Domestic Implementation of the Convention System
The Cape Town Convention provides for the manner of constituting an international interest in high value mobile equipment. In terms of Article 29, a registered interest enjoys priority over unregistered interests and any other subsequently registered interest. The Convention provides priority to the secured creditor who filed first, whether or not the creditor had actual knowledge of the existence of a prior security interest created before.
Prior to the adoption of the Convention and subsequent incorporation into domestic law, South Africa followed the registration system provided for in the RAA, which contains a principle different from the Convention’s priority principle. Section 4 provides for the creditor to register a security interest on an aircraft or share in aircraft, including spare parts and engines, where a loan or debt is acquired. A deed of mortgage is thereby created as evidence of such a security interest. The Director of Civil Aviation is authorized, upon production of such an instrument and payment of the prescribed fee, to record the mortgage in a register created for such purpose.
The Director records the mortgage in the order in which the deeds creating them are provided to him. They are endorsed with the date and time of that record. Where a mortgage is to be executed outside the Republic, a registered owner of an aircraft or share must apply to the Director for a certificate of mortgage. The certificate contains a statement of any registered mortgages or certificates of mortgage affecting the aircraft or share in respect of which the certificate is given. Section 6 provides that priority of mortgages in respect of the same aircraft shall be determined in accordance to the date and time at which each mortgage is recorded and not when it was executed.
In terms of Section 3 of the RAA, it is impermissible to mortgage by bond registered in a deeds registry an aircraft or a share in an aircraft. The aircraft or share in an aircraft may be mortgaged as security for a loan or other debt by means of an instrument in prescribed form lodged with the Director of Aviation. Section 4 provides for a register where such mortgages must be registered.
A registered owner of an aircraft or share in an aircraft must apply to the Director for a certificate of mortgage where a mortgage is executed outside the Republic. A registered owner means a person who owns an aircraft or share in an aircraft, and whose name is registered as such in the register. The certificate contains a statement of any registered mortgages or certificates of mortgage affecting the aircraft or share in respect of which the certificate is given and is personal to the owner. The domestic registration system is thus similar to the International Registry under the Cape Town Convention which is a system based on registration against an asset, not against a debtor.
Both registrations are a “notice filing” system, which gives a notice to third parties that a security interest exist that deserves further enquiries. Under both the Act and the Convention, the Director, like the Registrar assumes the accuracy of the provided information without any examination of it and records it accordingly.
A mortgagee under a registered mortgage is entitled to recover the amount due under the mortgage in any court of competent jurisdiction. The court may order that the mortgaged aircraft or share be sold in execution of the judgement (Section 7). Thus, a mortgage registered under the Act would qualify as an international interest and can be so registered in the international registry. If it is not registered in the International registry, but only contained in the local registry maintained by the Director of Civil Aviation, it would not enjoy priority consideration under the Convention system.
-  Goode, Official Commentary, supra note 5, para. 4.132.