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[2017] ZAWCHC 9
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Bartezky and Another v Standard Bank of South Africa Limited and Others (13668/2016) [2017] ZAWCHC 9 (16 February 2017)
Republic
of South Africa
IN THE HIGH COURT OF SOUTH
AFRICA
(WESTERN CAPE DIVISION, CAPE
TOWN)
Case No. 13668/2016
Before: The Hon. Mr Justice
Binns-Ward
Hearing: 13 February 2017
Judgment: 16 February 2017
In the matter between:
RICARDO
BARETZKY
First
Applicant
SHIN HAE
BARETZKY
Second
Applicant
and
STANDARD BANK OF
SOUTH AFRICA LIMITED
First
Respondent
THE NATIONAL
CREDIT
REGULATOR
Second
Respondent
THE SHERIFF:
STRAND
Third
Respondent
THE MINISTER OF JUSTICE
AND CONSTITUTIONAL
DEVELOPMENT
Fourth
Respondent
JUDGMENT
BINNS-WARD J:
[1]
An immovable property owned by the
applicants has been attached to satisfy a judgment obtained against
them. The property,
which is in Gordon’s Bay, is
residential. But the applicants do not live there. It is
currently let to a tenant.
The applicants reside in Belgium.
The sale in execution has been suspended pending the determination of
the applicants’
application for a ‘
declaratory
order declaring rule 46 of the High Court rules unconstitutional and
inconsistent with the right to property in terms
of section 25(1) of
the Constitution in so far that it fails to prescribe a reasonable
minimum reserve price based on the fair
market value and forced sale
value of the property being executed and the reasonable forced sale
value considering the judgment
debt amount being recovered and that
rule 46 of the High Court rules and the National Credit Act be
amended within 12 (twelve)
months to give effect to the said
declaratory order
’. It will
be observed that the formulation of the relief sought by the
applicants is somewhat incoherent, but upon
analysis it seems that
the challenge is in fact to the constitutionality of the rule 46(12)
of the Uniform Rules of Court on the
basis that it omits to provide
for a reserve price. Despite the wording of the notice of
motion, the application does not
implicate any provision in the
National Credit Act 34 of 2005
.
[2]
There was no proof in the court file that
notice of the application had been given to any of the respondents.
The application
had obviously been served on the first respondent
(the judgment creditor) because it opposed the application and was
represented
at the hearing. I was satisfied that the fourth
respondent (the Minister of Justice and Constitutional Development)
had received
notice when the applicants’ counsel handed up a
copy of a notice from the state attorney’s office indicating
that the
Minister abided the judgment of the court. It did not
appear to me (and counsel agreed) that the second and third
respondents
(the National Credit Regulator and the Sheriff: Strand,
respectively) had any direct or substantial legal interest in the
relief
sought, so no point would have been served by deferring the
hearing to obtain proof of service on them.
[3]
The applicants were also unable to satisfy
me that notice of the application had been given as required in terms
of
rule 16A.
That is not to say that notice had not been
given. A copy of such a notice had been included in the
papers before
me. It did not, however, bear the registrar’s
stamp and there was therefore no indication whether or not the
registrar
had indeed received it. The applicants’ counsel
sought a postponement of the hearing of the application to enable
that
issue to be addressed. The first respondent opposed the
request for a postponement and argued that the requirement should
be
dispensed with in terms of
rule 16A(9).
I was persuaded that it
would not be in the interests of justice, having regard to the
character of the case presented on
the papers, for the matter to be
postponed and accordingly made an order in terms of
rule 16A(9)
dispensing insofar as necessary with the requirements of the rule.
[4]
Rule 46
regulates the procedure for the
sale of immovable property in execution of judgments of the High
Court. Subrule (12) provides:
Subject to the provisions of subrule (5), the
sale shall be without reserve and upon the conditions stipulated
under subrule (8),
and the property shall be sold to the highest
bidder
.
(Subrule (5) affords a creditor whose claim to the proceeds of the
attached property is preferent to that of the judgment creditor
to
stipulate a reserve price.)
