The case of Stalwo (Pty) Ltd v Wary Holdings (Pty) Ltd was decided in the Supreme Court of Appeal with Maya JA delivering the unanimous decision of the judges on 28 September 2007.
The case will shake the conveyancing tree, as the possible practical effect thereof is to render the Subdivision of Agricultural Land Act 70 of 1970 ineffective. This is due to the Court's interpretation of the meaning of the term 'agricultural land' as used in the Act. If this is indeed the case, something will have to be done quickly by either the Minister or the legislator to protect the country's farmland from being indiscriminately cut up and developed.
On 6 December 2004 W sold to S "plots 5, 6, 7 and 8 of proposed subdivision Portion 54 of the Farm no 8 Port Elizabeth" for R 550 000. The land was advertised for sale as 'plots for light industrial' and was shortly thereafter used as such. The land was still zoned as 'agricultural land' but the seller, W, had lodged an application for its rezoning and subdivision with the relevant local authority.
On 26 August 2005 the local authority granted conditional approval for rezoning and subdivision. The conditions included a requirement that W provide certain essential services to the site, such as access way, water drainage services and so on. The cost of compliance with the conditions was higher than what the seller had anticipated when accepting S's offer of R550 000, so W sought to increase the price but the purchaser, S, was not biting.
The purchaser brought an application to the court a quo (presumably to compel the seller to give transfer of the property) and the seller opposed the application. Desperate times require desperate measures, and the seller found a few reasons to argue that the agreement was void since inception. (Conveyancing lesson # 1: When a dispute arises in a property transaction, sooner or later someone will look for a technical way out of the contract ).
The seller based his opposition of the application on two arguments, namely:
- the ALA argument : the agreement did not comply with section 2(1) of the Alienation of Land Act 68 of 1981 ('ALA'), in that the written agreement did not expressly contain the suspensive condition ('subject to subdivision'). As this was a material term of the agreement it ought to have been in the agreement, and since it was not, the agreement is invalid due to the peremptory wording of s 2(1);
- the SALA argument: the agreement was in contravention of s 3(a) of the Subdivision of Agricultural Land Act 70 of 1970 ('SALA'), which prohibited subdivision of agricultural land without written permission of the Minister of Agriculture. The reasoning was that the land in issue is 'agricultural land' within the meaning of s 1(i)(a) of SALA and no ministerial permission to subdivision was obtained.
The SCA agreed with the court a quo on one count, namely that the agreement complied with the provisions of the ALA. It found the suspensive condition (the condition that the agreement was subject to subdivision taking place) to be a tacit term, and it quoted from Wilkins v Voges 1994(3) SA 130 (A) in this regard: "... a tacit term, once found to exist, is simply read or blended into the contract: as such it is 'contained' in the written deed..."
However, the court decided that the land in question was NOT 'agricultural land' for purposes of SALA. Consequently ministerial approval for subdivision was not required, and the agreement was therefore valid and binding on the parties. So much for technical escape routes.
The SCA's reasoning in finding that the land concerned is not 'agricultural land'. The starting point for the court's reasoning is the definition of 'agricultural land' as contained in SALA , which is quoted below:
"(i) 'agricultural land' means any land except-
(a) land situated in the area of jurisdiction of a municipal council, city council, town council, village council, village management board, village management council, local board, health board or health committee..., but excluding any such land declared by the Minister after consultation with the executive committee concerned and by notice in the Gazette to be agricultural land for purposes of this Act;
Provided that land situated in the area of jurisdiction of a transitional council as defined in section 1 of the Local Government Transition Act, 1993 (Act no 209 of 1993), which immediately prior to the first election of the members of such transitional council was classified as agricultural land, shall remain classified as such." (author added emphasis)
From this the conclusion is drawn that if land falls within the jurisdiction of a local authority, it is not agricultural land. But now the timing of events becomes important: What if the land came under the jurisdiction of a transitional council (as provided for in the proviso) when SA's new dispensation came into being, and later became subject to a 'permanent' local authority?
The history of the property concerning local authority jurisdiction was as follows:
- At the time of the conclusion of the agreement between the parties, the land fell in the jurisdiction of the Nelson Mandela Metropolitan Municipality (the NMMM) which was a municipality in terms of s 2 of the Local Government: Municipal Structures Act 117 of 1998 ('the Municipal Structures Act').
- Before establishment of the NMMM the land fell under the jurisdiction of a transitional council as contemplated in s 1 of the Local Government Transition Act 209 of 1993 ('the Transition Act').
- When the transitional council was established in terms of the Transition Act, it gained jurisdiction over the land, even though up to that point agricultural land never fell under the jurisdiction of a local authority. Due to the proviso in SALA (quoted above), the land retained its status as agricultural land.
- (The intention of the authorities and the legislator at the time was to create 'wall to wall' municipalities for the whole of the country, an objective that has since been substantially achieved.).
The court then posed and answered the following questions, basing its arguments on an interpretation of the relevant pieces of legislation (below, the author paraphrases the salient points in the judgement, in the hope of simplifying and summarising the issues - please read the case for the actual reasoning).
- Was the NMMM a 'municipal council, city council or town council' as meant in the above quoted para (i)(a) of SALA? Yes.
- But did the land retain its original status as 'agricultural land' by virtue of the proviso, when the permanent municipality created in the Municipal Structures Act took over the jurisdiction? In other words, was the status of 'agricultural land' frozen in time when the transitional council gained jurisdiction, due to the wording of the relevant proviso in SALA, or did it change to 'non agricultural' when the permanent municipal council replaced the transitional council? The status of the land changed to non agricultural land when the permanent municipal council was established.
