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CIV/APN/350/99

IN THE HIGH COURT OF LESOTHO

In the matter between:

QUNITINO GONCALVES VICENTE APPLICANT

and

LESOTHO BANK LIMITED RESPONDENT

JUDGMENT

Delivered by the Honourable Mr. Justice T. Monapathi on the 21st day of October 1999

It has been said in this case, for the Applicant, that the Respondent Bank (the Bank) has taken the law unto itself (to the property of the Applicant) when it asked for execution over the property of one Mooki Vitus Molapo (Molapo) who was mortgagor over the property at Maputsoe (being Land Act lease number 23123-213) mortgaged in favour of the Bank. The mortgage agreement had not been cancelled and instead the Bank had foreclosed.

Applicant sought, on urgent motion, for the following Orders:

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1. Dispensing with the normal periods of notice prescribed by the Rules.

2. Interdicting the respondent from selling the Applicant's immovable property consisting of business premises on a portion of the plot bearing Land Act Lease number 23123-213 situate at Maputsoe, in the Leribe district which portion measures 1384 square metres save pursuant to a judgment by a court of competent jurisdiction against the Applicant in favour of the respondent.

3. Interdicting the sheriff and deputy-sheriffs of this Honourable Court from acting upon any writ of execution or other similar instrument purporting to authorise such sale.

4. Directing the respondent to pay the costs of this application.

5. Granting the applicant further or alternative relief.

The Bank filed opposition in terms of Rule 8(10)(c) and raised the following points of law:

1. The applicant has no locus standi to bring this application. Refer to Section 35 (1) (b) read together with subsection (5) thereof of the LAND ACT 1979;

2. The applicant has no locus standi to sue as he was not a party the mortgage bond on Lease No. 23123-213. (Parties have privity in a contract);

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3. The agreement of sale between applicant and Molapo creates personal rights between them. The rights are not binding on the Bank which has a real right;

4. This application is frivolous and it deserves costs on attorney and client scale.

The facts which were mostly common cause were as follows:

The Applicant who was a male trader residing at Maputsoe in the district of Leribe also carried business activities at the locality. The Respondent was Lesotho Bank Limited a government co-operation duly registered as such and according to the laws of Lesotho. It carried on banking activities in Lesotho and had its main office in the Maseru Urban Area.

During or about the year 1995 the Applicant purchased from Molapo certain immovable property consisting of business premises situate on a portion of a site belonging to the said Molapo at Maputsoe bearing Land Act lease number 23123-213 for the sum of M225,000.00 (Two Hundred and Twenty Five Thousand Maloti). Applicant had previously been occupying the portion of the land on payment of rental. The land had been undivided.

In view of the fact that the above property had been mortgaged by Molapo to the Respondent Bank it became necessary to obtain Respondent's consent to the sub-division of the original plot to enable the Applicant to secure a land lease over the portion allegedly purchased by the Applicant. The portion earmarked for division to the Applicant was duly surveyed by the Department of Lands and

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Physical Planning who undertook so. A plan was drawn by the said department and the portion was clearly shown in the copy of the plan which was annexed as QGV "1" to the founding affidavit

A letter dated the 15th July from the Respondent was annexed as QGV "2". It was directed to Molapo's attorneys Snyman and Co. It related to "Release of certain portion of plot 23123 Maputsoe - M.V. Molapo/O.G. Vicente." After indicating that it referred to the contents of the said attorneys letter of 2nd April 1998 it went on to say:

"We grant our consent to the subdivision subject to the following conditions:

1. That the value of the subdivided plot which will remain the Bank's security should not be below Ml70 000.00 (One Hundred and Seventy Thousand Maloti);

2. that a guarantee for payment of the proceeds of the sale of the portion should be made to Lesotho Bank;

3. that a bond amounting to M170 000.00 (One Hundred & Seventy Thousand Maloti), should be passed over the remaining portion to secure Maputsoe Agro fuel's indebtedness to the Bank;

4. that the lease of plot 23123-213 shall be released upon submission of the valuation report of the portion to the sub-divided and submission of guarantee for payment of the proceeds of the sale to the Bank". (My underlining)

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The Applicant made an opening salvo with a reference to the said QGV "2" at paragraph 4 of the founding affidavit by saying:

"It will be apparent................. that all conditions attached to the consent by the respondent had to be fulfilled by the said Molapo not by me. My only obligation was to pay Molapo the said purchase price which I duly did".

