NOT REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA 
(NORTH GAUTENG DIVISION)

CASE NUMBER:6088/2008
DATE: 21/01/2011
In the matter between:

and

PRETORIUS, THOMAS FREDERIK NO, (in his capacity as executor of the estate

VAN RENSBURG, E J (NARDUS) T/A

THE CITY MANAGER,

CORAM EBERSOHN AJ
JUDGMENT HANDED DOWN ON 21st JANUARY 2011

JUDGMENT

EBERSOHN AJ.

[2] The first respondent is a private company and was the developer of the Township.

[3] The late second respondent was a director of the first respondent and he was the managing director of the applicant from the 29th June 2005, it being the date it came into being, until the applicant's annual general meeting on 6 November 2006 when the election of a new board of directors took place. The second respondent died after the matter was argued and before judgment was given and was substituted by order of the court on the 17th January 2011, by the executor of his estate one Thomas Frederik Pretorius in terms of the provisions of Uniform Rule 15. In this judgment reference will still be made to the second respondent in person and not his executor.

[4] The third respondent is Van der Merwe Du Toit Inc., the firm of attorneys who attended to the transfer of the said erf 1504 back into the name of the first respondent.

[5] The fourth respondent is a sworn appraiser who trades as C.A. Young Waardasies. No relief was sought against him unless he opposed the application.

[6] The fifth respondent is the City Manager of the Tshwane Metropolitan Municipality and no relief was sought against him unless he opposed the application.

[7] The sixth respondent is the Registrar of Deeds who was formally joined in the application.

[8] Copies of the founding papers were also served on attorneys M.C. van den Berg Inc. and the owners of erven in the Township.

[9] The 22 prayers set out in the draft order "X" attached to the notice of motion can more practically and conveniently be classified under five main headings and the relief asked for under the five main headings will first be dealt with and thereafter the prayers will be dealt with separately.

[10] The applicant, firstly, claimed an order for the surrender by the first respondent, being the developer of the Township, to the applicant of the title deeds of erven 1593/12, 1641/17 and 1663 in the Township (title deed numbers T054067/06, Tl641/17 and T1663 respectively) being the title deeds of the common property in the Township and which were registered in applicant's name in 2006. All the erven in the Township are freehold erven.

[14] The applicant, fifthly, asked for an order deleting a limitation registered against the title deeds of erven in the Township in favour of the first respondent and which in any case no longer applied, but presented problems to owners of erven in the Township when they tried to transfer their erven after it was sold by them to third parties.

[15] The first, second and third respondents opposed the application except for the relief set out under headings one and five referred to in paragraphs [10] and [14] supra. It was conceded by them that the applicant was entitled to the relevant title deeds and indicated that the first respondent was to let go of the limitation clause in favour of the first respondent referred to in paragraph [14] supra. The court was given to understand, during the hearing of the matter, that the title deeds were in fact already delivered to the applicant.

[16] The following quoted conditions contained in the Schedule to the Proclaimed Township Preconditions as published in the Gazette, referred to supra, are relevant:

1.14.1 ASSOCIATION AND STATUTES
The developer must register a Section 21 Company (home owners association) in terms of the provisions of the Companies Act, 973, (Act 61 of 1973). All the owners of units in the township must become members of the Section 21 Company. A copy of the registered Deed of Association (CM4) and the Company's Statutes must be submitted to the City of Tshwane Metropolitan Municipality.
The Association and Statutes must clearly state that the main objective of the home owners' association is the maintenance of the internal engineering services of the development (i.e. water, sewerage, electricity, and the road and stormwater sewers). The developer is deemed to be a member of the Section 21 Company, with all the rights and obligations of an ordinary member, until the last erf has been transferred."

OWNERS' ASSOCIATION)
Erven 1594 and 1663 shall be transferred to the home owners' association (Section 21 Company) by and at the expense of the township owner."

CONDITIONS AS INDICATED, LAID DOWN BY THE CITY OF TSHWANE METROPOLITAN MUNICIPALITY IN TERMS OF THE PROVISIONS OF THE TOWN-PLANNING AND TOWNSHIPS ORDINANCE, 1986 (ORDINANCE 15 OF 1986):
2.1.1    .........
2.1.2   .........
2.1.3 ERVEN 1593,1595 TO 1662 INCLUSIVE:
Upon transfer, the owner of each erf must automatically become a member of the Section 21 Company and remain a member until he or she ceases to be the registered owner of that erf, which condition must be included in the title deed of the portion.
Transfer of the erf to a third party is allowed only with the consent of the Municipality and then only if the development of the dwelling-unit has been completed to the satisfaction of the
Municipality in accordance with the approved site development plan."

