Authored by Tiyana Ramchunder and Izak Lessing.
In a May 2026 judgment, the High Court confirmed that a general notarial bond over movable property does not itself give the creditor a real security right. The creditor obtains that right only when it perfects the bond by taking possession of the bonded movable property. Until then, the creditor’s rights are vulnerable to liquidation and competing enforcement.
The creditor held a general notarial covering bond over the movable property of a business that was in arrears. The bond allowed the creditor, if specified trigger events occurred, to take possession of the movable assets and exercise control necessary to preserve its security and recover the debt. The business was subject to another notarial bond in favour of its bank over the same movable property.
The creditor approached the court for a perfection order on an urgent basis. The court accepted that urgency can arise where there is a risk that competing enforcement of another bondholder may intervene before the creditor has taken possession. In practical terms, the creditor was entitled to act before the value of its security was lost or materially reduced.
Before perfection, a general notarial bond gives the creditor personal rights against the debtor. It does not create a pledge or a real right enforceable against third parties. A real right is established only through lawful delivery and possession. The bondholder who obtains possession first establishes that real right.
This matters especially where more than one creditor holds a general notarial bond over the same movable property. Registration alone does not put a creditor in possession. The practical priority belongs to the creditor who first obtains lawful possession under a perfection order from the courts, subject to any applicable doctrine of notice. A later bondholder may be constrained from perfecting in disregard of an earlier bondholder’s priority, but that does not remove the risk. The later bondholder, or another creditor, may apply for liquidation.
Once liquidation commences, the unperfected bondholder loses the right to perfect, regardless of its prior ranking. It is then left with a statutory preference over the free residue of the insolvent estate, and does not have the status of a secured creditor with a perfected pledge.
Importantly, the court confirmed that it does not have a broad discretion to refuse a perfection order once the applicant has established the right to take possession. Arguments based on proportionality, practical hardship, and the potential destruction of going-concern value, however drastic, do not justify refusing perfection. The court reaffirmed that fairness and reasonableness are not freestanding bases for declining to enforce freely concluded contractual terms, and that public policy generally favours their enforcement.
Creditors should note that a general notarial bond should not be treated as complete security until it has been perfected by court order. Where the debtor is in financial distress, or where another bondholder or creditor may act, the creditor must move promptly to court for a perfection order. Delay may convert what was intended to be security into only a limited preference claim in insolvency.