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IN THE HIGH COURT OF SOUTH AFRICA,

FREE STATE DIVISION, BLOEMFONTEIN

 

 Reportable:                             NO

Of Interest to other Judges:     NO

Circulate to Magistrates:         NO

                                                                             Case number:   2122/2019

 

In the matter between:

 

PHILLIP TSHEPISO MOTSIMA                                                                          1st Plaintiff

 

THANDIWE PATIENCE MOTSIMA                                                                     2^nd Plaintiff

 

And

 

LIPHAPANG ALBERT KOPA                                                                                1^st Defendant

 

NTHABISENG MOSOEU-KOPA                                                                           2^nd Defendant

 

THE TRUSTEES OF THE TIME BEING FOR THE

C & D INVESTMENT TRUST

[Registration No: IT 4256/2006]                                                                               3^rd Defendant 

 

THE REGISTRAR OF DEEDS, FREE STATE

PROVINCE                                                                                                                4^rd Defendant

 

THE TRUSTEES FOR THE TIME BEING OF THE

VAN DER MERWE FAMILY TRUST                                               

[Registration No: IT 020728/2014(B)]                                                                       5^th Defendant

 

 

         

 

JUDGMENT BY:     MOLITSOANE, J

 

HEARD ON:             28 OCTOBER 2020

 

DELIVERED ON:    8 FEBRUARY 2021

 

[1]     The First and Second Plaintiffs (the Plaintiffs) are husband and wife. They instituted an action against the First, Second, and Third Defendants, seeking the relief as herein- after set out in this paragraph. The First and Second Defendants are also husband and wife. The Fourth Defendant is cited by virtue of it being an office responsible for the registration and maintenance of the property registry. The Fifth Defendants are cited because of the interest they may have in the outcome of this case.  No relief is sought against the Fourth and Fifth Defendants. The Plaintiffs in essence seek the following relief:

 

1.1        That the agreement concluded between the Plaintiffs and the Third Defendant in respect of Erf [...] and better known as [...] (the property) as well as the subsequent transfer thereof from the Plaintiffs to the Third Defendant, be declared unlawful, against public policy and null and void;

1.2        That the agreement concluded between the    Plaintiffs, the  Kopas and the Third Defendant in respect of the sale of the property as well as the subsequent transfer thereof from the Third Defendant to the Kopas be declared unlawful, against public policy and null and void.

1.3        An order that the Plaintiffs reimburse the Kopas with an amount of R1 830 000, being the purchase price of the property the Kopas paid to the Third Defendant within a certain time.

 

[2]     The Kopas and the Third Defendant pleaded to the summons and also instituted provisional counter claims.

 

 

[3]     The version of the Plaintiffs is as follows:

 

         The Plaintiffs bought a vacant site and paid R400 000 for it. They paid R100 000 as a deposit. They then approached Standard bank for a loan to finance the balance. The bank granted them a loan of R300 000 secured by a mortgaged bond. They commenced to build on the vacant site and later applied for further financing from the bank.

 

[4]     Shortly thereafter the First Plaintiff lost his employment. His financial woes began. He had debts totalling about one and half million rands of which four hundred and sixty thousand rands was owed to Standard Bank.

 

[5]     The First Plaintiff, fearing that they might lose their house, turned to the internet to look for entities which might help them with financing in order to avoid the bank calling up its bond. He came across C & D Investment Trust (the Third Defendant). He contacted the Third Defendant and spoke to one Stompie Buys.

 

[6]     Buys informed him that he could sell his property to the Third Defendant and at the same time conclude a lease agreement which provided an option in favour of the plaintiffs to buy it back for a pre-determined price, which would enable them (the Plaintiffs) also to remain in occupation of the house. He was requested by Buys to send the house documents for assessment which he later did. He qualified for assistance by the Third Defendant. Buys informed him that the Third Defendant would purchase the property. According to the First Plaintiff the property was valued at the time of the negotiations with the Third Defendant at about R6.4 million. The First Plaintiff and Buys agreed that the Third Defendant would buy the house at R1.5 million being the total indebtedness of the First Plaintiff to his creditors.

