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7 APRIL 2021
REAL ESTATE
ALERT
Traversing uncharted territory: Does the
IN THIS conclusion of a ‘package deal’ trigger
ISSUE pre-emptive rights?
The genealogy of pre-emptive rights can be traced back as far
as the Digest of Justinian – where D 18 1 75 and D 19 1 21 5,
albeit scantly, dealt with the sale of land subject to the condition
that the buyer would not sell to anyone other than the seller.
It’s on the house - revisiting the accession
principle
Movable property, described in a manner that renders it readily
recognisable, may be pledged by a mortgagor in a special
notarial bond in terms of section 1(1) of the Security by Means
of Movable Property Act 57 of 1993. Having seen an increase
in the registration of complex notarial bonds recently, it has
become important to revisit when a movable thing will become
immovable for purposes of registering special notarial bonds.
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1 | REAL ESTATE ALERT 7 April 2021 our expertise and
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REAL ESTATE
Traversing uncharted territory: Does
the conclusion of a ‘package deal’
trigger pre-emptive rights?
The genealogy of pre-emptive rights Genesis of the dispute
Given its rich history, can be traced back as far as the
Dahlia Investments Holdings (Pty) Ltd
Digest of Justinian – where D 18 1 75
one might reasonably and D 19 1 21 5, albeit scantly, dealt
(Dahlia), the owner of certain farmland
assume that there with the sale of land subject to the
consisting of eight separate portions,
leased two portions thereof to Plattekloof
was nothing novel condition that the buyer would not sell
RMS Boerdery (Pty) Ltd (Applicant).
left to be said about to anyone other than the seller. Since
Clause 10 of the lease agreement granted
then, the nature, content and scope
pre-emptive rights. of pre-emptive rights have undergone
the Applicant a right of pre-emption
in respect of the two portions of the
considerable development – ranging
farmland so leased (pre-emption property).
from the early Roman Law pactum
The relevant provisions of clause 10 read
protimeseos to the Germanic Law
as follows –
näherrecht – and so, too, have the
remedies afforded to the grantee upon “10.1 Provided that the Lessee has
breach thereof by the grantor. complied with all of its obligations
under this agreement, the lessee
Given this rich history, one might
shall have the right of first refusal
reasonably assume that there was nothing
to purchase the Premises on terms
novel left to be said about pre-emptive
and conditions the same as nor
rights. Quite the contrary – in the recent
(sic) no less favourable than those
case of Plattekloof RMS Boerdery (Pty)
offered by a bona fide third party
Ltd v Dahlia Investment Holdings (Pty) Ltd
to the Lessor and the Lessor shall
and Another (7836/2020) [2021] ZAWCHC
deliver written notice to the Lessee
the court traversed uncharted territory,
specifying the terms and conditions
when it was called to determine whether
of such offer, and the Lessee shall
the conclusion of a so-called ‘package
have 14 (fourteen) days thereafter in
deal’, with a third-party purchaser,
which to accept or reject the offer
triggered pre-emptive rights in respect
by written notice, failing which the
of land leased by the grantee – an issue
Lessor shall be entitled… to dispose
for which there was, at the time, no
of the property…”
binding authority.
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REAL ESTATE
Traversing uncharted territory:
Does the conclusion of a ‘package
deal’ trigger pre-emptive rights?
...continued
On 7 April 2020, Dahlia entered into a amount of R13,000,000. These figures
For the subsistence deed of sale (Sale Agreement), pursuant were, in part, predicated on previous
to which it sold all eight portions of discussions between the relevant parties
of the lease period, the farm (including the pre-emption during the respective ‘half-baked’ sales
the Applicant was property) to Swellendam Plase (Pty) Ltd that subsequently fell through.
aware that Dahlia (Swellendam) for a purchase consideration
When it became apparent that the
of R17,000,000.
had intended to Applicant’s assumption was in fact false, it
sell the farmland It is worth noting that the Sale Agreement sought to vindicate its pre-emptive rights
did not specify what price had been by approaching the court. The Applicant
in its entirety, as it
allocated to the respective portions of moved for an order directing Dahlia to
had itself been an the land, which, in turn, made ascribing comply with its contractual obligations,
active participant in a specific value to the corresponding by proffering a written notice offering
several ‘half-baked’ portions all the more onerous. Moreover, the pre-emption property for a purchase
the respective portions of the farmland consideration of R4,000,000, on identical
sales, as it were, were by no means homogenous, as the terms and conditions to that of the
which had previously portions leased by the Applicant contained Sale Agreement.
