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[2016] ZAWCHC 93
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Sheriff of the High Court Piketberg and Another v Lourens; In re: Standard Bank of South Africa Ltd v Trustees for the Time Being of the Eila Trust and Others (3467/2014) [2016] ZAWCHC 93; 2016 (6) SA 110 (WCC); [2016] 4 All SA 239 (WCC) (1 August 2016)
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IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE
NO: 3467/2014
DATE:
01 AUGUST 2016
In
the matter between:
THE
SHERIFF OF THE HIGH COURT
PIKETBERG
.............................................
First
Applicant
THE
STANDARD BANK OF SOUTH AFRICA
LTD
.............................................
Second
Applicant
And
PIERRE
GERHARDUS
LOURENS
...................................................................................
Respondent
In re:
THE
STANDARD BANK OF SOUTH
AFRICA
......................................................................
Plaintiff
LTD
And
THE
TRUSTEES FOR THE TIME BEING OF
THE
................................................
First
Defendant
EILA
TRUST
...............................................................................................................
Second
Defendant
EBEN BESTER MARGUERITE MADELINE
BESTER
........................................
Third
Defendant
HEARD: 15
JUNE 2016 DELIVERED: 1 AUGUST 2016
JUDGMENT
Introduction
[1] In casu, after the second
applicant (judgment creditor) obtained judgment in its favour, a writ
of execution was issued for
the first applicant to attach and sell
the property. Upon receipt of the writ for the sale, the first
applicant ascertained what
real rights (such as bonds and any
encumbrances) were registered against the property. The first
applicant was obliged to inform
the parties of these real rights, if
any, and who the holders of these rights and their addresses were.
[2]
The second applicant, presumably after
consultaton with the first applicant, prepared the two documents
essential to the sale in
execution i.e. the notice of sale and the
conditions of sale. The notice stated the conditions of sale may be
inspected at the
office of the Sheriff, which the respondent did and
in so doing he no doubt became
aware of the conditions of
sale.
[3]
It
would apprear by ordinary accounts that the applicants adhered to the
practice under the Court Rules and the Consumer Protection
Act 68 of
2008 ("the Act”) and its regulations for the sale in
execution by public auction. The first applicant was
empowered by the
Uniform Rules of Court to “do anything necessary to effect
registration of transfer”. However the
transfer of ownership
could not take place because of the respondent’s recalcitrant
stance in regard to payment of the Value
Added Tax ("VAT”)
amount on the transaction,
notwithstanding
the fact that clause 4.7 of the conditions of sale peremptorily
placed the obligation to pay “transfer duty or VAT attracted
by
the sale” on the purchaser (respondent). The respondent also
did not respond to the second applicant’s demands for
payment
of the VAT amount of R88, 200.00.
[4]
In
the main application the applicants sought an order in terms of Rule
46(11)(a) and (b) of the Uniform Rules of Court for the
cancellation
of t
he sale in execution of Erf 3 L, situated at 1 C C, P O
,
in the Berg River Municipality, Piketberg, Western Province ("the
property”). The sale was held on 14 April 2015.
[5]
The
reason for the application is the respondent’s alleged failure
to comply with his obligations to pay an amount of R88
200.00 for VAT
due and owing to the second applicant before transfer can occur. The
applicants sought an order that the respondent
pay the costs in the
main application.
[6]
The
respondent opposed the application and launched a counterapplication
disputing the validity of the sale in execution on
the basis that it
does not comply with Regulation 22(2) of the Act
[1]
,
and seeking an order that the sale in execution in respect of the
property be declared null and void, together with an order that
the
first applicant (main application) repay the deposit paid by the
respondent in the amount of R75,285.78 with interest a tempora
morae
from the date of the sale in execution (i.e. 14 April 2015). For ease
of reference, this court will refer to the parties
as they are cited
in the main application.
[7]
The
respondent also averred that no valid auction was held on 14 April
2015 due to the first applicant’s failure to comply
with
Regulation 22(5)(d) of the Act. The respondent sought an order that
the applicants pay the costs in the counter-application.
