THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case no: 126/2010

In the matter between:

ORIENTAL PRODUCTS (PTY) LIMITED
Appellant

and

PEGMA 178 INVESTMENTS TRADING CC
First Respondent
SHIELD HOMES (EASTERN CAPE) (PTY) LIMITED
Second Respondent
HONG WEI QU
Third Respondent
THE REGISTRAR OF DEEDS FOR KWAZULU-NATAL
Fourth Respondent

Neutral citation:
ORIENTAL PRODUCTS v PEGMA 178

(126/10) [2010] ZASCA 166 (1 December 2010)

Coram:

HARMS DP, LEWIS, MAYA, SHONGWE JJA and

R PILLAY AJA

Heard:

12 NOVEMBER 2010

Delivered:

1 DECEMBER 2010

SUMMARY: Sale of immovable property – whether transfer and registration of
ownership is valid where the intention to transfer is absent – Vindication –
Power of Attorney to sell fraudulently obtained – Estoppel – whether original
owner is estopped from claiming retransfer – requirements for estoppel to
succeed

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: KwaZulu-Natal High Court (Pietermaritzburg) (Jappie J sitting as
court of first instance).

The following order is made:

The appeal is dismissed with costs.
___________________________________________________________________

JUDGMENT
___________________________________________________________________

SHONGWE JA:
[1] This appeal is against the order of the KwaZulu-Natal High Court,
Pietermaritzburg (Jappie J) dismissing the appellant’s application to vindicate the
immovable property described as Lot 117 Clansthal, situated in the development
area of Clansthal, Province of KwaZulu-Natal and 4047 square metres in extent (the
property) which is registered in the  name of the first respondent and also for an
order against the fourth respondent, (the Registrar of Deeds for KwaZulu-Natal), to
register the transfer of the said property in the name of the appellant. The appeal is
with leave of the court a quo.

[2] The appellant’s case in the court a quo, as well as before us, is that it was, at
all material times, the lawful registered owner of the property and that its property
was fraudulently transferred, first to the second respondent and thereafter to the first
respondent, without the appellant’s knowledge or authority. The third respondent is
alleged to have purported to represent the appellant in passing transfer of the
property to the second respondent. In truth, he had never been authorized to do so.
The second and third respondents, who took part in the proceedings below, have
filed notices to abide the decision of this court. The Registrar did not participate at all
in these proceedings.

[3] The factual background is as follows: A Mr Kuk Siu Wah, a businessman and
a Chinese national resident in Hong Kong, visited South Africa in or about 1990. He
then bought inter alia the following companies, Oriental Products (Pty) Ltd, the
appellant company and Galaxy Minerals (Pty) Ltd. He, together with his daughter,
Ms Cook Yin Ping, who is for convenience referred to as Ms Cook, were the only two
directors of the appellant. The third respondent, Mr Hong Wei Qu, also a Chinese
national, came to South Africa in 2001 to work as manager of Mr Kuk’s companies
Galaxy Minerals (Pty) Limited and Flourishing Trading (Pty) Limited in Mtubatuba,
KwaZulu-Natal.

[4] The third respondent refers to Mr Kuk as his grandfather. On
18 December 2006, Mr Kuk discovered that the property in question was no longer
registered in the name of the appellant. This he discovered after instructing attorneys
in Johannesburg to do a property search at the deeds office. After numerous letters
between his Hong Kong attorneys and Johannesburg attorneys it transpired that the
property in question had indeed been sold and transferred to the second respondent,
who in turn sold and transferred it to the first respondent.

[5] The appellant, represented by Mr Kuk, instructed his attorneys to launch the
application to recover the property. This happened in January 2008

[6] It transpired that the third respondent was indeed responsible for the sale and
transfer of the property. His version was that he was authorised by Mr Kuk to look for
a buyer and sell the property. He alleges Mr Kuk provided him with a special power
of attorney dated 4 May 2005 authorizing him to proceed with the transaction. Mr
Kuk vehemently denied that he authorized the third respondent to sell and transfer
the property. He alleged that the signatures appearing on all the documents used to
sell and transfer the property were not his. Even Ms Cook disavowed any knowledge
of any authority given to the third respondent.

[7] As a result of these material disputes of fact on the papers, the application
was referred to oral evidence on the following issues:

(a)
Whether the third respondent was authorized expressly, implicitly or tacitly by
or on behalf of the appellant to transfer the said property to the second respondent;
(b)
Whether the appellant is estopped from challenging the first respondent’s title
by bringing these proceedings in the time and in the circumstances in which it did;
(c)
Whether the appellant is estopped from denying the authority of the third
respondent to transfer the said property to the second respondent;
(d)
Whether the appellant has established a right to vindicate the immovable
property, and;
(e)
Whether the first respondent has a claim for compensation for improvements
to the said property and the quantum thereof;
(f)
Whether the first respondent has a right of retention or lien in its favour over
the property;
(g)
Whether the second respondent has any claim for improvements to the
property and the quantum thereof.