The suggestion was clearly that the agreement between Molapo and the Bank was a personal one to which the Applicant was not privy. In the same vein it was not a matter of concern to the Applicant (as he said) whether the conditions were fulfilled or not.

It was furthermore said that when the department of Lands and Physical Planning sought release of the original land lease document by the Respondent to the department, to enable it to issue new leases reflecting the said sub-division to Applicant, Respondent refused to do so. It contended that the fourth condition of the said QGV "2" had not been satisfied.

The Applicant then learned about two months before the launching of the application from the said Molapo's attorneys that the Respondent intended to sell the entire property, including the portion earmarked for the Applicant, to liquidate the debt owing to the Respondent by the firm Maputsoe Agro Fuel referred to in QGV "2" which had been secured by the said mortgage.

The Applicant said he attended on both Molapo's attorneys and the Respondent to plead that the sale ought not affect the property "known by the

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Respondent" to be the Applicant's and for the improvements of which Applicant had spent M1000,000.00 (One Hundred Thousand Maloti) should not be sold. The Applicant said he was in the dark with regard to "by what right respondent is entitled to do so". Applicant received no co-operation. Applicant say if the sale went on he would suffer irreparable harm if the sale of his portion was not interdicted. And that the sheriff and deputy sheriffs ought to be interdicted from acting upon any writ of execution or similar instrument purporting to authorize such sale.

The Applicant made the following submissions which deserved to be recorded in their simple terms. The Respondent knew of the agreement between the Applicant and Molapo which it consented to. The non-fulfilment of any conditions between Molapo and the Respondent could not deprive the Applicant of the rights he had acquired as a result of the agreement. The Court could not incline to accept that the alleged consent by the Respondent which was so heavily conditional amounts a transfer of any kind. I took the view that if the conditions were not all fulfilled the Applicant could not seriously hope to benefit to extent of someone who has acquired a leasehold over the property.

It was further submitted that when the Respondent foreclosed and sought to sell it could not do so (more especially the latter) without reference to the rights of the Applicant and "save pursuant to a judgment by a Court of competent jurisdiction" against the Applicant in favour of the Respondent. The act of the Respondent in proceeding with the sale or causing such sale without reference to the Applicant amounted to a denial of justice and a taking of the law into its hands. This would be the case regardless of the nature of the right of the Respondent vis a vis Molapo. The Applicant said he was being denied protection by the law "at all events" for improvements on the mortgaged land which he owns. The fact that

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these improvements form part of the property under a mortgage bond would entitle Respondent to cancellation of that mortgaged sale by order of a Court of law for suitable relief but the Respondent was not entitled simply to ignore that sale of land to Applicant and pretend that it did not exist.

I accepted as a general principle that the Land Act 1979 in conformity with previous legislation and Sesotho customary law, distinguishes between the right to occupy or use land and the rights to improvement thereon. With regard to the land itself it cannot be owned as ownership of all land in Lesotho rests in the nation. Hence the highest right as individual can hold in any piece of land in Lesotho is a land lease issued by the Commissioner of Lands acting on behalf of the State. On the other hand improvements on the land can be owned.

An illustration of the nature of rights over land is firstly that in terms of section 42(7) where land lease is terminated by the Minister the lessee is entitled to receive the value of improvements made by him on the land. Similarly in terms of section 56 where land held under a lease is set aside for public purposes in terms of section 54, the Minister is liable to pay the lessee the value of the improvements effected by the lessee on the land so too in terms of section 82 where there has been an allocation on the same land to two or more persons (rival claims). The ownership of the improvements effected on that land alone confers the right of occupation of the same on the person who has made such improvements. See also section 84 of the Land Act whose effect is that a person may receive compensation for improvements under certain conditions. None of those conditions apply here.