[8]
The
following facts are not in dispute: the sale in execution was
advertised lawfully; the conditions of sale were open for inspection
at the offices of the first applicant and were read out at the
auction prior to the commencment of the bidding on the property;
Ms
Beatrix Suzette Louw ("Mrs. Louw”) represented the
respondent at the auction where the sale in execution occurred
and
was the successful bidder; the respondent inspected the property and
conditions of sale; the respondent and his representative
did not
make enquiries about the VAT status of The Eila Trust (first
defendant) prior to the sale or whether the sale would attract
VAT;
the second applicant’s attorneys informed the respondent that
an amount of R88 200.00 in VAT was payable on the sale
before
transfer could occur; and the respondent informed the second
applicant’s attorneys that he would not pay VAT on the
transaction as it was not disclosed to him prior to the sale in
execution.
Conditions of
Sale
[9]
The
relevant clauses in the conditions of sale are:
9.1.
Clause
4.7 provides:
“The
purchaser shall be responsible for the payment of all costs and
charges necessary to effect transfer, including but not
limited to
conveyancing costs, transfer duty or VAT attracted by the sale and
any Deeds Registration Office levies.”
9.2.Clause 8.1 provides:
“If
the purchaser fails to carry out any of his obligations under these
Conditions of Sale, the sale may be cancelled by a
Judge summarily on
the report of the Sheriff after due notice to the purchaser, and the
property may again be put up for sale;
and the purchaser shall be
responsible for any loss sustained by reason of his default, which
loss may, on the application of any
aggrieved creditor whose name
appears on the Sheriff’s distribution account, be recovered
from him under judgment of the
Judge pronounced summarily on a
written report by the Sheriff...”.
9.3.Clause 8.2 provides:
“In
the event of the sale being cancelled as aforesaid the deposit shall
be retained by the Sheriff in trust for such period
that is
stipulated in the judgment in terms of Rule 46(11) or if no such
period is stipulated therein then until such time that
the property
has been sold to a third party and the plaintiff’s damages have
been quantified and judgment has been granted
in respect thereof.”
Issues in Dispute
[10]
The salient issues in dispute agreed to
by the parties are whether:
10.1
The
applicants had a duty to establish the VAT status on the property and
disclose this information to the respondent.
10.2
The
first applicant failed to comply with the provisions of the Act and
regulations.
10.3
There
was a valid auction held in respect of the sale in execution of the
property on 14 April 2015.
[11] Counsel for the first and second
applicants, Ms. M Treurnicht, argued that prior to the sale in
execution the conditions of
sale were available for inspection at the
offices of the first applicant, and that the respondent and his
agent, Ms. Louw, had
undertaken an inspection thereof. The conditions
of sale were also read out in full prior to the commencement of the
bidding on
the property. The respondent and his agent did not raise
any queries on the conditions of sale and proceeded to enter his bid,
which was accepted on 14 April 2015. They also did not enquire from
the first applicant whether the owner of the property is a VAT
vendor
and whether the sale will attract VAT.
[12] According to Ms Treurnicht, the
respondents refusal to comply with the conditions of sale and to pay
the amount of R88 200.00
in VAT on the transaction, effectively held
up the transfer of the property, with the result that the second
applicant could not
benefit from the sale or address the respondent’s
indebtedness. She argued that the respondent’s conduct was
severely
prejudicial to the second applicant, who also had to incur
substantial legal costs in obtaining judgment and in executing on
that
judgment.
[13] In her submissions, there was no basis
upon which the respondent could legitimately claim that he was not
liable for VAT because
it was disclosed to him prior to the sale in
execution. The duty to ascertain whether VAT was payable lay with the
respondent and
not the applicants. She argued that the respondent
misunderstood the application of VAT to the sale of the property and
was mistaken
in his averment that the applicants did not act in good
faith by “not inquiring from the South African Revenue Service
what
the outstanding VAT was”. Accordingly, since he was not
entitled to withhold the payment of the VAT on the transaction, his
refusal to pay placed him in breach of the conditions of sale,
especially clause 4.7 thereof.
[14] Ms Treurnicht further argued that a
Sheriff has the same rights to sell a property at execution and to
give transfer of the
property as if he is the rightful owner thereof.
