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[2015] ZASCA 44
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Firstrand Bank Limited v Nkata (213/2014) [2015] ZASCA 44; [2015] 2 All SA 264 (SCA); 2015 (4) SA 417 (SCA) (26 March 2015)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 213/2014
REPORTABLE
In
the matter between:
FIRSTRAND
BANK
LIMITED
......................................................................................
APPELLANT
and
NOMSA
NKATA
.............................................................................................................
RESPONDENT
Neutral
citation:
Firstrand Bank Ltd v Nkata
(213/14)
[2015] ZASCA
44
(26 March 2015)
Coram:
M
aya
,
Cachalia,
Majiedt, W
illis
and
Saldulker
JJA
Heard:
6
March 2015
Delivered: 26
March 2015
Summary:
National Credit Act 34 of 2005
– interpretation of
s 129
(4) – the rescheduling or restructuring of debt does not ipso
facto nullify a previously obtained writ of execution in relation
to
the credit agreement in question – execution means sale in
execution - appeal upheld.
ORDER
On
appeal from
:
Western
Cape
High Court,
Cape Town
(
Rogers
J sitting as the court of first instance)
1.
The appeal is upheld with costs, including the costs of two counsel.
2.
The following is substituted for the order of the high court:
‘
The
application is dismissed with costs.’
JUDGMENT
Willis
JA (M
aya
,
Cachalia,
Majiedt, and Saldulker
JJA concurring):
[1]
The appellant appeals, with the leave of the Western Cape High Court
(Rogers J), against the judgment and order which it delivered
on 16
January 2014. The respondent, Ms Nomsa Nkata (the debtor) had brought
an application for the rescission of a default judgment
which the
appellant, Firstrand Bank Ltd, trading as First National Bank (the
bank) had obtained against her, together with an application
for the
cancellation of the sale in execution of an immovable property (‘the
property’). It was erf 8832 Durbanville,
situated at 35 Vin
Doux Street, Durmante, Durbanville, Western Cape under deed of
transfer no. T42327/2005. A first mortgage
bond had been registered
over the property in order to secure a loan that the bank had given
the debtor to assist her to buy it.
The loan is subject to the
provisions of National Credit Act 34 of 2005 (the NCA). Although the
high court dismissed the application
for rescission of the default
judgment it, mero motu, reinstated the credit agreement, purportedly
in terms of s 129(3) of the
NCA. Not only the bank but also the
debtor applied for leave to appeal. Although the bank was given leave
to appeal, the debtor
was not.
[2]
The rescission application was the second that the debtor had brought
in respect of the property. The first had been brought
in
November 2010. Arising from the first application, the parties
settled the matter in terms of which a previously scheduled sale
in
execution of the property was cancelled, the debtor agreed to pay her
arrears and that, in the event that the debtor failed
to make good
her arrears, the bank would be able to proceed forthwith to sell the
property in execution. The settlement was reflected
in a draft order
of court. The debtor herself applied for the draft to be made an
order of court but the judge on duty at the time
declined to do so as
there had not been notice given to the bank. Neither the debtor nor
the bank took any further steps in this
regard. Nevertheless, in that
draft, the debtor clearly agreed that the property could subsequently
be sold in execution should
she once again default in respect of the
payments that were due.
[3]
The property was undeveloped at the time when the debtor bought it in
2005. The debtor, who describes herself as a ‘businesswoman’,
built a house on the property, taking occupation with her two
daughters during 2007. She is a supplier of hospital equipment. She
obtained financial assistance from the bank, which was secured by a
first mortgage bond registered over the property in May 2006
and a
second in 2007. The property is what is colloquially known as ‘up
market’. From the time when the debtor bought
the property in
2005 until she took occupation in 2007, she had been living in a
block of flats in Rondebosch, known as Devonshire
Hill. It was the
address at this flat which she had chosen as her domicilium citandi
et executandi.
