, alternatively;
(3)
it is a claim secured by a mortgage bond that only prescribes after
30 years under the
Prescription Act.
[5
]
Mounthaven supports the decision of the High Court and the
Supreme Court of Appeal that the Municipality’s claim
is a
“debt” that has become prescribed under the
Prescription
Act.
[4
] The sale was
concluded on 24 May 1985.  In August 1986 the property was
transferred to Mounthaven by the Municipality, subject
to the
following special conditions recorded under clause C in the deed of
transfer:
“(1) The purchaser shall erect, or cause to be erected on the
property, buildings to the value of not less than ONE HUNDRED

THOUSAND RAND (R100 000.00) and failing the erection of
buildings to that value within two (2) years from date of sale, then,

for the purpose of levying the general rate and sewer rate payable to
the Verulam Town Council by the Purchaser or his successors
in title,
there shall be deemed to be buildings to such required value on the
property and all valuation and rating provisions
of
section 157
of
Ordinance 25 of 1974 or any amendment thereof shall apply to the
property and be binding upon the Purchaser or his successors
in
title.
(2) If at the expiry of a period of three (3) years from the date of
sale the Purchaser has failed to complete buildings to the
value of
not less than ONE HUNDRED THOUSAND RAND (R100 000.00) on
the property, ownership of the property shall revert
to the Seller
which shall be entitled to demand re-transfer thereof to it from the
Purchaser who shall be obliged to effect transfer
thereof to the
Seller against payment by the Seller to the Purchaser of all payments
made on account of the purchase price less
any costs incurred by the
Seller in obtaining re-transfer of the property into its name,
including costs as between attorney and
client, all costs of
transfer, transfer duty, stamp duty and the like.
(3) The Seller shall have a pre-emptive right to re-purchase the
property at the price paid by the Purchaser, if the Purchaser
desires
to sell the property within five (5) years from the date of sale,
provided that this condition shall not apply where buildings
to the
value of not less than ONE HUNDRED THOUSAND RAND (R100 000.00)
shall have been erected on the Lot within three (3)
years from the
date of sale.”
[5] Mounthaven
failed to erect and complete the buildings within three years of the
date of sale.  The Municipality brought
the application to
compel re-transfer in the High Court only in 2014.  If the claim
for re-transfer is a “debt”,
it would have prescribed
three years after the period within which the buildings had to be
completed − that is, by May 1991.
If it is a real right,
then the submission is that prescription does not apply.  If it
is a right secured by mortgage
bond, the submission is that the
prescription period of 30 years has not yet elapsed.
[6]
All thus turns on whether it is a “debt”, to the
exclusion of the latter two possibilities.
Jurisdiction
[6] I accept that in
appropriate cases, where the interpretation of the
Prescription Act
may
have impact on the fundamental right of access to justice, that
will raise a constitutional issue that clothes this Court with
jurisdiction.
[7]
I will further accept that this is the case here.  I am
doubtful that, in addition, a separate arguable point of law
of
general public importance is at issue, but there is no need to
pronounce on this further alleged jurisdictional ground.
Leave to appeal
[7] In order to
grant leave to appeal it must be in the interests of justice to do
so.
[8]
Although not conclusive, it is generally not in the interests
of justice to grant leave where there are no reasonable prospects
of
success on the merits.
[9]
Here it is difficult to discern any compelling factor that
would justify granting leave if there are no reasonable prospects
of
success.  So the prospects of success are crucial for the
Municipality and they are not good, not on any of the legal issues

the Municipality relies upon.
Is the claim a
“debt”?
[8] In terms of the dictionary meaning of “debt” accepted
in
Makate
, an obligation to pay money, deliver goods, or
render services is included under the definition and would prescribe
within three
years under the
Prescription Act.
[10
]
Material or corporeal goods consist of property, movable or
immovable.  Ownership of movable corporeal property is
transferred to another by delivery, actual or deemed, of the
goods.
[11]
That is practically impossible in the case of immovable
property like land.  Hence it is an accepted principle of
venerable
ancestry in our law that the equivalent of delivery of
movables is, in the case of immovable property, registration of
transfer
in the deeds office.
[12]
A claim to transfer immovable property in the name of another
is thus a claim to perform an obligation to deliver goods in
the form
of immovable property.  It is a “debt” in the
dictionary sense accepted in
Makate
.  It really is as
simple and straightforward as that.
A real right?
[9] But, says the Municipality, this “obligation” to
deliver the immovable property (even if in the form of registration

