THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Reportable
Case no:
671/2002

In the matter between:

FIRST RAND BANK LIMITED
Appellant

and

THE BODY CORPORATE OF GEOVY VILLA
Respondent
_______________________________________________________

Coram:
Harms, Scott, Navsa, Cloete and Heher JJA

Date of hearing: 4 November 2003
Date of delivery: 28 November 2003

Summary:
Interaction between s 15B(3)(a)(i)(aa) of the Sectional Titles Act 95 of 1986 and

s 66(2) of the Magistrates’ Courts Act 32 of 1944 ─ a judgment creditor’s claim

for arrear levies and related costs in respect of a dwelling unit in a sectional title

development not preferent to the claim of the holder of a mortgage bond.

_______________________________________________________
J U D G M E N T
_______________________________________________________

NAVSA JA:
[1] The appellant is a registered commercial bank. The respondent
is a body corporate contemplated in s 36(1) of the Sectional Titles Act
95 of 1986 (‘the ST Act’). This appeal concerns the interaction
between s 15B(3)(a)(i)(aa) of the ST Act and s 66(2) of the
Magistrates’ Courts Act 32 of 1944 (‘the MC Act’) and considers
whether the respondent’s claim as judgment creditor in respect of
arrear levies and related costs due by an owner of a dwelling unit in a
sectional title development is preferent to the claim of the appellant
as holder of a mortgage bond over the unit in question. I will for the
sake of convenience refer to the appellant as ‘the bank’ and the
respondent as ‘the body corporate’.
[2] Section 15B (3)(a)(i)(aa) of the ST Act provides:

‘The registrar [of deeds] shall not register a transfer of a unit or of an
undivided share therein, unless there is produced to him ─
(a)
a conveyancer’s certificate confirming that as at date of registration ─

(i)(aa)
if a body corporate is deemed to be established in terms of

section 36(1), that body corporate has certified that all

moneys due to the body corporate by the transferor in

respect of the said unit have been paid, or that provision has

been made to the satisfaction of the body corporate for the

payment thereof;’

I will for the sake of convenience refer to this sub-section as ‘the
statute’.
[3] Section 66 (2) of the MC Act provides:

‘No immovable property which is subject to any claim preferent to that of
the judgment creditor shall be sold in execution unless ─
(a)
the judgment creditor has caused such notice in writing of the intended
sale in execution to be served personally upon the preferent creditor as may be
prescribed by the rules; or
(b)
the magistrate or an additional or assistant magistrate of the district in
which the property is situate has upon the application of the judgment creditor
and after enquiry into the circumstances of the case, directed what steps shall be
taken to bring the intended sale to the notice of the preferent creditor, and those
steps have been carried out,
and unless
(c)
the proceeds of the sale are sufficient to satisfy the claim of such preferent
creditor, in full; or
(d)
the preferent creditor confirms the sale in writing, in which event he shall
be deemed to have agreed to accept such proceeds in full settlement of his
claim.’
[4] The body corporate applied to the Transvaal Provincial Division
for an order declaring that the bank, as bondholder over the unit in
question, did not enjoy a claim preferent to its claim as judgment
creditor in respect of arrear levies and related costs and that the

provisions of s 66(2) of the MC Act were inapplicable. In addition, it
sought an order directing the sheriff to transfer to, and register the
unit in the name of, the purchaser who had purchased it at a sale in
execution on 12 February 2000. The respondent sought costs against
the sheriff and the bank only in the event of opposition.
[5] The material facts on which the bank relied for the relief sought
by it are common cause and are set out in the paragraphs that follow.
[6] Ms Thisinyana Augathe Radebe (Radebe) is the registered
owner of the unit. The bank is the only mortgagee. At the time of the
registration of the bond the amount owing by Radebe to the bank was
R108 000-00. On 11 December 2000 the body corporate obtained
judgment against her for outstanding levies and costs in an amount of
R8 600-00. The execution debt remained unsatisfied and the unit was
sold at a judicial sale in execution for an amount of R32 000-00. On
15 February 2002 the bank informed the body corporate in writing
that it was not willing to accept the purchase price obtained at the
sale. The body corporate’s written response on 27 February 2002
was that it enjoyed a preference above that of the bank as
bondholder and that it did not require the bank’s approval for the sale
in execution. This attitude was communicated to the sheriff. In
adopting this view the body corporate relied on the statute and on the