fallen through. a proportionately greater share of arable
The reasoning of the High Court
land compared to its counterparts. This
notwithstanding, had the entirety of The court intimated that the central issue
the farm been indiscriminately valued for determination was the position of
on a per hectare basis, in accordance the Applicant in terms of clause 10 of the
with the purchase consideration paid lease, when the ‘premises’ in respect of
by Swellendam, the combined value of which it enjoyed a right of pre-emption,
the pre-emption property would have became the subject of a contract of sale
amounted to approximately R6,600,000. which formed part of a larger ‘package
deal’. A factual matrix of this nature had
For the subsistence of the lease period,
no precedent in our law because the Sale
the Applicant was aware that Dahlia had
Agreement did not only pertain to the
intended to sell the farmland in its entirety,
pre-emption property, but rather, was a
as it had itself been an active participant
globular transaction for the entire farm, of
in several ‘half-baked’ sales, as it were,
which the pre-emption property was just a
which had previously fallen through.
component part.
Nonetheless, upon becoming aware of the
sale, the Applicant sought to enforce its The court considered the case of Sher v
pre-emptive rights. Allan 1929 OPD 137 (Sher v Allan) where
the lessee, too, had been, granted the “first
It laboured under the erroneous
option to purchase the leased property”
assumption that Dahlia would accept
in the event that the lessor desired to sell
R4,000,000 for the pre-emption property
it during the currency of the lease. In that
and that Swellendam would be content
instance the leased property was but a
with the remaining six portions for an
portion of a much larger registered erf.
3 | REAL ESTATE ALERT 7 April 2021REAL ESTATE
Traversing uncharted territory:
Does the conclusion of a ‘package
deal’ trigger pre-emptive rights?
...continued
Notwithstanding the lessee’s pre-emptive In this regard the court remarked that –
In the court’s right, the lessor in that instance sold the
“In Sher v Allan the clause required
entirety of the erf to a third-party without
estimation, the clause regard for the lessee’s pre-emptive right.
the lessor to offer the pre-emption
in Sher v Allan imposed property to the lessee should
The court, in that instance, held that the
he desire to sell it during the
a positive obligation on lessor was not at liberty to –
continuance of the lease. It was
the lessor whereas the “derogate from his own concession, for the lessor, and not a third party
clause in the present or defeat its operation by his own offeror to determine the terms
act. If he wished to sell the whole, upon which he wished to sell his
instance did not have
he could do so – provided, as to half property.”
the same import. of what he was willing to sell, he had
In the court’s estimation, the clause in
to respect his undertaking to the
Sher v Allan imposed a positive obligation
[lessee]; and his conduct would have
on the lessor whereas the clause in the
to be regulated accordingly.”
present instance did not have the same
In considering the import of the dicta import. The court intimated that the
from Sher v Allan, the court noted that content of the grantor’s obligations under
it lent support to the notion that Dahlia the contrasted pre-emptive clauses, had
may have incurred liability for damages, a direct bearing on the types of remedies
had it disposed of the leased property available to the grantee upon breach
to Swellendam without first offering it thereof by the grantor.
to the Applicant. Moreover, and perhaps
Given the novelty of the relief sought,
by implication, the judgment also lent
and the paucity of authority on the issue
support to the conclusion that, the
at hand, the Applicant sought support
Applicant could interdict the transfer of the
from the approach endorsed by Professor
pre-emption property to Swellendam, if
Naude.
it could illustrate that the Sale Agreement
so concluded failed to cater for its In her seminal article titled “Which
pre-emptive rights. transactions trigger a right of first
refusal or preferential right to contract”
The court did, however, note that
Professor Naude acknowledges the dearth
Sher v Allan did not provide support for the
of authority in our law on the matter at
relief sought by the Applicant, that being,
hand. She does, however, note that in the
the sale of the pre-emption property at
United States – whose jurisprudence on
a price gleaned from the circumstances
the topic is, in her estimation, informative
that surrounded the conclusion of the
– four conflicting approaches exist,
sale. More importantly, the court noted
the fourth of which the Applicant relied
that the terms of the pre-emptive right in
on. In terms of this approach upon the
Sher v Allan differed materially to those of
conclusion of the package deal by the
clause 10 in the present instance.
