Bonheur 76 General Trading (Pty) Ltd and Others v Caribbean Estates (Pty) Ltd and Others

The first appellant (Bonheur) and the first respondent (Caribbean) were co-owners of an undivided share in residential property in Morningside, Johannesburg. Bonheur held a 54% share and Caribbean held a 46% share, which they acquired in January 2006 from prior owners Vinella and Riverbend respectively. The property was adjacent to an office park and shopping centre developed by Bonheur and governed by the Morningside Wedge Office Park Owners Association. On 25 September 2008, Caribbean sold its 46% share to Wedgeport (Pty) Ltd. Transfer was effected on 1 December 2008, and on the same day a mortgage bond was registered over Caribbean's share in favour of Ettin and Greenberg as security for a loan made to Wedgeport. Bonheur had not consented to the sale. The appellants claimed there was a 'de facto' right of pre-emption arising from three sources: the articles and memorandum of the Association; a co-owners' agreement; and a joint venture development agreement (JVD agreement). A letter of intent dated 12 August 2005 had been signed by the predecessors of Bonheur and Caribbean, as well as by Ettin and Greenberg, referring to a proposed co-ownership agreement and the JVD agreement. However, neither the co-owners' agreement nor the JVD agreement was ever signed by Bonheur or Caribbean.

• Whether Bonheur had a right of pre-emption over Caribbean's share in the property
• Whether an oral or tacit partnership agreement existed between Bonheur and Caribbean precluding alienation of Caribbean's share without consent
• Whether Caribbean could alienate its undivided share without the consent of Bonheur as co-owner under common law principles of co-ownership
• Whether the requirements of the Alienation of Land Act 68 of 1981 were met to create a right of pre-emption
• Whether the sale, loan and mortgage transactions were simulated or sham transactions
• Whether section 34(1) of the Deeds Registries Act 47 of 1937 permits alienation of an undivided share without consent of other co-owners

The appeal was dismissed with costs including those of two counsel.

The binding legal principles established are: (1) Each co-owner of property is entitled to dispose of his or her undivided share without the consent of other co-owners, unless that right is fettered by agreement. (2) Section 34(1) of the Deeds Registries Act 47 of 1937 expressly permits the alienation of a full undivided share (including by sale or mortgage) without requiring the consent of other co-owners or the production of a certificate of registered title. (3) A right of pre-emption over immovable property must comply with section 2(1) of the Alienation of Land Act 68 of 1981, which requires such rights to be in writing and signed by the parties or their duly authorized agents. Unsigned draft agreements and letters of intent do not satisfy this requirement. (4) While one co-owner may not use or deal with common property as a whole without the consent of all co-owners, the sale or hypothecation of a co-owner's individual share does not affect the property as a whole and does not require consent.

The court distinguished the principle in Mazibuko v DPP relating to 'tied' co-ownership arising from marriage in community of property, noting that such co-ownership is different from ordinary co-ownership and the forfeiture principles applicable there do not apply to ordinary co-ownership situations. The court also made observations rejecting as 'entirely speculative' the argument that Bonheur's constitutional right to property might be jeopardized if Wedgeport's share were realized due to joint and several liability for municipal taxes, noting that this argument bore no relation to the case pleaded. The court observed that Bonheur had not shown any basis on which it was entitled to require that contracts between other parties be set aside, and that anti-dissipatory relief would not be competent where a party seeks to prevent disposal of property to which it has no right.

This case confirms important principles of South African property law regarding co-ownership of undivided shares. It clarifies that: (1) co-owners may alienate their undivided shares without the consent of other co-owners, subject to agreement to the contrary; (2) section 34(1) of the Deeds Registries Act permits registration of transfers and mortgage bonds over undivided shares without requiring consent of other co-owners; (3) alleged rights of pre-emption over immovable property must comply with the writing and signature requirements of section 2(1) of the Alienation of Land Act 68 of 1981; (4) unsigned draft agreements and letters of intent are insufficient to create enforceable rights over land; and (5) parties cannot change their case on appeal to introduce new grounds (such as an oral partnership agreement) that were not pleaded in the application. The case has no precedential significance as noted in the judgment header.