Bay Loan Investment (Pty) Ltd v Bay View (Pty) Ltd

• Jurisdiction: South Africa
• Judge: van Winsen J
• Judgment Date: 07 February 1972
• Citation: 1972 (2) SA 313 (C)
• Hearing Date: 24 November 1971
• Court: Cape Provincial Division

Bay Loan Investment (Pty) Ltd v Bay View (Pty) Ltd
1972 (2) SA 313 (C)

1972 (2) SA p313

Citation	1972 (2) SA 313 (C)
Court	Cape Provincial Division
Judge	van Winsen J
Heard	November 24, 1971
Judgment	February 7, 1972

Flynote : Sleutelwoorde

Mortgage — Sec. 54 of Act 47 of 1937 — Object and scope of — D Validity of bond — Company — Financial assistance by company — What amounts to — Act 46 of 1926, as amended, sec. 86 bis (2).

Headnote : Kopnota

The Court will not readily hold that a registered mortgage bond, regular on the face of it, is in fact a nullity.

In enacting section 54 of the Deeds Registries Act, 47 of 1937, the Legislature had in mind to eliminate the uncertainty as to the identity of the holder of the rights of a mortgagee which uncertainty might flow E from the fact that the identity of the mortgagee has to be sought in a contract de hors the bond, e.g. a contract of agency. Such a contract would be subject to variations not reflected in the bond. If certainty can be achieved by recognising the mortgagee named in the bond as the only holder of the rights thereunder no good reasons seem to exist for a presumed intention on the part of the Legislature that the bond should be visited with nullity.

The securing of the loan indebtedness by a company to the person F surrendering control of that company by reason of the sale by him of his shares in the company does not constitute the rendering of financial assistance by the company as contemplated by section 86 bis (2) of Act 46 of 1926, as amended. G

Case Information

Action for provisional sentence. The facts appear from the reasons for judgment.

M. Seligson, for the plaintiff.

L. Levy, for the defendant.

Cur adv vult.

Postea (February 7th).

Judgment

H van Winsen, J.:

For the reasons and under the circumstances stated in my judgment of 10th September this action was postponed to 24th November, 1971. [*] On that day plaintiff again applied for provisional sentence. The essential facts in relation to this matter are set out in

1972 (2) SA p314

van Winsen J

the above judgment and do not require repetition. Defendant opposed the application for judgment on the ground that (1) the bond sued upon was a nullity in that it conflicted with the terms of sec. 54 of Act 47 of A 1937 and/or with sec. 86 bis (2) of Act 46 of 1926, and (2) on the papers before the Court defendant had established upon a balance of probabilities that the terms of the bond did not represent the true agreement between the parties and that, if the bond were to be amended to conform to the true agreement, defendant would not have been proved to have committed a breach of its obligations under the bond.

B In the course of the judgment I shall refer to this agreement as 'the contract'.

It appears from the papers filed with the Court that Messrs. Tollman, Shapiro and the Estate Late Solomon Tollman in April, 1968, sold their total shareholding in defendant company to Corlett Drive West Rand C (Pty.) Ltd. At the time of the sale the sellers and one other were loan creditors of defendant company, and it was a term of the contract that a second mortgage bond be passed by defendant company in favour of the existing loan account creditors or their nominee to secure the defendant company's indebtedness to them. The bond sued upon is the bond passed in D terms of this contract and it recites that it is in respect of money lent and advanced but does not say that the money was advanced by the plaintiff company, and it can be taken as admitted that it was intended to secure money owing by defendant company to the loan creditors above referred to. Sec. 54 of Act 47 of 1937 provides that no mortgage bond shall be passed in favour of a person as agent or nominee of a E principal. Hence it is argued that because the bond was registered in breach of sec. 54 it is a nullity. No authority was advanced in support of this proposition save that the Court was referred to the case of Lief, N.O. v Dettman, 1964 (2) SA 252 (AD), in which it was held that the section in question did not permit a distinction between the F registered mortgagee as a purely nominal holder and some other person to be regarded in law as the beneficial holder of the rights embodied in the bond.

The relevant facts of this judgment are summarised in a portion of the head-note in the following form:

'After a mortgage bond for R12 000 had been passed in favour of a board to secure a loan granted by the board to the mortgagor, the board G had granted respondent a participation in the bond in consideration of payment of R4 500. Subsequently it granted a further participation to the extent of R1 600. Later the board purported to confirm the participations in the bond by ceding to the respondent 'its rights, title and interest in and to the said bond' to the extent of R6 100 in terms of a written instrument, headed a cession. Thereafter the board had granted further participations to other persons and finally delivered the bond to one of the participants who, with the consent of the board, had delivered it to the liquidator of the...