She argued that Regulation 22(2) to the Act did not apply to a sale
in execution
pursuant to a court order declaring the property
executable. The sale was not voluntary but occurred in the context
where judgment
was granted in favour of the judgment creditor (second
applicant) and the court then issued a writ placing a duty on the
Sheriff
(first applicant) to execute the order. It was absurd to
suggest that in these circumstances a written agreement needed to be
concluded
between the owner of the property and the first applicant
before the sale in execution could take place.
[15] Ms Treurnicht argued that the
respondent misunderstood Rule 46 of the Uniform Rules of Court as
well as the provisions of the
Act and Regulations. This was evidenced
from his suggestion that the sale in execution was not valid due to
the first applicant’s
non-compliance with Regulations 22(2) and
22(5)(d) of the Act. In the first applicant’s view, he
performed his duties to
the highest of standards and in accordance
with the Uniform Rules of Court. There was accordingly no merit in
the respondent’s
averment that the sale in execution is null
and void and should be declared as such.
[16] Counsel for the respondent, Mr. J
Lourens, argued that the conditions of sale were not binding because,
a material condition
of the contract of sale, namely the VAT payable
on the transaction, was not brought to his attention. The applicants
were guilty
of misrepresentation by failing to inform the respondent
beforehand that VAT had to be paid on the transaction. The second
applicant
or its attorney ought to have known (or suspected) that the
first defendant (The Eila Trust) was a VAT vendor and that VAT was
meant to be paid on the transaction. Further, he argued that the
applicants had a legal duty to ascertain whether the owner of the
property was a VAT vendor and to disclose the VAT costs to the
respondent who was the successful bidder. The applicants therefore
failed to adhere to the Act and regulations and did not act in good
faith, by declaring that VAT would be payable.
[17] Mr. Lourens argued that clause 4.7 of
the conditions of sale was unfair, unreasonable or unjust because it
was one-sided and
did not favour the respondent. If the auction were
to be conducted on a risk basis, and the respondent were held
responsible for
his own due diligence in relation to the terms and
conditions applicable to the sale, then in his submission, the
contract of sale
was unfair to the respondent.
[18] Mr. Lourens further argued that there
was no written agreement between the first applicant and the second
applicant (judgment
creditor) or the first defendant (owner/judgment
debtor) for the property to be sold. In his view, the first applicant
was not
the rightful owner of the property and acts as an organ of
state in whose custody the property was held. Accordingly, due to the
first applicant’s noncompliance with Regulation 22(2) to
the Act, the sale in execution was null and void since the
first
applicant had no authority to transfer ownership of the property to
the respondent. In his submission the first applicant,
as auctioneer,
failed to perform its duties in accordance with the highest standards
applicable to auctions and did not comply
with Regulation 22(5)(d) to
the Act.
Applicable Law
and Conventions
[19] The legal principle that a judgment
debtor retains ownership until it passes to the successful purchaser
upon registration
of transfer has been applied in cases involving
immovable property
[2]
.
In essense the courts have held that, at common law, a debtor could
redeem his attached property ‘up to the last moment
before the
actual sale’. It was originally stated by Kotze JA in
Liquidators Union and Rhodesia Wholesale Ltd v Brown &
Co
[3]
,
albeit in the context of the attachment of moveable property, as
follows:
“But
although the effect of a pignus judiciale is that the control of the
property arrested in execution passes from the judgment
debtor, and
therefore on his insolvency supervening does not come under the
administration of the curator of the insolvent estate,
the dominium
remains in the debtor, who can, up to the last moment before the
actual sale, redeem his attached property: that is
to say, the
property subject to pignus judiciale, for while the pignus lasts he
remains the owner of the pledge (dominus pignoris,
Dig. 20.5.12: Cod.
4.24.9).”
[20] Rule 46(11)(a) and (b) of the Uniform
Rules of Court corresponds with the relevant clauses in the
Conditions of Sale:
“(a)
If the purchaser fails to carry out any of his or her obligations
under the conditions of sale, the sale may be cancelled
by a judge
summarily on the report of the sheriff conducting the sale, after due
notice to the purchaser, and the property may
again be put up for
sale.