[5]
Section 25(1) of the Constitution provides:
No one may be deprived of property except in terms of law of
general application, and no law may permit arbitrary deprivation of
property.
[6]
It was common ground that the effect of a
sale in execution was to deprive a judgment debtor of its property
and that the pertinent
rules of court, including rule 46(12), fell
for the purposes of s 25(1) to be characterised as ‘law of
general application’.
Counsel were also in agreement that
the approach to determining whether the subrule permitted arbitrary
deprivation of property
should be informed by the judgment of the
Constitutional Court in
First National
Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue
Service and Another; First National Bank of SA Ltd
t/a Wesbank v
Minister of Finance
[2002] ZACC 5
;
2002 (4) SA 768
(CC) (‘Wesbank’).
[7]
At paragraph 66 of
Wesbank
the importance of the legislative context in question was
emphasised. It was recognised that ‘[i]
n
certain circumstances the legislative deprivation might be such that
no more than a rational connection between ends and means
would be
required, while in others the ends would have to more compelling to
prevent the deprivation from being arbitrary
’.
At para 100 of the judgment the Court held ‘…
it
is concluded that a deprivation of property is ‘arbitrary’
as meant by s 25 when the ‘law’ referred to
in s 25(1)
does not provide sufficient reason for the particular deprivation in
question or is procedurally unfair. Sufficient
reason is to be
established as follows:
(a)
It is to be determined by evaluating
the relationship between means employed, namely the deprivation in
question and ends sought
to be achieved, namely the purpose of the
law in question.
(b)
A complexity of relationships has to
be considered.
(c)
In evaluating the deprivation in
question, regard must be had to the relationship between the purpose
for the deprivation and the
person whose property is affected.
(d)
In addition, regard must be had to
the relationship between the purpose of the deprivation and the
nature of the property as well
as the extent of the deprivation in
respect of such property.
(e)
Generally speaking, where the
property in question is ownership of land or a corporeal moveable, a
more compelling purpose will
have to be established in order for the
depriving law to constitute sufficient reason for the deprivation
than in the case when
the property is something different and the
property right something less extensive. ….
(f)
Generally speaking, when the
deprivation in question embraces all the incidents of ownership, the
purpose for the deprivation will
have to be more compelling than when
the deprivation embraces only some incidents of ownership and those
incidents only partially.
(g)
Depending on such interplay between
variable means and ends, the nature of the property in question and
the extent of its deprivation,
there may be circumstances when
sufficient reason is established by, in effect, no more than a mere
rational relationship between
means and ends; in others this might
only be established by a proportionality evaluation closer to that
required by s 36(1) of
the Constitution.
(h)
Whether there is sufficient reason
to warrant the deprivation is a matter to be decided on all the
relevant facts of each particular
case, always bearing in mind that
the enquiry is concerned with 'arbitrary' in relation to the
deprivation of property under s
25.
[8]
Mr
Engelbrecht
,
who appeared for the applicants, was constrained to acknowledge that
he was unable upon an application of the tests stated in
para. 100
of
Wesbank
to contend that the impugned provision permitted arbitrary
deprivation of property, either substantively or procedurally.
I think his concession was properly made. The result, however,
was that the application remained for determination while
the court
was deprived of the benefit of any reasoned oral argument in support
of it.
[9]
There is a public interest in the
exigibility of judgments sounding in money. That creditors
should obtain the authorisation
of a court to exact payment from
their debtors is a fundamental aspect of the rule of law. The
alternative would be the chaos
and lawlessness of a regime of
self-help, in which the most vulnerable in society would be the most
exposed to abuse. A court
regulated system of debt recovery
must be effective, however, if it is to command respect. There
would be no point in creditors
having to obtain judgments for the
purposes of exacting recovery from their debtors if there was no law
in place to lend force
to the judgments and provide for their
execution. The rules of court governing execution against a
judgment debtor’s
property afford such law.
[10]
The notion that a debtor’s property
should be available to satisfy its debts is universally accepted.
