THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT
Case No: 499/2013

In the matter between:

MONICA GEZINA COWIN NO

FIRST APPELLANT
ORIEL RAMPOLOKENG SEKATI NO     SECOND APPELLANT
SILVER TUNNEL INVESTMENTS 7
(PTY) LTD

THIRD APPELLANT

and

KYALAMI ESTATE HOMEOWNERS
ASSOCIATION
FIRST RESPONDENT
KYALAMI EQUESTRIAN CENTRE CC SECOND RESPONDENT
THE MASTER OF THE HIGH COURT       THIRD RESPONDENT
THE REGISTRAR OF DEEDS,
PRETORIA

FOURTH RESPONDENT

And

ASSOCIATION OF RESIDENTIAL
COMMUNITIES  CC

First Amicus Curiae
NATIONAL ASSOCIATION OF
MANAGING AGENTS

Second Amicus Curiae

Neutral citation:    Cowin
NO
v
Kyalami
Estate
Homeowners
Association (499/2013) [2014] ZASCA 221 (12 December 2014)

Coram:

Maya, Theron, Saldulker JJA, Mocumie and
Gorven AJJA

Heard:

15 September 2014

Delivered:
12 December 2014

Summary:
Land – a title condition in a deed of transfer which prohibits the
transfer of immovable property without a clearance certificate or
the consent of a homeowner’s association constitutes a real right
– the title condition is thus binding on successors in title
including the liquidators of the insolvent property owner –
amounts owed by insolvent owner not ‘taxes’ as envisaged in s
89(5) of the Insolvency Act 24 of 1936.

__________________________________________________________

ORDER
___________________________________________________________

On appeal from: South Gauteng High Court, Johannesburg (Mashile AJ
sitting as a court of first instance):

Save for the amendment of the order of the court below by the deletion of
paragraph 36.1 thereof, the appeal is dismissed with costs including the
costs of two counsel.
___________________________________________________________

JUDGMENT
___________________________________________________________

Maya JA:  (Theron, Saldulker JJA, Mocumie and Gorven AJJA
concurring):

[1] This is an appeal against the judgment of the South Gauteng High
Court, Johannesburg (Mashile AJ). The high court dismissed an
application for an order declaring, inter alia, that a title condition
contained in a deed of transfer prohibiting the transfer of immovable
property registered in the name of the liquidated third appellant (the
insolvent) without a clearance certificate from the first respondent (the
association), confirming that all levies and penalties due to the latter  had

been paid, binds only the insolvent and the association and is not
enforceable against the insolvent’s liquidators.

[2] The first and second appellants are the insolvent’s joint liquidators.
The insolvent, a company in liquidation, is the registered owner of
Portion 2 of Erf 219, Kyalami Estates Extension 10 Township (the
property) which it purchased before its liquidation. It is situated in a
residential secured estate comprising 1106 residential units which was
developed in accordance with the Township and Development Ordinance
of the province. The estate is operated by the association.

[3] In terms of the association’s constitution (constituted by its
Memorandum and Articles of Association) its main business is ‘to
promote, advance and protect the communal interest of the occupiers’
within the estate and in particular ‘to ensure acceptable aesthetic,
architectural, environmental standards in the [estate], to promote security
services and systems to ensure acceptable security standards within the
[estate] and to maintain recreational facilities within the [estate]’.1 Its
members consist of registered owners of all the dwelling units within the
estate who automatically acquire such membership upon becoming
owners.2 The members are bound to observe all rules made by the
association’s trustees from time to time at a general meeting with regard
to various matters of communal interest. These include restrictions on a
member’s right to use his property as he pleases, the buildings, structures
and installations which may erected on the property, levies imposed upon
members for purposes of meeting all the expenses incurred or reasonably
expected to be incurred by the association in the pursuit of its business,

1 Clause 2 of the Memorandum of Association.
2 Article 3.4 of the Articles of Association.

fines imposed for non-compliance with the Articles and interest charged
on any arrear levies.3

[4] The title deeds of each of the dwelling units, including the one in
respect of the property,4 contain the following restrictive title conditions:
‘…
[B2] Imposed by the KYALAMI EQUESTRIAN CENTRE CC [the second
respondent] … for the benefit of [the association] and which are binding on the
Transferee [the insolvent] and its Successors in title, namely:
Every owner of the erf or any subdivision thereof or any interest therein or any unit
thereon as defined in the Sectional Titles Act, shall automatically become and shall
remain a Member of [the association] and be subject to its constitution until he ceases
to be an owner as aforesaid. Neither the erf nor any subdivision thereof nor any
interest therein nor any unit thereon shall be transferred to any person who has not
bound himself to the satisfaction of such Association to become a Member of [the
association].
The owner of the erf or any subdivision thereof or any interest therein or any unit
thereon as defined in the Sectional Titles Act, shall not be entitled to transfer the erf
or any subdivision thereof or any interest therein or any unit thereon without a
clearance certificate from [the association] stating that the provisions of the Articles
of Association of [the association] have been complied with.’

