Rennie NO v Gordon and Another NNO

• Jurisdiction: South Africa
• Judge: Corbett JA, Van Heerden JA, Grosskopf JA, Nicholas AJA and M T Steyn AJA
• Judgment Date: 24 September 1987
• Hearing Date: 24 August 1987
• Court: Appellate Division

Corbett JA:

The background facts in this matter may be summarised as follows. A company known as Rooderust (Pty) Ltd ('Rooderust') established a township for residential purposes on certain land near Wellington in the Cape Province. The township, known as Wellington H Extension No 28, Bergendal, was duly proclaimed as such on 17 January 1975. It comprised approximately 360 erven. While the township was still in the course of being established Rooderust commenced with the sale of erven therein and on 30 November 1972 one Joseph De Raedt entered into two deeds of sale in terms of which he purchased in all 24 erven from I Rooderust. The deeds provided for an initial payment of 10 per cent of the total purchase price on the signing thereof and for the balance to be paid in monthly instalments over a period of years. On 7 April 1977 Rooderust passed a first mortgage bond in favour of Standard Merchant Bank Ltd ('SMB') over the whole of the township property to secure a loan of R250 000 and the interest payable thereon. On 8 December 1978 J Rooderust was placed under provisional liquidation and on 18 April 1979

Corbett JA

A the provisional order was made final. First respondent was initially appointed provisional liquidator of Rooderust and later, on 10 July 1979, liquidator. I shall refer to him individually as 'the liquidator'.

As at the time of liquidation some 325 erven in the township had been sold and of these 97 had been transferred to the purchasers thereof. The B remaining 228 erven had been sold in terms of agreements whereunder the purchase price was payable in instalments over a period of years and transfer of the erven had not taken place. Included amongst these were the erven sold to De Raedt. It is common cause that these agreements of sale constituted 'contracts' as defined in s 1 of the Sale of Land on Instalments Act 72 of 1971 ('the Act'). For convenience I shall refer to C such a contract as 'an instalment contract'.

The reciprocal rights and obligations of the liquidator of a company and a person who had purchased land from the company prior to liquidation in terms of an instalment contract and when liquidation supervened had not yet taken transfer thereof, were at this time governed by s 14 of the Act. The Act was subsequently repealed by the D Alienation of Land Act 68 of 1981, which substituted new legislation covering the same general field and came into operation on 19 October 1982. It was not argued in this case, however, that Act 68 of 1981 had any application. The relevant portions of s 14, as amended by s 11 of Act 49 of 1975, read as follows:

E '14(1) If land which has been sold under a contract, is sold by the trustee or liquidator of the insolvent estate of the registered owner of the land, or is sold in execution to meet one or more claims against that owner or his estate, the person who acquired under an agreement the right to claim transfer of that land from that owner or the estate of that owner who has died or is insolvent or, if such person is deceased or insolvent, his deceased or insolvent estate, shall, apart from any other claim which he or his deceased or insolvent estate may prove F against the said owner or his deceased or insolvent estate, also be entitled to prove a claim against the said owner or his deceased or insolvent estate which shall be met from the proceeds of the land and which shall rank in preference directly after a claim which is secured by a mortgage bond over the land in question, for the portion of the purchase price which such person or his deceased or insolvent estate has paid under the agreement plus interest calculated at five per cent per annum on the said portion in respect of the period from the conclusion G of the agreement to the date upon which the land is so sold by the trustee or liquidator or in execution.

(2) Subject to the provisions of any law or the common law under which certain juristic acts which an insolvent has entered into before the sequestration or liquidation of his estate, may be rescinded by a court of law, the trustee or liquidator of the estate of an insolvent who is H the registered owner of land which has been sold under a contract, or the judgment creditor of a registered owner who has by virtue of a writ in execution against the immovable property of the registered owner attached land which has been sold under a contract, shall call upon the purchaser, or upon the intermediary or upon both, as the case may be, by written notice if the address of the purchaser or of the intermediary is known, or by two consecutive notices in a newspaper circulating in the I district in which the address referred to in s 16 is situate and by notice in the Gazette, if such address is not known, to take transfer of the land, and if such purchaser or intermediary does not so take transfer of the land, it shall be sold by the trustee or liquidator or in execution, subject to the claim of the person referred to in ss (1).