[17] A zoning certificate with regard to erf 1 594 was issued on the 23rd February 2007 by the General Manager: City Planning of the Municipality. The following relevant portions appear therein:
"1.     USESONE: SPECIAL

3. PURPOSES FOR WHICH BUILDINGS MAY BE ERECTED OR USED OR LAND-USED:
Uses only as in Annexure B.
4.......
5.......
6.......
7.......
8.......
9.......
10.......
11.      ATTACHED DOCUMENTS:
* Schedule 1: None
* Annexure : B 7203."

"The erf shall be used only for Private Open Space and Communal purposes (Le. club-house and recreational facilities), subject to the following conditions"
and 6 standard conditions relating to all buildings in the proclaimed township, were then also stated therein.

[19] It is common cause that erf 1594 was transferred by the first respondent to the applicant in terms of the stated Township conditions on the 18th May 2006 under deed of transfer no. T54036/2006.

[20] As already stated the second respondent, however, caused the said erf to be transferred back into the name of the first respondent for a purchase consideration of R0,00 on the 22nd May 2007.

[21] The history of the re-transfer of erf 1594 to the first respondent is not complicated. The second respondent was at the relevant time a director of the first respondent and was also the managing director of the applicant since its initial registration. He. fraudulently and in clear breach of his fiduciary duty, instructed the third respondent to draft the deed of sale and he then signed the deed of sale on behalf of the applicant as "seller" and the first respondent as "purchaser". In terms of the deed of sale erf 1594 was "sold" by the applicant to the first respondent for R0.00. The R0.00 was based on a "valuation" done by the fourth respondent.

[22] The second respondent returned the signed deed of sale to the third respondent together with an "extract" from a "resolution" authorising the sale of the erf to the first respondent and the second respondent to sign all documents necessary to pass transfer of the erf into the name of the first respondent. The third respondent thereupon drafted the deed of transfer.

[23] At that point in lime the third respondent was the attorneys of the applicant then being managed by the first and second respondent.

(d)      The applicant's said arguments cannot be faulted.

[25] Upon a reading of the papers the conduct of the third respondent was distressing and may have been unprofessional and the necessary order will be made in this regard.

[27] It was also argued on behalf of the applicant that if the first and/or second respondents and/or the then attorneys of the applicant, who at that stage were, however, apparently reporting to the second respondent and not to the applicant, complied with their obligations towards the applicant they would immediately, after registering erven 1594, 1593/12,1641/17 and 1663 into the applicant's name, delivered the title deeds thereof to the applicant and the second respondent would not have been able to fraudulently cause erf 1594 to be transferred back into the name of the first respondent.

[28] It is necessary to refer to another aspect of the documentation regarding the transfer. The second and third unnumbered paragraphs of the preamble to the deed of sale read as follows:
"AND WHEREAS the parties hereto agreed that the intention was that this property needed to remain in the name of the PURCHASER after proclamation, for purposes of rezoning and further development thereof;

"A disposal which is not in furtherance of the company's objects is ultra vires and void even if purportedly effected by the directors with the approval of the shareholders, subject, of course, to the operation of section 36."

[31] It is clear that section 36 of the Companies Act could not be invoked by the first and second respondents as a defence against the applicant's attack.

[32] With regard to the allegations made on behalf of the applicant that there never was any resolution adopted either by the board of directors of the applicant or by the members of the applicant at a general meeting of the applicant, Mr. Raath, who appeared for the first and second respondents, valiantly tried to persuade this court that upon a construction of several documents it could be said that a resolution was adopted at a meeting, although the resolution did not appear from the minutes of that meeting. It was stated in some of the supporting affidavits filed on behalf of the applicant that the second respondent approached some of the new directors of the applicant and tried to persuade them to fraudulently "remember" that the transfer of erf 1594 was in fact discussed at a meeting and that the minutes inadvertently did not reflect it. They all refused this approach by the second respondent.

[33] It is common cause that when instructing the attorneys to draft the power of attorney to register the transfer of erf 1594 into the name of the first respondent, the second respondent verbally confirmed to them that a resolution was in fact adopted by the applicant to register the transfer of erf 1595 into the name of the first respondent and that the second respondent never handed such a "resolution" to the said attorneys.

[34] It is clear that such a resolution was never adopted. The third respondent should have insisted on being provided with the original minutes of the meeting where the resolution was allegedly adopted the moment they were informed that the resolution was challenged by the applicant, but apparently elected to rather aid and abet the first and second respondents. How it came about that the attorneys also managed to persuade the Registrar of Deeds to by-pass the Proclaimed Township Preconditions referred to in paragraph [16] regarding erf 1594, is an aspect which will also have to be investigated by the Law Society and the Registrar of Deeds and they will also have to investigate the issuing of a valid and genuine clearance certificate regarding erf 1594 on behalf of the applicant.

