IN THE HIGH COURT OF SOUTH AFRICA,
FREE STATE DIVISION, BLOEMFONTEIN
Reportable:                                  YES
Of Interest to other Judges:       YES
Circulate to Magistrates:            NO	

In the matter between:                                        Case number: 4075/2020	

MATJHABENG LOCAL MUNICIPALITY

and

JUDITH MCDONALD

REGISTRAR OF DEEDS, BLOEMFONTEIN

MINISTER OF RURAL DEVELOPMENT AND LAND AFFAIRS, GOVERNMENT OF THE RSA

MEC, DEPARTMENT OF PUBLIC WORKS & INFRASTRURE
	
Applicant

1st Respondent

2nd Respondent

3rd Respondent

4th Respondent	
In the matter between:                                        Case number: 4077/2020	

MATJHABENG LOCAL MUNICIPALITY

and

JOHAN GODFRIED HARTMAN
LANCE MAREUIL AITCHISON                           
REGISTRAR OF DEEDS, BLOEMFONTEIN

MINISTER OF RURAL DEVELOPMENT AND LAND AFFAIRS, GOVERNMENT OF THE RSA

MEC, DEPARTMENT OF PUBLIC WORKS & INFRASTRURE

	
Applicant

1st Respondent
 2nd Respondent
3rd Respondent

4th Respondent

5th Respondent	
In the matter between:                                        Case number: 4078/2020	

MATJHABENG LOCAL MUNICIPALITY

and

ANNA MARGARETHA WAGENAAR

FREDERICK JOHANNES WAGENAAR
REGISTRAR OF DEEDS, BLOEMFONTEIN                       

MINISTER OF RURAL DEVELOPMENT AND LAND AFFAIRS, GOVERNMENT OF THE RSA

MEC, DEPARTMENT OF PUBLIC WORKS & INFRASTRURE	
Applicant

1st Respondent

2nd Respondent
3rd Respondent

4th Respondent

5th Respondent	

CORAM:			DAFFUE, J

HEARD ON:		21 JANUARY 2021

JUDGMENT BY:		DAFFUE, J	
_________________________________________________________

DELIVERED ON:	19 FEBRUARY 2021 

This judgment was handed down electronically by circulation to the parties’ representatives by email, and release to SAFLII.  The date and time for hand-down is deemed to be 11:00 on 19 February 2021.
_________________________________________________________

I   	INTRODUCTION 

[1]	The legal maxim, bona vacantia, deriving from Roman law, is an established legal principle since time memorial.  It was utilised in case of a property owner dying without a will and in the absence of intestate heirs.  During the early imperial period such property became the property of the imperial treasury, the fisc.  In English law the same principle was adopted, ie ownerless property, whether in the case of an owner dying without a will and intestate heirs, or upon dissolution of a company, accrued to the Crown.  Successive English Companies Acts confirmed this principle pertaining to companies and the principle is yet again confirmed in the latest Companies Act.   The legal maxim has been applied in South Africa for at least a century as is evident from the judgments in Spangenberg and Baker, as well as numerous judgments thereafter as will be shown below.  I would have thought that the legal principles are unambiguous and clear. 

[2]	The question to be asked in the three cases to be adjudicated by me is whether our Constitution has changed the common law. The applicant, a local municipality, submits that the common law in this regard is not relevant anymore in the light of our Constitution and seeks relief in its favour as will be shown below.  The relief claimed in all three applications is exactly the same and consequently one judgment is delivered.

[3]	Deregistration of companies failing to comply with statutory requirements has become the order of the day.  There is reason to believe that other municipalities will in future seek similar relief as in casu.

II	THE PARTIES

[4]	The applicant in all three cases is the Matjhabeng Local Municipality which includes the towns Welkom, Virginia, Odendaalsrus, Hennenman, Ventersburg and Whites.  Adv MC Louw appeared for the applicant on instructions of Phatshoane Henney Inc.  

