Stalwo (Pty) Ltd v Wary Holdings (Pty) Ltd [2007] SCA 133 (RSA) Case Discussion

By Jacques Jacobs

Background: Subdivision of Agricultural Land Act 70 of 1970

Assented TO 28 September, 1970Commencement: 2 January, 1971

Purpose of the Act: Control the subdivision and use of agricultural land To prevent land from uncontrolled subdivision into smaller uneconomic

units

Background: S 3 (a)-(e) Act 70 of 1970

(a) agricultural land may not be subdivided;(b) no undivided share in agricultural land “not already held by any person, shall vest in

any person”;(c) “no part of an undivided share in agricultural land shall vest in any person, if such part

is not already held by any person”;(d) no long-term lease in respect of a portion of agricultural land may be entered into; and(e) no portion of agricultural land may be sold or advertised for sale and no right to such

portion may be sold or granted by virtue of a long-term lease or advertised for sale or for lease

unless the Minister of Agriculture has consented in writing.

Amended

Proclamation R100 / 1 October 1995

‘Provided that land situated in the area of jurisdiction of a transitional council as defined in section 1 of the Local Government Transition Act, 1993 which immediately prior to the first election of the members of such transitional council was classified as agricultural land, shall remain classified as such.’

Effect of amendment

Attorneys in practice often have problems determining whether land is deemed agricultural or not.

Kotze v Minister van Landbou 2003 (1) SA 445 T XXX‘Laastens kan gesê word dat dit waarskynlik gewens sou wees indien die Wetgewer nuwe wetgewing daarstel om die beheer oor onderverdeling van landbougrond te reël, met gebruikmaking van definisies en so meer wat pas by huidige grondwetlike en ander werklikhede. Dit mag oor ’n tydperk van jare onbevredigend wees om vir die doeleindes van Wet 70 van 1970 steeds te moet vasstel of plase op ’n tydstip in die verlede in ’n bepaalde dorpsraad of gesondheidsraad se gebied geleë was.’

If land is classified as agricultural land and relevant consent from the minister is not obtained, the sale is ab initio void.

State of the Law before Stalwo

Kotze v Minister van Landbou 2003 (1) SA 445 T Held that consent of the Minister of Agriculture is still required. This decision was in line with the practice of the Department of Land Affairs and in

accordance with the practice laid down by the Chief Registrar of Deeds, Chief Registrar’s Circular 6 of 2002.

Thus S 1 of the Act still applies, despite Proclamation R100 Accepted by implication in Geue v Van der Lith 2004 (3) SA 333 (SCA)

Other concerns:

Act 70 of 1970 repealed by:– S 1 of the Subdivision of Agricultural Land Act Repeal 64 of 1998– (Date of commencement to be proclaimed)– Thus Act 70/1970 is still in operation.– Why? – Communal Land Rights Act 11/2004 – Communal Property Associations Act 28/1994– Rights registered in a communal land ownership might create a conflict in law/further

uncertainty to subdivision of agricultural land.

Current Uncertainties

Definition of “Agricultural Land” in section 1 of XXX– “agricultural land” means any land, except—– (a)

land situated in the area of jurisdiction of a municipal council, city council, town council, village council, village management board, village management council, local board, health board or health committee, and land forming part of, in the province of the Cape of Good Hope, a local area established under section 6 (1) (i) of the Divisional Councils Ordinance, 1952 (Ordinance No. 15 of 1952 of that province), and, in the province of Natal, a development area as defined in section 1 of the Development and Services Board Ordinance, 1941 (Ordinance No. 20 of 1941 of the last-mentioned province), and in the province of the Transvaal, an area in respect of which a local area committee has been established under section 21 (1) of the Transvaal Board for the Development of Peri-Urban Areas Ordinance, 1943 (Ordinance No. 20 of 1943 of the Transvaal), but excluding any such land declared by the Minister after consultation with the executive committee concerned and by notice in the Gazette to be agricultural land for the purposes of this Act;

= Therefore, any land falling outside the “area of jurisdiction” of the said local authorities was “agricultural land”.

Current Uncertainties

Local Government Transition Act 209 of 1993 Effect: Changed the area of jurisdiction of local authorities existing at that time / To

accommodate new constitutional structures/local authorities Extended their areas of jurisdiction. Result: “agricultural land” that fell outside the area of jurisdiction of local authorities

prior to the1993 Act referred to in section 1 of the 1970 Act, now falls within the area of jurisdiction of the “extended” local authorities.

This amendment to the Act effectively ‘ring-fenced’ all agricultural land at that date. “Wall to wall – municipalities. Consent was thus necessary from local authorities and the Minister.

In Practice

Chief Registrar’s Circular 6 of 2002, Created a uniform practice for al Deeds Registries in SA Registration of all subdivisions of agricultural land and the increase of shareholders in

agricultural land requires the consent from the Minister of Agriculture or a letter from the Department of Agriculture to the effect that the land in question is not agricultural land as defined in the Act.

For the sake of uniformity, the Registrars of Deeds applied the above instruction to all land, irrespective of its extent, which contained the word ‘farm’ in its property description.