 

[7]     Buys further informed him that the Third Defendant would pay the purchase price to the Plaintiffs, which would enable them to pay off their debts in respect of the property. The property would, however, be registered in the names of the Third Defendant.     

 

[8]     Plaintiffs and the Third Defendant subsequently concluded a written Deed of Sale and Lease agreement with an option to buy the property back within 12 months. The property was thereafter transferred to the Third Defendant and became its property. The Plaintiffs remained in occupation of the property by virtue of the lease agreement. Before the period within which to exercise the option expired, the Plaintiffs approached the Kopas to purchase the property from the Third Defendant. The Kopas, after the Plaintiffs had authorised the Third Defendant to sell the property to them (the Kopas), bought and took transfer of the property. The Plaintiffs now seek to impeach the sale agreements and subsequent transfer to the Third Defendant and later to the Kopas. Both the Plaintiffs and a sworn appraiser testified for the Plaintiffs.

 

 [9]    After the evidence of the Plaintiffs was adduced and at the request of the Counsel for the Kopas and the Third Defendant I ordered that the conditional counter claims should stand over for later determination. However, in the event that the main claim is dismissed with costs, then in that case the conditional claims will be considered as withdrawn.  The Plaintiffs did not object to this request. The Defendants closed their case in the main action without leading evidence. 

 

 

 [10] The Plaintiffs   rely heavily on the unreported decision of this court in Ditshego v Brusson Finance (Case 5144/2009) delivered on 22 July 2010. The court in this case dealt with the so called Brusson scam. The main features of the Brusson scheme was as follows:

 

a)    The agreement or transaction comprising the sale of the property was between Brusson, the victim and the investor;

b)   The Brusson agreements comprised of a blank offer to purchase which was signed by both the purchaser and a so- called investor in terms of which the victim sold his/her house to the investor;

c)   The investor immediately thereafter sold the house back to the victim by concluding a deed of sale in terms of which the victim agrees to repay the loan in monthly instalments;

d)    The profit of the sale, raised by registration of a mortgage bond, was shared by the investor and Brusson with a small potion paid to the victim;

e)   The victim paid the instalments to Brusson which had guaranteed the obligations of the investor towards the financial entity;

f)     Contrary to practise where the purchaser pays the transfer costs, the victim(who sells)  undertook to pay all transfer costs and appointed Brusson to administer and pay such costs on his/her behalf;

g)   The victim further pays an amount of R5 000 to Brusson an administration fees and for facilitating the agreement.

 

        The court in this case identified the following elements of the so-called Brusson scam:

 

10.1 The investor does not intend to buy the property and never takes

     occupation thereof;

10.2    The victim does not intend selling the property and does not lose occupation thereof;

10.3    The investor pays nothing and stands to lose nothing if anything goes wrong;

10.4    Brusson arranges everything, receives payments, effects payments to the bank, and in the event of default by the victim, Brusson ends up owning the property;

10.5    The victim of the scam sells the property for far less than the market value, and immediately buys it back for R42 000.00 more;

 

[11] The court further found that the “only one reasonable conclusion, namely that the real intention was and is that the Applicants are obtaining a loan from Brusson against security of their property. The agreements are nothing but simulated transactions. From the aforesaid it is clear that Brusson, in partnership or association with so- called investors, lends money to borrowers. Brusson guarantees the obligations of the parties to the different agreements and in effect bears the eventual risk of default on the part of the borrower. In return, Brusson has effective control of the whole transaction and, in the event of default, it becomes entitled to obtain and retain ownership of the property. The whole scheme amounts to nothing less than an unlawful pactum commisorium.”

          The victims in this scheme were misled into selling their property to a so-called ‘investor’ while the property ends up being owned by Brusson.

            

[12]   In Radebe and another v The Sheriff for the district of Vereeniging[1] [2014] ZAGPJHC the court also dealing with a similar Brusson scam said the following:

         “[20] The requirements for the transfer of immovable property are therefore twofold: delivery effected by registration of transfer in the Deeds Office and the existence of a ‘real agreement’, the essential transfer ownership of the property and an intention on the part of the transferee to acquire ownership of the property. If there is any defect in the real agreement, that is the lack of intention on the part of the transferor and transferee to transfer and acquire ownership of the property respectively, then ownership will not pass despite registration. So, too, if the agreement is tainted by fraud or obtained by some other means that vitiates consent.”