[5]	The Registrar of Deeds (the Registrar), the Minister of Rural Development and Land Affairs of the Republic of South Africa (the Minister) and the MEC for the Department of Public Works and Infrastructure, Free State Province (the MEC) were cited as respondents in all three applications.  The Registrar filed a report in terms of the Deeds Registries Act (The Deeds Act) which I shall discuss below.  The other two parties, the Minster and the MEC, gave notice through the Office of the State Attorney in Bloemfontein that they will abide the decision of the court.

[6]	The first respondent in application 4075/2020 is Judith McDonald a major female and former director of Small Fry (Pty) Ltd, a company deregistered by the Company and Intellectual Property Commission (the CIPC) on 24 February 2011.  The deregistered company is the owner of two immovable properties, to wit Erf 44, Odendaalsrus, district Odendaalsrus, Free State Province and Erf 45, Odendaalsrus, district Odendaalsrus, Free State Province by virtue of Deeds of Transfer T6781/1988 and T3011/1984 and respectively.  Contrary to applicant’s version in the founding affidavit that no mortgage bonds are registered over the properties, mortgage bond B6657/1991 is indeed registered over both properties in favour of Chevron South Africa (Pty) Ltd in the amount of R60 000-00 as is evident from the report filed by the Registrar.

[7]	The first and second respondents in application 4077/2020 are Johan Godfried Hartmann and Lance Mareuil Aitchison, the former directors of St Helena Hotels (Pty) Ltd, which company has been deregistered by the CIPC on 28 February 2015.  The deregistered company is the registered owner of Erf 707, Welkom extension 1, district Welkom, Free State Province by virtue of Deed of Transfer T3368/1956.  No mortgage bond is registered over the property.

[8]	The first and second respondents in application 4078/2020 are Anna Margaretha Wagenaar and Frederick Johannes Wagenaar, the former directors of Defcor Konstruksie (Pty) Ltd, a company deregistered by the CIPC on 16 July 2010.  The deregistered company is the registered owner of Erf 9095, Welkom, extension 24, district Welkom, Free State Province by virtue of Deed of Transfer T5967/1986.  Contrary to applicant’s version in the founding affidavit, mortgage bond B8269/1987 is registered over the property in favour of ABSA Bank Ltd.

III	APPLICANT’S CLAIM IN RESPECT OF ARREAR RATES AND TAXES

[9]	The amounts owed by Small Fry (Pty) Ltd to applicant for arrear rates and taxes are R98 796.45 and R99 473.56 in respect of the two properties respectively.

[10]	The amount owed by St Helena Hotels (Pty) Ltd to the applicant is R441 374.39.

[11]	The amount owed by Defcor Konstruksie (Pty) Ltd to the applicant is R1 958 725.05.

IV	THE RELIEF CLAIMED

[12]	Applicant claims that:

12.1	the properties registered in the names of the various deregistered companies “be declared bona vacantia the property of the Applicant” and that

12.2	the Registrar of Deeds be authorised and directed to transfer the properties to the applicant.

V    	ORDER OF 3 DECEMBER 2020

[13]	The matter came before me in the unopposed motion court of 3 December 2020.  As indicated, the Minister and MEC gave notice through the State Attorney that they would abide the decision of the court.  The Registrar came to the same conclusion in the reports filed in respect of all three applications.  Therefore, all three applications are unopposed.  The Registrar correctly held that s 6 of the Deeds Act, inter alia relied upon by applicant, does not apply in casu as the section deals with the cancellation of registered deeds. It is not necessary to say anything more in this regard.  The Registrar also referred to s 33 of the Deeds Act which deals with the registration of title other than in the ordinary process.  Subsection 33(1) reads as follows:

Section 33.  Registration of title by other than the ordinary procedure:
(1)	Any person who has acquired in any manner, other than by expropriation, the right to the ownership of immovable property registered in the name of any other person and who is unable to procure registration thereof in his name in the usual manner and according to the sequence of the successive transactions in pursuance of which the right to the ownership of such property has devolved upon him, may apply to the court by petition for an order authorizing the registration in his name of such property.” (emphasis added)
	
[14]	As the Registrar indicated, s 33(1) applies where a person has acquired ownership in any other manner other than expropriation and cannot obtain registration in his name in the usual manner.  It is further submitted by the Registrar, without suggesting or advising that any order should be granted, that if the court is persuaded to grant relief to applicant, the order should be issued in terms of s 33 (and not s 6) of the Deeds Act.  As mentioned, the Registrar abides by the decision of the court.