[4]
Between March and November 2010, the debtor received numerous calls
from the bank concerning her arrears. Two letters were
addressed by
its attorneys to the debtor in terms of s 129(1): the first on 1 June
2010 and the second on 4 June 2010. The debtor
claims not to have
received these notices and the summons in respect of which the
default judgment was obtained. Be this as it
may, the debtor
approached a debt counsellor on 4 August 2010 and applied for debt
review on 20 August 2010. The debtor acknowledges
that she had
learned of the default judgment and the first pending sale in
execution during the first half of October 2010. This
lead to her
issuing the first application for rescission on 19 November 2010.
That application was opposed by the bank but, as
has already been
mentioned, the matter was settled as reflected in the draft order of
court.
[5]
The bank debited the debtor’s account with costs related to
the recovery of the debt. These were R9 050 on 25 October
2010, R14
498 on 21 February 2011 and R4 000 on 1 March 2013. The total was
therefore about R28 000 – less than the sum of
approximately
R33 000 which the debtor owed in respect of arrears at the time of
the sale in execution.
[6]
The summons was issued on 27 July 2010. Default judgment was
granted, in terms of rule 31(5) of the Uniform Rules of the
High
Court, by the registrar on 28 September 2010, the property being
declared executable. The writ of attachment was issued on
the same
day.
[7]
In May 2012, the debtor informed the bank that she was experiencing
difficulties meeting her monthly instalments. She had several
meetings with the bank concerning the issue but no agreements were
concluded as a result thereof. In October 2012, she approached
another debt counsellor. The debtor managed to continue with her
instalments until February 2013. According to the bank, it attempted,
on numerous occasions between February and April 2013, to resolve the
matter, but to no avail. On the debtor’s own version
of events,
she was informed by the bank of the impending sale in execution in
March 2013. The property was sold in execution on
24 April 2013.
[8]
At that stage the debtor’s arrears were R33 716.89. As at 2
July 2013, the debtor’s arrears were R66 918.19. The
purchaser
at the sale in execution was Kraaifontein Properties and was the
third respondent in the motion court. The second respondent
was the
sheriff. Kraaifontein Properties renovated the property and then sold
it ‘on’. By agreement between the
purchaser at the
sale in execution and the new buyer, registration of the transfer has
been suspended, pending the outcome of this
matter. A deeds registry
search conducted on 2 July 2013 revealed that the debtor was the
co-owner of two other properties. One
of these properties is in
Parklands, which she owns with her attorney. The other property is in
Hunters’ Retreat, which she
owns with one Ms Thembile Maxwell
Nkata.
[9]
Relying on the provisions of s 129(3)
(a)
of the NCA, the high
court declared that the loan agreements had been reinstated because
the debtor made good her arrears in both
March 2011 and March 2012
and that, accordingly, the default judgment and the writ in execution
ceased, by operation of the law,
to have any force and effect. The
order also interdicted the transfer of the property which would have
ensued consequent on the
sale in execution. By reason of the fact, as
will appear later, the decision of this court is based on its
interpretation of s
129(4)
(b)
of the NCA, it is not necessary
to deal with the high court’s reasons and its findings in
respect of s 129(3)
(a).
[10]
Before us, Ms Dzai, counsel for the debtor sought to argue that the
high court was incorrect to refuse the rescission. The
high court
refused to grant leave on this point. Moreover, there was no
cross-appeal in regard thereto. This question is therefore
not before
us. Ms Dzai otherwise supported the judgment of the high court. She
also contended that the settlement agreement concluded
between the
parties on 10 December 2010 invalidated the writ that gave rise to
the sale in execution. This submission flies in
the face of the
express terms of the settlement agreement providing that in the event
that the debtor failed to make good her arrears,
the bank would be
able to proceed forthwith to sell the property in execution. Ms Dzai
otherwise supported the judgment of the
high court. She also
contended that the settlement agreement concluded between the parties
on 10 December 2010 invalidated the
writ which gave rise to the sale
in execution. This submission flies in the face of the express terms
of the settlement agreement
providing that in the event that the
debtor failed to make good her arrears, the bank would be able to
proceed forthwith to sell
the property in execution.