[5] The relevant provisions of the articles of association referred to in
the title condition include:
(i)
clause 7.9 which provides that ‘No unit shall be capable of being
transferred without a Certificate first being obtained from the Association
confirming that all levies and interest have been paid up to date and
including date of registration of transfer of a unit’;
(ii)
clause 7.8 which provides that ‘[a]ny amount due by a Member by
way of fines, levy and / or interest shall be deemed to be a debt by him to

3 Articles 6.2, 7 and 8 of the Articles of Association.
4 Deed of Transfer No. T 165574/2004 dated 25 November 2004.

the Association. The obligation of the Member to pay a levy and interest
shall cease upon his ceasing to be a Member without prejudice to the
Association’s rights to recover all arrear levies and interest. No fines,
levies or interest paid by a Member shall under any circumstance be
payable to the Association upon his ceasing to be a Member. A Member’s
successor in title to a unit shall be liable from the date upon which he
becomes a Member pursuant to the transfer of that unit, to pay the levy
and interest thereon attributable to that unit’;
(iii)
clause 6 which provides that the ‘right and obligations of a
Member shall not be transferrable …’; and
(iv)
clause 8.6 in terms of which any fine imposed upon any Member
shall be deemed to be a debt due by the Member to the Association and
shall be recoverable by ordinary civil process.

[6] The insolvent registered three mortgage bonds over the property in
favour of Absa Bank Ltd (Absa) in terms of which it declared ‘to bind
specially … [the property] … subject to the conditions contained [in the
deed of transfer] and especially to the reservation of rights to minerals
and to the rights of [the association]’. After its liquidation on 8 June
2010, Absa obtained judgment against it and the property was also
declared executable. Thereafter, the joint liquidators concluded an
agreement of sale of the property with a third party, Oxter Construction
Projects CC, for a purchase price of R2,25 million. The purchaser
fulfilled its obligations under the agreement and the municipal rates
clearance amounts were duly settled. However, the association refused to
issue a clearance certificate to facilitate the transfer of the property before
it had been paid a sum of R887 408,94 which comprised arrear levies.

[7] The joint liquidators took the view that the association’s stance
prejudiced the concursus creditorum, particularly the rights of Absa as
the secured creditor over the property, and that any amounts due to the
association could not supersede those of secured creditors who hold
mortgage bonds over the immovable property. As far as they were
concerned, the association was confined to proving its claim as a
concurrent creditor in the insolvent estate. And they did not consider
themselves at all bound by title condition B2 which they contended
merely creates a personal relationship between parties to the agreement
(the Articles of Association), ie the owner of the property and the
association, and does not bind third parties upon liquidation. It is on that
basis that they approached the high court, mainly for declaratory relief
that would allow transfer of the property and its registration in a
prospective purchaser’s name without the association’s consent. Among
the relief sought was an order declaring that the amounts due by the
insolvent do not constitute tax as defined in s 89(5) of the Insolvency Act
24 of 1936 (the Act).

[8] The association and the amici curiae, which joined the fray as the
only recognised representative bodies in the country for homeowners
associations and managing agents, contended otherwise. They argued that
the title condition, a convenient method to enable homeowners
associations to maintain infrastructure and provide services to their
members which does not offend public policy and enjoys longstanding
and widespread registration and enforcement, constitutes a real right as it
results in a subtraction from dominium of the property against which it is
registered. It binds the owner of the property and his successors-in-title.
Thus, in insolvency, it binds the liquidators of the insolvent estate, who in
this case could not, in any event, extricate the insolvent from the

restrictive condition or its contract with the association in respect of
services pertaining to the property which could not be discontinued. The
amounts due fell to be dealt with either as ‘costs of realisation’ in terms
of s 89(1) of the Act read with ss 342 and 391 of the Companies Act 61
of 1973, or ‘costs of administration (liquidation)’in terms of s 197 of the
Act read with ss 342 and 391 of the Companies Act or, otherwise, under
the common law. The amici curiae also submitted that the interpretation
of the title condition contended for by the joint liquidators would result in
the arbitrary deprivation of the association’s property in the form of the
real right in breach of s 25 of the Constitution.

[9] This appeal, in which the issues remain the same as in the high
court, was heard in this court together with Willow Waters Homeowners
Association (Pty) Ltd & another v Koka NO & others,5 which is a matter
similar to this one. The reasons given for upholding the appeal in that
matter apply equally to this case. I do not, therefore, intend to repeat them
here. Suffice it to say that I agree with the reasoning and conclusion of
the high court except for the declaratory relief which it granted in respect
of s 89(5) of the Act – that the moneys due to the association by the
insolvent constitute ‘tax’ within the meaning of this section. Apart from
the fact that the issue simply did not arise for determination as the
association never contended that the amounts do constitute such tax, this
court has expressly said that they do not in Barnard NO v Regspersoon
van Aminie en ‘n ander.6 As for title condition B2, it does constitute a
real right that is binding on the insolvent company and the joint

5 Willow Waters Homeowners Association (Pty) Ltd & another v Koka NO & others (768/13) [2014]
ZASCA x (x 2014).
6 None of the parties contended that it does, correctly so in light of this court’s decision in Barnard NO
v Regspersoon van Aminie en ‘n ander 2001 (3) SA 973 (SCA) paras 25-29.

liquidators who stepped into its shoes consequent to its liquidation. For
the same reasons stated in Willow Waters, it is not necessary to engage
the constitutional argument. Accordingly, the appeal must fail with costs
to follow the result.