[35] The first and second respondents relied with regard to the transfer of erf 1594 back into the name of the first respondent on a certain clause inserted into an addendum attached to only some of the deeds of sale, and not all of them, which were concluded between the first respondent as developer of the Township and some of the purchasers of erven in the Township.

[36] This clause was for instance not inserted into the deeds of sale entered into between the first respondent and of the purchasers of erven in the Township as is described in paragraph 5.4.1 on page 77 1 of the founding papers.

[37] The said clause inserted into the said certain deeds of sale reads as follows:

[38] It was submitted by Mr. Botha on behalf of the applicant that to insert such a clause into the deeds of sale was a fraudulent misrepresentation and did not empower the first respondent. ex-kge. to take transfer of erf 1594 even if all the purchasers of erven would have signed for the transfer of erf 1594 into the name of the first respondent. The first and second respondents could therefore, in any case, not rely on an alleged "unanimous consent" of all the owners of erven in the Township as there was no unanimous consent as many of the owners did not sign such clauses.

[40] The applicant also relied on the fact that the purchase price was stated to be R0.00 in the "deed of sale". It is clear that as the "deed of sale" was not a genuine deed of sale it is not necessary* to deal further with this aspect and the authorities in that regard (e.g. Christie: The Law of Contracts. 5th ed. p. 122) that any purported sale was at common law invalid as there was no purchase price.

[41] It is therefore clear that the first respondent could not validly take transfer of erf 1594. despite the fraudulent conduct on the part of the second respondent, and the transfer must be set aside as being invalid and it is clear that the relief claimed in the second prayer must also be granted.

[44] The respondents did not oppose the relief the applicant sought fifthly, namely for an order deleting a limitation registered against the title deeds of erven in the Township in favour of the first respondent and which in any case no longer applied, but presented problems to owners of erven in the Township when they tried to transfer their erven after it was sold by them to third parties and the necessary order will be made in this regard too.

[45] The court now deals specifically with each of the prayers contained in the draft order to the notice of motion (pages 5-17 of the record):

The delivery of the title deeds is not in issue and will be ordered, 

It is clear that the deed of sale and the transfer itself were void and must be set aside and the necessary order regarding the void deed of sale and transfer and the cancellation of the endorsement on Deed of Transfer No. T06752907 which evidences the transfer of the property into the name of the first respondent, will be made.
ad prayer 1.5:
It will be ordered that the relevant title deeds be delivered to and the necessary steps be taken with regard to the order in terms of prayers 1.2. 1.3 and 1.4 by the applicant's attorneys at the expense of the first and second respondents.
ad prayer 1.6:

It is necessary, in view of the fraud perpetrated upon the applicant, that the auditor of the applicant must investigate and redraft the 2006. 2007. 2008 and 2009 Financial Statements of the applicant and the First and Second Respondents will be ordered to bear these costs.
ad prayer 1.8:

ad prayer 1.9:

ad prayer 1.10:
An order will be made to the effect that the sixth respondent shall at the cost of the first and second respondents insert the necessary replacement conditions as is set out in prayer 1.10.
ad prayer 1.11:

ad prayer 1.12:
The sixth respondent will be ordered in terms of prayer 1.12 to register the compulsory' membership conditions as reformulated in prayer 1.10.

The necessary order will be made to compel the first respondent to sign all documents required in terms of the order of the court within a stated period of tine failing which any Deputy Sheriff may sign such documents.
ad prayer 1.14:
An order will he made declaring clause "4" or "G"(or numbered otherwise in any title deed of any erf in the Township which reads to the effect that the erf may not be transferred without the written consent of the first respondent) be declared null and void as from the 6th November 2006, and authorising the sixth respondent to amend the title deeds concerned accordingly.
ad prayer 1.15:
A declarator will be issued to the effect that the first respondent as from the 6th November 2006 had no authority in respect of any erf in the Township other than where the first respondent is the owner of such erf.

A declarator will also be issued to the effect that the applicant was the sole Home Owners' Authority in the Township as from the 6th November 2006.
ad prayer 1.17:
An order will be issued to the effect that sec. 5.11.8 of the applicant's Articles of Association must be complied with before any application may be lodged to the Registrar of Deeds to subdivide or rezone erf 1594 in the Township by the then owner of the said erf and that the order be registered against the records of the sixth respondent relating to erf 1594.
ad prayers 1.18,1.19.1.20 and 1.21:
The necessary costs orders will be made.