judgment of this Court in Nel NO v Body Corporate of the Seaways
Building and Another 1996 (1) SA 131 (A). The Nel case will be dealt
with in due course.
[7] The sheriff responded and stated that it had been a long-
standing practice in dealing with the provisions of section 66(2) of the
MC Act to regard a mortgagee as having a claim preferent to that of a
body corporate and suggested that in the event of the dispute
remaining unresolved the body corporate should approach a court for
a mandamus. The approach to the High Court referred to in para [4]
followed soon thereafter, the sheriff and the bank being cited as the
first and second respondents.
[8] The bank resisted the application contending that s 66(2) of the
MC Act was protective of its rights as mortgagee and that the body
corporate was not entitled to sell the unit without regard to the
security it enjoyed in terms of the mortgage bond. It submitted that
the effect of the order sought by the body corporate would be to
render its security valueless and that all mortgagees in its position
would be exposed to having their security sold without notice to them
for amounts sufficient only to cover debts due to the bodies
corporate. The bank contended further that the provisions of the

statute and the ratio in the Nel case were more limited in effect than
contended by the body corporate.
[9] Hartzenberg J accepted the body corporate’s interpretation of
the statutory provisions and of the Nel case. He held in favour of the
body corporate and made the following order:

‘1.
A declaratory order issues to the effect, that for the purposes of
section 66(2) of Act 32 of 1944, the Magistrates’ Courts Act, the first bond of the
second respondent over Unit No. 8 in the sectional title scheme SS204/83 does
not rank higher in order of preference than the applicant’s claim for amounts
provided for in section 15B(3)(a)(i)(aa) of Act 95 of 1986.
2.
The first respondent is directed to transfer the said unit to the purchaser,
who bought it at the sale in execution on 12 February 2002.
3.
No order as to costs is made either in favour of or against the first
respondent.
4.
The second respondent is ordered to pay the applicant’s costs of the
application.’
[10] The bank appealed against the judgment and order of the Court
below, leave to appeal having been granted by Hartzenberg J. The
judgment of the Court below is reported as Body Corporate of Geovy
Villa v Sheriff, Pretoria Central Magistrate’s Court, and Another 2003
(1) SA 69 (T).
[11] It is the body corporate’s case that since the provisions of the
statute give it the power to resist the transfer of immovable property

until moneys due and owing to it have been paid or until
arrangements to pay have been made to its satisfaction by the owner
of a unit in a sectional title development, it enjoys an effective
preference which translates into a right superior even to that of a
secured creditor such as the bank. It submits therefore, that the
provisions of s 66(2) of the MC Act, which are protective of the rights
of a preferent creditor, do not operate in favour of the bank and that it
has the power to dispose of the unit without reference to the bank as
the Court below concluded.
[12] There is nothing in the provisions of the statute that expressly
supports the far-reaching interpretation contended for by the body
corporate. This is an aspect to which I will return later in this
judgment.
[13] Hartzenberg J noted that provisions such as those contained in
the statute are not unknown. Similar provisions have long existed in
terms of which local authorities have the right to resist the transfer of
immovable property until their claims for rates and other charges are
satisfied. Such provisions have aptly been referred to as embargo or
veto provisions.
[14] I turn to consider how our courts have interpreted such
provisions and determined the rights flowing from them.

[15] In Johannesburg Municipality v Cohen’s Trustees 1909 TS 811
the provision that stood to be interpreted was to the effect that no
transfer of property could be registered without a certificate by the
municipality that the rates on the property had been paid. Innes CJ
said, at 817:

‘Now reading that section in connection with other provisions of the
statute, the intention seems to have been to give to the local authority a right to
veto the transfer of property until its claims in respect of rates should be satisfied.
The result, of course, was to create, in effect, a very real and extensive
preference over the proceeds of rateable property realised in insolvency; and to
compel payment of the burden thus imposed before a sale of such property could
be carried through, even in cases where insolvency had not supervened. The
hold over the property thus given to the local authority is entirely the creation of
the statute; its object was to ensure payment of the liabilities due by ratepayers
as such, and one would therefore think that it was intended to continue until all
liabilities arising out of rates had been discharged. . .’
[16] Some years later in Rabie, NO v Rand Townships Registrar
1926 TPD 286 a similar provision was considered. It was contended
that the local authority concerned was a preferent creditor in respect
of rates due to it for the purposes of s 55(2) of the Magistrates’ Courts
Act 32 of 1917, which contained provisions similar to those of s 66(2)
of the MC Act. Greenberg J, who delivered the judgment of the Full
Bench, held that the effect of the provision was not to constitute the

local authority a preferent creditor for the purposes of s 55(2). In
dealing with reliance by the applicant on the Cohen case supra
Greenberg J said at 290:

‘The extracts quoted, in terms, deal only with the practical result of the
section and in my opinion do not show that the section creates a lien in the strict
legal sense or, in the words of s 55(2) “a claim ranking in priority” to other claims’.
And, at 292:

‘I do not think that one can go any further than to say that the result of the
right is “in effect to create a preference” or “something not wholly in the nature of
a lien or a hypothec but sui generis.” In my opinion the council’s claim was not
one ranking in priority to the mortgage within the meaning of the section.’
[17] Greenberg J described the ‘extraordinary results’ in the event of
the applicant’s contentions being upheld (at 290-291):
‘It is a fair assumption that a large number of judgment debtors who come to
such a pass that their immovable property is attached in execution will be in
arrear with the payment of their rates. If an ordinary trade creditor or the holder of
a mortgage bond wishes to execute on their immovable property, the existence
of the unpaid rates will constitute a claim ranking in priority to the debts of these
creditors and the property will not be liable to execution by the messenger. In all
these cases therefore the benefit sought to be introduced by the Magistrates’
Courts Act of providing an inexpensive form of execution will not be available.
Thus the council would not only have the right to prevent transfer being passed
but also to prevent execution being levied in the magistrate’s court on

immovables in all these cases. No matter how small the claim for rates or how
valuable the property as long as rates were unpaid there could be no execution
under s 55(2). Moreover, the security afforded by mortgage investments would
be materially decreased if bonded property is liable to be sold in execution for a
trifling claim for rates without notice to the mortgagee: the rules of the
magistrate’s court do not prescribe the precautions afforded by the practice in the
superior courts of requiring notice to the mortgagee.’
[18] As will be shown below the reasoning and conclusions in the
Rabie case, supra, have stood the test of further judicial scrutiny over
time.
[19] In South African Permanent Building Society v Messenger of
the Court, Pretoria, and Others 1996 (1) SA 401 (T) at 403A-B,
Curlewis J, in referring to the Rabie case, supra, said:

‘The decision there is correctly put in the headnote and really puts the
respondent out of Court:
“The right given to municipal councils by s 47(b) of Ord 9 of 1912 of preventing
transfer of premises until arrear rates have been paid does not constitute a ‘claim
ranking in priority’ to a mortgage over such premises within the meaning of s
55(2) of Act 32 of 1917.” ’
Dealing with the then s 15(4)(b) of the ST Act which was in terms
similar to the provisions of the statute, Curlewis J said the following at

403C-D:

‘I am not prepared to go an inch beyond what s 15(4)(b) sets out. The right
may be “not wholly in the nature of a lien or a hypothec but sui generis”, but it is
nothing more. I am pleased that this is the conclusion since commercial
undertakings (indeed the public generally) requires certainty from our law rather
than doctrinal purity or juristic rightness, and mortgage bonds have enjoyed a
certain and preferred existence for many years: this should not be likely
disturbed. If Parliament wishes to bring about a change, then the intention to do
so must be clearly expressed and the ambit of the change clearly defined.’
[20] There may of course be legislation that expressly provides for a
form of statutory hypothec in favour of local authorities and other
institutions in respect of charges owing to them and which expressly
states that their claims enjoy preference above the claims of a
bondholder. See in this regard Stadsraad van Pretoria v Letabakop
Farming Operations (Pty) Ltd 1981 (4) SA 911 (T). In the present
case we are not dealing with such a legislative provision.
[21] In the Nel case this Court considered the provisions of the
statute. In that case the appellant was the liquidator of a company
which at the time it was placed in liquidation was the owner of a
number of units in a sectional title development. These units were
mortgaged in favour of a bank. The liquidator sold the units by public
auction but was unable to pass transfer to the purchaser because of

a dispute concerning the interpretation of the provisions of the
statute.
At
134B-135D
EM
Grosskopf
JA
considered
the
Johannesburg Municipality, Rabie and South African Permanent
Building Society cases supra and said at 135C-D:

‘In argument before us it was accepted by both sides, rightly in my view,
that the juristic nature of the contested provision is the same as that of the
measures considered in the above cases. The position then is that the contested
provision, although it did not create a preference in the ordinary sense,
nevertheless gave the body corporate a power to resist transfer of units until
moneys due to it were paid. The question at issue was the exact ambit of this
power.’
[22] In the Nel case this Court held that the provisions of the statute
must be understood to create an effective preference in the event of
insolvency in favour of the body corporate in respect of its claim for
outstanding levies and that such a preference can be accommodated
in the scheme of insolvency created by the Insolvency Act 24 of 1936
as being part of the costs of realisation envisaged in s 89(1) of that
Act. It otherwise approved of the interpretation given to embargo
provisions in the Rabie and South African Permanent Building
Society cases. See 135B of the judgment.
[23] The effect of the judgments referred to in the preceding
paragraphs is that the ‘preference’ created by virtue of an embargo or