of transfer) flows from a real, not personal, right.  Real
rights are concerned with the relationship between a person and
a
thing, not with the relationship between persons as in the case of
personal rights.  Real rights give rise to competencies,
not
correlative personal obligations that translate into a “debt”
for the purposes of prescription.
[13]
Because of that real rights cannot prescribe, the argument
goes.
[10] This argument,
however, fails at both a factual and legal level.
[11] The Supreme Court of Appeal has endorsed a test to determine
whether a right is real, as opposed to being personal.  Two

requirements must be met: (1) the person who created the right must
have intended the present owner as well as successors in title

to be bound; and (2) the right must result in a subtraction from the
dominium
of the land against which it is registered.
[14]
The Municipality stumbles on the facts at the first hurdle.
Clause C(2) contains no provision that it is binding on

successors-in-title, unlike the express provision to that effect in
clause C(1).
[12] Does the
registration of clause C(2) under the
Deeds Registries Act
[15
]
make any difference?
[13]
Section 63
of
the
Deeds Registries Act provides
that no condition in a deed of
transfer “purporting to create or embodying any personal
right”, nor one which “does
not restrict the exercise of
any right of ownership in respect of immovable property”, is
capable of registration.  But
the section comes with a proviso:
“[A] deed containing such a condition . . . may be registered
if, in the opinion of the
registrar, such condition is complementary
or otherwise ancillary to a registrable condition or right contained
or conferred in
such deed”.
[14] It may be accepted that registration of the reversionary clause
was proper in terms of the section, as being complementary
or
ancillary to transfer of ownership of the property to Mounthaven.
But registration of this kind, in conjunction with a
real
right, or by mistake, does not convert an ordinary personal right
into a real right.
[16]
[15] Against that is a remark made by Lord De Villiers CJ, in
Ferreira Deep Ltd
,
[17]
to the effect that a certain class of rights – the so-called
jura in personam ad rem acquirendam
(loosely translated,
personal rights to delivery of things) – is personal until
registration, when the rights are converted
into real rights by
registration:
“That personal rights,
jura in personam
, are not capable
of registration is a truism.  The definition of such rights
excludes their registration.  But that does
not apply to the
class of personal rights which are known as
jura in personam ad
rem acquirendam
.  As contracts, with few exceptions, give
rise only to personal rights, this class of right, although relating
to immovable
property, is a personal right until registration, when
it is converted into a real right by such registration.  The
same applies
to burdens upon land, encumbrances of immovable property
(
onera realia
).  They are personal until registration,
when they become real.”
[18]
[16] The
reversionary clause creates a reversionary right for the
Municipality.  That a reversionary right has the effect of

restricting the landowner’s exercise or full enjoyment of her
right of ownership, like keeping it undeveloped as long as
it so
wishes or building a structure worth R100 000.00, does not in
any way detract from its true character as a personal
but not a real
right:
“Not only recognised real rights but also personal rights can
impose an obligation on a landowner, which restricts the free

exercise of his or her right of ownership.  An owner’s
right of disposal of his or her property is for instance restricted

by a prohibition on alienation, a right of pre-emption,
a
reversionary right
, an option and a fideicommissary right.
Ostensibly such rights are only binding on a landowner in his
or her personal capacity
since his or her successors in title are by
no means involved if the landowner fulfils his or her obligations.
Historical
practices and policy considerations have however
resulted in some of these rights, such as an option, being placed in
the category
of personal rights whereas others, such as a prohibition
on the alienation of land, are recognised as registrable real
rights.
Moreover, rights of pre-emption, reversionary rights
and fideicommissary rights are registered on account of established
practices
or usage in spite of the prohibition on the registration of
personal rights in the Deed Registries Act”.
[19]
(Footnotes omitted.)
It follows that
though registrable, a reversionary right is not by mere reason of
registration in any way elevated from a personal
right to a real
right. Because this matter involves a reversionary right, the
decision in
Ferreira Deep Ltd
does not find direct application
here.
[17] One should in
any event be careful not to elevate the practical judicial sanction
of the then usage and practice in the then
Transvaal in relation to
claim and stand licences
[20]
as fundamentally impacting on the legal conceptualisation of the
difference between real and personal rights.  A more acceptable

