Enforcement measures

Repossession following lease termination

Outline the basic repossession procedures following lease termination. How may the lessee lawfully impede the owner’s rights to exercise default remedies?

Absent agreement repossession would need to be pursued by way of formal proceedings in the High Courts of South Africa. Usually this would be done by way of application proceedings. These proceedings may be launched on an urgent basis and without notice to the counterpart where the circumstances require.

There are no general rights of self-help available to lessors or lenders.

In circumstances where lease termination is contested court proceedings may be required to establish the right to terminate and that such right has been properly exercised.

A lessee may lawfully impede an owner’s right to exercise default remedies by contesting the basis upon which the default has been called and, in turn, the right to exercise the relevant remedies. This presupposes that there are grounds for the lessee to contest.

Enforcement of security

Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?

Absent agreement, security interests would need to be enforced by way of formal proceedings in the High Courts of South Africa. Usually this would be done by way of application proceedings. These proceedings may be launched on an urgent basis and without notice to the counterparty where the circumstances require.

There are no general rights of self-help available to lessors or lenders.

An aircraft may be detained by way of ex parte proceedings where the circumstances require. Usually this would be where, if the counterparty were to be given notice of the proceedings, there would be a risk of the aircraft being moved to avoid detention.

A local owner may lawfully impede a mortgagee’s right to enforce security by contesting the basis upon which the underlying default has been called and, in turn, the right to exercise the relevant enforcement remedies. This presupposes that there are grounds for the owner to contest.

The laws of insolvency may well affect the rights of an enforcing creditor.

Simplistically, in the context of a lease, the liquidator would have an election as to whether or not to abide by the terms of the lease. If the liquidator elected to abide by the lease he or she would need to make sure that the insolvent debtor performed all its obligations under that instrument. If the liquidator elected to terminate the lease then the lessor would be entitled to repossess the asset.

In the context of a secured loan the enforcing creditor would need to work through the liquidator to enforce the security held by it over the asset. This would entail agreeing the valuation of the asset with the liquidator or causing the asset to be sold by way of a public auction. The proceeds of the valuation or sale of the asset would be paid to the secured creditor from the insolvent estate on the winding up of the estate.

Mention is also to be made of section 84 of the South African Insolvency Act (Act No. 24 of 1936) in the context of conditional sale transactions. In terms of this provision, notwithstanding any reservation of ownership by the conditional seller of the asset, ownership of the asset will pass to the insolvent conditional purchaser. The conditional seller is, however, afforded a statutory hypothec over the asset to secure its claim against the insolvent conditional purchaser.

Priority liens and rights

Which liens and rights will have priority over aircraft ownership or an aircraft security interest? If an aircraft can be taken, seized or detained, is any form of compensation available to an owner or mortgagee?

The following liens and rights may have priority over aircraft ownership or an aircraft security interest, namely, expropriation, nationalisation and requisition rights of the state, all forms of possessory liens, liens for unpaid flight charges and other taxes and duties.

Compensation should be payable by the state for the exercise of any of the aforesaid rights. Although the governing legislation does provide for the mechanism to contest the level of compensation offered, from a practical stance, it may be difficult to effectively exercise this right.

Enforcement of foreign judgments and arbitral awards

How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?

As mentioned above, South Africa is a party to the New York Convention. Foreign judgments may be enforced by way of a fresh action instituted in South Africa or by bringing an application to enforce a foreign judgment.