[8] Several witnesses testified on behalf of the appellant. The first respondent
and the second respondent called only one witness each and the third respondent
testified and called a handwriting expert, Mr Irving.

[9] The court a quo found that the third respondent was not properly authorized to
pass transfer of the property to the second respondent, therefore the transfer was
void as it lacked the prerequisite to effect registration of transfer, being that the
transferor (in this case the appellant), must intend to transfer and the transferee (in
this case the second respondent) must intend to take transfer (Trust Bank van Afrika
v Western Bank & andere 1978 (4) SA 281 (A) at 302 A-F referring with approval to
Commissioner of Customs and Excise v Randles Brothers & Hudson Ltd 1941 AD
369 at 397-398. See also Wille’s Principles of South African Law 9 ed (2007) at 520-
521.)

[10] The above conclusion, which I respectfully agree with, answers the first
question referred to oral evidence. Considering the evidence as a whole and taking
into account that the credibility of the third respondent was at stake, the court a quo
rightly rejected the evidence of the third respondent that he had any authority to pass
transfer of the property.

[11] Before us neither of the parties contest the lack of authority of the third
respondent which resulted in both transfers, ie the transfer to the second respondent
as well as the transfer to the first respondent, being void.

[12] It is trite that our law has adopted the abstract system of transfer as opposed
to the causal system of transfer. Under the causal system of transfer, a valid cause
(iusta causa) giving rise to the transfer is a sine qua non for the transfer of
ownership. In other words if the cause is invalid, eg non compliance with formal
requirements, the transfer of ownership will also be void – see Carey Miller ‘Transfer
of Ownership’ in Feenstra & Zimmermann Das Römisch-Hollandische Recht 537;
‘Transfer of Ownership’ in Zimmerman & Visser Southern Cross 727 at 735-9. Under
the abstract system the most important point is that there is no need for a formally
valid underlying transaction provided that the parties are ad idem regarding the
passing of ownership: Meintjies NO v Coetzer & others 2010 (5) SA 186 (SCA).

[13] It is correct that registration of title in terms of the Deeds Registries Act 47 of
1937 is a brilliant system of public access to the register of owners of property and
the registration of other protected rights such as servitudes. What is even more
important is the correctness of the contents of the register. It is said that ‘[w]hen the
Dutch settled in the Cape Colony they brought over from Holland this system of
registration, and the titles to land granted by the governors were registered before
the Commissioners of the Court of Justice. No sales of this land and no servitudes
imposed thereon were recognised, unless these were registered against the title
before the Commissioners’. The purpose is to publicise to the world and for the
protection of registered owners – Houtpoort Mining and Estate Syndicate Ltd v
Jacobs 1904 TS 105 and Hollins v Registrar of Deeds 1904 TS 603 and the cases
cited therein. Even though there is no guarantee of title, the record needs to be
accurate, though subject to correction. The record provides proof of the present
registered owner of the property or right.

[14] Most cases deal with transfer of ownership of movables, however, there is no
reason in principle why an abstract system of transfer should not be applied to
immovables as well (Klerck NO v Van Zyl and Maritz NNO 1989 (4) SA 263 (SE) at

273). See also D L Carey Miller with Anne Pope in Land Title in South Africa 51;
Apostoliese Geloofsending van S A (Maitland Gemeente) v Capes 1978 (4) SA 48
(C). Recently this court in Legator Mckenna Inc & another v Shea & others 2010 (1)
SA 35 (SCA) para 21 Brand JA stated that ‘time has come for this court to add its
stamp of approval to the view point that the abstract theory of transfer applies to
immovable property as well’. I agree with the sentiment expressed by him and wish
to add that in effect the result is the same whether one deals with movable or
immovable property. See also Dreyer & another NNO v AXZS Industries (Pty) Ltd
2006 (5) SA 548 (SCA) and the cases cited therein.

[15] The next question is whether the appellant is estopped from challenging the
first respondent’s title by bringing these proceedings at the time and in the
circumstances in which it did. Perhaps it would be appropriate at this stage to give a
brief background of the circumstances and the time in which the initial application
was launched. It is common cause that the third respondent held a responsible
position in running the affairs of Mr Kuk and the applicant. He became privy to
transactions which were initiated by Mr Kuk, for instance he knew of the intended
sale of the very property, which fell through, although he was not directly involved.
He was thereafter contacted telephonically by Mr Kuk to procure a new purchaser for
the property. Ms Cook also confirmed that the third respondent was required to
perform various administrative duties in connection with certain other properties
owned by the group of companies.