[15]	The three applications were enrolled on the unopposed motion court roll of 3 December 2020 presided over by me.  Bearing in mind the principles applicable to the legal maxim, bona vacantia, I informed applicant’s counsel, Mr Louw of my reservations in respect of the relief sought.  I postponed the matter to 21 January 2021 with leave to file written heads of arguments on/or before 15 January 2021.  

VI     BONA VACANTIA:  ESTABLISHED LEGAL PRINCIPLES

[16]   In De Villiers & Others v GJN Trust and Others Van der Merwe JA recently confirmed the principles applicable to bona vacantia with reference to Rainbow Diamonds (Edms) Bpk en Andere v Suid-Afrikaanse Nasionale Lewensassuransiemaatskappy, repeating that such ownerless property automatically passes to the State without any form of delivery. 

[17]	In the locus classicus, Rainbow Diamonds the Appeal Court (as it was known then) made it clear that, given the existence of practice and procedure over many decades, Treasury shall exercise the right to decide whether the State will lay claim to any undistributed money or claims upon the dissolution of a company and that the prerogative of the State has never been abolished by legislation.

[18]	In Miller and others v Nafcoc Investment Holding Co Ltd and others the court confirmed the established principle that deregistration “puts an end to the existence of a company” at which stage its “corporate personality ends in the same way that a natural person ceases to exist at death.”

[19]	Binns-Ward J reiterated in Walker Engineering CC t/a Atlantic Steam Services v First Garment Rental (Pty) Ltd (Cape) the following established principle:
	“The effect of the deregistration of a company is that all its property, including any claims it might have against third parties, thereupon vest in the State as bona vacantia….. Thus, without any need for an act of cession or anything of the like, the state has the right, should it so decide, to prosecute the action against the defendant.”  
          
[20]	In Walker Engineering the deregistered company was the plaintiff in a civil trial.  There was no appearance for the plaintiff on the trial date.  The learned judge also dealt with the interest of the Minister of Finance, stating with reference to Rainbow Diamonds that it has always been a requirement under the 1973 Companies Act when an application for restoration of the registration of a company was made to require “as a matter of practice that notice of the application be given to the Minister of Finance and the head of any other department which might have any interest by virtue of the vesting of the company’s assets in the State as bona vacantia upon the company’s deregistration.”

[21]	In Mckersie v SDD Developments (Western Cape) (Pty) Ltd Rogers AJ (as he then was) considered the claim of a sectional title owner for registration of a registered right to exclusive use in his name in accordance with the provisions of s 33 of the Deeds Act.  The learned judge made it clear that it was apparent from the few reported decisions on s 33 that the section is only applicable in those cases where an applicant had acquired ownership of property, but could not obtain registration in his name in the usual way.  An obvious example is when a person has become the owner of property by means of acquisitive prescription.  It must be emphasised that any order in terms of s 33 is discretionary in nature, but in order for the court to exercise its discretion, an applicant must bring himself within the jurisdictional requirements of s 33(1). 

VII	EVALUATION OF THE SUBMISSIONS BY APPLICANT’S COUNSEL 

[22]	Mr Louw duly complied with my directive of 3 December 2020 and I wish to extend my gratitude to him for his detailed heads of argument.  On 21 January 2021 I heard oral legal argument during a virtual meeting on the Webex internet platform whereupon I reserved judgment.

[23]	As indicated earlier, the contentious point in casu is whether the applicant has become owner or acquired the right to ownership of the immovable properties registered in the names of the three deregistered companies.

