Uniting Presbyterian Church in SA v Reformed Presbyterian Church in Southern Africa   

Abstract transfer theory and SCA decided that “a real agreement may itself be defective or may not have come into existence. In such a case registration of transfer does not result in the passing of ownership and has no effect.”

‘Our law subscribes to the abstract theory of transfer of property, including immovable property. In terms of this theory, the validity of the transfer of ownership is not dependent on a valid underlying agreement. This means that ownership of immovable property passes on registration of transfer, notwithstanding that the underlying contract is defective, when the registration gives effect to a so-called real agreement, that is, a meeting of minds to transfer and receive ownership. The general principles applicable to agreements, apply to real agreements. Thus, a real agreement may itself be defective or may not have come into existence. In such a case registration of transfer does not result in the passing of ownership and has no effect. . . . .” [para 24]

Essence

Abstract transfer theory applies and ito South African law validity of the transfer of ownership of property is not dependent on a valid underlying agreement.

Decision

(1438/2018) [2019] ZASCA 129 (30 September 2019).

Order

Allowed appeal.  See below for full order.

Judges

CHG van der Merwe JA (Leach, Tshiqi, Zondi JJA and Dolamo AJA concurring)

Heard: 27 August 2019
Delivered: 30 September 2019

Reasons

“When a representation by a party results in a fundamental or material mistake on the part of the other party, the contract between them is void ab initio. Put more correctly, a contract does not come into existence at all. That is so because there is no consensus between the parties and, when the ‘contract’ is in writing and the doctrine of quasi-mutual assent applies, the error of the other party is iustus. In such a case there is no need for cancellation or rescission because there is nothing to cancel or rescind. See . . . .  It follows that no sale agreement came into existence in respect of erf 546 and that it is immaterial that the City did not purport to rescind or cancel such agreement.” [para 23]

Court summary

“Contract – material error in persona caused by respondent – no contract of sale came into being.
Property – abstract theory of transfer of ownership – dissensus as to identity of party that would obtain ownership – no real agreement to transfer and receive ownership – ownership not passing.”

Quotations from judgment

Note: Footnotes omitted and emphasis added

[1] The first appellant, the Uniting Presbyterian Church in Southern Africa (the UPCSA), is a voluntary association with legal personality. The second appellant is a constituent congregation of the UPCSA, situated in Langa, Cape Town (the Langa Congregation). The Langa Congregation forms part of the Western Cape Presbytery of the UPCSA. It is common cause that the Langa Congregation is a legal person in its own right. The first respondent is cited as the Reformed Presbyterian Church in Southern Africa (the RPCSA). Whether the persons who acted in the name of the RPCSA in this matter in fact represented that entity, is one of the issues in the appeal. For convenience I refer to them simply as the respondent.

[2] The City of Cape Town (the City), a duly constituted municipality, is the second respondent. The City filed a helpful explanatory affidavit in the court a quo. It opposed only a portion of the relief claimed by the appellants, which relief the latter subsequently abandoned. The City abides the decision of this court. The third respondent, the Registrar of Deeds: Cape Town (the Registrar), did not participate in the appeal.

Litigation history

[3] The appeal concerns two adjoining properties occupied by the respondent, namely erven 546 and 547, Washington Street, Langa (the properties). As I shall explain, erf 546 is registered in the name of the RPCSA. The City is the registered owner of erf 547.

[4] On 22 March 2005, the respondent, acting in the name of the RPCSA, submitted a written application to the City to purchase erf 546. After having followed its standard processes in this regard, the City approved the application. Consequently, the City entered into a written agreement of sale with the respondent, acting in the name of the RPCSA, in terms of which the City sold erf 546 to the respondent for the amount of R22 500. Pursuant to the agreement of sale, the Registrar registered erf 546 in the name of the RPCSA on 17 July 2007.

[5] On 26 June 2008, the respondent, again acting in the name of the RPCSA, submitted an application to the City to purchase erf 547 as well. In terms of its standard procedures, the City published the application for public comment. This resulted in an objection to the application by the Langa Congregation. The attorneys of the Langa Congregation conveyed the grounds of the objection in a detailed letter to the City. As I shall explain fully, the essence of the objection was that the respondent neither constituted nor represented the RPCSA.

[6] At about this time, the appellants became aware that erf 546 had already been sold and transferred as set out above. They consequently approached the Western Cape Division of the High Court, Cape Town, for an order aimed at setting aside the sale and transfer of erf 546, obliging the City to transfer it to the Langa Congregation and affording the Langa Congregation the opportunity to submit an application to purchase erf 547.

That court (per Thulare AJ) dismissed the application with costs, but granted leave to the appellants to appeal to this court.

[7] On appeal the appellants limited their claim for relief to an order:

  • (a) setting aside the sale and transfer of erf 546 to the RPCSA;
  • (b) interdicting the City from considering the respondent’s application to purchase erf 547 until such time as the Langa Congregation has submitted its application to purchase erf 547.

I proceed to consider whether the appellants made a case for any of this relief.

. . . . .

Analysis

. . . . .

[19] The foundation of the case of the respondent was that the transfer of the immovable properties of the RPCSA to the UPCSA had not been completed and that the RPCSA therefore remained in existence. This was accepted by the appellants as far as it goes. By June 2004 some, but not all, of the various immovable properties of the RPCSA had been registered in the name of the UPCSA.

