Neutral citation: eThekwini Municipality v Mounthaven (Pty) Limited  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
On Wednesday, 31 October 2018 at 10h00 the Constitutional Court handed down judgment in an application for leave to appeal against a judgment of the High Court of South Africa, KwaZulu-Natal Division, Pietermaritzburg. In a unanimous judgment written by Justice Froneman, the Constitutional Court refused leave to appeal on the basis that the application lacked reasonable prospects of success.
On 24 May 1985, the eThekwini Municipality sold immovable property to Mounthaven at a public auction for an amount of R60 000. In the Deed of Sale a special condition was included to the effect that Mounthaven was to erect buildings on the property to the value of R100 000 within three years of the purchase date. In the event that Mounthaven failed to do so, the Municipality would be entitled to the re-transfer of the property.
Mounthaven failed to develop the property within the specified time period of three years and the property remains undeveloped. Mounthaven explained that this failure was caused by a dispute with the Municipality regarding a storm-water pipe that runs beneath the property. According to Mounthaven it was the Municipality’s responsibility to relocate the storm-water pipe. In 2012 the Municipality approached the High Court, relying on the special condition in the Deed of Sale, claiming the re-transfer of the property. In response, Mounthaven argued that the claim for re-transfer constituted a debt for purposes of the Prescription Act, and that the Municipality cannot rely on such claim as a debt prescribes within three years in terms of the Act and the Municipality waited for 24 years to claim the re-transfer. The High Court found in favour of Mounthaven. The parties’ positions remained unchanged in the Constitutional Court on appeal.
In arriving at the decision to refuse leave to appeal this Court found that the dictionary definition of a debt - an obligation to pay money, deliver goods, or render services - encompassed a claim to transfer immovable property in the name of another. The claim to transfer property is essentially a claim to deliver goods. Meaning that it is a debt that satisfies the definition of a debt in the Prescription Act and owing to an effluxion of time longer than three years, the claim has prescribed.
In arriving at that conclusion this Court rejected the Municipality’s submission that the obligation to claim re-transfer stems from a real right and not a personal right. Consequentially a real right cannot expire. The rejection was based on the fact that the clause in the deed of transfer does not bind successors in title and registration of that clause at the deeds registry does not change the fact that the clause remains a personal right.
I suppose then the condition does not have to be carried forward if the owner was to transfer the property to another person when the three years (or any specified time) have lapsed. The question is whether the deeds office will allow the owner to use section 68(1) of the Deeds Registries Act to remove the condition without needing proof that the buildings have been erected. I suppose that should be the position. The most pressing question, however, is whether such a condition is registrable in terms of section 63(1) of the Deeds Registries Act vis-à-vis the application of the subtraction of the dominium test.
The registration of reversionary rights not binding successors in title has been the practice for time in memorial, as is evident from the ex parte Zunkel case. However, as alluded to in the judgement, this does not elevate them to real rights merely because of the registration thereof. I do believe this should continue. The Registrar of Deeds cannot sua motu cancel the reversionary right in terms of section 68(1) of the DRA as prescription has to be proved. Before such condition can be cancelled the enforcer will have to consent or obtain an order of court.
I agree with Allen. Of course, the real problem here lies in the framing of the condition in the first place - either by whoever drafted the agreement of sale imposing the condition, or by the conveyancer who registered the transfer, and imposed the condition in the PA. If one reads the judgement, it is clear that more care in draftsmanship from the outset would have saved the municipality from this embarrassment and predicament. Moreover, as conveyancers we daily come across poorly drafted (but registered) conditions - despite them being in direct conflict with section 63 of the DRA. In fact, some of these conditions impose a purely positive duty on the servient owner, as opposed to being a subtraction from the dominium, and the Registrar should never have allowed them to be registered in the first place.
I don't agree that Section 68(1) could be invoked at all, even when such rights have lapsed by effluxion of time or fulfilment of the condition. Section 68(1) specifically refers and applies to the cancellation of personal servitudes. Since such reversionary rights are not servitudes, but registrable personal rights, which don't, by virtue of their registration, get elevated to being real rights, section 68(1) should not be invoked to remove them from deeds, as is currently the practice. Even if the enforcer should consent to such cancellation, Section 68(2) provides that the servitude shall be cancelled by notarial deed. So apart from the fact that such conditions are not servitudes, Section 68(1) does not apply where a personal servitude is cancelled with consent or by agreement.
I do not agree with Mandy and refer her to RCR 16 2008.
Whilst Mandi may be right that such rights are not elevated to being real rights, (and which Allen and John do not dispute) one can hardly apply section 68(2) if you are of the opinion that section 68(1) does not apply because such rights are not personal servitudes. Like section 68(1) section 68(2) likewise applies to personal servitudes. I see no harm in continuing the current practice as per RCR 16/2008. I agree with John and Allen.
I am aware of RCR 16/2008, but in my opinion it is bad in law. A servitude is a real right. Reversionary rights are personal rights, and are not elevated to being real rigths by virtue of registration, as confirmed by this judgment.
Perhaps it is prudent to clarify that not all reversionary rights are personal rights. Where the reversionary right binds successors in title it is a real right and then classified as a personal servitude. Please refer to section 53 (2) of the DRA I would like to know why section 68 (2) must be used which alludes to an "agreement" and not section 68 (1) which alludes to " for any reason "
It seems I was somewhat misunderstood. I am trying to say that Section 68 shouldn't be invoked AT ALL when cancelling reversionary rights such as the one in the judgment under discussion, as they are not servitudes, but personal rights. My point is that even if a servitude - a real right - is cancelled by agreement or consent, Section 68(1) does not apply, as Section 68(2) provides that in such case it shall be done by notarial deed. The reason is simple: Real rights supersede personal rights. It is prudent to remember that servitudes are in essence agreements - agreements which bind successors in title. But only if they are registered. An unregistered servitude agreement does not give rise to real rights, only personal rights. Therefore an unregistered agreement to cancel a servitude does not actually cancel the servitude; it does not bind successors in title, and the servitude - real right - supersedes such personal rights. And that is why Section 68(2) - not 68(1) - must be invoked to cancel personal servitudes by agreement or consent. Because an unregistered agreement to cancel a servitude is not sufficient proof that the servitude has lapsed. Reversionary rights, such as the one in the judgment under discusseion, should be cancelled without invoking Section 68 AT ALL, as they are not servitudes, but personal rights. Perhaps by invoking Section 3(1)(v)?
I agree with Mandi. I might add that RCR16/2008 merely confirms RCR15/2007 which states that "Sec 68(1) must be complied with in all instances where a personal servitude (i.e. a real right, not a personal reversionary right) lapses for any reason". So actually, RCR16/2008 does NOT justify invoking Sec 68(1) to cancel reversionary rights which are not servitudes. Conference clearly confused such personal reversionary rights with personal servitudes when said resolution was taken. RCR16/2008 and the current practice of cancelling such reversionary rights in terms of Sec 68(1) is bad in law.