(b)
The purchaser shall be responsible for any loss sustained by reason
of his or her default, which loss may, on the application
of any
aggrieved creditor whose name appears on the sheriff’s
distribution account, be recovered from him or her under judgment
of
the judge pronounced summarily on a written report by the said
sheriff, after such purchaser shall have received notice in writing
that such report will be laid before the judge for such purpose."
[21] Sales in execution at the instance of
banks were recently brought into the realm of the Act. Section 45(1)
provides:
“(1)
In this section, ‘auction’ includes a sale in execution
of or pursuant to a court order, to the extent that
the order
contemplates that the sale is to be conducted by auction."
[22] Subsequently, the regulations
promulgated in terms of the Act also dealt with auctions. Regulation
22(2) of the Act is particularly
relevant to this case and provides:
“(2)
Unless the auctioneer is also the owner or the rightful holder (who
has the right to sell) of the goods to be auctioned,
no auctioneer
may sell goods on auction until he or she has first entered into a
written agreement with the owner or rightful holder
(who has the
right to sell) of such goods to be sold, whether for a specific
auction or auctions in general, which agreement contains
the terms
and conditions upon which that auctioneer accepts the goods for
sale."
[23] Another regulation that is relevant to
this case is Regulation 22(5)(d) of the Act, which provides:
“
In performing the duties of an auctioneer, every auctioneer - (d)
must otherwise perform his or her duties in accordance
with the
highest standards applicable to auctions."
[24] It is axiomatic that the sale of fixed
property cannot attract both VAT and transfer duty. The now
commonly-known convention,
which operates in accordance with the 2012
amendments to the Value Added Tax Act 89 of 1991 ("the VAT
Act”), is that
if property is sold by a VAT vendor in terms of
the VAT Act then only VAT will be payable by the seller on the sale
transaction
to the South African Revenue Service ("SARS”).
Thus at the point where the sale of the property would be considered
a VAT transaction, having regard to two factors namely the status of
the seller as a VAT vendor and the type of transaction, the
seller
would be liable for payment of VAT at the time of registration of
transfer of the property. Where the seller is a non-vendor,
transfer
duty will be payable thereon by the purchaser; and if the seller and
the purchaser are non-vendors, the purchaser is liable
for the
transfer duty that is payable to SARS.
[25] Consistent with this convention, there
is the notion that operates in respect of VAT transactions that the
purchase price of
the property is deemed to be VAT inclusive, except
if the conditions of sale provide otherwise. This means that the
seller as VAT
vendor is liable to SARS for the output tax of 14% of
the purchase price of the fixed property at the point of transfer.
Analysis
[26] In casu, it emerged that this was a VAT
transaction because of the status of the seller (first defendant) as
a VAT vendor,
and in those circumstances ordinarily the obligation
would have laid with the seller to pay VAT to SARS out of the
purchase price.
However the type of transaction was a sale in
execution, which occurred at an auction, totally independent from the
second applicant
and first defendant’s (owner/judgment debtor)
input into the purchase price or the transaction.
[27] Since the first defendant, as judgment
debtor, was unable to pay the VAT to SARS this obligation fell on the
second applicant
(judgment creditor), as holder of rights over the
property, to raise the money to pay the VAT over to SARS. The second
applicant
therefore demanded, and correctly so in my view, the VAT
amount of R88, 200.00 from the respondent to effect transfer of the
property.
[28] The question arose whether there is a
general duty on the applicants to establish the VAT status of the
owner of the property
and disclose this information to the
respondent. While these issues are significant to the respondent, in
my view they are self-evidently
issues that the respondent ought to
have investigated and fully appraised himself of prior to the
auction.
[29] The first applicant was not required in
law to exend it’s enquiries beyond what the real rights
attached to the property
that was the subject of the sale in
execution were. The respondent did not submit any authority or
evidence to the contrary. On
the facts of the case, there was no
evidence that the first applicant was instructed to enquire into the
status of the owner (first
defendant) i.e. whether the owner was a
VAT vendor or not.
[30] The court is not persuaded by the
respondent’s argument that the applicants did not act in good
faith by declaring that
VAT would be payable on the sale transaction,
because the conditions of sale clearly stipulated that VAT would be
payable by the
purchaser.