[20] It is beyond doubt, however, that the congregations of the RPCSA were integrated into the UPCSA during 1999 and that the RPCSA continued to have a technical legal existence only for the purpose of completion of the transfer of its immovable properties and other assets to the UPCSA. It follows that at no time did the members of the Tiyo Soga Congregation who had broken away from the UPCSA thereafter become members of the RPCSA, nor its representatives.

[21] It is equally clear, however, that the respondent led the City to believe the contrary and that it represented the RPCSA. The truth was that the respondent was simply a breakaway group that did not represent the RPCSA and that the RPCSA was, in any event, bound to transfer its properties and rights to the UPCSA.

[22] The City is an organ of state. Section 195 of the Constitution provides, inter alia, that the administration of the City must be governed by the democratic values and principles enshrined in the Constitution, including that of transparency and accountability. The City’s conduct in respect of the competing claims of the parties and the present litigation, indicated that it took these prescripts seriously. It would not permit the sale of public property to a person that materially misrepresented its identity. Put differently, that the other party to the transaction was what it said it was, was material to the City. Therefore it cannot be gainsaid that had the City known the truth, it would not have entered into the sale agreement in respect of erf 546. In the result the conduct of the respondent caused a material mistake (error in persona) on the part of the City.

[23] When a representation by a party results in a fundamental or material mistake on the part of the other party, the contract between them is void ab initio. Put more correctly, a contract does not come into existence at all. That is so because there is no consensus between the parties and, when the ‘contract’ is in writing and the doctrine of quasi-mutual assent applies, the error of the other party is iustus.

In such a case there is no need for cancellation or rescission because there is nothing to cancel or rescind.

See

  • Brink v Humphries & Jewell (Pty) Ltd 2005 (2) SA 419 (SCA) para 2;
  • North East Finance (Pty) Ltd v Standard Bank of South Africa Ltd [2013] ZASCA 76; 2013 (5) SA 1 (SCA) para 5;
  • Spenmac (Pty) Ltd v Tatrim CC [2014] ZASCA 225; 2015 (3) SA 46 (SCA) para 28;
  • S W J van der Merwe et al Contract General Principles 4 ed at 26;
  • G B Bradfield Christie’s Law of Contract in South Africa 7 ed (2016) at 373 and
  • D Hutchison et al The Law of Contract in South Africa 2 ed (2012) at 83-84, 88, 100-101 and 110-111.

It follows that no sale agreement came into existence in respect of erf 546 and that it is immaterial that the City did not purport to rescind or cancel such agreement.

[24] Our law subscribes to the abstract theory of transfer of property, including immovable property. In terms of this theory, the validity of the transfer of ownership is not dependent on a valid underlying agreement. This means that ownership of immovable property passes on registration of transfer, notwithstanding that the underlying contract is defective, when the registration gives effect to a so-called real agreement, that is, a meeting of minds to transfer and receive ownership.

The general principles applicable to agreements, apply to real agreements. Thus, a real agreement may itself be defective or may not have come into existence.

In such a case registration of transfer does not result in the passing of ownership and has no effect.

See

  • Cape Explosive Works Ltd & another v Denel (Pty) Ltd & others 2001 (3) SA 560 (SCA) para 10;
  • Legator Mckenna Inc & another v Shea & others [2008] ZASCA 144; 2010 (1) SA 35 (SCA) paras 20-22;
  • Absa Ltd v Moore & another [2015] ZASCA 171; 2016 (3) SA 97 (SCA) paras 36-37 and
  • P J Badenhorst et al Silberberg and Schoeman’s The Law of Property 5 ed at 79-80.

[25] The City had no intention to transfer ownership of erf 546 to the respondent. It intended to transfer ownership to the RPCSA, an entity that the respondent did not represent. In the result there was no real agreement to transfer and receive ownership of erf 546. Despite the registration of transfer in the name of the RPCSA, ownership of erf 546 did not pass and remains vested in the City.

[26] Do the appellants have standing to obtain relief in respect of these transactions? In my view they clearly do. By adopting the Basis of Union, the holder of the 99-year lease in respect of the properties, namely the RPCSA, relinquished any rights to obtain ownership of the properties to the UPCSA. The UPCSA therefore has a direct and substantial interest in the sale and transfer of the properties. It chose to exercise its rights through the Langa Congregation. And as a resident of the area of jurisdiction of the City, the Langa Congregation in any event has standing to hold the City accountable for the unlawful alienation of public property.

See for instance

  • Jacobs en ‘n ander v Waks en andere 1992 (1) SA 521 (A) at 536J-537B.

. . . . .

Conclusion

[30] To summarise, no contract of sale came into existence in respect of erf 546 and ownership thereof did not pass. The properties vest in the City and, as between the appellants and the respondent, the appellants are entitled to apply to the City to purchase them.

[31] For these reasons the appeal must be upheld with costs and the order of the court a quo set aside and replaced with the order referred to above. The appellants did not ask for the costs of two counsel.

[32] The following order is issued:

1 The application for condonation is granted. The appellants are directed to pay the costs of the application for condonation on an unopposed basis and the first respondent is directed to pay the costs of opposition.
2 The appeal is upheld with costs.
3 The order of the court a quo is set aside and replaced with the following:
‘(a) The sale, transfer and registration of erf 546, situated at Washington Street, Langa Township, Western Cape, held by the first respondent under Deed of Transfer T00056121/2007, is set aside;
(b) The second respondent is interdicted from considering the first respondent’s application in respect of the purchase of erf 547, situated at Washington Street, Langa Township, Western Cape until such time as the second applicant submits its application to purchase erf 547, which application must be submitted within a reasonable time after the date of this order; and
(c) The first respondent is directed to pay the costs of the application.’