[16] Ms Cook in her founding affidavit states that ‘at about the end of 2006 and for
reasons not relevant for present purposes, Mr Qu ceased his aforesaid employment
and Mr Kuk and I lost track of him’. It is common cause that the property was
transferred to the second respondent on 28 December 2005. Already at the end of
2006 Mr Kuk started making enquiries from the conveyancer at Webber Wentzel
Bowens in Johannesburg to ascertain whether the third respondent had been in
contact with them regarding any sale of the property. Clearly Mr Kuk and Ms Cook
were suspicious of the third respondent’s conduct as early as December 2006.

[17] By 18 December 2006 the directors of the appellant knew that the property
was no longer registered in its name but in the name of the second respondent. They

did nothing to intervene and put the record straight by either writing a letter to the
Registrar or the new registered owner (the second respondent) or launching an
interdict for that matter. Since the appellant was represented by attorneys in
Johannesburg, it cannot be heard, in my view, to plead ignorance of the South
African system of registration of transfer of ownership of immovable property. Ms
Cook conceded, during her cross-examination, that Hong Kong also has a system of
property registration and transfer similar to our system.

[18] The first respondent’s contention is that the failure to take immediate steps to
bring proceedings against the second respondent amounts to a representation that
the second respondent was the lawful and registered owner with a right to sell the
property. The first respondent further argues that the said failure also carries with it
the requisite negligence on the part of the appellant to found estoppel. The first
respondent contends that, had the appellant acted timeously, the property would not
have been transferred to the second respondent and the first respondent would, not
have embarked on high scale development of the property, which it did. In order to
demonstrate that the appellant acted negligently, Ms Cook testified that in January
2007 she did not know that the first respondent had purchased the property and she
had not decided who was going to be her attorney to deal with the matter. On the
contrary, by 18 December 2006 she knew that the property had been transferred and
registered in the name of the second respondent. Webber Wentzel Bowens had
already informed her of the first transaction. Relying on the appellants’ inaction the
second respondent sold the property to the first respondent who consequently
started developing it. Had the appellant acted swiftly the chain of events would have
been avoided.

[19] It is generally accepted that an owner of movable property is estopped from
asserting his right to his property only where the person who acquired his property
did so because the negligence of the true owner misled him into the belief that the
person from whom he acquired it was the owner and was entitled to dispose of it.
(See Oakland Nominees (Pty) Ltd v Gelria Mining & Investment Co (Pty) Ltd 1976
(1) SA 441 (A); Electrolux (Pty) Ltd v Khota & another 1961 (4) SA 244 (W)). There
seems to be no reason why this principle cannot be applied to immovable property.
The possessor raising estoppel must prove that:

(a)
There was a representation by the owner, by conduct or otherwise, that the
person who disposed of his property was the owner or was entitled to dispose
of it;
(b)
The representation must have been made negligently in the circumstances;

(c)
The representation must have been relied upon by the person raising the
estoppel, and
(d)
Such person’s reliance upon the representation must be the cause of his
detriment.

[20] The appellant contends that there is no proper basis for an estoppel to
operate because there is no evidence tendered to the effect that the first and second
respondents knew of the representation and that they relied upon it in conducting
their affairs in regard to the property. The appellant argued that all that the first
respondent relied upon was the mere fact of the sale of the property by the second
respondent to the first respondent and the process of registration of transfer, which
followed from the sale. The appellant further contended that estoppel ‘is by its
nature, a weapon of defence, it cannot be used as a weapon of attack, to transfer
ownership of a property which, but for the operation of estoppel, would not have
been transferred’. The logical consequence of upholding the defence of estoppel is
that the person in possession of the goods or property, raising estoppel, acquires an
unassailable right to continue possessing the goods. In my view, it is still a defence
entitling the possessor to continue exercising that right. In the present case transfer
had already occurred long before the defence was raised. We were not referred to
any unequivocal authority, nor have I found any, to the effect that estoppel can or
cannot be used in cases involving the transfer of ownership of immovable property.
The case quoted by counsel for the appellant (Barclays Western Bank Ltd v Fourie
1979 (4) SA 157 (CC)) simply states the requirements to prove the defence of
estoppel. I consider this point moot in the South African jurisprudence. The present
case does not strictly turn on this point. (See J W Louw ‘Estoppel en die Rei
Vindicatio’ (1975) 38 THRHR 218 and H J O van Heerden ‘Estoppel: ‘n Wyse Van
Eiendoms-verkryging?’ (1970) 33 THRHR 19 at 25).