[24]	In his written heads of argument Mr Louw quoted from Ex parte Minister of Lands to bolster his argument that it was possible, even in terms of the common law, for a municipality to obtain registration of transfer of immovable property that has become bona vacantia.  He conceded during oral argument that he misunderstood the judgment and that neither this case, nor any other reported or unreported case in this country has set a precedent that bona vacantia vest in a municipality, either automatically or upon a declaration to that effect.  

[25]  In Minister of Lands the Cape Town Municipality was anxious to acquire immovable property which had become bona vacantia for the purposes of a housing scheme.  It requested the Department of Lands to make an application to the court to have the property declared bona vacantia and to be registered in the name of the Government which orders were ultimately granted.  Clearly, this judgment does not support the initial views of Mr Louw set out in his written heads of argument.  

[26]   In his heads of argument Mr Louw also referred to a judgment of the English Court, to wit Re Maldonado (deceased), State of Spain v Treasury Solicitor in support of his argument that bona vacantia vest in a local authority.   Mr Louw did not read the judgment in its proper context and conceded that during oral argument.  The English court never held that bona vacantia devolved upon a municipality or township, instead of the Government or “Crown.”  In that matter a Spanish citizen, the owner of property in England, died without a will and any intestate heirs.  The State of Spain brought the application and the court held as follows: 
	“It also appears to me to accord with natural justice, namely, that the property of a deceased Spanish woman who died interstate should be distributed among charities in her own locality in Spain rather than go to the English Crown.  I am satisfied that by Spanish law, the State of Spain is the sole and universal heir of the deceased, and that, therefore, the deceased’s English assets are not ownerless, but belong to the State of Spain.”

[27] 	I indicated that a long line of authority dispels the argument that the applicant automatically became the owner of the ownerless immovable properties as a consequence of deregistration of the three companies or that it acquired the right of ownership.  The common law does not support applicant’s claim of ownership and registration of the properties in its name.  The next question to be answered is whether I may develop the common law in order to assist applicant in its quest for relief.  I shall deal with this aspect in the next paragraphs.

[28]  The applicant wants this court to overrule the common law and a long line of authorities with its reliance on the Constitution of South Africa and the Local Government:  Municipal Systems Act (the Systems Act).  Having conceded the common law position, Mr Louw submitted that in terms of s 229 of the Constitution the applicant as a municipality is obliged to levy and collect rates and taxes from its residents and property owners and in terms of ss 5(1)(g) and 5(2)(b) of the Systems Act there is a duty on ratepayers to make corresponding payment for such municipal services.  Furthermore, the applicant has the right to govern on its own initiative the local government affairs of its community in terms of s 151(3) of the Constitution, subject to national and provincial legislation.  Also, so he submitted, in terms of s 156(1) of the Constitution the applicant has the executive authority in respect of and has the right to administer local government matters listed in Part B of both Schedules 4 and 5 of the Constitution, which authority inter alia includes “municipal public works in respect of the needs of municipalities in the discharge of their responsibilities to administer functions specifically assigned to them under the Constitution or any other law.”  

[29]	In developing his argument Mr Louw submitted that the applicant’s authority referred to in the previous paragraph includes the right to administer properties within its jurisdiction which are bona vacantia.  The exercise of such right is fundamental to municipalities in general and the applicant in particular.  The applicant has an obligation to collect revenue and provide services in a financially sustainable manner.  He submitted in this regard that s 151(4) of the Constitution dictates that “(t)he national or a provincial government may not compromise or impede a municipality’s ability or right to exercise its powers or perform its functions.”  

[30]	Mr Louw concluded his argument in respect of the need to change the common law by relying on Fedsure Life Assurance Ltd and others v Greater Johannesburg Transitional Metropolitan Council and others in order to show that original powers have been granted to municipalities in terms of the Constitution, while before then, municipalities merely had administrative powers.  Based on the authorities granted to municipalities by our Constitution and the consequent decentralised governance model, designating specific powers and functions to each sphere of government, Mr Louw argued vehemently that this court should deviate from the long established common law principle explained above.  According to him the Constitution has changed the common law.