[31] Evidently, and the court accepts this
to be the case, the respondent and his agent were again made aware of
the conditions
of sale at the time of the auction, but oddly did not
query it or raise any concerns they may have had. In these
circumstances,
there is no material basis for the respondent to
suggest that the conditions of sale were not binding on the parties
to the transaction
or that he was not liable for the VAT amount.
There is accordingly no basis for this court to conclude that the
applicants violated
any of the consumer protections afforded the
respondent by the Act and regulations.
[32] Moreover, it would be inappropriate for
the court to invoke an onerous interpretation of the Act and
regulations in order to
place additional regulatory burdens on the
first applicant, who is already operating with limited capacity and
resources within
the terrain of increased consumer protections.
[33] These factors are in any event
inconsequential for purposes of considering the merits of the main
application, which in my
view turns on the issue of pricing in the
context of a VAT transaction arising form a sale in execution, and
the amount that the
respondent was legally obliged to pay in order to
effect transfer of the property.
[34] I am satisfied that in the
circumstances of this case all the parties were properly sensitised
to the issue of pricing in regard
to the property, and particularly
the respondent who carried the liability for the VAT amount.
Accordingly, the applicants are
entitled to the cancellation of the
sale in execution, in view of the respondents failure to comply with
his obligations and pay
an amount of R88 200.00 for VAT due and owing
before transfer can occur.
[35] In casu, the auction took place as it
were in the context of a sale in execution pursuant to a court order.
This meant that
Rule 46 of the Uniform Rules of Court regulated the
sale in execution in some detail. However, the applicants also needed
to apply
the Act and regulations, since section 45(1) provides that a
sale in execution is an “auction” as contemplated in the
Act.
[36] Since the Act and its regulations
incorporate sales in execution and are binding on the first applicant
who was authorised
in terms of a warrant issued by the court to give
effect to the order, it was therefore required to be fully compliant
with the
provisions therein, failing which the legitimacy of the sale
in execution would be open to question. In assessing the issue of
compliance by the first applicant, it is necessary for the court to
briefly consider the application of Regulations 22(2) and 22(5)(d)
to
the Act, to the first applicant in the role of auctioneer per se.
[37] Regulation 22(2) of the Act establishes
three categories of auctioneers which may legally sell the fixed
property to be auctioned.
The first category refers to an ‘owner’
auctioneer, in terms of which full dominium in the property vests in
the person
holding title therein; the second refers to a ‘rightful
holder’ auctioneer, in terms of which a person who does not
hold title is placed in charge of the fixed property for a defined
purpose and whose dominium therein is limited; and the third
is a
‘commercial’ auctioneer, typically an auctioneer from a
commercial enterprise who is required to enter into a
written
contract with the owner or rightful holder of the property to be
auctioned.
[38] It is glaringly obvious from the above
that a structural lacuna exists in that none of these categories
explicitly envisages
the Sheriff of the High Court in the role of
auctioneer appointed in terms of an order of court.
[39] The conclusion drawn from this is that
there is a need to harmonise the Rule 46 of the Uniform Rules of
Court with the Act
and its regulations, essentially for the purpose
of catering for the unique role of the Sheriff as auctioneer in
regard to sales
in execution.
[40] The lacuna has sensitised the court to
the fact that Regulation 22(2) to the Act has been targeted primarily
at standard commercial
auctions with typical ‘owner’,
‘rights holder’ or ‘commercial’ auctioneers
appointed to sell
fixed property on auction. However, the fact that
the regulations to the Act do not specifically cater for the role
that the Sheriff
of the High Court plays in the context of an
auction, does not in my view delegitimise or invalidate the sales in
execution that
are undertaken pursuant to an order of court.
[41]
In considering the merits of the
counter-application herein, there are
three important factors that weigh heavily
with the court:
41.1.
Firstly,
it must be recognised that the first applicant is now operating in an
era of increased consumer protection and that while
Rule 46 of the
Uniform Rules of Court and the Act and regulations may operate from
different premises, the application of these
provisions is very wide
and caters for both standard commercial auctions and auctions
conducted by the Sheriff of the High Court.
This means that while the
first applicant’s interest in and control over the property to
be auctioned is considerably limited,
it cannot act ultra vires the
court’s mandate and the provisions of Rule 46 read with the Act
and regulations.