[21] The relevant period in this case is between 18 December 2006, when
attorneys Webber Wentzel Bowens wrote a letter to Mr Kuk advising him that the
property had been registered in the name of the second respondent and
8 February 2007 when the property was indeed transferred to the first respondent.
The directors of the appellant remained inactive for almost two months after learning
that its property had been registered in the name of the second respondent. The
inaction for almost two months is sufficient to constitute negligence considering the
surrounding circumstances as described above. One must bear in mind that we are
dealing with immovable property which was the core business of the appellant. It
should have rung a bell and raised a red flag immediately to Mr Kuk and Ms Cook
after they heard of the new developments in mid December 2006. They only
launched the application for vindication on 7 May 2008, almost seventeen months
after knowing that the property had been fraudulently sold and transferred.

[22] I am satisfied in concluding that the appellant’s inaction was negligent
representation which led the first respondent to rely on it to its detriment. Steyn JA in
Grosvenor Motors (Potchefstroom) Ltd v Douglas 1956 (3) SA 420 (A) at 427 defines
estoppel as a principle in terms of which an owner ‘forfeits his right to vindicate
where the person who acquires his property does so because, by the culpa of the
owner he has been misled into the belief that the person from whom he acquired it,
is entitled to dispose of it.’ (See Voet Commentarius ad Pandectas, 6 1 13 & 23;
P J Rabie The Law of Estoppel in South Africa at (1992) 86 599; D L Carey Miller
The Acquisition and Protection of Ownership (1986) at 263 and Johaadien v Stanley
Porter (Paarl) (Pty) Ltd 1970 (1) SA 394 at (A) 406).

[23] In the context of this case, the appellant is entitled to retransfer of the property
but for the fact that it cannot assert its right of ownership because of estoppel. Hence
the applicant loses its ownership of the property. It is not necessary to deal with the
other points referred to oral evidence in view of the conclusion I have reached.

[24] For the above reasons the appeal is dismissed with costs.

_________________

J SHONGWE

JUDGE OF APPEAL

HARMS DP (Lewis and Maya JJA and R Pillay AJA concurring)

[25] I have read the judgment of my learned my colleague Shongwe JA and
although I agree with the conclusion that the appeal should be dismissed with costs I
do not agree with all the reasoning. His judgment sets out the salient facts and I do
not intend to repeat them unless necessary for an understanding of this judgment.
[26] The case of the appellant was that it remained owner of the property because
it had been transferred to the second respondent by Mr Qu who had no authority to
transfer it; and that the transfer to the first respondent was likewise void because the
second respondent was not the true owner and could, accordingly, not have effected
transfer. Both transfers were consequently void for the same reason. The old adage,
nemo plus iuris ad alium transferre potest quam ipse haberet, as formulated by
Ulpian (Digest 50.17.54), applies: no one can transfer more rights to another than he
himself has (using Hiemstra and Gonin’s translation for safety’s sake). Applied to this
case it means that Qu had no rights to ownership and, in the absence of the owner’s
authority, he could not have transferred ownership to the first purchaser. And
because the first purchaser did not become owner it, in turn, was unable to transfer
ownership to the second purchaser. All this, in my respectful view, has nothing to do
with the abstract system of transfer which, in any event, is a well established
principle of our law. Because counsel argued the case before the court below with
reference to the abstract system that it, incorrectly, found that the second transfer
was valid – something no one argued before us.

[27] The real issue in this case concerns estoppel. The two requirements for a
valid reliance on estoppel at issue in this case require consideration:
misrepresentation and negligence. Although the issues are legally discrete, they
become intermingled because the same facts are relevant to both issues.

[28] The first respondent’s case was that the deeds registry reflected, to the
knowledge of the appellant, that the second respondent was the true owner of the

property. In his judgment, Shongwe JA has pointed out with reference to cases
dating back to 1904 that the public is entitled to rely on the correctness of entries in
the deeds office. Although the fact of registration is not a guarantee of any right
registered, a party will not take transfer of immovable property if he has reason to
suspect that the register is wrong. By knowingly leaving the register to reflect the
incorrect position as to ownership the appellant, by omission, represented to the
world in general and to the first respondent in particular that the second respondent
was the true owner of the property. It could not be said with any measure of
confidence that the first respondent did not take transfer in the light of this
representation.

