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IS IT POSSIBLE FOR A RIGHT OF PRE-EMPTION ESTABLISHED THROUGH A TESTAMENTARY DISPOSITION TO PRESCRIBE?

Firm • 13th Nov, 14

 

The Supreme Court of Appeal had to deal with the question whether a right of pre-emption, acquired by virtue of a testamentary disposition and registered against the title deed of a farm, prescribed prior to the grantee having exercised that right.

The facts were as follows:  The appellant Christoffel and his brother Johannes were beneficiaries in the will of their parents with their mother being the survivor.  In terms of the will each son would inherit a farm.  The bequest to Johannes was subject to a life usufruct in favour of his mother and a right of pre-emption in favour of Christoffel.  That right of pre-emption was registered against the title deed of the farm and it read as follows “If Johannes, after the death of the survivor, decides to sell the farm then our son Christoffel must be given the first option to purchase the said property at the Land Bank valuation as established at the time of the sale.  The option must be exercised in writing within a period of 60 (sixty) days after the option has been given.”   

Johannes’ mother passed away in February 2004.  Already in September 2003 Johannes had granted a written option to Cronje, the director of the respondent (“Cronje”), to buy the farm.  In October 2003 the attorney of Johannes and Cronje wrote to the attorney of Christoffel informing him that Johannes had given an option to Cronje to purchase the farm and requested Christoffel to waive his right of pre-emption.  Christoffel unequivocally informed Johannes that he elects not to waive his right of pre-emption and requested to receive a written option to buy the farm at Land Bank value since Johannes decided to sell it.

On 29 March 2007 Cronje exercised the option to purchase the farm.  After certain developments Christoffel received a written option to purchase the farm at Land Bank value in February 2010 and a sale agreement was subsequently concluded between Christoffel and Johannes on 25 March 2010.

Cronje sought a declaratory order that a valid agreement to purchase the farm existed between Cronje and Johannes as a result of the exercising of the option in March 2007 and that Christoffel’s right of pre-emption had prescribed.  It was Cronje’s argument that once Johannes had decided to sell and Christoffel acquired knowledge thereof, the right of pre-emption came into force and that the testamentary clause did not require a written option before Johannes could exercise his right. 

In order for this right to prescribe within three years of the grantee having received knowledge of the intention to sell the property, the right must be a ‘debt’ as stipulated in the Prescription Act, 1969.  The court, without deciding, accepted that the right of pre-emption constituted a debt.  It went then on to examine whether the debt is due and settled law in this regard states that a debt is due as soon as a complete cause of action in respect of that debt exists, i.e. every fact necessary to prove and support the claimants right to judgment. 

It was argued that Christoffel’s right of pre-emption was triggered by the decision of Johannes to grant Cronje an option to purchase in September 2003, entailing that the right had prescribed in September 2006.  It was further averred that prescription could have been interrupted by Christoffel had he instituted proceedings on the basis of an interdict to prevent the transfer of the property, a declaratory order that he had a registered right or an action for specific performance for Johannes to act in accordance with the pre-emptive right.

The 1985 SCA decision of Hirschowitz v Moolman confirmed that in order for a holder of a right of pre-emption over land to claim specific performance against the grantor, on the holder’s right maturing and on the grantor failing to recognise or honour the holder’s right, the right of pre-emption itself should comply with the provisions as prescribed in the Alienation of Land Act, the requirement of which is writing. 

Wherefore the court found that the debt became due in February 2010 when Christoffel received a written offer to purchase the land and that debt did not prescribe because Christoffel had exercised his right when concluding the sale agreement with Johannes.

In conclusion, a right of pre-emption over land constitutes a debt and is capable of prescribing, provided that the holder does not exercise his right of pre-emption within three years of having received a written option to purchase.

 

Carolin Gillon
Associate



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