Mistaken transfer

From a deeds registry perspective the Supreme Court decision of Bester and Others NNO v Schmidt Bou Ontwikkelings CC (696/11) [2012] ZASCA 125 inadequately resolved the challenge of an erroneous transfer of property, which resulted in the execution of an invalid deed of transfer.

Section 14 and 16 of the Deeds Registries Act 47 of 1937 ("the Act”) provides the practices and procedures for the registration of deeds. Section 16 further provides for the general rule for the transfer of land from one person to another, which may only take place by means of a deed of transfer, unless another law provides otherwise. On the other hand, section 14 provides another general rule which states that the registration of transfers of land must follow the sequence of their relative causes. The deeds registry is an office responsible for keeping records of ownership of property and real rights over immovable property. All acts of registration effected in the deeds registry are and must be evident from the Registry’s records, being the land register. Colloquially all transactions dealt with in the deeds registry must leave a trail in the land register. This practice was developed to achieve what the Appellate Division in Rosenburg v Dry’s Executors and Others 1911 AD 679 identified as “… the completeness … of … record …”.

Facts of the Case
In terms of a deed of sale, Erf 3117, held under deed of transfer T98193/1993 by Schmidt Bou Ontwikkelings CC (the respondent), was to be subdivided into two pieces of land, one being the Remainder of Erf 3117, and the other portion: Erf 4675 (a portion of Erf 31117). Due to oversight in preparation of the deed of transfer and power of attorney, the whole Erf 31117 was transferred and registered vide deed of Transfer T 38254/2005, in favour of Bendigo (Pty) Ltd` which later changed its name to Innova Holdings (Pty) Ltd. Standard practice in the deeds registry is to endorse T98193/1993 with a transfer endorsement resulting in the deed being referred to as a “dead” title deed because the whole property held by the title is held by another title.

Mistaken transfer of property
Applying the abstract theory of the transfer of ownership to the facts, the court held that it was clear that there was no intention that transfer of the whole of the property is effected to Innova, nor that lnnova intended to purchase more than a portion of Erf 3117. The court dismissed defences raised by the Appellants and ruled that the transfer of the whole Erf of Innova was a case of a mistaken transfer.

Rectification of the mistake
Ordinarily, mistakes are made in the preparation and subsequent registration of deeds in the deeds registry. The Act makes provision for rectification of “an error in the name or the description of any person or property mentioned therein, or in the conditions affecting any such property” (section 4(1)(b) of the Act). This procedure is further accentuated by the Chief Registrar‘s Circular 2 of 2010.

The powers of the registrar of deeds, in terms of section 4(1)(b) of the Act, are limited to the rectification of errors in registered deeds, subject to the general rule that no real right may be transferred when applying section 4(1)(b).

In the case in question the error revealed a peculiar element. It is an error in registration which resulted in the execution of a 'new' (invalid) deed of transfer. Although, the High Court alluded to section 4(1)(b) in Para 22 of the judgment, the orders of both the High Court and the Supreme Court of Appeal made no mention of section 4(1)(b) because the order of the court answers the prayers of the litigants. The order sought by Schmidt Bou was summarized by the Supreme Court of Appeal as follows:

“(a) A declaratory that it is the owner of an immovable property situated in Sedgefield which is at present registered in the deeds registry, Cape Town, in the name Innova;

(b) Rectification of the deed of transfer pertaining to that property so as to reflect the true owner of the property as Schmidt Bou instead of lnnova;

(c) Cancellation of a bond registered over the property in favour of Absa as security for its claims against Innova;

(d) Authorizing and directing the Registrar of Deeds, Cape Town to give effect to the orders in the previous paragraphs".

Para (b) above does not disclose any section of the Act upon which the order of rectification is relied. It goes without saying that section 4(1)(b) cannot be invoked to effect rectification in a case where an error in registration which resulted in the execution of a 'new’ (invalid) deed of transfer. The duty to reverse the erroneous situation by discharging the order of the High Court rested with the registrar of deeds after the dismissal of the appeal by the Supreme Court of Appeal.

Once executed a deed of transfer or a certificate conveying real rights shall not be cancelled by the registrar of deeds, except upon an order of a court (see section 6 of the Act). It is not evident from the facts of the case as to how the Registrar’s report (if any), in terms of Section 97 of the Act, advised the Court in dealing with the matter.

The High Court was more practical in its order: it declared Schmidt Bou the rightful owner of the remainder of Erf 3117 and further ordered rectification of T38243/2005 by amendment of the property description to reflect the property held thereunder as Erf 4675 ('n gedeelte van Erf 3117).

The Court further ordered cancellation of the bond (B11323/2007) registered on T38243/2005, encumbering the Whole Erf 3117 in favour of the fifth appellant.

The registrar of deeds was ordered to carry out the terms of the court order above. Again, no section of the Act was relied upon for performance of the order. By implication the court effected cancellation of T 38243/2005, but not in terms of section 6 of the Act. In the same vein the order of the court implicitly revived the “dead” T98193/1993 to remain the holding title of the remainder in favour of Schmidt Bou.

The right to ownership of the Erf 3117 held by Innova under T38243/2005 was reduced to ownership of the Erf 4675 (a portion of Erf 3117) by an order of rectification.

The practice
The Act and various other statutes forming the main statutory framework in Deeds Registration advises the registrar of deeds on the procedures and practices involved in updating the land register to "afford security of tenure", the Act further provides for the appointment of the Chief Registrar of Deeds whose duty it is to supervise all Deeds Registries in order to bring about uniformity in practice and procedure.

It is my submission that at a cost of integrity to our land registration system, section 3(1)(v) (as a catch all provision of the Act) must be applied by the Registrar of Deeds to carry out the order of the court.

The Registrar’s report to the court, in terms of section 97 of the Act, must always bring to the attention of the court sections of the Act from which the facts in dispute are relevant. A court may declare a registered deed invalid by interpretation of substantial law, but the Act provides an administrative mechanism in terms of section 6 of the Act. When writing a report to court, the registrar of deeds must inform the court about any circular, resolution or practice which may have an impact on the court's decision.

Nkuba Ngoasheng
Assistant Law Lecturer
Deeds Training
Pretoria