INTRODUCTION & BACKGROUND
The eThekwini Municipality (the “Applicant”) sought leave to appeal against the decision of the Supreme Court of Appeal (the “SCA”) wherein the SCA unanimously confirmed the dismissal by the High Court of South Africa, KwaZulu-Natal Local Division, Durban (the “High Court”) of the Applicant’s application to compel Mountaven (Pty) Ltd (the “Respondent”) to re-transfer a property that the Applicant had previously sold to the Respondent.
On or about 24 May 1985, the Applicant sold immovable property to the Respondent and, thereafter, in August 1986, the property was transferred to the Respondent pursuant to a Deed of Transfer wherein a special condition was included to the effect that the Respondent was to erect buildings on the property to the value of R100 000 (one hundred thousand Rand) within 3 (three) years of the date of sale, failing which the Applicant would be entitled to re-transfer of the property.
The Respondent failed to erect the buildings within 3 (three) years of the date of sale and, consequently, in 2014 the Applicant brought an application in the High Court to compel re-transfer of the property.
The Respondent contended that the claim for re-transfer of the property constituted a “debt” in terms of the Prescription Act No. 68 of 1969 (the “Act”) and, as such, the “debt” prescribed 3 (three) years after the period within which the buildings had to be completed, being May 1991.
On its application to the Constitutional Court of South Africa (the “Court”) for leave to appeal the decision of the SCA, the Applicant argued that:
- relying on the Court’s decision in Makate v Vodacom [2016] ZACC 13, a constitutional issue arises in that prescription presents a possible bar to access to the courts under section 34 of the Constitution;
- the SCA’s decision 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 and, accordingly, the legal issue is one of public importance;
- its claim is not a “debt” in terms of the Act;
- the reversionary right under the deed of transfer is a limited real right in the property and, as such, is not subject to prescription; and
- alternatively, it is a claim secured by a mortgage bond that only prescribes after 30 (thirty) years in terms of the Act.
The Respondent relied on the decision of the High Court and the SCA that the Applicant’s claim is a “debt” that has become prescribed under the Act.
HELD
In arriving at its decision not to grant the Applicant leave to appeal the decision of the SCA, the Court considered:
Jurisdiction
Where the interpretation of the Act may have an impact on the fundamental right of access to justice, that will raise a constitutional issue that clothes the Court with jurisdiction, which the Court accepted was the case in the circumstances.
Leave to Appeal
The Court was unable to discern any compelling factor that would justify the granting of leave to appeal and, more particularly, the application lacked reasonable prospects of success on the merits.
Is the claim a “debt”?
The Court applied the dictionary definition of “debt”, which was accepted in Makate v Vodacom [2016] ZACC 13, and held that a claim to transfer immovable property in the name of another is a claim to perform an obligation to deliver goods in the form of immovable property and, accordingly, constitutes a “debt”.
A real right?
The Court applied the test endorsed by the SCA to determine whether or not a right is real, as opposed to personal. A real right must satisfy the following requirements:
- the person who created the right must have intended the present owner as well as successors in title to be bound; and
- the right must result in a subtraction from the dominium of the land against which it is registered.
The Court rejected the Applicant’s submission that the obligation to claim re-transfer stems from a real right and not a personal right on the basis that the relevant clause in the Deed of Transfer did not bind successors-in-title.
Further, the Court accepted that registration of the reversionary clause in the Deed of Transfer was proper in terms of section 63 of the Deeds Registries Act No. 47 of 1937, as being complementary or ancillary to transfer of ownership of the property to the Respondent, however, registration of this kind, in conjunction with a real right, or by mistake, does not convert an ordinary personal right into a real right.
The Court emphasised 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.
The Court refused leave to appeal as it was not in the interests of justice to grant leave in the circumstances as there were no reasonable prospects of success on appeal.
VALUE
A claim to transfer immovable property in the name of another is a claim to perform an obligation to deliver goods in the form of immovable property and, accordingly, constitutes a “debt” and is subject to prescription.
A reversionary right is not by mere reason of registration in any way elevated from a personal right to a real right.
Written by Saul Mayers and supervised by Kerry Theunissen, 13 November 2018