       In this case the transaction was tainted by fraud.      

 

[13] The Plaintiffs in this case contend that the verbal agreement concluded between them and the Third defendant and the subsequent written Deed of Sale and Lease agreements concluded in respect of the first transfer of the property from them to the Third Defendant constitute an indivisible agreement. The Plaintiffs contend that this indivisible agreement is unlawful.   

 

[14]   They further contend that the verbal agreement between them and the Kopas and the written agreement concluded between the Kopas and the Third Defendant also constitute an indivisible agreement which is also unlawful.     

 

[15]   The Plaintiffs further contend in the heads of argument that if the true nature of the transactions are examined it will become apparent that ‘the first transfer of the property throughout, was meant to serve as a form of security for what actually was a loan that the Third Defendant advanced to the First and Second Plaintiffs, and the second transfer of the property throughout, was meant to serve as a form of security for what actually was a loan that the First and Second Defendants advanced to the First and Second Plaintiffs.’

 

[16]   The Plaintiffs further contend that, over and above, the agreement which led to the transfer of the property from the Third Defendant to the Kopas was tainted by fraudulent misrepresentation.     

 

[17]   The Defendants, on the other hand, contend that the Plaintiffs have failed to establish any fraud on the part of the First, Second and Third Defendants. In the absence of proof of fraud, so the argument goes, the written agreements cannot be impeached. All the alleged verbal agreements preceding the sale and transfer of the property are disputed by the First, Second and Third Defendants.

 

[18]   I am of the view that Ditshego is distinguishable from the case before me. In Ditshego, the agreements or the transaction underlying the transfer was between three people, viz, the broker, Brusson, the investor and the victim. In this case the agreement was between the seller and the purchaser only. In Ditshego, the victim and the ‘investor’ concluded a deed of sale and simultaneously concluded another deed of sale in which the victim bought back the property. In the case before me the Plaintiffs and the Third Defendant did not conclude another deed of sale buying back the property either at the time of signing the first deed of sale or at any stage thereafter. In the case before me, the Plaintiffs concluded a twelve-month lease agreement, subject to an option to buy back the property. There is no evidence that the Kopas concluded another deed of sale buying back the property other than the only one which led to the transfer.

 

[19]   In the first transfer between the Plaintiffs and the Third Defendant no allegations of fraud are made by the Plaintiffs. In an attempt to prove the unlawfulness of the first transfer, the Plaintiffs rely heavily on the contested verbal agreement. The upshot of this verbal agreement is that the true intention of the Plaintiffs and the Third Defendant was not that the Third defendant would acquire outright ownership of the property and the property was actually held by the Third Defendant on the Plaintiffs’ behalf in order for the First and Second Plaintiffs to recover from their financial constraints.      

 

 

[20]   In order to decide if the verbal agreement is indivisible from the Deed of sale and the lease agreement one has to examine all three agreements. Proper understanding of the verbal agreement show that it is intended to constitute an agreement of sale of property. It postulates the sale of the property against a purchase price which became determinable by reference to the price being the amount outstanding under the Plaintiffs’ loan with the bank, alternatively the amounts the Plaintiffs owed on the property as security to the bank. At the end of the day the price was determined.    

 

[21]   The First Plaintiff is the only witness who testified in respect of the verbal agreement of sale. His testimony is by and large uncontested. It is the only version before the court. Section 2(1) of the Alienation of Land Act, 68 of 1981, however, provides that:

          “No alienation of land after the commencement of this section shall, subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.”

           The Alienation of Land Act defines ‘alienate ‘as follows:

            “‘alienate’, in relation to land, means sell, exchange or donate, irrespective of whether such sale, exchange or donation is subject to a suspensive or resolutive condition , and ‘alienation ’has a corresponding meaning.”  