[11]
Mr Gautschi, counsel for the bank, submitted that the case turns on
the interpretation of ss 129 (3) and (4) of the NCA. Subsections
129(3) and (4) of the NCA read as follows:
‘
(3)
Subject to subsection (4), a consumer [ie a person in the position of
the debtor] may –
(a)
at any time before the credit provider [ie a person in the
position of the bank] has cancelled the agreement re-instate a credit
agreement that is in default by paying to the credit provider
all amounts that are overdue, together with the credit provider’s
permitted default charges and reasonable costs of enforcing the
agreement up to the time of re-instatement; and –
(b)
after complying with para
(a
), may resume possession of
any property that had been repossessed by the credit provider
pursuant to an attachment order.
(4)
A consumer may not re-instate a credit agreement after –
(a)
the sale of any property pursuant to –
(i)
an attachment order; or
(ii)
surrender of property in terms of section 127;
(b)
the execution of any other court order enforcing that agreement; or
(c)
the termination thereof in accordance with section 123.’
[12]
The high court concluded that, in order for a consumer to be able to
re-instate a credit agreement, the debtor need not pay
the full
accelerated debt but merely the arrear instalments. I agree. This
view also has academic support.’
[1]
Although it had originally adopted the position that it was the
full accelerated debt that had to be paid, the bank now wisely
and
correctly accepts that the high court’s conclusion was the
proper one to make in this regard.
[13]
The high court found that the reasonable costs of enforcing the
agreement must be either taxed or agreed. I agree, but this
point is
irrelevant because, at the time of the sale in execution, the
aggregate of the charges for recovery of the debt was less
than the
amount in respect of which the debtor was in arrears.
[14]
The high court also found that:
‘
FRB
[the bank] in the present case did not present costs to Nkata [the
debtor] and invite her to pay them. FRB simply debited the
amounts to
the bond account. If the amounts in question were owing by Nkata, it
is clear from FRB’s conduct that the bank
was content to settle
the costs by lending her the money through a debit to her bond
account.’
and
‘
By
debiting the legal costs to the account rather than demanding
separate payment thereof, the credit provider indicates to the
consumer that the credit provider is content to lend the
corresponding amount to the consumer and to receive payment thereof
in
instalments as if the debited costs were part of the capital. For
the purposes of s 129(3)
(a)
the costs, if properly debited,
lose their separate character as costs of enforcing the agreement.
Put differently, the enforcement
costs which the consumer must pay as
contemplated in s 129(3)(a) in order to obtain reinstatement are
those costs of which the
credit provider is at that time requiring
payment.’
[15]
Mr Gautschi submitted that this was an impermissible interpretation.
He contended that this interpretation was not only novel
and
imaginative but also that it did not accord with reality and is quite
unjustified. Mr Gautschi put forward the proposition
that a customer
of a bank necessarily operates an account with it. By debiting
the account of its customer with charges and
costs relating to the
recovery of a debt due – which in any event is permitted in
express terms by the mortgage agreement
in this case – the bank
is simply claiming the amount. The bank, so the argument went, says
in effect: ‘This is what
we say you owe us.’ Without
further ado, that does not constitute a payment by the customer. Mr
Gautschi submitted that if
a customer were, for example, to continue
to make deposits into the bank account, without protest after receipt
of a bank statement
reflecting the debit or debits, this silence may
justify the inference that the customer has paid the amounts claimed
by the bank.
[16]
Additionally, Mr Gautschi contended that, properly construed, s
129(3)
(a)
requires some form of communication by the consumer
with the credit provider that she intends to reinstate, for how else
can a
determination be made as to what the ‘reasonable costs of
enforcing the agreement up to the time of re-instatement’
might
be?
