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Mendelow

19 September 2013

Neutral citation: Nedbank Limited v Mendelow NO (686/12) [2013] ZASCA 98 (5 September 2013)
Coram: Lewis, Maya, Malan and Shongwe JJA and Zondi AJA
Heard: 16 August 2013
Delivered: 5 September 2013

Summary:
The facts of this case are briefly the following:

Mrs Emily Valente owned immovable property. The property was ‘sold’ to a company, U Valente Africa (Pty) Ltd (subsequently in liquidation and in which she, and her sons Riccardo and Evan were directors)when her son forged her signature on the deed of sale a week before she died. The respondents as joint executors of the deceased estate, applied to the North Gauteng High Court, for an order in effect setting aside a purported transfer of the property to the company, and the registration of a bond over the property in favour of Imperial Bank Ltd, registered in October 2008. That bank was acquired by the appellant, Nedbank Ltd (Nedbank), in 2010.

In their application the executors alleged that the sale and transfer of the property to the company, and the registration of the bond in favour of Nedbank, had been vitiated by fraud: Riccardo had forged Mrs Valente’s signature on the deed of sale and forged Evan’s signature on a document entitled ‘consent to sale’.

The original causes of action (s 342(2) of the Companies Act 61 of 1973 and s 42(2) lf the Administration of Estates Act 66 of 1965) were transformed at the hearing to a review in terms of the Promotion of Administrative Justice Act 3 of 2000 (PAJA). The high court (Baqwa AJ) ordered that because of the fraud the property should be returned to the deceased estate and the bond cancelled not by virtue of a condictio or rei vindicatio, since the former remedy was not pursued at the hearing and the latter was mistakenly considered by the legal representatives of the executors to be unavailable to the estate, but by virtue of ‘administrative law’. The ‘decision’ of the Master in signing a certificate authorizing the transfer and (by implication) the ensuing act of the Registrar of Deeds in registering the property in the name of the company constituted ‘administrative action’ reviewable under the PAJA.

Nedbank argued on appeal that the high court misconceived the relief granted: the PAJA does not make provision for vindicatory relief. Before dealing with the applicability of the PAJA, Lewis JA dealt with the principal issue which seemed to him to form the nub of the relief that the executors asked for. Did ownership pass to the company?

No, because:

[12] It is trite that where registration of a transfer of immovable property is effected pursuant to fraud or a forged document ownership of the property does not pass to the person in whose name the property is registered after the purported transfer. Our system of deeds registration is negative: it does not guarantee the title that appears in the deeds register. Registration is ‘intended to protect the real rights of those persons in whose names such rights are registered in the Deeds Office.1 And it is a source of information about those rights.2 But registration does not guarantee title, and if it is effected as a result of a forged power of attorney or of fraud, then the right apparently created is no right at all.

[13] This court has recently reaffirmed the principle that where there is no real intention to transfer ownership on the part of the owner or one of the owners, then a purported registration of transfer (and likewise the registration of any other real right, such as a mortgage bond) has no effect. In Legator McKenna Inc v Shea3 Brand JA confirmed, first, that the abstract theory of transfer of ownership applies to immovable property, and, second, that if there is any defect in what he termed the ‘real agreement’ – that is, the intention on the part of the transferor and the transferee to transfer and to acquire ownership of a thing respectively – then ownership will not pass despite registration. Thus while a valid underlying agreement to pass ownership, such as a sale or donation, is not required, there must nonetheless be a genuine intention to transfer ownership. This principle was unanimously approved in Commissioner of Customs and Excise v Randles, Brothers and Hudson Ltd 4and has been followed consistently since then.

[14] However, if the underlying agreement is tainted by fraud or obtained by some other means that vitiates consent (such as duress or undue influence) then ownership does not pass: Preller v Jordaan.5 That principle was applied recently by this court in Meintjies NO v Coetzer6 and Gainsford & others NNO v Tiffski Property Investments (Pty) Ltd7.

[15] It is clear, therefore, that when Riccardo forged his mother’s signature on the deed of sale of the property and the signature by a beneficiary of her will, Evan, on the consent to the sale, Evan did not intend to transfer ownership of the property and that the power of attorney signed by the Master to permit the registration of transfer was vitiated by the fraud and the forgery. Ownership did not pass to the company. And accordingly the bonds registered first in favour of BoE and then Imperial Bank were not valid: the company was not the owner of the property mortgaged. Nedbank cannot resist the claim of the executors for cancellation of the registration of the bond. And the executors are entitled to re-registration of the property in the name of the deceased estate.

Nedbank however had argued that the executors were not entitled to rely on the principles raised by the court mero motu and that the application was a sham as the executors were the alter ego of the disaffected brother who had been content to ignore the forgery. However they failed to show that the executors had acted with mala fides and in any event the court cannot condone the fraud in the exercise of some discretion they were urged to have.

Turning to the argument that the conduct of the Master and of the Registrar of Deeds amounted to administrative action reviewable under the PAJA, the court found that a distinction must be must thus be drawn between discretionary powers and mechanical powers. Professor Hoexter points out15 (8) that a mechanical power involves no choice on the part of the holder of the power such as when a properly executed mortgage bond is presented to the Registrar for registration ‘it is his duty to register it in the manner required by law’. A discretionary power, on the other hand, does impose such a choice and in that event is a quasi-judicial function. This was not the case here.

The appeal was therefore dismissed with costs.

Notes

  1. Frye’s (Pty) Ltd v Ries 1957 (3) SA 575 (A) at 583E-F.
  2. Ibid.
  3. Legator McKenna Inc v Shea 2010 (1) SA 35 (SCA) paras 21 and 22.
  4. Commissioner of Customs and Excise v Randles, Brothers and Hudson Ltd 1941 AD 369.
  5. Preller v Jordaan 1956 (1) 483 (A) at 496. See P J Badenhorst, Juanita M Pienaar and Hanri Mostert Silberberg and Schoeman’s The Law of Property 5 ed (2006) pp 222-224 and 230-232.
  6. Meintjies NO v Coetzer 2010 (5) SA 186 (SCA) para 9.
  7. Gainsford & others NNO v Tiffski Property Investments (Pty) Ltd 2012 (3) SA 35 (SCA) paras 38 and 39. See also Knysna Hotel CC v Coetzee NO 1998 (2) SA 743 (SCA) at 753A-I.
  8. C Hoexter Administrative Law in South Africa 2 ed (2012) pp 46-48.

Full Judgment

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