would observe mostly clearly that the Applicant may have made improvements on the land but he surely cannot be likened to a person possessed of a rival claim in terms of section 82 of the Land Act. He cannot be said to have

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been allocated the portion by lawful authority; in this case the Commissioner of Lands after the Minister's consent. Whatever meaning is attached to the attempt by functionaries of the Commissioner of Lands which ended in the compilation of document QGV " 1" (plan) cannot be an act of the allocation. It was however not denied that improvements were made on the portion by the Applicant after purchase of the same. I questioned the wisdom nevertheless on the part of the Applicant of the undertaking of such improvements when a stipulation was made in QGV"2" that ".........the value of the sub-divided plot will remain the Bank's security........".

The Respondent may have known or may have approved of the sale between Molapo and the Applicant, but the question which remained was how - if the sale was conditional as far as it concerned Molapo as the Applicant consistently urged -the Applicant would escape the legal implications of the nature of the security over the land? Why would the Respondent in law be required to inform the Applicant that he was seeking to sell the mortgaged land (which included a portion claimed by the applicant) when this sale was pursuant to a judgment obtained against Molapo. Applicant submitted that while the Respondent was entitled to seek redress for Molapo's breach of his obligation to it was entitled to accord the same treatment to applicant because the latter has an interest in the portion of that property. This treatment that was suggested was not only that the Applicant ought to be informed of the intention to sell, it was that the Respondent had to seek leave of Court to cause sale over the portion occupied by the Applicant.

Mr. Sello for Applicant submitted further that execution over the portion of the Applicant was tantamount to seizure of the portion without his consent other than by due process constituted spoliation which was wrong whether the seizure was lawful or unlawful. It was contended that it did not help the Respondent's case

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therefore even if the execution was sought to be done under cover of a writ issued against Molapo (a third party) and not against the Applicant. In this regard the Court was referred to the case of Lesotho Court of Appeal in MASITHA TENTE vs GUGU SELLO AND OTHERS 1993-1994 LLR10. In this case execution was sought to be levied on the school secretariat which had executed a bond to pay a sum of money, undertaken on a bail bond on default, of a debtor who had defaulted. A writ was issued against the school secretariat when the demand went unpaid. The Court a quo had held that the issuing out a writ against the third party (school secretariat) who was not a judgment debtor was a technicality which could be overlooked in the circumstance of the case. The Court of Appeal felt however that the writ was invalid in "that execution in satisfaction of a debt is and should be strictly controlled within the process of law". To me this decision which cannot be doubted on its own circumstances. But in that case in particular the bond in favour of the judgment debtor was not a mortgage bond over land and a security against the land. This Court of Appeal case cannot therefor provide a complete answer. That is why it is distinguishable The Respondent replied that it ought not to give notice to the Applicant and it ought not to seek leave or redress from Court in order to execute over the plot by way of sale of the plot which included the Applicant's portion all the same.

All the questions about whether the Applicant had any cause of action or whether the Applicant had locus standi to sue and whether the transaction between the Applicant and Molapo was a nullity or not vis a vis third parties can be satisfied as follows. By an answer as to whether the agreement between Applicant and Molapo was a valid agreement in terms of section 35(b) of the Land Act 1979 and/or whether the Respondent's right to execute over the entire plot of Molapo can be circumscribed by the existence of the agreement between Applicant and Molapo whether the Respondent knew it or not. This answer to the latter will be

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as what nature of a right is in a mortgage.

The Respondent was the owner of a real right (as so registered) and as mortgage bond in its favour in the Deeds Registry. The said mortgage still subsisted in as much as certain conditions which appeared in QGV "2" had not been fulfilled. The learned authors IJ Scott and S Scott in their book WILLES LAW OF MORTGAGE AND PLEDGE IN SOUTH AFRICA 3rd ed. at page 17 sum up the legal position very well where they say on alienation of mortgaged immovable property:

