Does a builder enjoy a lien over state owned property?

In the construction industry it is well known that a building contractor enjoys a lien or right of retention over work which he has carried out for an employer as security for payment of any or all amounts which may be due and payable to him therefor. However, according to Loots, Construction Law and Related Issues (1995), a contractor may not enjoy such security in regard to the execution of construction or engineering contacts for government departments, provincial administrations or similar public bodies in South Africa today.

16 Nov 2016 4 min read Dispute Resolution Alert Article

This position is supported by several Dutch jurists including Voet, Matthaeus and Wissenbach. In particular, Matthaeus (De Auctionibus 2.10.21.) contends that the reasons for the absence of a contractor’s right of retention with regard to state owned property, are as follows:

  • A right of retention over private works lies in the protection of the contractor against the breach of faith or insolvency of a private employer, but this consideration does not find application in circumstances where the employer is the state.
  • A right of retention over public works could be against public policy and cause embarrassment to the state.
  • A right of retention is analogous to set-off, which cannot be raised against the state.

Although the question of whether there exists a right of retention over state owned property has not been pertinently decided in South Africa, it has been raised in several early reported cases where the above views were quoted with approval, albeit obiter, namely:

  • In Hunter & Turpin v Standard Bank, Pietermaritzburg (1883) 4 NLR 49, the court, referencing Voet and Matthaeus, found that the builder of a new house and the repairer of an existing one enjoyed a right of retention, save for if the work was for the government which was expected to be in a position to pay for such work.
  • Similarly, the above position taken by Matthaeus as well as the reasons therefor were referred to with approval in The Colonial Government v Smith, Lawrence & Mould and Others (1885 – 1886) 4 SC 194 and Land Bank v Mans 1933 CPD 17.
  • In Provincial Administration (O.F.S.) v John Adams & Co 1929 OPD 29, where the contractor relied on an alleged improvement lien in regard to a public road, McGregor J, again lending support to the old authorities, held that the case before him was one where:

“one should have regard to what is said by Matthaeus (Over de Opveilingen) where (bk. 2, c. 10, sec. 21) he points out that the right of retentie should not avail against “’t gemeene Land”; he points out that the protection should not be necessary --- there should be no assumption that the State cannot pay what is due; and further there might be public prejudice.”

Whether a South African court will find this exception still applicable today, is not easy to predict according to Loots, in light of the fact that a substantial amount of time has elapsed since the issue was raised in our courts. Loots states that it could very well be argued that the exception has been abrogated by disuse or desuetude and can no longer be used by an employer to defend a contractor’s claim to a right of retention over state owned property. However, it must be emphasised that the mere lapse of time from the last judicial application or recognition of a rule such as this is not, in itself, sufficient to prove that the rule is no longer valid and applicable.

Furthermore, despite the absence of the exception’s application in modern South African case law, the recognition of the exception by South African courts is clearly indicative of a judicial recognition and acceptance thereof (see the Smith and Mans cases above) and the fact that the exception may have been overlooked by our courts for some time, again, in itself, does not render it inapplicable and not a part of South African common law.

In modern times, the absence of the risk of insolvency of the state and the policy consideration that work done for the state be completed and made available to the public as soon as possible are two of the three reasons (as contended by Matthaeus above) that appear to Loots to remain valid and applicable justifications for the exception to the general rule that a contractor enjoys a lien or right of retention over the works which he has carried out as security for payment of any or all amounts which may be due and payable to him therefor.

Accordingly, an employer which is a government department, provincial administrator or similar public body should be aware that a contractor which attempts to assert a builder’s lien, may not be legally entitled to do so (absent of course, the obtaining of a formal waiver of lien from the contractor at the outset of the contract).

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