[17]
In order to understand the prohibition on re-instating a credit
agreement, as provided for in s 129(4), one needs first to
know what
the requirements or conditions for re-instatement are, as set out in
s 129(3)
(a)
. At least to this extent, sub-ss 129(3)
(a)
and s 129(4) must be read conjunctively. It is not necessary,
however, to decide the matter in terms of the gravamen of the
submissions made by Mr Gautschi relating to the interpretation of s
129(3)
(a)
. I refer, in particular, to those aspects which, by
reference to s 129(3)
(a)
, touch upon the interpretation of
what may constitute payment of default charges and costs and the
need, if any, for there to be
a communication by the consumer to the
credit provider of an intention to re-instate the credit agreement. I
come to this conclusion
by reason of the interpretation of
‘execution’ in s 129(4)
(b)
which, in my opinion, a
court is compelled to make.
[18]
Referring to s 129(4)
(b)
of the NCA, the high court found
that:
‘
The
judgment is only actually ‘executed’ when money is raised
pursuant to a sale of attached property and paid to the
judgment
creditor.’
In
coming to this conclusion, Rogers J referred to the judgment of Peter
AJ In
Nedbank
Ltd v Fraser & another and Four Other cases
[2]
and the article written by Reghard Brits, to which I have referred
earlier, ‘Purging mortgage default: Comments on the right
to
reinstate credit agreements in terms of the
National Credit Act&rsquo
;.
[3]
[19]
In
Nedbank
Ltd v Fraser & another and Four Other cases
[4]
the judge said:
‘
In
the case of immovable property, the right of redemption is
extinguished only when registration takes place into the name of the
purchaser after the sale in execution.’
[5]
In
coming to this conclusion, he relied on
Liquidators
Union and Rhodesia Wholesale Ltd v Brown & Co
;
[6]
Simpson
v Klein NO & others
[7]
and
Shalala
v Bowman NO & others
.
[8]
In my respectful opinion, the court misconstrued these authorities.
[20]
The word ‘execution’ is not defined in the NCA. First and
most significantly, one needs to understand – as
Mr Gautschi
correctly submitted – that civil execution is a process rather
than an event. In regard to this understanding
there is no dearth of
authority. The topic has vexed many judges both here and abroad:
there is no shortage of instances where
debt recovery has been
troublesome, requiring judicial attention.
[21]
In
Reid
& another v Godart & another
[9]
De Villiers JA said:
‘…
[T]he
word “execution” means, as it seems to me, “carrying
out” of or “giving effect” to the
judgment, in the
manner provided by law; for example, by specific performance, by
sequestration, by the passing of transfer, by
issue of letters of
administration, by ejectment from premises, or by a levy under a writ
of execution’.
[10]
[22]
In
Liquidators Union v Brown
Kotzé JA, after referring
to the old common law authorities, said:
‘
But
although the effect of a
pignus
judiciale
[11]
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 actual sale, redeem his attached property: that is to
say, the property subject to the
pignus
judiciale
,
for while the
pignus
lasts he remains the owner of the pledge….’
[12]
For
present purposes, the significance of this understanding is that, at
common law, a debtor could redeem his attached property
‘up to
the last moment before the actual sale’.
[23]
Section 129(3)
(b)
read with 129(3)
(a)
, together with
s
129(4)
of the NCA give the consumer the right to ‘re-instate’
a credit agreement and ‘resume possession’ of the
property in question (the equivalent of ‘redemption’ at
common law) by paying the credit provider all amounts that
are
overdue, together with ‘default charges’ and ‘reasonable
costs of enforcing the agreement’, but does
not alter the
common law consequence of ‘the axe falling’ upon the sale
in execution. At common law one could, up to
the time of the sale,
redeem ownership and possession by discharging the full amount of the
debt. Now, under the NCA, ownership
and possession can be redeemed
merely by paying the amount overdue, together with charges and costs.
The Rubicon has been and remains
the sale in execution. The NCA has
not changed this. On the contrary, it has expressly provided that a
consumer may not ‘re-instate’
a credit agreement after
the execution of a court order enforcing the agreement.