Execution does
not occur arbitrarily. It takes place only after
a court has by its judgment confirmed the existence of the obligation
and
authorised enforcement of compliance with it. Thereafter, a
number of prescribed procedures have to be complied with before
execution of the judgment is actually carried out. These
include notice of to the judgment debtor of the attachment of the
property, the ability of a judgment debtor in the ordinary case to
point out the property that should be attached, advertisement
and a
public sale. The procedural requirements afford a judgment
debtor adequate practical opportunity to avoid the sale
of its
property if it is able to redeem its indebtedness by other means.
[11]
The relative importance of immovable
property – something recognised by the Constitutional Court in
Wesbank
(see sub-para (e) in para. 100) – is acknowledged in the
provision that ordinarily execution must occur against movables,
and
only when those have been excussed may the judgment creditor proceed
against immovable property. The position is different,
when, as
in the current matter, the court had declared the immovable property
to be directly executable, but that invariably occurs
when the debtor
has bound itself to submit to such an order – usually in the
context of having mortgaged the property.
There is nothing
arbitrary about that.
[12]
Nor is the exposure of the property to
execution something that happens arbitrarily. It is always
founded on some underlying
liability by the judgment debtor. A
judgment debtor who undertakes contractual liability voluntarily
undertakes the risk
that breach of or failure to perform in terms of
the contract may have adverse proprietary consequences. A
property owner
who does some wrong to a third party that gives rise
to delictual liability is similarly itself responsible for exposure
of its
property to execution if it is not willing or able voluntarily
to settle the resultant liability in compensatory damages.
[13]
There will always be a risk when a sale is
forced, rather than voluntary, that the price realised will be less,
sometimes considerably
so, than the owner might have been able to
achieve by private treaty. But the proper ordering of the
judicial process would
be rendered ineffectual if the execution of
judgments were to be made subject to the debtor’s disposition
of attached property
by private treaty; cf.
Firm
Mortgage Solutions (Pty) Ltd and Another v Absa Bank Ltd and Another
2014 (1) SA 168
(WCC). Save in a case in which some improper
collusion or ulterior purpose is engaged, the execution creditor will
have a
corresponding interest with the judgment debtor in realising
the property for an amount that will at least cover the judgment
debt.
The rules specifically provide that the sheriff, as the
judicial salesperson, must be a disinterested party in the
transaction.
These factors militate against any conclusion that
the deprivation of property pursuant to rule 46 is arbitrary.
If a situation
should arise in which a manifest injustice arose out
of the peculiar circumstances of a sale in execution, there is
nothing to
prevent the judgment debtor from seeking appropriate
relief. As the judgment in
Firm
Mortgage Solutions
supra illustrates,
such cases would be exceptional. That the realised price was
disadvantageous would not be sufficient.
[14]
The introduction of a requirement that a
sale in execution had to be subject to a market value related reserve
price might have
some societal value. One thinks particularly
in this regard of sales of immovable property that is the judgment
debtor’s
home. Something can be said in favour of the
argument that such a requirement in those cases would promote the
rights under
s 26 of the Constitution. But those are
policy questions. The introduction of such policy would require
consideration
of a number of related factors, including the cost of
enforcement measures and the impact of any increase thereof on the
availability
of credit. Some means would have to be devised to
deal with cases in which the reserve was not realised. The
possibility
of the implementation of such a policy and its merits and
demerits have no bearing on the determination of whether the law as
it
stands gives rise to an arbitrary deprivation of property.
The current regime might be amenable to improvement, but it affords
an adequately rational connection between ends and means.
[15]
For these reasons I have not been persuaded
that rule 46 in general, or sub-rule 46(12) in particular, permits
arbitrary deprivation
of property, whether substantively or
procedurally.
[16]
Notwithstanding the application’s
character as a purported assertion of a fundamental right under the
Bill of Rights I do
not think in the peculiar circumstances of the
case that there is any reason why costs should not follow the
result. The
application is dismissed with costs.
____________________
A.G.
BINNS-WARD
Judge of the
High Court