4 | REAL ESTATE ALERT 7 April 2021REAL ESTATE
Traversing uncharted territory:
Does the conclusion of a ‘package
deal’ trigger pre-emptive rights?
...continued
grantor with the third party, the grantee The court did not, however, agree that the
It remains to be seen may purchase the pre-emption property Applicant became entitled to purchase
alone. Given the attendant difficulty of the pre-emption property for R4,000,000.
whether the approach determining the price payable for the pre- Applying the Plascon-Evans rule, the
espoused by the court emption property, Professor Naude posits court proceeded on the basis that at the
in this instance will that the court ought to fix the price at a conclusion of the Sale Agreement, the
reasonable amount. pre-emption property was worth more
be followed in future
than R5,000,000. Therefore, according to
‘package deal’ cases. The court was unpersuaded by this line
the court the relief sought by the Applicant
of reasoning, as it felt that this would,
– namely, that the pre-emption property
in effect, result in the court making a
be sold for R4,000,000 – could not be
contract for the parties for the sale of the
granted. Accordingly, the court dismissed
pre-emption property, at a reasonable
the application.
price when the right of pre-emption itself,
did not vest the holder thereof with a right Conclusion
to buy it at a reasonable price. That said,
It remains to be seen whether the
having considered the contentions put
approach espoused by the court in this
forward by both parties, the court held that
instance will be followed in future ‘package
the pre-emptive rights contained in clause
deal’ cases. Nevertheless, until then,
10 of the lease were, in fact, triggered
the court must be applauded for giving
by the Sale Agreement. Moreover,
primacy to the terms of the clause in
upon the triggering thereof, Dahlia
which the pre-emptive right was sourced,
became obliged to give the Applicant
as it is the wording employed therein that
written notice specifying the terms and
determines the obligation assumed by the
conditions of the Sale Agreement, to
grantor, and by corollary, the remedies
which the Applicant would then elect
available to the grantee. It is thus clear that
whether or not it intended to acquire the
there is still, in fact, more to be said about
pre-emption property.
pre-emptive rights and, perhaps, more
uncharted territory to traverse in future.
Fatima Gattoo, Shanita Goven and
Khoro Makhesha
5 | REAL ESTATE ALERT 7 April 2021REAL ESTATE
It’s on the house - revisiting the
accession principle
Movable property, described in (ii) the manner and degree of attachment.
Accession is the a manner that renders it readily The accessory thing must be
recognisable, may be pledged by a permanently attached to the principal
process whereby mortgagor in a special notarial bond thing. If the accessory thing loses its
a movable thing in terms of section 1(1) of the Security own identity and becomes an integral
is combined with by Means of Movable Property Act 57 part of the principal thing or if the
another thing (either of 1993. Having seen an increase in the attachment is so secure that separation
registration of complex notarial bonds would involve substantial injury either
movable or immovable) recently, it has become important to the accessory thing or the principal
through a natural or, to revisit when a movable thing will thing, the accessory thing would be
more commonly, an become immovable for purposes of regarded as immovable; and
registering special notarial bonds.
artificial process. (iii) the subjective intention of the annexor.
Accession
In Potchefstroom Dairies, the court applied
Accession is the process whereby a the three criteria in a way that is now
movable thing (the accessory thing) is known as the traditional approach. The
combined with another thing (either court firstly considered, with reference to
movable or immovable) through a the nature and purpose of the attachment
natural or, more commonly, an artificial and the manner and degree of attachment,
process. The accessory thing loses its whether attachment of the movable asset
independence and becomes a component to the immovable asset occurred. The
of another object (the principal thing). court further found that if the first two
The owner of the principal thing will thus criteria produce an inconclusive result, the
become the owner of the accessory thing. stated subjective intention of the owner of
the movable asset will be decisive.