[24]
Insofar as redemption is concerned,
s 129(4)
(b)
necessarily
alters the common law only to the extent that redemption
(re-instatement in the terms of the NCA) may occur not necessarily
by
payment of the full debt but merely to the extent of arrears,
together with related charges. This takes account of the fact
that
nowadays many consumers borrow money over a protracted period of time
in order to finance the acquisition of large purchases
such as a home
or a motor vehicle. Less affluent citizens may avail themselves of
extended credit to purchase household appliances,
for example.
[25]
In
Simpson
v Klein NO & others
[13]
Kriegler J referred to
Liquidators
Union v Brown.
Although
he did say that:
‘…
(T)he
words “actual sale” in the quoted passage from the
judgment of Kotzé JA… were not intended to relate
to
the act or moment of the sale as such (ie when the property was
knocked down to the highest bidder) but to delivery pursuant
to and
in terms of the sale’,
[14]
he
nevertheless observed that:
‘
Neither
Judge was concerned with the point in issue in this case, namely at
which precise point in time fixed property, which has
been attached
and sold in execution, passes from the estate of the judgment
debtor.’
[15]
and
‘
In
the case of immovables, however, ownership in the attached property
can not pass during the sale in execution. It only passes
subsequently upon formal transfer of the property by the deputy
sheriff to the purchaser in execution.’
[16]
In
my respectful opinion, this reasoning of Kriegler J is unassailable.
The context to which he was referring was, however, very
different
from that with which this court is now dealing. As Kriegler J was
careful to point out:
‘
In
so far as we are now dealing with
s 20
of the
Insolvency Act of 1936
,
whereas the learned Judge [Kotzé JA] had been commenting on
the relevant provisions of Act 32 of 1916, care should be taken
to
ensure that the comments relating to the former
Insolvency Act are
equally valid with regard to the current
Insolvency Act&rsquo
;.
[17]
[26]
The context of a debtor’s supervening insolvency, after a sale
in execution of immovable property, but before transfer
thereof, is
very different from that with which we have to do in this case. Here
the debtor is seeking to set aside a bona fide
sale in execution to
redeem for herself the property in question. The two situations
cannot be considered to be coextensive or
in
pari materia
.
In the case of insolvency, the interests of a single creditor are in
competition with the concursus creditorum. In the situation
with
which we are now dealing, it is the interests of the debtor which are
in competition not only with a single creditor, the
bank, but also an
innocent third party, the purchaser of the immovable property.
Furthermore, as Kriegler J was astute to
indicate, the consequence of
his judgment was not that the sale in execution was invalid or fell
to be set aside but that the proceeds
of the sale in execution did
not fall outside of the estate of the debtor.
[18]
[27]
Moreover, as Kriegler J noted:
‘
It
is, however, clear from the passage quoted that execution is a
process
for the enforcement of a judgment and entails a number of successive
steps. Such execution is perfected eventually by a number
of
different procedures to be performed by the officer of the court.
They include delivery to the purchaser of the goods attached
and sold
in execution, receipt of the price obtained at the sale in execution
for such goods, the accounting for such receipts
(including the
calculation of the costs of execution), the payment to the judgment
creditor or creditors of what is his or their
due and the payment
over to the judgment debtor of any balance which may then still
remain. The whole of that
process
is
embraced under the concept of execution.’
[19]
(Emphasis added.)
Section
129(4)(
b)
does not refer to the completion or perfection of a
sale in execution
.
To infer that this is so would lead
to absurd results. What if the deputy sheriff’s fees and
charges are to be taxed?
What if the taxing master’s decision
is subject to review in the high court? What if that review is
subject to an appeal?