Stalwo (Pty) Ltd v Wary Holdings (Pty) Ltd

Facts: At the time of the sale the land was still zoned as ‘agricultural land’. The land, which the appellant (Stalwo) intended to use for industrial purposes. Wary Holdings had lodged an application for its rezoning and subdivision with the

relevant local authority. At the time of the conclusion of the agreement, the land fell under the jurisdiction of

the Nelson Mandela Metropolitan Municipality Prior to the establishment of the NMMM, the land fell under the jurisdiction of the Port

Elizabeth Transitional Rural Council ("the PETRC"), a transitional council as contemplated in section 1 of the Local Government Transition Act 209 of 1993

Facts:

The appellant, aware of these facts and the possibility that the application could be rejected and the sale unravelled, duly took occupation of the land on lease and took various steps to prepare it for use.

The local authority finally granted its approval subject, however, to various conditions which included a requirement that the respondent effect certain substantial improvements relating to an access way, storm water drainage system and other essential services on the land.

Consequently, the respondent sought to increase the purchase price of the property on the basis that the financial costs involved in complying with these conditions significantly exceeded its expectations when the agreement was concluded. As was to be expected, the appellant was not amenable to the increase in price. This is what sparked the present dispute.

Facts:

Two issues needed to be decided.

1. The agreement did not comply with s 2(1) of the Alienation of Land Act 68 of 1981, in that the written agreement did not contain a certain suspensive condition that the sale will be void if Ministerial consent was not obtained for subdivision.

2. The agreement was in contravention of s 3(a) of the Subdivision of Agricultural Land Act, in that no consent of the Minister was obtained.

Court a quo: (reference of a quo judgment?)

Contract did not fall foul of the provisions of the Alienation of Land Act, but, due to the fact that no ministerial consent was obtained for the subdivision, the contract was void.

SCA: Ruling

• Supreme Court of Appeal agreed with the court a quo on the alienation of land dispute. However, the court held that the land in question was not agricultural land and therefore the agreement was valid and binding on the parties.

• The court based its argument on the following grounds:

• The Act is a piece of ‘old-order legislation’ envisaged by the Constitution and s 93(8) of the Municipal Structures Act 118 of 2000, and thus the definition of agricultural land must include all municipal structures.

SCA:Ratio

The SCA found that the proviso to the definition of ‘agricultural land’ introduced on 31 October 1995, which effectively ‘ring- fenced’ agricultural land to remain as agricultural land if it was classified as such prior to the first election of members of a transitional council elected in terms of the LGTA which was intended only to operate and to have ‘ring-fenced’ ‘agricultural land’ until such time as the relevant transitional council dissolved into a municipality, in terms of the provisions of the Local Government: Municipal Structures Act 117 of 1998 (the Structures Act). (Preserved the status quo)

The status of agricultural land is fluid rather than static and changes with the expansion of local authorities and new ones.

The Minister retains, in terms of the definition of agricultural land, as set out in s 1 of the Act, the power to declare land agricultural land for the purposes of the Act.

SCA: Final Verdict

On the facts the court found that the property in question had not been used as agricultural property anymore.

Therefore the Minister’s consent was not necessary. Court ordered Wary holdings to transfer the property.

Effect:

No longer any land situated outside the jurisdiction of a local authority, there is thus, strictly according to the definition of agricultural land, no more agricultural land

However, the Department of Land Affairs is of the opinion that the Minister will have the last say with regards to which land is to be deemed agricultural land.

Practical implications

Developers:

They need not await the outcome of the Minister’s consent to any applications submitted for subdivision or township establishment.

They need not apply for the suspension of the provisions of the Act in terms of s 33(2)(j)(iv) of the Development Facilitation Act 67 of 1995 (the DFA) when making application for the establishment of a land development area in terms of the DFA.

They can consider the densification of their proposed developments on undeveloped land by subdividing same into relatively small units.

Sectional Title/Share block schemes schemes can now be developed on agricultural land

S1 /S 3 Sectional Titles Act of 1986) / s 5(1)(a) and s 5(1A) Share Blocks Control Act 59 of 1980

Practical Implications

Litigators puts an end to applications to the High Court founded on a contravention of s 3 of the

Act. On the other hand, conveyancers would welcome the outcome of the decision as

more transferable units will be created and become susceptible to transfer. Should the Registrars of Deeds still require the submission of the Minister’s consent

prior to the opening of township registers or prior to passing transfer of properties

Effect

Deeds Registry decided that Chief Registrar’s Circular 6 of 2002 should still be used. And when dealing with such an issue, proceed with ex abundanti cautela (extreme

caution) .

Current Status

Wary Holdings have appealed to the Constitutional Court. Effectively freezes SCA decision till CC have made a decision. The main issue:

whether the proviso was intended to be only a temporary measure until the local municipalities were established, or whether the proviso is still in force.

If the proviso is found to have been only a temporary measure, then the land in question does not fall within the definition of agricultural land and the Minister’s consent is not required for the subdivision or sale thereof.

If, however, it is found that the proviso is still in force, then the land in question will fall within the definition and the lack of Ministerial consent will have rendered the contract invalid.