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Mounthaven (Pty) Ltd

19 November 2015

EThekwini Municipality v Mounthaven (Pty) Ltd (1985/2014) [2015] ZAKZDHC 78 (30 September 2015)

A company, Mounthaven (Pty) Ltd, bought property from Ethekweni Municipality which was subject to a number of conditions.  With the effect of the relevant ones for this case in summary being:

  1. If the Respondent did not, within two (2) years of the sale date, erect buildings with a value of not less than R100 000.00 on the property then the Respondent would be liable to the Applicant for increased rates on the property as if such buildings had in fact been built on it; and

  2. If the Respondent did not, within three (3) years of the sale date, erect such buildings on the property then the Applicant was entitled to compel re-transfer of the property to it at the Respondent’s expense against re-payment of the price (“the reversion clause”).

As the Respondent did not erect any buildings, Applicant invoked the reversion clause and demanded re-transfer of the property (in 2012, when the debt had became due in 1988). Respondent refused to, and raised prescription as one of its defences.  Applicant submitted that their claim is based on a rei vindicatio as owner, and therefore a claim under the rei vindicatio is not for a “debt” subject to extinctive prescription.

The questions for determination were therefore:

a) whether the re-transfer of the property to the Applicant is a “debt” or not, and

b) whether there is an exception when the claim is vindicatory in nature, as ownership is a real right which the owner can exercise against anyone who is in possession thereof.

In the view of the court,

At " [18] … each case should be decided on its facts. In this case, nothing is owing to the Applicant. It was aware of the time frame of the reversionary rights to the property and also aware of the debtor. It did not exercise its rights when the three (3) year period expired, but it tried to assist the Respondent without reserving its rights to the property.

[19] I therefore find that this claim is a “debt” as envisaged in the Desai case, where the Court held that a debt was said to have “a wide and general meaning and includes an obligation to do something and refrain from doing something.”

Regarding the question to determine was whether the word “debt” must be given a meaning wider than a monetary debt which is due, and be extended to a debt for the vindication of property, Mbatha J revisited the conditions of title and concluded that:

"20.3 The wording of this provision (C2) is peremptory and stipulates that the period should be three (3) years if no buildings are erected. It further states that the seller “shall be entitled to demand re-transfer”. The wording of the provision, does not say that the property “shall automatically” revert to the seller. It is trite that property can only be transferred by registration thereof and does not occur automatically.

No demand was made at the expiration of three (3) years by the Applicant, therefore its claim lapsed. It has also not made any submission that prescription was interrupted, as at all times it was aware of its cause of action and the debtor was known to it.

21.1 It is my view that it’s right to claim re-transfer could not have occurred automatically. The successors in title are only bound to the value of the building of the property. A right that was vested to the Applicant was extinguished by the effluxion of time. The Applicant has not established that it had an absolute real right to the property. They lost their right of action when it prescribed after three (3) years."

As to the question of whether Applicant was still owner of the property and could therefore exercise the rei vindicatio the court considered the requirements for the passing of ownership as held in Legater McKenna Inc. and Another v Shea and Others, being the following:

1) Delivery (registration of transfer);
2) Real agreement, essential elements of which being;
i. intention of transferor to transfer ownership; and
ii. Intention of transferee to acquire ownership.

And agreed with the ruling in Middleton v Middleton and Another, that in all instances where rights of ownership of immovable property could only be vested in a person by means of an act of traditio, the only legal recognised and effective method of accomplishing that was by registration of a deed of transfer in the Registry of Deeds. As this did not happen here, Respondent remained owner.

The plea for prescription was therefore upheld.

Mounthaven (Pty) Ltd

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