If one has regard to
s 129(4)
as a whole, it is
clear that some kind of final, irrevocable step is envisaged, beyond
which a consumer may not return. A bona
fide sale in execution is
precisely such a step. Besides, even a perfected sale in execution
may not be the end-game. What if the
proceeds of the sale in
execution of the immovable property are insufficient to discharge the
debt but the debtor has other immovable
properties? These could then
be sold in execution until the debt has been discharged. When it
refers to ‘execution’,
s 129(4)
(b)
cannot have
envisaged complete, absolute, perfect finality in the process of
execution.
[28]
Shalala
v Bowman
,
the other case to which the court refers in
Nedbank
v Fraser
,
follows
Simpson
v Klein
.
In
Shalala
v Bowman
Blum AJ deals with a company in liquidation. This does not add, in
any significant way, beyond
Simpson
v Klein,
to the issues to be decided in this case. The other case to which the
court referred was
Syfrets
Bank Ltd & others v Sheriff of the Supreme Court, Durban Central,
& another; Schoerie NO v Syfrets Bank Ltd &
others
.
[20]
Like
Shalala
v Bowman
,
it deals with the effect of a company’s liquidation on a sale
in execution. Combrink J disagreed with Blum AJ’s reasoning
in
Shalala
v Bowman
and found that a bona fide sale in execution of immovable property
which had taken place not only before a company had been placed
in
liquidation but also before registration of transfer is unaffected by
the order of liquidation.
[21]
Combrink J quoted approvingly
[22]
from the judgment of Booysen J in
Strydom
NO v MGN Construction (Pty) Ltd & another: In re Haljen (Pty) Ltd
(in Liquidation)
,
[23]
which, in turn, quoted from
Rennie
NO v Registrar of Deeds & another
[24]
with approval.
[25]
[29]
In
Rennie v Registrar of Deeds
Schock AJ said:
‘
Execution
is, in my view, “put into force” within the meaning of
those words in the said section when, in pursuance
of a writ of
execution, the Sheriff or the messenger of the court, as the case may
be, enters into possession of the property,
i.e. when execution is
levied. This has always been the interpretation of those words placed
on the corresponding and substantially
similar section in the English
Companies Acts from which these words in our Companies Act (and its
predecessors) were taken. Moreover
this interpretation has been
applied in our Court by
Maasdorp
J
(as he then was), in the case of
In
re Cape Cold Storage and Supply Co Ltd: Hendry v Trollip
(1908) 25 SC 502
, in construing similar words in the Cape (pre-Union)
Companies Act. It is also in accordance with the interpretation
applied by
Clayden
J
in the case of
Pols
v. Pols – Bouers en Ingenieurs (Edms) Bpk
1953 (3) SA 107
(T) at 110E-H in construing a similar provision of
the 1926 Companies Act. There is a
dictum
to the contrary by
Jennet
J
in
Ex
parte: Flynn In re United Investments & Development Corporation
Ltd (in Liquidation)
1953 (3) SA 443
(E) at 445B-C, but it appears that he did not have
the benefit of the judgment in
Pols
’
case,
supra
.
The reasoning of
Jennet
J
seems to me, with respect, quite unconvincing. An execution is surely
put into force once and for all and not – as
Jennett
J
suggests in the above-cited passage – every time a further step
in the
process
of execution is taken. The weight of authority thus clearly supports
the view that execution – in terms of the said section
–
was “put into force” when the messenger of the Court
attached the said erf and this is the meaning which commends
itself
to me.’
[26]
(Emphasis
added.)
For
Schock AJ the ‘once and for all’ character of the process
of execution came into operation upon attachment but an
awareness of
context is, as always, important: Schock AJ had to determine the
critically important step in the process of execution
in relation to
the time when an order is made for the winding-up of a company. What
is important for present purposes is that,
in Schock AJ’s
reasoning, execution did not ‘occur’ only once there had
been a distribution of the proceeds of
the sale in execution –
or even after some step after that.