and logical explanation is “that although these rights are not
converted into real rights and although they do not constitute
real
burdens on land their registration nevertheless has certain practical
consequences”.
[21]
One of these may be that, because of registration, the doctrine
of notice may operate in appropriate circumstances to prevent
a third
party from establishing a real right in respect of the land in
question.
[22]
[18] The “right
to delivery of a thing” remains a personal obligation between
persons – the one who owes
the obligation to deliver the
thing to another − until actual delivery (in the form of
registration of transfer) of the “thing”,
in this case
the immovable property itself:
“The moment registration takes place, A’s personal right,
in terms whereof he may claim transfer, is terminated and
he becomes
owner of the land because B’s right of ownership has been
transferred
to him, and not because of the registration of any
ius in personam ad rem acquirendam
.”
[23]
This is the change
from personal to real rights upon registration that
Ferreira Deep
Ltd
, properly construed, speaks to. Before that happens the
doctrine of knowledge may operate against new purchasers, nothing
more.
[19] Put
differently, before registration there is as yet no relationship
between the person who holds the right to delivery and
the object of
the right, the thing or property.  There is no real right, in
the sense of a relationship between the person
who holds the right to
delivery and the object of the right, the property.
[24]
Upon registration the real right becomes that of ownership, a
relationship between the owner and the property.  The
initial
personal right to acquire the property from another person has then
served its purpose and comes to an end.
[25]
[20] This is of
little assistance to the Municipality.  The reversionary clause
in C(2) creates a personal obligation on Mounthaven
to complete
buildings to a certain value within a limited time.  The clause
is not of a kind that creates a real burden (
modus
) on the
property itself, in which case the real right might exist in the
relationship between the holder and the burdened object
of the
right.
[26]
There is no third party involved here.  Had there been, an
argument could perhaps have been made that the third party
should be
held to the condition if the property was acquired before 1991, when
the debt created by the reversionary clause prescribed,
but for
nothing more.  It is not, however, an issue that arises for
decision here.
[21] This also
effectively disposes of the alternative argument that the
registration of the reversionary right created a mortgage
bond to
secure compliance with its provisions, which only prescribed after
thirty years.  A mortgage bond creates accessory
liability as
security for compliance with the principal debt.  It does not
extend the accessory liability beyond that of the
principal
liability.
[27]
For as long as the obligation to comply with clause C(2)
existed − until 1991 − Mounthaven was liable to
re-transfer
in the event of non-compliance.  But once the period
for compliance with the principal debt or obligation to complete the
buildings lapsed because of prescription, so did the accessory
obligation.
[28]
[22] There are thus
no reasonable prospects on appeal.  It is not in the interests
of justice to grant leave under these circumstances.
Order
[23] Leave to appeal
is refused with costs.
For the
Applicant:

G D Goddard SC, S Mahabeer and T R Palmer instructed by Moodie &
Robertson Attorneys
For the
Respondent:

D D Naidoo instructed by Mervyn Gouden & Associates
[1]
High Court of South Africa, KwaZulu-Natal Local Division, Durban.
[2]
68 of 1969.
[3]
Makate v Vodacom Ltd
[2016] ZACC 13
;
2016 (4) SA 121
(CC);
2016 (6) BCLR 709
(CC) at para 90.
[4]
Section 167(3) of the Constitution and
Mokone v Tassos Properties
CC
[2017] ZACC 25
;
2017 (5) SA 456
(CC);
2017 (1) BCLR 1261
(CC)
at para 17.
[5]
Section 11(a)(i) provides that
¾
“[t]he periods of prescription of debts shall be the
following:
(a) thirty years in respect of
¾
(i) any debt secured by mortgage bond.”
[6]
Section 11(a)(i)
of the
Prescription Act.
[7
]
Makate
above n 3 at para 29.
[8]
Paulsen v Slip Knot Investments 777 (Pty) Ltd
[2015] ZACC 5
;
2015 (3) SA 479
(CC);
2015 (5) BCLR 509
(CC) at paras 29-30.  See
also section 167(6) of the Constitution.
[9]
See for example,
Marshall v Commissioner, South African Revenue
Service
[2018] ZACC 11
;
2018 (7) BCLR 830
(CC) at para 14;
Snyders N.O. v Louistef (Pty) Ltd
[2017] ZACC 28
;
2017 (6) SA
646
(CC);
2018 (1) BCLR 19
(CC) at para 14;
Radio Pretoria v
Chairperson, Independent Communications Authority of South Africa
[2004] ZACC 24
;
2005 (4) SA 319
(CC);
2005 (3) BCLR 231
(CC) at para
22;
De Reuck v Director of Public Prosecutions, Witwatersrand
Local Division
[2003] ZACC 19
;
2004 (1) SA 406
(CC);
2003 (12)
BCLR 1333
(CC) at para 3;
National Education Health and Allied
Workers Union v University of Cape Town
[2002] ZACC 27
;
2003 (3)
SA 1
(CC);
2003 (2) BCLR 154
(CC) at para 25;
Islamic Unity
Convention v Independent Broadcasting Authority
[2002] ZACC 3
;
2002 (4) SA 294
(CC);
2002 (5) BCLR 433
(CC) at para 18;
S v
Boesak
[2000] ZACC 25
;
2001 (1) SA 912
(CC);
2001 (1) BCLR 36
(CC) at para 12;
Brummer v Gorfil Brothers Investments (Pty) Ltd
[2000] ZACC 3
;
2000 (2) SA 837
(CC);
2000 (5) BCLR 465
(CC) at para
3;
Fraser v Naude
[1998] ZACC 13
;
1999 (1) SA 1
(CC);
1998
(11) BCLR 1357
(CC) at para 7.
[10]
Makate
above n 3 at paras 83 and 85. Paragraph 85 states:
“In
Escom
the Appellate Division said that the
word
‘debt’ in the
Prescription Act should
be the meaning
given the meaning ascribed to it in the Shorter Oxford Dictionary,
namely:
‘1. Something owed or due: something (as money, goods or
service) which one person is under an obligation to pay or render
to
another.  2. A liability or obligation to pay or render
something; the condition of being so obligated.’”
See also
Food
and Allied Workers’ Union obo Gaoshubelwe v Pieman’s
Pantry (Pty) Ltd
[2018] ZACC 7
;
2018 (5) BCLR 527
(CC) at paras
155-6.
[11]
Info Plus v Scheelke
[1998] ZASCA 21
;
1998 (3) SA 184
(SCA)
at 189D-9E:
“It is, of course, trite law that transfer of ownership of
corporeal movable property requires delivery, ie transfer of

