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[2011] ZASCA 106
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Standard Bank of South Africa Ltd v Swartland Municipality and Others (2011 (5) SA 257 (SCA)) [2011] ZASCA 106; 562/10 (1 June 2011)
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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 Senekal
2
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.
[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 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) Ltd
7
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
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.
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.
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.
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.