[31]	I accept that if a rule of the common law is incompatible with constitutional values, courts have a constitutional duty to develop the common law to accord with those values.  This was made clear by Harms JA in Tsung v Industrial Development Corporation of SA Ltd. The learned judge of appeal continued as follows:
	“It has often been said that our law is a virile, living system which has to adapt itself to deal with new challenges and changing conditions, but such development must be consistent with the inherent basic principles of the law.  This enables higher courts after due reflection and on sound policy grounds to change the direction of the law because ‘the law must be sensitive to human development and social change’ and ‘judges must necessarily look to the present and to the future as well as to the past’.”  

[32]	It is convenient to also quote from the judgment of the Constitutional Court in Carmichele v Minister of Safety and Security (Centre for Applied Legal Studies Intervening) as Harms JA also did:
	“In exercising their powers to develop the common law, Judges should be mindful of the fact that the major engine for law reform should be the Legislature and not the Judiciary.”  
           The Constitutional Court in Carmichele continued to quote the following dictum of Jacobucci J, cited with approval by Kentridge AJ in Du Plessis and Another v De Klerk and Another : 
        “Judges can and should adapt the common law to reflect the changing social, moral and economic fabric of the country.  Judges should not be quick to perpetuate rules whose social foundation has long since disappeared.  Nonetheless there are significant constraints on the power of the Judiciary to change the law….  In a constitutional democracy such as ours it is the Legislature and not the courts which has the major responsibility for law reform…  The Judiciary should confine itself to those incremental changes which are necessary to keep the common law in step with the dynamic and evolving fabric of our society.” (Emphasis added)	

[33]	It is necessary to say something about State land referred to in some relevant statutes.  State land, in years gone by referred to as Crown land, is all the land within the borders of South Africa and beyond belonging to the government.  By virtue of our Constitution ownership thereof vests in the President of South Africa as the Head of the State who also exercises the right of disposal in respect thereof.  Consequently, all registrations of State land are in principle and in practice done in the name of the Republic of South Africa.

[34]   Nothing prohibits municipalities to purchase immovable properties in their own names to for example develop townships.  Once development has taken place and individual erven sold and transferred to private owners, municipalities enjoy executive authority and the right to administer such remaining land within its boundaries designated as public spaces such as streets, parks and the like in accordance with the principles relied upon by Mr Louw set out in detail above.  In terms of our law municipalities have specific competencies over immovable property vested in them.  This is not in doubt, but the crucial question to be answered is whether a municipality such as applicant in casu automatically becomes owner of bona vacantia situated within its municipal boundaries, alternatively acquires the right to ownership upon deregistration of the registered owner of the property. 

[35]	The Public Finance Management Act (PFMA), enacted during our present constitutional dispensation, regulates financial management in the national and provincial governments to inter alia ensure that the assets of those governments are mentioned efficiently and effectively.  Section 76(1)(k) of the PFMA provides that the National Treasury must make regulations or issue instructions applicable to departments concerning “the alienation, letting or other disposal of state assets.” Section 76(2)(i) of this Act provides that the National Treasury may make regulations or issue instructions applicable to departments concerning “assets which accrue to the state by operation of any law.”  The Schedules to the PFMA deal with inter alia constitutional institutions, major public entities and other public entities without any reference to local authorities.

[36]	Regulation 10.2.1 of the Treasury Regulations provides as follows:
“10.2	Assets accruing to the state by operation of any law (section 76(2)(i) of the PFMA) 
10.2.1	Where any money, property or right accrues to the state by operation of law (bona vacantia), the relevant treasury may exercise all powers, authority and prerogatives, and fulfil any obligation on behalf of the state.”

