Legator McKenna Inc and Another v Shea and Others

• Jurisdiction: South Africa
• Judge: Harms ADP, Brand JA, Cloete JA, Ponnan JA and Leach AJA
• Judgment Date: 27 November 2008
• Citation: 2010 (1) SA 35 (SCA)
• Docket Number: 143/08
• Hearing Date: 17 November 2008
• Counsel: DJ Shaw QC (with N Singh SC) for the appellants. M Pillemer SC for the respondents.
• Court: Supreme Court of Appeal

Brand JA:

[1] The first appellant, Legator McKenna Inc, is an incorporated firm of attorneys in Durban. The second appellant, Mr Michael McKenna (McKenna), is an attorney in that firm. On 8 March 2002 McKenna was appointed as curator bonis to the estate of the first respondent, Ms Clare J

Brand JA

A Shea (Shea), by order of the Durban High Court. The reason for his appointment was that Shea had been found incapable of managing her own affairs as a result of brain injuries she sustained in a motor-vehicle accident on 5 February 2002. At the time Shea was the registered owner of a house in Berea, Durban. On 22 April 2002 McKenna, in his B capacity as curator bonis, purported to sell the house to a married couple, Mr and Mrs Erskine (the Erskines) - who are the joint second respondents in these proceedings - for R540 000. The reason why I refer to the transaction as 'a purported sale' will soon appear. In the interest of brevity and without prejudicing any issues, however, I will henceforth refer to the transaction simply as 'a sale'. Pursuant to the sale, the house C was subsequently transferred to the Erskines by registration in the Pietermaritzburg Deeds Office.

[2] Contrary to medical expectations, so it seems, Shea then recovered from the consequences of her brain injuries to the extent that the Durban High Court declared her capable of managing her own affairs. This D happened on 10 March 2003. Slightly more than a year later she instituted an action in the same court for the return of her house, which eventually led to the present proceedings. The first three defendants in the action were the two appellants and the Erskines. Other defendants (who had abided the decision of the court) were the master of the High E Court, the registrar of deeds and the bondholder over the house who advanced the purchase price to the Erskines. Litigation thus proceeded between Shea, the two appellants and the Erskines.

[3] Shea's main claim in the action, referred to as claim 1, was essentially, as I have indicated, that the transfer of her house to the F Erskines be declared invalid and that the house be returned to her against repayment of the purchase price. I shall return later in more detail to the cause of action advanced in support of this claim. Broadly stated, however, she contended that the contract of sale between McKenna and the Erskines, which gave rise to the transfer, was invalid in that it was concluded by McKenna before the master had issued him G with letters of curatorship in terms of s 72(1)(d) of the Administration of Estates Act 66 of 1965 (the Act).

[4] Shea also formulated two claims for damages, claims 2 and 3, against the two appellants: one in addition, and the other in the alternative, to H her main claim. These claims are not material to the appeal. Of some consequence, however, albeit indirectly, is a conditional third-party claim by the Erskines against the two appellants. It is formulated on the supposition that Shea would be successful in her claim for return of the house. In this event, the Erskines claimed damages from the appellants in the amount of about R1,7 million, for the loss they would allegedly I suffer through McKenna's breach of an implied warranty that he was authorised to sell Shea's house.

[5] At the commencement of the trial the parties asked the court a quo (Motala AJ) to order a separation of issues. In terms of the separation order the issues relating to Shea's main claim for return of the house J were to be decided first. The remaining issues concerning Shea's two

Brand JA

claims for damages, as well as the Erskines' conditional third party claim, A stood over for later determination. The parties also agreed that the issues surrounding the main claim were to be decided on the factual basis set out in a document entitled 'Admitted facts' and the supporting documents attached thereto. Despite an additional term of the agreement that any party would be free to lead further evidence, no one elected to do so at the trial. B