[10] In the result, the following order is made:

Save for the amendment of the order of the court below by the deletion of
paragraph 36.1 thereof, the appeal is dismissed with costs including the
costs of two counsel.

________________________
MML MAYA
JUDGE OF APPEAL

APPEARANCES:

For Appellants:

FH Terblanche SC (JE Smith)

Instructed by: Tim du Toit & Co Inc.,

Johannesburg

Phatshoane Henney Attorneys,

Bloemfontein
For 1St Respondent:

EA Limberis SC (A De Kok)

Instructed by: Fluxmans Inc,

Johannesburg

Lovius-Block, Bloemfontein

For Amicus Curiae:

S Budlender

Instructed by: Adams & Adams

Attorneys, Pretoria

Honey Inc, Bloemfontein

THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
12 December 2014
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.

Cowin NO v Kyalami Estate Homeowners Association (499/2013) [2014]
ZASCA 221 (12 December 2014)
The Supreme Court of Appeal handed down judgment today in an appeal from the South
Gauteng High Court, Johannesburg. The high court dismissed an application by the
appellants (the liquidators of an insolvent company) for an order declaring, inter alia, that a
title condition contained in a deed of transfer prohibiting the transfer of immovable property
registered in the name of the liquidated third appellant (the insolvent) without a clearance
certificate from the first respondent (the association) confirming that all levies and penalties
due to the latter had been paid, binds only the insolvent and the association and is not
enforceable against the insolvent’s liquidators.
The insolvent company had purchased a property prior to its liquidation, which property is
operated by the association. It had registered three mortgage bonds over the property in
favour of Absa Bank Ltd (Absa), which were made subject to the conditions contained in the
deed of transfer. After its liquidation, Absa obtained judgment against it and the property was
also declared executable. Thereafter, the joint liquidators concluded an agreement of sale of
the property with a third party. The purchaser fulfilled its obligations under the agreement
and municipal rates clearance amounts were duly settled. However, the association refused to

issue a clearance certificate to facilitate the transfer of the property before it had been paid a
sum comprising arrear levies.
The joint liquidators took the view that the association’s stance prejudiced the concursus
creditorum, particularly the rights of Absa as the secured creditor over the property, and that
any amounts due to the association could not supersede those of such secured creditors. The
association was thus confined to proving its claim as a concurrent creditor in the insolvent
estate. The liquidators further contended that the conditions in the title deed merely created a
personal relationship between parties to the agreement (being the owner of the property and
the association) and does not bind third parties upon liquidation.
The liquidators then approached the high court, mainly for declaratory relief that would allow
transfer of the property and its registration in a prospective purchaser’s name without the
association’s consent. Among the relief sought was an order declaring that the amounts due
by the insolvent do not constitute tax as defined in s 89(5) of the Insolvency Act 24 of 1936
(the Act).
The association and the amici curiae (the only recognised representative bodies in the country
for homeowners associations and managing agents) argued that the title condition constitutes
a real right as it results in a subtraction from dominium of the property against which it is
registered. It binds the owner of the property and his successors-in-title. Thus, in insolvency,
it binds the liquidators of the insolvent estate. The amounts due fell to be dealt with either as
‘costs of realisation’ in terms of s 89(1) of the Act read with ss 342 and 391 of the Companies
Act 61 of 1973, or ‘costs of administration (liquidation)’in terms of s 197 of the Act read with
ss 342 and 391 of the Companies Act or, otherwise, under the common law. The amici curiae
also contended that the interpretation of the title condition contended for by the joint
liquidators would result in the arbitrary deprivation of the association’s property in the form
of the real right in breach of s 25 of the Constitution.
Before this Court, the appeal was heard together with the similar matter of Willow Waters
Homeowners Association (Pty) Ltd & another v Koka NO & others. The reasons given for
upholding the appeal in that matter apply equally to this case. In sum, this Court agreed with
the reasoning and conclusion of the high court except for the declaratory relief which it
granted in respect of s 89(5) of the Act – that the moneys due to the association by the
insolvent constitute ‘tax’ within the meaning of this section. Apart from the fact that the issue

simply did not arise for determination as the association never contended that the amounts do
constitute such tax, this court has expressly said that they do not in Barnard NO v
Regspersoon van Aminie en ‘n ander.  As for the relevant title condition, it does constitute a
real right that is binding on the insolvent company and the joint liquidators who stepped into
its shoes consequent to its liquidation. For the same reasons stated in Willow Waters, it is not
necessary to engage the constitutional argument.
In the result, the appeal fails with costs to follow the result.