Fegen v Mphakathi

The King of the Pondos sold two immovable properties (erf 711 and erf 712 Port St John's) to Mphakathi on 15 June 2000 for R150,000 and R110,000 respectively. Mphakathi paid deposits of R20,000 on each property and was entitled to immediate occupation with balance payable in instalments. Mphakathi could not immediately occupy erf 711 due to unlawful occupiers and instituted eviction proceedings which were successful in July 2003. During this period, Fegen visited Mphakathi on the properties, offered to buy them from him (which was refused), and was informed about Mphakathi's rights. Despite this, Fegen subsequently approached the King (through the Queen) and purchased the same properties for R30,000 (or R25,000 according to the deed of transfer). The King transferred the properties to the Fegens. When the Fegens gave notice to Mphakathi to vacate, he launched an application to declare the second sales null and void and set aside the transfers. The King was joined as third respondent but took no part in the proceedings.

• Whether the second purchaser (Fegens) acquired the properties with knowledge of the prior sale to the first purchaser (Mphakathi)
• Whether the first purchaser's right to claim transfer from the seller had prescribed and what effect this would have on the validity of the second sale
• Whether prescription had been interrupted by acknowledgement of liability or renounced by the seller
• What constitutes sufficient knowledge for purposes of mala fides in successive sales of immovable property
• Whether the notice of motion interrupted the running of prescription in terms of section 15(1) of the Prescription Act

The appeal was dismissed with costs. The judgment of the Eastern Cape High Court declaring the agreements of sale between the Fegens and the King void and of no force and effect and setting aside the transfer of the properties to the Fegens was confirmed.

The binding legal principles established are: (1) A second purchaser of immovable property acts mala fide and cannot defeat a prior purchaser's personal right if the second purchaser subjectively foresaw the possibility of the prior right but proceeded regardless (dolus eventualis standard applies). (2) Wilfully shutting one's eyes to obvious facts and deliberately refraining from making reasonable enquiries constitutes the requisite knowledge for mala fides. (3) Prescription of a creditor's claim can be interrupted by ongoing acknowledgement of liability by the debtor, which can be inferred from conduct such as allowing continued occupation, supporting the creditor's litigation, and not contesting the creditor's rights. (4) The benefits of prescription can be renounced by the debtor through conduct. (5) Where a seller has acknowledged liability to a first purchaser or renounced prescription benefits, a second purchaser cannot successfully raise prescription as a defence to setting aside the second sale. (6) The onus is on the party alleging prescription to plead and prove the necessary averments.

The court made several non-binding observations: (1) Miller J noted that Mphakathi was not a typically idle, careless or negligent creditor, given he had to overcome significant obstacles including evicting unlawful occupiers and defending against the second sale. (2) The court observed that prescription as an issue in the case was 'with some justification' diversionary. (3) The court noted it was 'beyond the scope of this judgment' to enter into debate about what the ultimate consequences would be for the parties following confirmation of the order setting aside the second sale. (4) The court commented that the King 'pointedly did not participate' in the proceedings and his wife did not testify in support of the Fegens as they had anticipated. (5) The court observed the anomaly that the sale price in the agreement (R30,000) differed from the deed of transfer (R25,000), noting this 'remains unexplained'.

This case is significant in South African property law for clarifying several important principles: (1) It confirms that a second purchaser of immovable property can be held to have mala fides on the basis of dolus eventualis regarding a prior purchaser's rights, not just actual knowledge. (2) It establishes that wilfully shutting one's eyes to obvious facts and deliberately refraining from making enquiries that would reveal a prior right constitutes sufficient knowledge to vitiate a subsequent transfer. (3) It demonstrates that prescription can be interrupted by ongoing acknowledgement of liability by a debtor (seller) to creditor (purchaser), and that such acknowledgement can be inferred from conduct including allowing continued occupation, supporting litigation, and not contesting claims. (4) It illustrates that the benefits of prescription, once accrued, can be renounced by conduct. (5) It affirms that third parties (like second purchasers) can raise prescription as a defence even in proceedings not directly between the original debtor and creditor, but clarifies the limitations of such a defence where there has been acknowledgement or renunciation.