The (unfounded) basis of the classification and operation of liens in South African law

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The (unfounded) basis of the classification and operation of liens in South African law
United Building Society v Smookler’s Trustees and Golombick’s Trustee 1906 TS 623

Abstract

In principle, South African law distinguishes between enrichment liens and debtor and creditor liens. Enrichment liens are classified as real security rights, but debtor-creditor liens are not. It seems illogical that the same concept in law, a lien, is classified as a real security right in some instances only. This case discussion analyses the origin of this illogical classification of liens, namely United Building Society v Smookler’s Trustees and Golombick’s Trustee 1906 TS 623. In this case, Bristowe J classified liens on the basis of their enforceability against third parties. He concluded that a lien for useful and necessary expenses is always an enrichment lien and thus a real security right.

This case discussion evaluates the facts, legal arguments and finding in United Building Society v Smookler’s Trustees and then provides a critical analysis of the judgment. Each relevant statement of the judge is discussed, followed by an interpretation of the statement. The interpretations are supported by references to relevant case law, legislation and academic writings. The judge’s references to Voet are analysed and evaluated by examining them in their proper context in the works of Voet. The definition of a lien and the distinction between a lien and a tacit hypothec, as well as their legal nature, are discussed. Next, attention is given to the type of expenses that may be incurred in respect of a thing and the different liens that serve as security for such expenses. Lastly, the judge’s understanding of third-party operation (real operation) is dealt with.

The conclusion is that the court erred when it held that the builder concerned had an enrichment lien, which gave him preference over the bank’s claim. It is clear from the writings of Voet and the applicable provisions of the Insolvency Act 24 of 1936 that no distinction should be made between an enrichment lien and a debtor-creditor lien with regard to its third-party operation and preference. Accordingly, all liens have third-party operation and enjoy preference over other creditors’ claims.

Keywords: Bona fide possessor; builder’s lien; contractual claim; debtor-creditor lien; enrichment claim; enrichment lien; ex lege; improvement lien; ius retentionis; lien; necessariae impensae; personal right; physical control; preference; real operation; real right; real security right; rei vindicatio; right of retention; salvage lien; tacit hypothec; utiles impensae; voluptuariae impensae

Lees die volledige artikel in Afrikaans: Vonnisbespreking: Die (ongegronde) grondslag vir die klassifisering en werking van retensieregte in die Suid-Afrikaanse reg

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