"The effect of a special mortgage over immovable property, duly executed and registered, is that it affects the property itself so that it passed to any allienee subject to the mortgage, whether the allienee acquired the property by an onerous or lucrative tide and whether he was aware of the mortgage or not. It follows that as long as duly registered special mortgage is in existence over immovable property such property is subject to the bond and no alienation of the property can deprive the mortgagee of his mortgage even where the ownership was transferred incorrectly free of the mortgage as in the case where the bond was cancelled without written consent of the owner thereof having been obtained beforehand, contrary to the provisions of the Deeds Registry Act". (My underlining)

And then at page 160 the authors add on and clarify by saying:

"A mortgagor may, in the absence of an express agreement to the contrary grant a lease of the property without the consent of the mortgage, but he cannot by such lease confer any rights which will

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conflict with those of the mortgagee".

One of the rights of the mortgagee is to bring the mortgage to an end by foreclosure proceedings when the property is sold in execution of judgment and the property delivered to the purchaser. Where a third party such as Applicant was neither an agent nor cedent nor preferential creditor it does not suggest at all that for the mortgagee to exercise his right that notice or consent leave of Court was necessary. The Respondent (mortgagee) has acquired a real right in its favour which avails against the whole world with exception of third parties who may have acquired rights before registration or parties who may have acquired real rights with the mortgagee's consent. A long lease may be registered without the mortgagee's consent and will still be unprotected. To hold otherwise would negate the very nature of a registered mortgage over land as a kind of a real security.

The Respondent said that it was the owner of a real right. That the mortgage subsist as long as certain conditions which appeared in QGV "2" had not been fulfilled. Indeed the Applicant did not say any had been fulfilled. The learned author H. Silberberg in the LAW OF PROPERTY 1st Edition had this to say at page 67 of the book.

"In other words once a real right has been registered it becomes enforceable against the rest of the world at large provided only that it has been obtained if good faith. Conversely every member of the public is, subject to certain exceptions - entitled to rely on the deeds register being correct".

The mortgage is a real right - see Silberberg (supra) at page 322.

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An agreement of mortgage although confers a real right it still remain a contract in which the parties thereto have privity to the exclusion on the other praties. The learned authors of MERCANTILE LAW OF SOUTH AFRICA Coaker and Zeffert, 18th ed. at page 77 record that: "The rights and duties under contract ordinarily attach only to original parties to the agreement".

Unless the parties are substituted the Applicant would not have capacity to sue in terms of the mortgage. This cannot mean that he has no locus standi. He did not appear to be suing over the mortgage agreement strictly speaking. He was contending that his rights have been affected by the agreement. This would however not disturb the reason for my decision. The nature of the right which the Applicant has cannot assist him. His insisting that he be given notice first and/or there be leave of Court in order for the Respondent to execute is therefore untenable.

I would further address the matter of the sub-division of Molapo's plot follows. Section 35 of the Land Act 1979 provides as follows:

"35(1) A lessee shall be entitled -

1. ...........................................

2. subject to obtaining the consent of the Minister - (i) to dispose of his interest;

3. (ii) to encumber the land leased by mortgage (iii) to sublet the land leased". (My underlining)

The meaning of (ii) above seems plain enough. And then section 36(5) provides in

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"Any transaction conducted by the lessee without consent of the Minister or contrary to the terms and conditions of a general consent shall be of no effect". (My underlining)

Again the consent of the Minister was emphasized as in MOHALE AND ANOTHER v COMMISSIONER OF LANDS LAC (1985-1989) 251. In essence therefore the sub-division and the sale of land entered into by the Applicant and Molapo was a nullity as no proper consent had been obtained. The parties to the contract may have had personal rights between themselves but their agreement had no effect on third parties more especially the Respondent. Equally:

"A real right differs from a personal right in so far as the latter is enforceable only against a particular individual or association of individuals on the basis of a special legal relationship". See SILBERBERG (supra) at page 30.

To round up, it does not appear that the Applicant was entitled to any form of notice or process prior to Respondent's right to proceed with sale. Therefore the prayers were baseless and the application ought to be dismissed with costs. I so ordered.

T. Monapathi

JUDGE

21st October, 1999

For the Applicant : Mr K. Sello

For the Respondent: Mr T. Matooane