41.2.
Secondly,
there is a great need to regulate the property market and to ensure
the necessary protections against manipulation, corruption,
malfeasance
, etc. Rule 46 of the Uniform
Rules and the Act and regulations sought amongst other things to
ensure that auctioneers regulate
and where possible constrain
anticompetitive
behavior
and
corruption in the property market, and to intervene in the wanton
manipulation and unbridled increases in the commercial values
of
properties. In my view, these regulatory goals and standards were
meant to apply to all types of auctions regardless whether
auctioneers are appointed to sell the property on behalf of the
seller or in terms of a warrant of execution issued by the court.
41.3.
Thirdly,
the Sheriff of the High Court’s unique role as auctioneer of
the property to be sold in execution is no less important
to, and is
simultaneously
distinct from, standard
commercial auctioneers in certain key respects. For instance, the
Sheriff merely becomes the lawful custodian
of the property to be
auctioned based on the authority given to it by the court and not the
seller. This means that it’s
dominium in the property to be
auctioned does not extend to full ownership, which remains vested in
the owner (judgment debtor/first
defendant) until the registration of
transfer takes place. Also, the Sheriff is merely a messenger of the
court and therefore operates
unlike an auctioneer from a commercial
enterprise conducting an auction, who carries its mandate exclusively
from the seller.
[42] In light of the above considerations,
this court takes the view that Regulation 22(2) of the Act does
indeed apply to a sale
in execution pursuant to a court order
declaring the property executable. Further, in the circumstances of
this case, there are
compelling reasons to bring the first applicant
within the ambit of Regulation 22(2) of the Act and that, having
regard to the
nature of its unique role in the context of an auction,
the first applicant (Sheriff) can be regarded as “the rightful
holder
(who has the right to sell)”.
[43] This interpretation may address the
lacuna that exists to some degree, however it remains necessary for
the legislature and
the Rules Board to harmonise the regulations in
regard to sales in execution by: broadening the premise thereof to
cater for the
role of Sheriff’s as auctioneers per se and
bringing certainty regarding sales in execution undertaken by the
Sheriff of
the High Court; and increasing the protections for
indebted consumers and judgment creditors in the context of auctions.
[44] Turning to the remaining issues before
this court, the respondents submission that the sale in execution
must be treated as
null and void, cannot hold water, especially when
having regard to the status of the first applicant as the rightful
holder (who
has the right to sell) in terms of Regulation 22(2). I
find that the first applicant was indeed authorised by the court to
transfer
ownership of the property to the respondent.
[45] The first applicant was not legally
required to additionally enter into a written agreement with either
the registered owner
of the property (the first defendant) or with
the second applicant (judgment creditor), for the property to be sold
in execution.
Accordingly, the first applicant did not breach
Regulation 22(2) of the Act.
[46] Similarly, I find that there is nothing
unlawful or inappropriate in the conduct of the first applicant prior
to or during
the auction, and accordingly here is no breach of
Regulation 22(5)(d) of the Act. Consequently, the court finds that
there was
indeed a valid auction of the property on 14 April 2015.
Order
[47] In the result, the following order is
made:
1.
The
application succeeds and t
he sale in execution of Erf 3 L,
situated at 1 C C, P O
, in the Berg River
Municipality, Piketberg, Western Province (“the property”),
that was held on 14 April 2015, is set
aside. The property may be put
up for sale again.
2.
The
deposit paid by the respondent in the amount of R75,285.78 shall be
retained by the first applicant in trust for a period of
ninety (90)
days from the date of this order or the sale of the property,
whichever occurs first.
3.
The
Respondent is ordered to pay the costs of the application.
4.
The
counter-application is dismissed with costs.
MAHOMED AJ
[1]
The
Consumer Protection Act Regulations
, GN R 293, GG 34180 of 1
April 2011.
[2]
Ex parte Vermaak NO: In re Klopper NO v Lavdas
1980 (2) SA 696
(T) 698G; Jaftha v Schoeman and Others; Van Rooyen v
Stoltz
[2003] 3 ALL SA 690
(C) 703704 para 45
[3]
1922 AD 549
at 558