"You cannot register a bond over a property you do not own."
The above principle has just been re-confirmed by the Supreme Court of Appeal in the matter between ABSA Bank Limited vs. Christina Martha Moore and Jacques Moore – Case Number 20719/2014.
The facts in this matter are fairly simple. In summary, the Moores owned a property in Vereeniging, Gauteng that had 5 bonds registered over it. They fell into financial difficulties and faced with this situation, they then approached a company called Brusson Finance (Pty) Ltd ("Brusson") to assist them with a loan. Brusson was willing to assist provided that they (the Moores) put up their house ("the property") as security. They subsequently went to a Brusson Office and signed documents that they believed gave effect to a loan to them and provided security for repayment of the loan in the form of a bond over the property to Brusson. It later transpired that what happened is that the Moores had in fact "sold" the property to a Mr. Sunnyboy Kabini ("Kabini") who took transfer of the property and had a bond by ABSA Bank Limited registered over it. (The Moores had signed a document titled "OTP" which did not have a purchaser's name. Naturally, when the property was transferred to Kabini, bonds that had been passed by the Moores were cancelled). This, the Moores discovered when Kabini had defaulted on his ABSA Bank loan and ABSA was about to sell the property in execution.
The Moores approached the High Court for an interdict to stop the sale. For reasons different from the Supreme Court's reasons, the High Court declared the agreements between the Moores and Kabini invalid and of no force and effect on the basis that the agreements were simulated. (A simulated agreement is an agreement that conceals the true nature of the transaction). Further, it also set aside the ABSA Bank bond passed by Kabini over the property.
ABSA Bank appealed the decision of the High Court and argued that: "…It should not be deprived of its real right (bond) over the property when it was innocent of any wrong doing." On the basis of the evidence which was given that the Moores did not understand that they were concluding a sale of the property and that if it had been clear to them that in order to secure the loan, they had to sell the property to a third party, they would never have entered into the transaction, the Appeal Court held that "Kabini has not acquired ownership of the property. This is based on the fact where the so – called transferor does not intend to transfer ownership, the registration has no effect."
The question then became – was the ABSA Bank bond passed by Kabini valid? The Court held that the ABSA Bank bond also "has no effect". Kabini was not the owner of the property and therefore he had no property to bond. The Court's reasoning was drawn from its decision in the matter of Nedbank Limited vs. Mendelow 2013 (6)SA130(SCA) which basically re-affirmed the principle that "where there is no real intention to transfer ownership on the part of the owner............ then a purported registration of transfer (and registration .......... of a mortgage bond) has no effect. Effectively, if the underlying agreement is tainted by fraud or ....... then, ownership does not pass". In essence, a bond registered over the property fraudulently transferred is of no force and effect in law.
Banks do not register their bonds – they rely on conveyancers to do so. So conveyancers are warned – be on the lookout! I would not like to have been a conveyancer who registered the transfer from the Moores to Kabini and the ABSA Bank bond over the property. As the Supreme Court reminds us in this matter, there is a huge responsibility placed on conveyancers when they attend to conveyancing matters. This is set out in Section 15A of the Deeds Registries Act No. 47 of 1937 ("the Act") which provides that "a conveyancer who signs a prescribed certificate on a deed or document accepts the accuracy of those facts mentioned in such deed of document." The facts that the conveyancer accepts as being correct are set out in Regulation 44A to the Act. These facts are, inter alia, the following:-
The copies of all deed / documents lodged for registration are identical;
Correctness of identity number, marital status, company registration numbers, etc;
That the person who signs a document on behalf of another is duly authorised to do so.
With so much fraud going on, banks and conveyancers are warned. Be vigilant! You could be passing a bond over a property that has been fraudulently transferred in which case you will have some explaining to do which could be financially costly.