[29] The more difficult issue concerns negligence because of the short period that
elapsed between the date on which the appellant became aware of the state of
affairs (18 December 2006) and the date on which the first respondent acted on the
representation, which was the date of transfer (8 February 2007). Although the
application was launched only during January 2008, nothing in my views turns on
this delay as far as the vindicatory claim is concerned because the detrimental act on
which the first respondent relies was the taking of transfer.

[30] The following facts dispose in my view of this issue in favour of the first
respondent. The appellant knew from past experience that Qu was not to be trusted
with company property. The appellant also knew that Qu had no authority to transfer
the property and that he had in fact done so. It was aware of the value attached to
entries in the deeds register and it should have known that others could act on the
assumption that the register was correct by not only selling the property but also by
effecting improvements thereon. All this called for urgent action, which was feasible
because there was no suggestion that the appellant did not have the necessary
funds or expertise to launch an application. The only explanation for the lackadaisical
approach given by Ms Cook was that the company had to find an attorney. But this
explanation does not hold water. The company had access to the services of the
attorney who did the deeds office search on its behalf.  Although this is a borderline
case I am satisfied that the first respondent was able to discharge its onus.

[31] Counsel for the appellant argued that a finding that the first respondent could
rely on estoppel meant that estoppel has become a method of acquisition of
ownership while it is supposed to be a shield of defence and not a sword of attack.
That estoppel may only be used as a defence is part of English law and since the
Roman-Dutch roots of the doctrine are said to be found in the exceptio doli, a legal
defence rather than an action, the same may be said to apply in our law. Whether
this formalistic approach can still be justified need not be considered in this case
even though the effect of the successful reliance on estoppel has the effect that the
appellant may not deny that the first respondent holds the unassailable title in the
property or that the deeds registry entry is correct. This means that should the latter
wish to dispose of the property the appellant would not be able to interfere. If this
means that ownership passed by virtue of estoppel so be it. The better view would
be that the underlying act of transfer is deemed to have been validly executed.

_____________________
L T C HARMS
DEPUTY PRESIDENT

APPEARANCES:

For Appellants:

J C King SC

Instructed by:

Shepstone & Wylie

RICHARDS BAY

Claude Reid Inc

BLOEMFONTEIN

For 1st Respondent:

A J Dickson SC
Pegma 178 Investments
Trading CC

Instructed by:

Austen Smith

PIETERMARITZBURG

Lovius-Block

BLOEMFONTEIN
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From: The Registrar, Supreme Court of Appeal

Date:
1 December 2010

Status:
Immediate

Please note that the media summary is intended for the benefit of the media
and does not form part of the judgment of the Supreme Court of Appeal.

ORIENTAL PRODUCTS v PEGMA 178

The Supreme Court of Appeal dismissed with costs an appeal by Oriental
Products (Pty) Ltd against an order of the KwaZulu-Natal High Court
(Pietermaritzburg) dismissing its application.

Oriental Products (Pty) Ltd was the original owner of an immovable property
described as Lot 117 Clansthal, situated in the Province of KwaZulu-Natal and
4047 square metres in extent (the Property). The property was then sold to
Shield Homes (Pty) Ltd (the second respondent) by one Mr Qu (the third
respondent in the appeal, a Chinese national who used to work for Mr Kuk,
also a Chinese national, one of the directors and shareholder of Oriental
Products (Pty) Ltd) who had no authority to sell nor to transfer it. It was found
that the Special Power of Attorney which Mr Qu used was fraudulently
obtained. Shield Homes, in turn sold the same property to Pegma 178

Investments Trading CC, (the first respondent). Oriental Products (Pty) Ltd
approached the High Court to claim ownership of the property and that the
Registrar of Deeds be directed to cancel the registration of transfer into the
name of the first respondent and retransfer to it.

The SCA held that, due to the principle that no one can transfer more rights to
another than he himself has, both transfers i.e. to the first purchaser and the
second purchaser were void because Mr Qu was not the true owner and
consequently the first purchaser could not effect transfer to the second
purchaser, as it was also not the true owner.

The question arose whether Oriental Products (Pty) Ltd was entitled to the
retransfer under the circumstances. The SCA held that it lost its right of
ownership by operation of the principle of estoppel in terms of which an owner
forfeits his right to vindicate where the person who acquires his property does
so because by the negligence of the owner he has been misled into the belief
that the person from whom he acquired it is entitled to dispose of it. The SCA
further held that the two requirements for a valid reliance on estoppel in this
case are misrepresentation and negligence. It found that oriental Products
(Pty) Ltd negligently misrepresented to the second purchaser and the world at
large that the registration of transfer as it appeared in the Deeds Office was a
true reflection of the state of affairs. Therefore the answer to the above
question is that the true owner is barred from vindicating its ownership of the
property, hence the appeal was dismissed.