Nel NO v Body Corporate of the Seaways Building and Another

• Jurisdiction: South Africa
• Court: Appellate Division
• Judge: E M Grosskopf JA, Nestadt JA, Eksteen JA, Nienaber JA and Olivier JA
• Judgment Date: 25 August 1995
• Citation: 1996 (1) SA 131 (A)
• Docket Number: 45/94
• Counsel: O L Rogers for the appellant. A C Oosthuizen for the first respondent. No appearance for the second respondent.

E M Grosskopf JA:

The appellant is the liquidator of General Transport and Warehousing (SA) (Pty) Ltd ('the company'). The company was placed in liquidation by a special resolution registered on 9 June 1992. It was at E that time the owner of a number of units in a sectional title development in Mouille Point, Cape, named Seaways. These units were mortgaged in favour of Standard Bank of South Africa Ltd ('the bank'). When application was brought in this matter the bank's claim was of the order of R1,3 million.

F On 26 September 1992 the appellant sold the units by public auction for R1 050 000. However, he found himself unable to pass transfer to the purchaser because of a dispute concerning the interpretation of s 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986 ('the Act'). The relevant portion of this provision ('the contested provision') reads as G follows:

'(3) The Registrar shall not register a transfer of a unit . . . unless there is produced to him -

(a)

a conveyancer's certificate confirming -

(i) (aa)

that, if a body corporate is deemed to be established in terms of s 36(1), that body corporate has certified that all moneys due to the body corporate H by the transferor in respect of the said unit have been paid, or that provision has been made to the satisfaction of the body corporate for the payment thereof. . . .'

The first respondent is the body corporate of Seaways ('the body corporate') and is deemed to have been established by s 36(1) of the Act. It has refused to furnish the certificate contemplated by the above I provision. Its attitude is that there are unpaid contributions owing by the company in respect of the units. It contends that as at 1 May 1993 the company owed it R106 655,24.

The appellant launched an urgent application in the Cape Provincial Division. It is not necessary to set out the relief claimed in detail Its aim was to enable transfer to be given to the purchaser without the J body

E M Grosskopf JA

A corporate being paid the outstanding contributions in so far as they accrued prior to liquidation. Any post-liquidation contributions were not in issue in this case. The Court (Brand J) found in favour of the body corporate. His judgment is reported at 1995 (1) SA 130 (C). With the leave of the Court a quo the matter now comes before us on appeal. The B body corporate opposes the appeal, but the second respondent, the Registrar of Deeds, abides by the judgment of the Court.

It will be convenient first to discuss the nature of the contested provision. Similar measures have been found in our law for many years. In Johannesburg Municipality v Cohen's Trustees 1909 TS 811, a Full Bench decision, the Court dealt with a provision that no transfer of rateable C property should be passed before the Registrar until there was produced to him a receipt or certificate signed by a duly authorised official of the municipality 'for payment of the rates imposed on such property'. The trustees in Cohen's insolvent estate wanted to transfer certain landed property from the estate. For this purpose they required a receipt or D certificate from the Johannesburg municipality pursuant to the above-mentioned provision. The dispute before the Court was whether the word 'rates' included interest on unpaid rates. This issue is, of course, not relevant for present purposes, but in the course of their judgments two members of the Court considered the nature of the provision with which they were dealing. At 817 Innes CJ said:

E 'Now reading that section in connection with other provisions of the statute, the intention seems to have been to give to the local authority a right to veto the transfer of property until its claims in respect of rates should be satisfied. The result, of course, was to create, in effect, a very real and extensive preference over the proceeds of rateable F property realised in insolvency; and to compel payment of the burden thus imposed before a sale of such property could be carried through, even in cases where insolvency had not supervened.'

And at 821 Solomon J said:

'. . . (T)he effect of applying the rule is to give the local authorities a hold upon all rateable property in respect of its rates, inasmuch as the G owner cannot pass transfer of his property until he has paid his rates. The consequence is that the council obtains a species of lien upon all rateable property, and in case of the insolvency of the owner secures a preference over other creditors.'

The nature of these provisions was again considered in Rabie NO v Rand Townships Registrar 1926 TPD 286. There the question was whether the municipality's claim for rates, fortified as it was by the right to veto H the transfer of a property until the rates were paid, was a 'claim ranking in priority to that of the judgment creditor' within the meaning of s 55(2) of the Magistrates' Courts Act 32 of 1917. The Court (per Greenberg J) held that a number of anomalies would arise if the municipality's right could be so described, but that this would be unavoidable if the words I pointed clearly and unambiguously to that construction. He then continued (at 292):

'But is it clear from the fact that the privilege of preventing transfer is given to municipal councils that this right constitutes a claim ranking in priority to other debts? These words ordinarily convey the idea of a right in the person holding such claim to have the property sold which is subject to the claim and to be paid first out of the proceeds, or a right, J when the property is sold in execution by

E M Grosskopf JA

A another creditor, to be so paid and not merely a right to resist any dealing with the property unless the claim is paid.'

The Court accordingly held that the municipality's claim, although enjoying the benefits discussed in the Cohen's Trustees case, nevertheless was not 'a claim ranking in priority to that of the judgment creditor'. See also the unreported judgment in South African Permanent Building B Society v Messenger of the Court, Pretoria, and Others to which reference is made in the judgment of the Court a quo in the present matter at 133D-F. [*]

In argument before us it was accepted by both sides, rightly in my view, that the juristic nature of the contested provision is the same as that of the measures considered in the above cases. The position then is that the C contested provision, although it did not create a preference in the ordinary sense, nevertheless gave the body corporate a power to resist transfer of units until moneys due to it were paid. The question at issue was the exact ambit of this power.

In his heads of argument the appellant's main contention was that the D contested provision did not apply at all to transfers from an insolvent estate or...