This is my response to George Tsotetsi's interesting overview of Registrars' Conference Resolutions 19/2005 ("RCR 19/2005") and 44/2005 ("RCR 44/2005"), which overview was published under the heading Conference resolutions on Thursday 31 August 2006, in the General category of the GhostDigest.
A. 19/2005 - Section 57
B. 44/2005 Cession of section 25 real right and substitution
- George Tsotetsi questions the correctness of the consistent application of section 57 of the DRA by deeds registries in circumstances where a bond has been passed by more than one mortgagor, and submits that: "where a co-mortgagor transfers her/his share in the relevant property, the appropriate procedure is to release the said co-mortgagor as contemplated in section 55 (DRA) and not to invoke the provisions of section 57 (DRA) as postulated in RCR 7/1994."
- For the reasons set out below, I do not doubt the correctness of Registrars' Conference Resolution 7/1994 ("RCR 7/1994") and RCR 19/2005.
- In view of the fact that section 57 (1) of the Deeds Registries Act 47 of 1937 ("the DRA") refers to "land" and "land", unless inconsistent with the context, is defined in section 102 of the DRA as including a share in land, I submit that it is inevitable to accept that section 57 of the DRA applies to a joint-mortgagor also.
- In my opinion, a crucial implication of the aforementioned definition of "land" is that, technically, a joint-owner/mortgagor/debtor, who transfers her/his whole share in land, as implied in section 34 (1) of the DRA, does not, and cannot, transfer her/his joint-owner/mortgagor/debtor's whole share in the land.
- In my opinion, George Tsotetsi's arguments/questions about the value of substituting a person who is already a mortgagor as a mortgagor and the difference between a substitution of a co-debtor and an addition of a co-debtor, can be answered as follows:
(a) In section 57 of the DRA, the legislature has made provision for a cheap and short mechanism for the substitution of debtors and joint-debtors - refer to similar substitutions provided for in sections 24 bis (3), 45 (2) (c) and 45 bis (2) (a) and (b) (iii) of the DRA. The said mechanism is an alternative to the long and expensive mechanism whereby, for example, in order to achieve the same result, an existing mortgage bond would have to be cancelled and a new one registered - refer to section 56 and 50 of the DRA.
(b) Depending upon the number of the transferees set out in the relevant deed of transfer, a substitution of debtor in terms of section 57 of the Act, read with RCR 7/1994 and RCR 19/2005, can result in an addition of more debtors. However, such addition is not incompatible with, and does not detract or subtract from, the relevant substitution.
(c) A reference, particularly to sections 24 bis (3), 45 (2) (c) and 45 bis (2) (a) and (b) (iii) of the DRA, casts a doubt on the correctness of some aspects of George Tsotetsi's understanding to the effect that a substitution will necessarily result in one person (who, according to him, cannot be a current joint-debtor) taking the place of another and the other person disappearing from the picture altogether. It is clear, for example, from section 45 (2) (c) of the DRA, that the substitution referred to therein results not only in the disappearance "from the picture altogether" of one joint-debtor but also in the substitution of the other and existing joint debtor for her/his former joint-debtor.
- For the following reasons, I am unable to fully subscribe to George Tsotetsi's views on "joint debtor" in section 3 (1) (g) of the DRA, and submit, therefore, that the words "substitution of another person for a debtor in respect of any such bond" in the said section conform to the prevailing application of section 57 of the DRA as envisaged in RCR 7/1994 and RCR 19/2005.
(a) Section 6 (b) of the Interpretation Act 33 of 1957 provides that, in every law, unless the contrary intention appears, "words in the singular number include the plural, and words in the plural number include the singular." Therefore, if the land in question is being transferred by joint-owners/debtors, "substitution of another person for a debtor in respect of any such bond" will be applied accordingly.
(b) If they were to be followed, George Tsotetsi's said views would, for example, render the provisions of sections 24 bis (3), 45 (2) (c) and 45 bis (2) (a) and (b) (iii) of the DRA nugatory because of a substitution of one existing joint-mortgagor for the other existing joint-mortgagor. Further, it would not be permissible to register a substitution of joint-transferees C and D for joint-owners/transferors/debtors X and Y under section 57 of the DRA.
- I now consider George Tsotetsi's view to the effect that "the appropriate procedure is to release the said co-mortgagor as contemplated in section 55 (DRA) and not to invoke the provisions of section 57 (DRA) as postulated in RCR 7/1994."
(a) It is significant that, whereas section 57 of the DRA applies to the transfer by an owner of "land which is hypothecated under a registered mortgage bond ……", the absolution of the transferor from any obligation secured by the bond and the substitution of the transferee for the transferor as debtor in respect of such bond, there is no provision for such transfer, absolution and substitution in section 55 of the DRA. Accordingly, I submit that section 55 of the DRA does not provide for an alternative to section 57 of the DRA.
(b) However, it is not only useful but also of particular interest to note from section 55 (1) of the DRA that the legislature is favourably disposed to, and recognises, joint-mortgaging and the continuation of a mortgage bond after the release of a joint-mortgagor and all her/his property.
(c) I make the observation that, instead of a release of a joint debtor in terms of section 55 (1) of the DRA, the legislature in section 57 of the DRA intended to preserve a joint-mortgage by way of substitution of a another joint-mortgagor for an existing joint-mortgagor provided, amongst other things, that the transfer in question is of the whole land, or the whole share in the land, being transferred.
(d) It is also significant to note the implication of the difference between "all the property" in section 55 (1) (b) of the DRA and "the whole of the land" in section 57 (1). In my opinion, the former is directed at one or more properties while the latter relates to the integrity of the land, or a share in the land, being transferred by one deed of transfer.
- In conclusion and by way of a summary, I submit that, as envisaged in RCR 7/1994 and RCR 19/2005, section 57of the DRA should be applied, for example, in the following cases:
(a) A and B are the mortgagors of an erf, which they own in undivided shares, and A transfers her/his whole share in the erf either to B alone, B and C jointly or C alone.
(b) X, the owner of Erf 66, and Y, the owner of Erf 99, have passed one mortgage bond over their erven. X transfers the whole of Erf 66 to either Y alone, Y and Z jointly or Z alone.
(c) J, the mortgagor of Even 77 and 78, transfers the whole of Erf 77 to either K alone, K and L jointly or L alone.
- For the sake of completeness, it is necessary to mention that George Tsotetsi's statement to the effect that "section 57 of Act 57 of 1937 refers only to the substitution in respect of a bond on land….." is subject to the definition of "land" in the Act - refer to paragraph A 3 above.
- I am not convinced that "land" in section 57 of the DRA is the reason for the disqualification of a substitution under section 57 of the DRA of a debtor for a mortgagor of the real right of extension referred to in section 25 (1) read with section 25 (4) of the Sectional Titles Act, 1986 (Act No. 95 of 1986) ("the STA"). In my opinion, the actual and only reason for the said disqualification is to be found in section 18 of the STA, which reads as follows:
"The provisions of sections 56 and 57 of the Deeds Registries Act shall apply mutatis mutandis with reference to the transfer of any mortgage unit or undivided share in a unit, the cession of any mortgaged lease of a unit or undivided share in a unit, the cession of any mortgaged real right in or over a unit or an undivided share in a unit, and the transfer under section 17 of this Act of any mortgaged common property or land or an undivided share therein."
04 September 2006