THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Case no: 562/10
In the matter between:

Standard Bank of South Africa Limited

Appellant
and
The Swartland Municipality

First Respondent
Michiel Smith Truter Basson

Second Respondent
Mario Brand

Third Respondent

Neutral citation:
Standard Bank v The Swartland Municipality (562/10) [2011]
ZASCA 106 (1 June 2011)
Coram:
LEWIS, CACHALIA, SHONGWE, THERON and MAJIEDT JJA
Heard:
10 May 2011
Delivered:
1 June 2011
Summary:  Mortgagee should be joined in proceedings that affect property in
which it has a real right: where there is no defence to claim for demolition
mortgagee cannot interdict municipality from proceeding with demolition.

___________________________________________________________________

ORDER
___________________________________________________________________
On appeal from:  Western Cape High Court (Cape Town) (Moosa J sitting as court of
first instance):
The appeal is dismissed with costs.
___________________________________________________________________
JUDGMENT
___________________________________________________________________
LEWIS  JA (CACHALIA, SHONGWE, THERON and MAJIEDT JJA concurring)
[1] This appeal is against the refusal by the Western Cape High Court (Moosa J) to
grant either a final interdict or one pendente lite to the appellant, the Standard Bank of
South Africa Ltd (the bank), to prevent or to stay the demolition of a structure by the
first respondent, the Swartland Municipality, on land owned by the third respondent,
Mr M Brand. At issue is whether the bank, which holds two mortgage bonds in the
property, should have been joined as a party to an application in the magistrate’s
court, Malmesbury, brought by the municipality for the demolition of the structures.
Judgment was given by default. The bank was not given notice of the application let
alone joined as a respondent.

[2] The bank brought an urgent application to the high court for the stay of the
demolition order.  Only the municipality opposed the application in the high court. The
owner, and the second respondent, the deputy sheriff who was ordered to demolish
the structures, did not.

[3] The basis of the application by the bank was that, as mortgage holder, it had a
real right in the property, and thus also the structures erected on it. It should, it argued,
have been joined as a party and been given the opportunity to defend the application.
Moosa J held not. He considered that the bank had only a ‘financial’ interest in the
property, not in the outcome of the proceedings, and that it could not ask that the
structures be allowed to stand since they had been erected illegally and that
suspending the demolition order would perpetuate the illegality. But he gave leave to
appeal to this court against his order.

[4] The issues before us are thus whether the bank should have been joined as a
party to the application in the magistrate’s court for the demolition of the structures,
and if so, whether it is entitled to either an interim or a final interdict staying or
prohibiting the demolition of the structures which the municipality contends have been
erected illegally. Before turning to these some factual background is required.

[5] In 1998 Brand acquired land at 3 Simmentaler Street Malmesbury (Erf 7407).
On 11 August 2006 he granted a mortgage in favour of the bank. In October and
November of 2006 he erected various structures on the land without first obtaining
permission from the municipality. It is not disputed that these structures were

unlawfully erected. First, the municipality had refused consent to build pursuant to
plans put before it, and other structures were erected without building plans even
having been submitted. And secondly, some of the structures were built in
contravention of the zoning regulations operative in the area. Brand had been warned
by the municipality in writing not to proceed with the buildings in accordance with the
unapproved plans.

[6] In April 2007, when the structures had already been illegally erected, Brand
obtained a second mortgage bond from the bank over the property. Two years later he
was in default, and on 30 April 2009 judgment against Brand was given to the bank
allowing it to foreclose on the property. Fortuitously, the magistrate’s order that the
illegal structures be demolished was given the day before – on 29 March.

[7] On 4 May 2009 a writ of attachment was issued. And on 26 May Brand sent the
bank the demolition order. The bank’s attorney immediately contacted the
municipality’s attorney and ‘without prejudice’ discussions took place. These came to
nought. A sale in execution of the property was scheduled for 16 July 2009. The
municipality proposed, however, to proceed with the demolition. But eventually the
municipality and the bank agreed that neither the sale in execution nor the demolition
would take place before the bank had instituted an urgent application to stay the
demolition. The agreement was made an order of court on 8 June 2009 and the urgent
application was instituted on the same day.

[8] The basis of the application was that the bank had a right in the property as
bond holder, and that it should have been joined as a party to the application in the
magistrate’s court. As I have said, Moosa J in the high court held that it did not have
an interest in the outcome of that litigation – an application for the demolition of an
illegally erected structure. I turn to that question.

Joinder and a mortgagee’s interest
[9] It is trite that a mere financial interest in the outcome of litigation does not give
a party the right to be joined in legal proceedings.1  But a mortgagee, as the holder of
a real right in property, which includes buildings on the land, erected lawfully or
otherwise, in my view clearly has more than a financial interest in the outcome of
proceedings for the demolition of those buildings. In Home Sites (Pty) Ltd v Senekal2
Schreiner JA said that where a person claimed to have a servitude in land, and the
validity of the servitude might become an issue in litigation between other parties, she
had a clear right to be joined – to be given an opportunity to be heard and joined as a
party. He cited in support of this the criterion stated in Collin v Toffie:3 where a person
has a ‘direct and substantial interest in the results of the decision’ the matter cannot
be ‘properly decided’ without her being joined as a party.

1 See Henri Viljoen (Pty) Ltd v Awerbuch Brothers 1953 (2) SA 151 (O) at 169-170, and the authorities
cited in Herbstein and Van Winsen The Civil Practice of the High Courts and the Supreme Court of
Appeal of South Africa 5 ed by Andries Charl Cilliers, Cheryl Loots and Hendrick Christoffel Nel at 217
and in Jones & Buckle The Civil Practice of the Magistrates’ Courts in South Africa  Vol 1 (looseleaf)
eds H J Erasmus and D E van Loggerenberg at 175.
2 Home Sites (Pty) Ltd v Senekal 1948 (3) SA 514 (A) at 520-521.
3 Collin v Toffie 1944 AD 456 at 464.