(3) When land sold under a contract is attached by virtue of a writ of execution against the immovable property of the registered owner or when J land sold under

Corbett JA

A a contract is registered in the name of any person in respect of whose estate a final order of sequestration or liquidation has been given, and that land is not encumbered by a mortgage bond....

(4) When in the circumstances referred to in ss (3) the land sold under a contract is encumbered by a mortgage bond, the land shall, failing any other arrangement relating to the transfer thereof to the B purchaser, be transferred, without prejudice to the rights of any purchaser who purchased the land from any intermediary, if any, by the deputy sheriff, messenger of the court, trustee or liquidator concerned, as the case may be, into the name of the person who has the right to claim transfer of the land and who makes arrangements to the satisfaction, as the case may be, of the deputy sheriff or messenger of the court, as contemplated in the said subsection, or of the Master C concerned, within 30 days after the purchaser or intermediary, or both, as the case may be, has or have been called upon in terms of ss (2) to take transfer, for payment of the outstanding balance under the mortgage bond plus interest to the date of the registration of transfer and all such costs of sequestration and administration as relate to such land, including any endowment to be made in terms of any law to any person in respect of such land, and such other amounts as rank in preference prior D to the claim secured by the mortgage bond, or of the outstanding balance under the agreement plus interest to the date of the registration of transfer, whichever of the two amounts may be the larger and all other costs in connection with transfer, as well as for the signing of all the documents required in connection with transfer: Provided that if the holder of a mortgage bond over the land has taken out a writ of execution in respect of the land, the person who takes transfer shall E also pay the actual amount paid by the mortgagee or for which he is liable in respect of the attachment of the land, before he is entitled to transfer of the land.

(5) If a person referred to in ss (3) or (4) has, by virtue of the arrangements he was required to make under that subsection, paid more than the outstanding balance under the agreement plus interest to the date of the registration of transfer, he may recover the difference F between the two said amounts from the person from whom he acquired the right to claim transfer of the land.'

The general effect of these provisions and their impact on the position at common law were fully considered by this Court in the cases of Glen Anil Finance (Pty) Ltd v Joint Liquidators, Glen Anil Development Corporation Ltd (in Liquidation) 1981 (1) SA 171 (A) at 182D - 184E and G Gordon NO v Standard Merchant Bank Ltd 1983 (3) SA 68 (A) at 82A - 83H, 90E - 91H, and what was said in those cases need not be repeated. Put briefly, the main innovations introduced by the Act (as compared with the common law), in a case where a company which has sold land under instalment contracts is placed under liquidation, are the following:

(1)

H Whereas under the common law the liquidator had the exclusive power to decide whether to implement and enforce the contract vis-à-vis the purchaser or to terminate it - the purchaser having no say in the matter - under the Act this option is in effect given to the purchaser. In terms of the Act (s 14(2)) the I liquidator is obliged to give the purchaser notice to take transfer and then, depending on whether the land is encumbered by a mortgage bond or not, the purchaser has 30 days or six months, as the case may be, to decide whether to take transfer (against making the required financial arrangements) or not (s 14(3) and (4)).

(2)

Whereas under the common law a purchaser who did not obtain J transfer of the land sold to him merely had a concurrent claim

Corbett JA

A against the liquidator for the repayment of instalments, in terms of the Act (see s 14(1)) a purchaser who opts not to take transfer has a preferent claim for the repayment of such instalments, plus interest.

These innovations substantially improved the position of a purchaser B under an instalment contract. As was stated by Trengove JA in the Glen Anil case supra at 183 in fin,

'(t)he principal purpose of the Legislature was obviously to protect the interests of a purchaser buying land under such a contract'.

At the time of liquidation the principal asset of Rooderust was the township. Nevertheless the liquidator found its affairs to be (as he put it in a circular letter to instalment debtors) 'highly complex and C involved'. Two of the problems confronting the liquidator were (a) uncertainty as to the legal validity of SMB's mortgage bond, and (b...