possession, of the property by the owner to the transferee coupled
with a real agreement between them.”
[12]
Harris v Trustee of Buissine
(1840) 2 Menz 105
at 107-8
quoted in
Jordaan v Tshwane Metropolitan Municipality
[2017]
ZACC 31
;
2017 (6) SA 287
(CC);
2017 (11) BCLR 1370
(CC) at para 34:
“[T]he
dominium
[title] or
jus in re
[real
right] of immovable property can only be conveyed by transfer made
coram legi loci
[formally according to the law of the place
concerned], and this species of transfer is an essential to divest
the seller of,
and invest the buyer with, the
dominium
or
jus
in re
of immovable property as actual
traditio
[handing
over or conveyance] is to convey the
dominium
of movables.”
See further
Jordaan
at paras 31-8 for a crisp discussion on the history of registration
of immovable property in South Africa.
[13]
National Stadium South Africa (Pty) Ltd v FirstRand Bank Ltd
[2011] ZASCA 164
;
2011 (2) SA 157
(SCA) at para 31 which was cited
with approval in
Absa Bank Ltd v Keet
[2015] ZASCA 81
;
2015
(4) SA 474
(SCA) at para 21.
[14]
Willow Waters Homeowners Association (Pty) Ltd v Koka N.O.
[2014] ZASCA 220
;
2015 (5) SA 304
(SCA) at para 16; and
Cape
Explosive Works Ltd v Denel (Pty) Ltd
[2001] ZASCA 28
;
2001 (3)
SA 569
(SCA) at para 12.  See also Van der Merwe “Things”
in
LAWSA
2 ed (2014) vol 27 at paras 63-8.
[15]
47 of 1937.
[16]
Nel N.O. v Commissioner for Inland Revenue
1960 (1) SA 227
(A) at 235A;
Low Water Properties (Pty) Ltd v Wahloo Sand CC
1999 (1) SA 655
(SE) at 662A-H;
Ex parte Menzies et Uxor
(
Ex
parte Menzies
)
1993 (3) SA 799
(C) at 806F;
Lorentz v Melle
1978 (3) SA 1044
(T) at 1055E;
Fine Wool Products of SA Ltd v
Director of Valuations
1950 (4) SA 490
(E) at 499A-C.
[17]
Registrar of Deeds (Transvaal) v Ferreira Deep Ltd
1930 AD
169
(
Ferreira Deep Ltd
).
[18]
Ferreira Deep
Ltd
id at 180.  Professor Van der
Merwe comments that “[t]his remark probably accounts for the
peculiar definition of
a real right in [section 102 of] the
Deeds
Registries Act as
comprising any right which becomes real on
registration”, Van der Merwe above n 14 at para 69.  See
also
Odendaalsrus Gold, General Investments and Extensions Ltd v
Registrar of Deeds
1953 (1) SA 600
(O) at 607-8; and
Ex parte
Menzies
above n 16 at 806F.
[19]
Van der Merwe above n 14 at para 68.
[20]
Ferreira Deep Ltd
above n 17 at 180-1.
[21]
Van der Merwe above n 14 at para 69.
[22]
Id.  In
Meridian Bay Restaurant (Pty) Ltd v Mitchell SC N.O.
[2011] ZASCA 30
;
2011 (4) SA 1
(SCA) at para 14, Ponnan JA
explains:
“Under the doctrine of notice, someone who acquires an asset
with notice of a personal right to it which his predecessor
in title
has granted to another, may be held bound to give effect thereto.
Thus a purchaser who knows that the merx has
been sold to another,
may, in spite of having obtained transfer or delivery, be forced to
hand it over to the prior purchaser.
Reverting to my earlier
example: if C had purchased with knowledge of the prior sale to B, B
would be entitled to claim that
the transfer to C be set aside and
that transfer be effected from A to B, or B may perhaps even claim
transfer directly from
C.”
[23]
Badenhorst et al
Silberberg and Schoeman’s The Law of
Property
5 ed (LexisNexis Butterworths, Durban 2006) at 67.
[24]
See
National Stadium South Africa (Pty) Ltd
above n 13 at
para 31.
[25]
A sale agreement to sell immovable property to another is also a
“personal right to delivery of a thing”, but is
not
registrable for that reason.  The intermediate class of rights
known as
iura in personam ad rem acquirendam
has its origin
in feudal law and its only analogy in South African law may be the
right created by virtue of
section 20
of the
Alienation of Land Act
68 of 1981
, where the seller of land is compelled to have the
contract of sale recorded in the Deeds Office.  The effect is
that the
purchaser will upon execution or insolvency of the seller
have a preferent claim in respect of the proceeds of the sale.  See

Van der Merwe above n 14 at para 69.
[26]
Compare
Benoni Town Council Minister of Agricultural Credit and
Land Tenure
1978 (1) SA 978
(T) and the discussion of real
security in
Jordaan
above n 12 at para 38:
“Real security in property is a limited real right with the
purpose of ensuring satisfaction of a debt or obligation to
another,
usually ahead of other, unsecured creditors.  This is important
for it illustrates the difference between real
security rights
specifically of security (which are designed to shore up debt, and
are a sub-category of limited real rights)
and limited real rights
in the broader sense.  It moves us away from asking whether a
real security right is in principle
enforceable against a third
party – which, as a sub-species of limited real rights, it
must in principle be – and
towards focusing on the purpose for
which the limited right was created.  The point of the right of
security in property
is to ensure payment of a debt.  Then the
question becomes the one at issue here: if that debt could be
satisfied by execution
upon the property before the debtor disposes
of the property – or even later – why should it be
enforceable against
innocent third parties who are unconnected with
the debt and may not even know of its existence?”
[27]
See
Panamo Properties 103 (Pty) Ltd v Land and Agricultural
Development Bank of South Africa
[2015] ZASCA 70
;
2016 (1) SA
202
(SCA) at para 24 (and the further authorities cited there):
“A mortgage bond is of course always accessory to an
obligation, no matter its origin.  If the obligation is
unenforceable
the security in respect of it is unenforceable too.”
[28]
Id at para 25:
“[W]hen enforcement of the bond is sought it must be in
respect of a valid obligation.  And when determining whether
an
obligation is secured by a bond, one must have regard to its
particular terms.”