veto provision is something less than and something different from
the preference referred to in the MC Act. See in this regard CG van
der Merwe ‘Does the restraint on transfer provision in the Sectional
Titles Act accord sufficient preference to the body corporate for
outstanding levies?’ 1996 (59) THRHR 367.
[24] In para [12] above I noted that there was nothing in the
provisions of the statute that expressly elevated the embargo or veto
right of a body corporate above the rights of a holder of a mortgage
bond. If Parliament had intended them to have that effect, why should
it not have said so in express terms? It is clear that in enacting the
statute and s 15(4)(b), which was its predecessor, Parliament was
aware of the decision in the Rabie case supra but nevertheless chose
to use words typical of embargo provisions without more.
[25] Section 15B(3)(b) provides that the registrar of deeds shall not
register a transfer of a unit or of an undivided share therein unless
there is produced a clearance certificate from the local authority that
all rates and moneys due to such local authority have been paid if
provision is made by law for the separate rating of units or the
transfer will result in the establishment of a body corporate in terms of
s 36. This is a typical embargo provision as in the Rabie case. There
is no specific provision elevating the embargo right above that of a

bondholder as was the case in the Letabakop judgment supra where
the Legislature considered it necessary to protect the local authority
in that manner.  In the present case it did not in the provisions of the
statute or of s 15B(3)(b) elevate the position of the body corporate or
the local authority above that of a bondholder. The legislature must
have been aware of the ‘extraordinary results’ referred to by
Greenberg J of creating a preference such as that for which the body
corporate contends in this case.
[26] The practical effect of the statute is that, assuming the
availability of funds, a body corporate will be paid before transfer of
immovable property is effected. A reasonable mortgagee and body
corporate might arrive at an accommodation where there are
insufficient funds available to cover the total of the debts owing to
both parties ─ but neither is obliged in law to do so.
[27] If the owner of a unit in a sectional title development is
sequestrated or liquidated the statute in effect creates as against the
insolvent estate a preference in favour of a body corporate and the
payment of outstanding levies is treated as being part of the ‘cost of
realisation’ envisaged by s 89(1) of the Insolvency Act 24 of 1936.
The fact that the debt to the body corporate is satisfied as part of the
process of realisation produces the same result as if the rights

conferred by an embargo provision were preferent in the strict sense.
See CG van der Merwe supra at 385.
[28] Radebe’s estate was not sequestrated and the bank’s claim as
mortgagee is, for the reasons set out earlier in this judgment,
preferent in terms of the provisions of s 66(2) of the MC Act. The
body corporate consequently does not have the right to sell the unit in
question in execution without reference to the security afforded to the
bank by the mortgage bond. It follows that the Court below erred in
making the order set out above and that the appeal should be upheld.
[29] I have already dealt with the extraordinary results that would
follow and impact upon bondholders in the event of the body
corporate’s contentions being upheld. Hartzenberg J who heard the
application in the Court below, in his judgment at 73D-74D, before
interpreting the relevant statutory provisions, dealt with the reverse
side of the coin and considered the difficulties experienced by bodies
corporate who are faced with owners who default in their obligations
to pay levies and related costs and the consequent socio-economic
problems. These problems clearly weighed heavily with the learned
judge when he interpreted the statutory provisions in question. In an
unreported judgment in the Transvaal Provincial Division in

Regspersoon van Solitaire v Julian Candice Neeuwfan (20 May 2002-
case no: 22118/2001), Swart J expressed similar concerns.
[30] In the article by CG van der Merwe, supra, the learned author
considered whether a body corporate’s claim for outstanding levies
should not be converted into a form of statutory hypothec that would
qualify as a true preferent right. In respect of insolvency he submitted
that a body corporate’s ability to recover arrears fully may be
impeded by the existence of a pre-existing mortgage on a unit
justifying the creation of a form of statutory hypothec in favour of a
body corporate.
[31] The problems and suggested solutions referred to in the
preceding paragraphs are issues beyond our jurisdiction. Bodies
corporate have to be vigilant and take early steps to recover monies
due to them so as to minimise possible negative effects on owners of
other units within a development. In the main the problems raised are
for consideration not by the courts but by the Legislature.
[32] I make the following order:
1.
The appeal is upheld with costs including the costs of two
counsel.
2.
The order of the Court below is set aside and the following

order is substituted:
‘The application is dismissed with costs including the costs of two counsel
(to the extent employed)’.

_____________
MS NAVSA
Judge of Appeal

CONCUR:

Harms
JA
Scott
JA
Cloete
JA
Heher
JA