[6] In the event the preliminary issues were decided in favour of Shea. Hence the court a quo declared the contract of sale concluded between McKenna and the Erskines both illegal and void, and directed the registrar of deeds to cancel the registration of transfer of the house to the C Erskines, against repayment of the purchase price by Shea. In addition, the two appellants and the Erskines were ordered, jointly and severally, to pay the costs of the preliminary proceedings. The two appellants then sought and obtained the court a quo's leave to appeal to this court. The Erskines, on the other hand, sought no such leave. That is why they were joined as joint second respondents on appeal. On the face of it the court D a quo's order seems to have an immediate impact on the Erskines only. But in the light of the outstanding issues, and particularly the Erskines' conditional third party claim for damages against the appellants, it is apparent that the appellants have a very real interest in the outcome of the appeal.

[7] Central to an appreciation of the issues on appeal is the sequence of E material events. Resulting from the way in which the facts were presented at the trial, these events were not in dispute. A convenient date to start the sequence is 8 March 2002. That, as we know, was the date upon which McKenna was appointed as curator bonis to Shea's estate. On 27 March 2002 he instructed Wakefields Estate Agents, who had F valued Shea's house at R525 000, to find a purchaser for R550 000. On 19 April 2002 Wakefields presented him with an offer, signed by the Erskines, for R520 000 which they increased at McKenna's request to R540 000. On 22 April 2002 McKenna signed the amended offer as seller. Alongside his signature he wrote the word 'curator' and below all G that he added, again in his own handwriting and in parenthesis, '(subject to approval of Master of High Court)'.

[8] On 3 June 2002 the master issued McKenna with letters of curatorship in terms of s 72(1)(d) of the Act. At first sight the sale of the house by McKenna before he obtained his letters of curatorship appears to H have occurred with unseemly haste. One's instinctive reaction is that, as an attorney, he should have known better than to do so. But his reasons for doing so appear from the documents attached to the 'Admitted facts'. Essentially they amounted to this: while the house was Shea's only asset worthy of note, she had a number of pressing debts. Some of these debts, I such as the insurance premiums and rates and taxes on the house, could be avoided by the sale. Others, like the premiums on her life policies and her children's school fees, were in need of urgent settlement from the proceeds of the sale. In the circumstances McKenna obviously thought that it was in Shea's best interests to sell the house as soon as possible. What McKenna also knew was that Shea had herself attempted to sell J

Brand JA

A the house for the greater part of the previous year for R500 000, but that she had been unsuccessful in obtaining a buyer at that price. He therefore considered R540 000 a good price.

[9] To complete the chronological picture: on 17 July 2002 the master granted his consent for the sale of Shea's house. Transfer to the Erskines B was registered in the deeds office on 27 July 2002. In both the power of attorney authorising the transfer, signed by McKenna, as well as the transfer deed itself, the causa for the transfer is described as a sale which was concluded between McKenna and the Erskines on 22 April 2002.

C [10] The court a quo's reasons as to why Shea was on these facts entitled to the return of the house can be summarised thus:

•

The agreement between McKenna and the Erskines was illegal and invalid because it was concluded at a time when McKenna had not yet received his letters of curatorship. In consequence, so the court D held, the sale constituted a contravention of s 71(1) of the Administration of Estates Act and indeed rendered McKenna guilty of a criminal offence under s 102(1)(g) of the Act.

•

Because the agreement of sale, which formed the causa of the transfer to the Erskines, was invalid, Shea was entitled to the return of her E property.

•

The jurisprudential basis for the return of the property to her is dependent upon whether or not ownership passed notwithstanding the void underlying causa for transfer.

•

If ownership did not pass, Shea had a real right to vindicate the F property as owner.

•

If, on the other hand, ownership did pass to the Erskines, Shea had a personal right to claim the return of the property from them - as immediate parties to the transaction - on the basis of the condictio ob turpem vel iniustam causam.

G [11] The appellants' answers to the court a quo's line of reasoning were manifold. First among these was the contention that the court a quo erred in finding that the sale agreement, which led to the transfer, constituted a contravention of s 71(1) of the Act. In...