This article specifically focuses on the
principal of inaedificatio, which refers to In this case, Potchefstroom Dairies sold
the process whereby the accessory thing an erf, on which a diary plant was situated
is attached to land through an artificial to Jacobson in terms of an instalment
process and becomes part of the land. The sale agreement. The erf would have
application of the principle of accession been transferred to Jacobson once the
renders all accessory things attached to final instalment was paid. Jacobson also
land ‘immovable’. In terms of the common purchased a refrigeration plant from
law, the owner of land is also the owner of Macdonald in terms of a hire purchase
all items permanently attached to it. agreement and replaced the existing
plant on the property with this new
MacDonald v Radin and The
refrigeration plant. Jacobson was unable
Potchefstroom Diaries and Industries Co
to settle its debt with Potchefstroom
1915 AD 454 (Potchefstroom Diaries) sets
Diaries or Macdonald and the court
out the criteria that must be considered
had to determine whether the new
when investigating whether an accessory
refrigeration plant had acceded to the
thing has become immovable.
land, owned by Potchefstroom Diaries.
The factors are – The new refrigeration plant was installed
in the building in a concrete foundation
(i) the nature and purpose of the
and attached to the walls with nuts and
attachment. This requires the
bolts. Nevertheless, the machinery could
accessory thing to be capable
be removed without causing injury to
of permanent attachment to the
the premises and the old plant, now
principal thing;
6 | REAL ESTATE ALERT 7 April 2021REAL ESTATE
It’s on the house - revisiting the
accession principle...continued
in storage, could be re-installed at a be a proper and necessary inference that
A word of caution, reasonable cost. After considering the the person who installed the lifts intended
first two requirements, the court found them to form a permanent part of the
considering the that it was not clear that accession had structure and consequently that they
case law, a fixture taken place. Thus, the court held that the acceded to it”. However, the court did
clearly intended to third criterion- the subjective intention of not stop its enquiry there and proceeded
Macdonald- should be decisive. to consider the subjective intention
be permanent will
of the owner of the lift, as stated in an
not necessarily be The court explained at 467 that “the
agreement, after which it found that the lift
importance of the first two factors is
deemed movable had not acceded to the building.
self-evident from the very nature of the
simply due to enquiry. But the importance of intention What are the implications of these
the operation of is for practical purposes greater still; for decisions for the registration of special
the provisions of in many instances it is the determining notarial bonds? When receiving an
element. Yet it is sometimes settled by the instruction to register a special notarial
an agreement mere nature of the annexation. The article bond, the first point of enquiry should
stating otherwise. may be actually incorporated in the realty always be whether the movable assets
or the attachment may be so secure that are in fact movable. This may not be a
separation would involve substantial injury straightforward enquiry and it may be
either to the immovable or its accessory. In necessary to involve technical experts to
such cases the intention as to permanency assess whether an asset can be moved
would be beyond dispute”. without causing substantial harm to the
land and the movable asset. The stated
The court found with reference to the
intention of the owner of the movable
terms of the hire-purchase agreement
asset, as set out in an instalment sale
that Macdonald clearly did not intend
agreement or long-term lease agreement
for Jacobson to become the owner of
must also be considered.
the machinery until he had paid for the
machinery in full and that accession had A word of caution, considering the
not taken place. case law, a fixture clearly intended
to be permanent will not necessarily
Over the years there have been many
be deemed movable simply due to
decisions emanating from our courts,
the operation of the provisions of an
some of which adopted the traditional
agreement stating otherwise. Then again,
approach, as set out in Potchefstroom
a court may find that the subjective
Diaries, while others held that the
intention of the owner of the movable
subjective intention was the most
is of overriding importance. Each case
important factor even if, based on the
must be considered with reference to its
objective criteria, accession had taken
case-specific circumstances.
place. One such a case is Melcorp SA
(Proprietary Limited) v Joint Municipal The identification of movable and
Pension Fund (TVL) [1980] 1 All SA 498 immovable assets plays a pertinent role in
(W), where the court found that a lift the registration of special notarial bonds.
installation formed an integral part of When drafting a special notarial bond, time
a building wherein it was installed. The and care must be taken to understand
court, at 507 explained that if it only had when an accessory thing has formed part
to consider the first two criteria “it would of a principal thing.
Akhona Mdunge
Overseen by Janke Strydom
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