The proviso, in my view, provides a point in time with reference to which it must be established if land qualifies as agricultural land. If at that point in time, it is to be regarded as agricultural land it remains so notwithstanding any changes to local government structures and their boundaries. This point in time is the first election of the members of the transitional council. As stated above, it is common cause that at this point in time Portion 54 qualified as agricultural land. It follows that it remained so and still was agricultural land at the time the agreement was entered into.
Not so, said the SCA , which is the court with the highest authority in our land (except for constitutional matters), and therefore able to overturn judgements of other courts . Instead of freezing the status of land as agricultural on any given moment, the intention of the legislator of SALA contemplated the concept 'agricultural land' as fluid rather than static, changing with the expansion of local authorities and the creation of new ones. On pages 11 to 14 of the written record of the judgement, the court proceeds to explain the rationale for this view. Although this is really the heart of the judgement, due to the technical nature of the reasoning, it will not be discussed here, and readers affected by the decision will have to study it first hand in any event.
In any event, says the SCA, the Minister retains, in terms of the definition of agricultural land in SALA, the power to exclude any land from the exceptions imposed by it, and to declare it agricultural land for purposes of SALA . "This is a fact," says the SCA, "which the learned judges in Kotze and in the court below seem to have overlooked, their reasoning being premised on the basis that any other interpretation of the proviso would lead to the emasculation of (SALA) ... Section 3 of the Act still prohibits subdivision of agricultural land without the Minister's permission. Having regard to these provisions there clearly is no possibility that this objective may be thwarted."
Digesting the judgement
The author's understanding is that there is no longer any land in our country which falls outside of the jurisdiction of a local authority. If that is so, then, in view of the Supreme Court of Appeal's ruling concerning the interpretation of the relevant legislation, there is no longer any such thing as 'agricultural land' (except in isolated cases where the Minister has published, or in future publishes, notice in the Government Gazette declaring specified land to be agricultural land).
If so, then the decision to subdivide or not subdivide appears to be in the hands of the various local authorities. It could probably then be said that, unless the Minister or the legislator takes swift action, there is no longer overall control or a broad plan under one ministerial roof to protect agricultural land from being cut up into smaller and smaller pieces. The zoning of land as 'agricultural' is in effect practically meaningless. SALA becomes irrelevant. Standing between indiscriminate development and perpetual cutting-up of agricultural land are only the local authorities' individual views on the issues concerning farmland falling within their respective jurisdictions.
It is hoped that this pessimistic take on the implications of the judgement in Stalwo v Wary is incorrect. Readers views? Admittedly the Minister may still declare land to be 'agricultural land' for purposes of SALA, but this it-is-out-until-declared-in approach to protecting agricultural land leaves the door open to abuse and irreversible damage. With respect, author is of the view that the Kotze decision and the court a quo offered the correct interpretation, and that this was also the best solution to the problem.
An interesting twist
A reading of Chief Registrar's Circular 6 of 2002 reveals that the potential 'time bomb' of an impotent definition of 'agricultural land' (which problem has now become a reality, thanks to Stalwo) was already foreseen seven years ago, in 2000. This is the wording of the Circular (thank you, Allen West, for drawing the author's attention to it):
CHIEF REGISTRAR'S CIRCULAR NO. 6 OF 2002
CONSENTS IN TERMS OF ACT NO. 70 OF 1970
- The introduction of municipalities covering the entire Country has made it impossible to identify land that is agricultural land as defined in section 1 of Act No. 70 of 1970.
- The definition of agricultural land in section 1 of Act No. 70 of 1970 has been amended by Proclamation R. 100 of 1995. The effect of such amendment is that all land which was agricultural land prior the establishment of transitional councils remains classified as such.
- The Department of Agriculture has raised concerns that certain subdivisions of agricultural land have been registered only on the basis of consents granted by local authorities and without the requisite consent of the Minister of Agriculture in terms of Act No. 70 of 1970. The Department of Agriculture is of the view that this practice can have serious economic implications, especially when prime agricultural land is involved.
- In view of the concerns of the Department of Agriculture and the State Law Advisors' opinions 553/2000 and 408/2001 dated 21 December 2000 and 25 October 2001 respectively, all farm property must, in future, until proof to the contrary has been furnished, be regarded as agricultural land as defined in Act 70 of 1970.
- The following documents must be lodged with all deeds in which subdivision of farm land is being given effect to:
5.1 A consent by the Minister of Agriculture in terms of Act No. 70 of 1970; or
5.2 A letter by the Department of Agriculture to the effect that the land in question is not agricultural land as defined in Act No. 70 of 1970 and a consent by the local authority in whose area of jurisdiction the land is situated, as required by the relevant Provincial legislation, if any.
- With regard to transactions having the effect of increasing the number of registered owners of farm land in undivided shares, the consent of the Minister of Agriculture must be lodged or a letter referred to in paragraph 5.2 must be lodged. No consent by the local authority is necessary in this instance.
The assumption in para 2 of this Circular has now been swept away by Stalwo; the Chief Registrar will likely have to repeal the Circular and issue a new one to give guidance as to how the deeds offices will address the issue in future. With respect, the deeds office will no longer be able to insist on compliance with para 5 of the ruling - surely a practice guidance note cannot overrule law.
Would the SCA in Stalwo have come to a different conclusion regarding the intention of the legislator concerning the definition of agricultural land, if it had had sight of the documents referred to in para 4 of this Chief Registrar's Circular? Another question worth asking is: Why did the Department of Agriculture and the legislator, having been made aware of the potential problem so many years ago, not act then to prevent the crisis that has now arisen?
Presumably all concerned relied on the decision in Kotze's case and regarded the interpretation of the term as expressed in that case as selfevident. Conveyancing (and litigation) lesson # 2: It ain't over until the fat lady sings.
Igqwetha Training Academy (Pty) Ltd