20 Sep 2013

Registered Title Trumped by Fraud

In Nedbank v Mendelow NO and another, recently decided by the Supreme Court of Appeal (SCA) Mendelow and his co-executor in a deceased estate sought to recover ownership of a property which had been transferred from the estate to a company. Subsequent to the transfer Nedbank advanced a loan to the company against the security of a first mortgage bond. It transpired in the court proceedings that one of the beneficiaries in the deceased estate, the deceased's son had forged her signature on a deed of sale shortly prior to her death and subsequently forged his brother's signature on a "consent to sale" (his brother being the other beneficiary in the estate).

The Master of the High Court, having been mislead by the forgeries, signed a certificate permitting the transfer of the property and pursuant thereto the Registrar of Deeds registered the transfer of the property into the name of a company controlled by the forger.

Subsequently, when the innocent brother and the executors became aware of the forgery proceedings were instituted by the estate to set aside both the transfer of the property into the name of the company and the registration of the bond in favour of Nedbank. Only Nedbank opposed the relief.

In the court below the case proceeded on the assumption that the estate was entitled to relief based upon principles of Administrative Law namely that both the Master and the Registrar of Deeds in performing their functions, had performed administrative acts which fell to be reviewed in terms of the Promotion of Administrative Justice Act ("PAJA"). Nedbank on appeal argued that PAJA does not make provision for vindicatory relief and further argued that the only person who stood to gain from the relief sought by the estate was the innocent brother of the forger who, so it was argued, had waived his rights.

The SCA rejected both arguments. Firstly, it held that it is not possible for the court to sanction the waiver by a person of criminal conduct. The court further held that PAJA was not applicable to the case at all as the actions of the Master and the Registrar of Deeds were "clerical" rather than "administrative" because, in performing the said actions, these officials were not required to exercise any decision-making function. The court pointed out that a distinction must be drawn for purposes of PAJA between "discretionary powers" and "mechanical powers".

The court further reiterated that while a valid underlying agreement to pass ownership such as a sale or donation is not required, there must nonetheless be a genuine intention to transfer ownership by the transferor. This was absent in the present case because of the forgeries and consequently the executors were entitled to vindicate the property free of any mortgage bond thereon.