[10] In my view the bank had a clear and substantial interest in the outcome of the
application in the magistrate’s court. The value of the property in which it had real
rights would no doubt be affected by the demolition of structures erected on it. The
bank’s ability to sell the property for the amount owed to it was placed in jeopardy. It
was accordingly necessary for the municipality to join the bank as a respondent in the
application.4

[11] The municipality’s response that it was unaware of the existence of the two
bonds does not assist it. Bonds are registered in the Deeds Office and the municipality
is deemed to have knowledge of their existence: Frye’s (Pty) Ltd v Ries.5

[12] The high court thus erred in finding that the bank did not have a right to be
joined. But that does not mean that the magistrate’s demolition order is a nullity. The
consequence is that the bank cannot be met with the exceptio rei judicata.6 That
brings me to the question whether the bank was entitled to relief in the high court.

Was the bank entitled to a temporary or final stay of the demolition order?
[13] The bank argued that since it had a right to be joined it is entitled to the relief
claimed. It pointed out that the application for demolition was brought in terms of s 21
of the National Building Regulations and Building Standards Act 103 of 1977. The

4 As to necessary joinder see also Rosebank Mall (Pty) Ltd v Cradock Heights (Pty) Ltd 2004 (2) SA
353 (W) paras 29-39 and L T C Harms Civil Procedure in the Supreme Court B-103.
5 Frye’s (Pty) Ltd v Ries 1957 (3) SA 575 (A) at 582A-583F.
6 Jones & Buckle  above at 179, citing, amongst others, Amalgamated Engineering Union v Minister of
Labour 1949 (3) SA 637 (A) at 655ff and Home Sites above at 520-521.

bank, as a person having an interest in the property, was entitled, it contended, to
apply to the municipality in terms of s 18 of the Act to permit a deviation from the
applicable building regulations and might, if successful, have been able to avert the
demolition. If it had known of the demolition proceedings it would have made such an
application. If the bank were granted permission to deviate, the municipality would not
have succeeded in its application for the demolition order. The argument is entirely
speculative. It certainly does not show that the bank had a prima facie right to interdict
the demolition, let alone a right that would found a final interdict.

[14] As argued by the municipality, the bank’s proper course of action would have
been to seek rescission of the order. Although it would not have been able to appeal
against the order, not being a party to it, it could, in terms of rule 49(1) of the
Magistrates’ Courts Rules of Court, have applied for rescission, on good cause shown,
within 20 days after obtaining knowledge of the judgment. The subrule gives a person
‘affected by such judgment’ the right to file an application for rescission.

[15] Quite apart from the fact that the bank did not make such an application, it is
difficult to see how it could have shown good cause. The structures were illegal. In
Silber v Ozen Wholesalers (Pty) Ltd7  this court held that good cause includes the
existence of a substantial defence. The bank had no defence to the claim for
demolition, given that the structures were erected without permission and in
contravention of the municipality’s zoning and the Act. Even if it had been joined as a
respondent, as it should have been, it could not have defended the application since

7 Silber v Ozen Wholesalers (Pty) Ltd 1954 (2) SA 345 (A) at 353G-H. And see the other authorities
cited in Jones & Buckle above Vol 2 in its commentary on rule 49.

the Act gives the municipality the right to demolish illegally erected structures. In the
circumstances the bank was not entitled to the relief that it sought in the high court.

[16] The appeal is dismissed with costs.

_______________
C H Lewis
Judge of Appeal

APPEARANCES:

APPELLANTS:

F S G Sievers

Instructed by

William Inglis, Cape Town

Lovius Block Bloemfontein.

RESPONDENTS:

J W Olivier SC

Instructed by

Terblanche Slabbert Pieters ,

Malmesbury;

Naude’s Attorneys,

Bloemfontein.
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

MEDIA SUMMARY
1 June 2011
STATUS: Immediate

Standard Bank v The Swartland Municipality (562/10) [2011] ZASCA 106 (1
June 2011)

Please note that the media summary is intended for the benefit of the media and
does not form part of the judgment of the Supreme Court of Appeal

Today the Supreme Court of Appeal dismissed an appeal against the decision of the
Western Cape High Court which held that the appellant bank, the mortgagee of
immovable property in Malmesbury, was not entitled to an order interdicting the
Swartland Municipality from proceeding with a demolition order granted by a
magistrate’s court.

The municipality had applied for a demolition order in respect of structures illegally
erected by the owner. The owner had not responded to demands to demolish the
structures himself, and did not oppose the application. He also did not pay what he
owed the bank in respect of two mortgage bonds over the property. The municipality
did not join the bank as a respondent, and judgment was given by default.

Fortuitously the bank had obtained an order that it foreclose on the property the day
before the demolition order was granted. When it discovered that the demolition
order had been granted it brought an urgent application in the high court to stay or

interdict the municipality from proceeding with the demolition. It alleged that as a
holder of a right in the property it should have been joined, and that it would, if the
order were at least stayed, attempt to obtain a relaxation or waiver of regulations and
zoning from the municipality.

The high court held that the bank as mortgagee had only a financial interest in the
property and was not a necessary party to the proceedings in the magistrate’s court.
It also held that the bank could not ask for an order that the structures admittedly
erected illegally be allowed to stand in contravention of zoning and building
regulations.

The SCA found that the bank as mortgagee should have been joined in the
demolition application: it had a substantive right in the property, and was entitled to
protect its value. But it held that the bank could have raised no defence to the
application. Its argument that it might be able to obtain consent for the structures to
stand was entirely speculative. The application was thus correctly refused, and the
appeal dismissed.

-----------