[37]	Mr Louw submitted that the above regulation is not cast in peremptory terms because it refers to “prerogatives.”  He emphasised, with reference to the Land Affairs Act that the national Department of Public Works is tasked with acquiring land for public services falling within the ambit of the various State departments.  In this regard the Land Affairs Board, controlled by the Department of Public Works, is central in the process.  Any controversy and/or uncertainty in respect of powers of acquisition or expropriation mentioned by Mr Louw with reference to legal writers in their text books does not at all assist applicant.  No writer has ventured to suggest that a municipality automatically becomes owner of or is entitled to ownership of ownerless property – bona vacantia – situated within its municipal boundaries.

[38]	It was always accepted that National Treasury should be cited in applications for the reinstatement of a deregistered company or close corporation.  The 1973 Companies Act provided for reinstatement of deregistered companies by order of court, but this process now falls within the province of the CIPC as is apparent from the provisions of s 82(4), save perhaps in so far as s 83(4) might be applicable.  The prescribed manner and form for such an application are contained in the regulations issued in terms of the Companies Act.  A number of requirements must be met by an applicant which do not have to be set out herein, but one thereof is the written confirmation from National Treasury and the Department of Public Works indicating that such departments have no objection to the reinstatement of the company if it has immovable property.  	This requirement does not mention a local authority such as a municipality at all.  The Local Government:  Municipal Finance Management Act deals with the management of the financial affairs of municipalities.  This Act does not contain similar provisions as the PFMA pertaining to bona vacantia for obvious reasons: local authorities such as municipalities do not acquire ownership of ownerless property, this being the entitlement of the State.
	
[39]	When I enquired from Mr Louw why it was deemed necessary to approach the court for relief if the applicant as a component of the State automatically became owner of the bona vacantia and in circumstances where neither the Minister, nor the MEC or any other organ of state apparently disputes its entitlement, he responded that the orders sought were required for the purpose of legal certainty.  But he has not pointed to any dispute in this regard.  Mr Louw also fears that the Registrar may refuse to transfer the properties when applicant in future seeks to sell and transfer same to third parties.  

[40]	In order to grant relief in favour of the applicant this court will have to depart from the common law and a long list of authorities.  I am not convinced that a development as suggested by Mr Louw will be consistent with inherent basic principles of our law following upon the promulgation of our Constitution.  It will not be a case of adapting “the common law to reflect the changing social, moral or economic fabric of the country,” but a dramatic departure from existing legal principles.  Such a major change in order to reform our law is the prerogative of the Legislature and not the Judiciary.  In fact, the PFMA, its regulations and Schedules are indicative of the Legislature’s intention not to change the common law principles in respect of bona vacantia.

[41] 	The properties automatically became vested in the State upon deregistration of the three companies.  Nothing prohibits National Treasury to decide on how the properties should be liquidated and what to do with the proceeds thereof.  The liabilities of the deregistered companies have not been extinguished upon deregistration, but only rendered unenforceable as long as deregistration subsists.  No doubt, the applicant’s claims in respect of rates and taxes need to be paid as a first charge against the properties.  The bondholders remain preferent and secured creditors.  The application papers have not been served on the bondholders, but they are not prejudiced, bearing in mind my conclusions. 

VIII    CONCLUSION

[42]	The applicant is not entitled to any relief.  I am not prepared to grant the first prayer contained in the notice of motion, ie a declaratory order in terms whereof it is declared that the applicant is the owner of the bona vacantia, to wit the properties presently registered in the names of the three deregistered companies.  Ownership in the immovable properties has automatically passed to the State, being the government of the Republic of South Africa.  Even if the applicant was successful in respect of its first prayer, the second prayer, ie directing the Registrar to transfer the properties to applicant, would be superfluous for the reasons advanced herein.

IX    ORDER

[43]	The following order is issued in all three applications, to wit application numbers 4075/2020, 4077/2020 and 4078/2020: 

The application is dismissed.

_______________
J P DAFFUE, J

On behalf of Applicant	:	Adv MC Louw
Instructed by	:	Phatshoane Henney Inc
			Bloemfontein