  

[22]   It is common cause that the property was alienated by way of a sale. The verbal agreement flies in the face of the Alienation of the Land Act in that it was not in writing and was not signed by any of the parties. It is difficult to discern how it could form part of the Deed of Sale. The Alienation of Land Act does not envisage some parts of the agreement to alienate land to be verbal while others are not. If it were so, the very objective of the Alienation of Land Act of demanding written deeds in order to avoid disputes and uncertainties would be defeated. What this subsection and its predecessors “require is that (at least) all the material terms of the contract be reduced to writing and signed by the parties. This does not mean that the terms of the contract and the signatures of the parties must necessarily be embodied in one document. Thus, a written and signed offer by one party in one document and a written and signed acceptance thereof by the other in another document would constitute compliance with the subsection, provided that these documents fully recorded the contract.”(See Hirschowitz v Moolman and Others 1985(3) 739 (SCA) at 758 B-C)

 

[23]   It is common cause that the Plaintiffs and the Third defendant concluded a written deed of sale. In terms of the said deed of sale the Third Defendant purchased the property from the Plaintiffs for an amount of One million five hundred and seventy-five thousand rand. The deed of sale was subject to a suspensive condition allowing for the simultaneous conclusion of a lease agreement for a year. The conclusion of the deed of sale and its terms are not in dispute and cannot be impeached. The deed of sale makes no reference to the terms alleged in the verbal agreement that the sale was subject to a condition(s) that the Third Defendant was not an outright owner.     

 

 

[24]   The Plaintiffs and the Third defendant further concluded a separate lease agreement with an option to buy back the property. Clause 25.3 of the agreement provided that the option would automatically become void if any of the rent is paid later than 7 days after the 1^st of the month. Clause 22.1 of the lease agreement provided that the agreement was the ‘entire agreement between the parties.’  

 

 

[25]    In the lease agreement, it is further recorded that neither party relies in entering into the lease upon any warranties, representations, disclosures or expressions of opinion which have not been incorporated into the lease as a warranty and an agreement. Having regard to the fact that the verbal agreement was not in compliance with the Alienation of Land Act and further that the lease agreement recorded the entirety of the said agreement to the exclusion of any other agreements, I am unable to find that the verbal agreement, the deed of sale and lease agreement constitute an indivisible agreement or transaction.       

 

[26]   The Plaintiffs, subsequent to signing the Deed of Sale signed the Power of Attorney to pass transfer of the property to the Third Defendant. They confirmed that they ceded and transferred the said property in full and free property to the Third Defendant.  The First Plaintiff was aware of the implications of the option contained in the lease agreement and specifically that if they failed to exercise an option or fail to pay rent within the stipulated time, they stood to automatically loose the right to purchase the house back. The property was ultimately transferred to the Third Defendant and it became the owner. The Plaintiffs retained possession of the property as a result of the lease agreement. During the subsistence of the lease agreement the Plaintiffs did not exercise the option provided for in the lease.  

 

[27]   Before the period within which to exercise the option expired, the Plaintiffs approached the Kopas to buy the property from the Third Defendant. After engagements the parties came to an understanding to purchase the property as a result of which the First Plaintiff further approached the Third Defendant. The latter requested to be furnished with the identity documents of the Kopas. The Third Defendant further requested the permission of the First Plaintiff to sell the property to the Kopas. The First Plaintiff granted such permission. Why the Third Defendant sought permission from the First Plaintiff to sell its property appears odd as the ownership and title of the property no longer vested in the Plaintiffs but in the Third Defendant. As alluded to in paragraph [24] above, during this interaction between the First Plaintiff and the Third Defendant about the sale of the property to the Kopas, the period within which to exercise the option had not expired.     

 

[28]   The Kopas bought the property for the amount of One Million Eight Hundred and Thirty Rands from the Third Defendant. The property was transferred to the First and Second Defendant on 1 October 2018. I agree that there were discussions between the Plaintiffs and the Kopas before and after the transfer of the property, but no conclusive agreement could be reached. It has to be borne in mind that when such discussions took place, the Plaintiffs were no longer the owners of the property, the Third Defendant was.   Even if I could find that any verbal agreement was reached to transfer the property from the Kopas to the Plaintiffs, such agreement had to comply with the Alienation of the Land Act.  There is no such agreement. The remarks I make in paragraphs [22] and [23] above are equally applicable here.