[46] Regarding costs it is clear that the conduct of the first and second respondents was fraudulent and despicable and their actions call for a severe punitive order.

[47] The conduct of the third respondent, the attorneys, must now be dealt with. It will be necessary, as examples of their conduct, for purposes of this judgment, to refer to a few aspects (there are many more worrying aspects):

Ons instruksies is om w mee te deel dat ons kiient voortgaan met die oordrag."

"In die Stigtingsvoorwaardes is daar egter tussen die ontwikkelaar en die Mooikloof Gardens Home Owners Association ooreengekom dat die eiendom weer terug sal gaan na die ontwikkelaar en het die eienaarsvereniging dus nie 'n reg tot die eiendom vir verdere ontwikkeling nie. Die eiendom is dus vir die Mooikloof Home Owners Association nul rand (RD) werd."

the applicant into the name of the first respondent under title deed no. T06752907 is declared void and is set aside and the sixth respondent is ordered to cancel title deed no. T 06752907.
b) The sixth respondent is ordered to simultaneously cancel the endorsement on title deed no. T54036/2006. it being the title deed under which the applicant held the property erf 1594 Pretorius Park Extension 25, Pretoria, to the effect that the property was transferred into the name of the first respondent.

set out in paragraph 1.12 of this order, and after the expiration of the period of time staled in paragraph 1.11 (b) of this order, or after the final determination of any application brought by an owner of an erf in terms of the said paragraph, endorse the insertion or the replacement of existing related and comparable conditions in each and every title deed of the erven in the Township Pretorius Park Extension 25. Pretoria, (referred to as the "Membership Provision") excluding that of erven 1594. 1663. 1593/12 and 1641/17. of/by the draft set out in prayer 1.10 as a pre-amble and paragraphs (a), (b). (c). (d). (e). (f), (g). <h) and (i) respectively thereto.

1.11 a) That a copy of this order shall be served by the Deputy Sheriff on each and every owner of an erf in the Township Pretorius Park Extension 25, Pretoria (except erven 1594, 1663, 1593/12 and 1641/17) at the address of the erf together with a written notification containing the full wording of the replacement conditions referred to in paragraph 1.10 (a) of this order and informing each owner of the date this order was made, by the applicant addressed to each owner of an erf. and wherein such owner is specifically referred to the contents of the order as a whole and specifically the contents of paragraph 1.11 (b) of this order.

title deed of any erf in the Township Pretorius Part Extension 25, Pretoria, which reads to the effect that the erf may not be transferred or as is stated and detailed in prayer 1.14. without the prior written consent of the first respondent, be declared null and void as from the 6th November 2006.

applicant's attorneys are ordered to draft a comprehensive referral to the Law Society, which must include this judgment and the record of the case, wherein the conduct of the third respondent in their capacity as attorneys is specifically detailed and supported with annexures and to assist the Law Society in their investigations of the matter until its conclusion.
b) The third respondent is ordered to pay all the taxed attorney and client fees and costs relating to the preparation, drafting, typing and making of copies of documents for referral purposes and for attendances on the Law Society and the giving of evidence there at any hearing, until the final conclusion thereof, on the scale of attorney and own client.

fourth respondent and the applicant's attorneys are ordered to draft a comprehensive referral to the said Board, which must include this judgment, wherein the conduct of the fourth respondent in his capacity as valuator is specifically detailed and supported with annexures and to assist the said Board in its investigations of the matter until its conclusion.
b) The fourth respondent is ordered to pay all the taxed attorney and client fees and costs relating to the preparation, drafting, typing and making of copies of documents for referral purposes and for attendances on the said Board and the giving of evidence there at any hearing, until the final conclusion thereof, on the scale of attorney and own client.

6. The applicant's attorneys are ordered lo forward copies of the papers in this matter, including this judgment, and the referrals to the Law Society and the Board of Valuators, to the South African Revenue Service to investigate the matter and to institute such action and/or to impose such penalties and/or institute such prosecutions as they may deem fit.

P.Z. EBERSOHN

Applicant's counsel Dr. T.J. Botha
Applicant's attorneys Jacques van Wyk & van As
Tel. 012 x 332 5790

First and second respondents' counsel Adv. R.J.Raath SC
assisted by Adv. J J). Venter
First and second respondents' attorneys Roestoff, Venter & Kruse
Tel.
Ref. Mr. J. Roestoff
Third Respondent's counsel Adv. F.J. Erasmus
Third respondent's attorneys Van der Merwe Du Toit Inc.
Tel.
Ref.