By Duncan Wild on 1 November 2014

The applicant in this case, Ms Virginia Sarrahwitz seeks a declaration of unconstitutionality of the common law position that immovable property which had been sold but not yet transferred to the purchaser prior to the seller’s insolvency, vests in the trustee of the seller’s insolvent estate. If the trustee does not honour the contract of sale and transfer the property, the purchaser is left only with a concurrent claim against the insolvent estate.

Ms Sarrahwitz entered a contract of sale with Mr Raynier Posthumus on 17 September 2002 in order to purchase certain land in Port Elizabeth. The purchase price was paid, but the property was never transferred to Ms Sarrahwitz. In April 2006, the estate of Mr Posthumus was sequestrated and Hermanus Maritz (the first respondent in this application) was appointed as trustee.

Ms Sarrahwitz brought an application before the High Court seeking to compel transfer of the property, but the application was denied on the basis that the that existing law provided that the property vests in the trustee of an insolvent estate, who has a discretion to honour the contract.

Under the common law, the position is that immoveable property which has been sold but not transferred when the seller is declared insolvent vests in the insolvent estate, and if the trustee does not honour the contract the purchaser is left with a claim against the estate.

The Alienation of Land Act 68 of 1981 (“Land Act“) provides an exception for this rule when the contract of sale involves the payment of the purchase price in two or more installments, once certain conditions are met.

Ms Sarrahwitz argues that the common law position is unconstitutional and violates various rights, including the rights to equality, property, just administrative action and dignity. She argues that she should therefore be entitled to transfer of the property.

The Minister of Trade and Industry, cited in his capacity as administrator of the Land Act, does not oppose the application but has made submissions in order to assist the Court. The Minister agrees that the common law position is unconstitutional and argues that the Land Act should be read by the Court to apply to situations such as the current one where the full purchase price has been paid.