 

[29]   In Ditshego and other decisions[2] which dealt with the Brusson schemes, fraudulent conduct was at the heart of the underlying agreements preceding the transfer between the parties to the indivisible agreements. I am of the view that in this case, the evidence elicited does not prove fraud or any other conduct which might vitiate consent in respect of both transfers.

 

[30]   In Absa Limited v Moore and Another 2016 (3) SA 97 (SCA), the court dealt with a similar scam as in Brusson and held as follows:

 

         “[26] In cases dealing with the Brusson scam the Courts have by and large held the transactions to be simulated. But I consider that they are not. The Moores and other victims of the scams certainly did not intend to disguise the contracts as something they were not. On the contrary they were hoodwinked as to the nature of the transactions. They believe them to serve some other purpose entirely. The Brusson transactions, certainly the ones before the Free State High Court and the Court a quo, were not simulated in the sense in which that term is properly used. The question is whether they were rendered invalid as a result of a fraud perpetrated on the victim client. And the further question is what the victim clients really intended to achieve by contracting with Brusson and so-called investors.”

 

           [27] The distinction is an important one. Where a transaction pursuant to which property is to be transferred is simulated- where all parties intend to disguise the true nature of the transaction-the transferor and transferee may well intend to transfer ownership. And since a valid transaction is not required for a transfer to be effected, the transfer itself may not be impeached.( my emphasis) I shall deal with the legal principles when considering the Moore’s understanding of their contracts with Mr Kabini and Brusson and accordingly their intention. Suffice to say for the moment that it is only where the parties do not intend to change ownership of the property, but have been misled into purporting to do so, or for some other reason that vitiates their intention to transfer property such as undue influence or duress, that the transfer will be of no effect.”(my emphasis) 

  

 

 

[31]   In the first transfer, it is not the case for the Plaintiffs that they were misled or hoodwinked in selling the property to the Third Defendant. In the second transfer, when the alleged discussions took place regarding the sale to the Kopas, the Plaintiffs were no longer the owners of the property. It is not the case for the Plaintiffs that the owner, the Third Defendant, misled them. If indeed, the Kopas misled them, this had nothing to do with the owner of the property, the Third Defendant. Whatever the discussions there might have been there between the Plaintiff and the Kopas did not affect the ownership, right and title of the Third Defendant in the property. He could sell the property to anyone including the Kopas. It is difficult to discern in the circumstances of this case that the Plaintiffs’ were entering into any other agreement other than a sale agreement with the Third defendant. I cannot find that the transfer from the Plaintiffs to the Third Defendant and from the Third Defendant to the Kopas is tainted with fraud or there is a reason which can vitiate the consent of any party in the transfers and ultimately render the transfers unlawful and against public policy.

 

[32]   Lastly, I am unable to find that the property was sold at an amount far less than its value. The parties enjoy freedom to contract in any way sanctioned by law. The Plaintiffs can sell their property in any amount they deem fit and to whosoever they wish. The testimony of the sworn appraiser takes this matter nowhere. There is no evidence of the value of the property at the time of the first transfer. The First Plaintiff only said the property was valued at R6.4 m. No evidence was placed before me supporting this assertion. The testimony of the appraiser talks about the evaluation in 2017. He values the property at R4.5 m. This valuation was arrived at by comparing the sales of the property in the area where the property is situated within a certain period and applying averages. It did not take into account the improvements or damages, if any, in the property. Crucially, the valuation does not tell us what the value of the property was when the Plaintiffs sold it to the Third Defendant. I cannot say with certainty what the value of the property was at the time of the sale and certainly can I not say whether it was sold with the price far below its value. The claim must fail and the conditional counterclaims are deemed withdrawn. I make the following order:   

 

  ORDER

1.   The main action is dismissed with costs.

 

 

 

 

PE MOLITSOANE, J

 

 

 

 

                          

 

 

 

On behalf of the Plaintiffs:                  Adv. R  Van der Merwe

                                                                     Instructed by:

                                                                     MAREE AND PARTNERS

                                                                     BLOEMFONTEIN

 

 

On behalf of the 1^st 2nd and 3^rd

Defendants                                          Adv. SJ Reinders 

                                                                    Instructed by:

                                                                    VAN WYK & PRELLER

     BLOEMFONTEIN

 

 

 

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