[30]
In
Maharaj
Brothers v Pieterse Bros Contruction (Pty) Lt & another
[27]
Caney J,
after
referring to English authorities as well as
Reid v Godart
,
said:
‘
Execution
in its widest sense means carrying out of or giving effect to a
judgment in the manner provided by law…
In
a narrower sense it is the
process
by which the Sheriff or the messenger of the magistrate’s court
“procures for a judgment creditor the fruits of his
judgment”.
In
re A. Company
1915 (1) Ch. 520
(C.A.) at p.527.’
[28]
(Emphasis added.)
[31]
I am fortified in my opinion that civil execution is a
‘process-oriented’ concept rather than one which refers
to a single event but that the event of a sale in execution denotes
finality and a point of no return, by reference to English
cases. In
In
re: Overseas Aviation Engineering (G.B) Ltd
[29]
Lord Denning MR said, by reference to s 325 of the English
Companies Act, 1948:
‘
The
word “execution” is not defined in the Act. It is, of
course, a word familiar to lawyers. “Execution”
means,
quite simply, the
process
: for enforcing or giving effect to
the judgment of the court: and it is “completed” when the
judgment creditor gets
the money or other thing awarded to him by the
judgment…
Applying
this meaning of the word “execution”, I should have
thought it plain that when a judgment creditor gets a charge
on the
debtor’s property, it is a form of “execution”, for
it is a means of enforcing the judgment.’
[30]
(Emphasis added.)
In
Overseas
Aviation Engineering
,
Lord Denning referred, with approval, to
Blackman
v Fysh
[31]
in which Kekewich J said:
‘
What
is the meaning of “taken in execution”? Read
irrespectively of authorities, it means taken by
process
of
law for the enforcement of a judgment creditor’s right and in
order to give effect to that right.’
[32]
(Emphasis added.)
[32]
In
Fagot
v Gaches
[33]
Du Parcq LJ said:
‘
To
my mind, “to proceed to Execution on, “or” to
proceed to the enforcement of a Judgment is only a way of saying
“to
Execute” or “to enforce”….’
[34]
[33]
In summary then, there is an almost across-the-board judicial
consensus not only in South Africa but also in England, from
which so
much of our law of procedure (our ‘adjectival law’ in
contrast to our ‘substantive law’) derives,
that
‘execution’ refers to a process. It is also clear that
the precise meaning to be given to ‘execution’
in a
particular statute depends very much on context.
[34]
In the article by Reghard Brits, which was mentioned previously, he
comments on the right to reinstate credit agreements in
terms of the
National Credit Act&rsquo
;.
[35]
He argues that ‘…
section 129(4)
qualifications should by
and large be regarded as the boundaries for debtors’ rights
under
section 129(3)
to reinstate credit agreements that are in
default’
[36]
and argues
that
s 129(4)
(a)
and
(b)
should
respectively be construed ‘…so that reinstatement
is only prohibited once the judgment had been
enforced or
the
property sold
’.
[37]
(Emphasis added.) Brits goes on to argue that:
‘…
[T]o
allow reinstatement to occur after sale but prior to registration
would render auction sales very insecure (and hence unpopular)
and
would cause great inconvenience for auction purchasers as well as the
deeds registration system. The public auction process
would not be
able to fulfil its debt recovery function properly. Also, lower
prices (which will, no doubt, accompany the high risk
of sales
failing due to reinstatement) will in return prejudice debtor’s,
which is contrary to the NCA’s core purposes.’
[38]
I
agree.
[35]
In
ABSA
Bank Limited v Van Eeden & others
[39]
,
after referring to the maxim
quoniam
fiscalis hastae fides facile convelli non debeat
,
to which reference was made in
Sookdeyi
& Another v Sahadeo & Another
,
[40]
it was said that public confidence in the process of execution is
fundamentally important. The maxim may be translated as explaining
the judicial preference for deference to sales in execution, once
these have taken place, ‘by reason of the fact that public
confidence in the institutional weapon of execution should not
lightly be disturbed’ (my translation).
[41]
For obvious reasons, this deference is to be applied with even
greater rigour once there has been delivery (in the case of
movables)
or transfer registered in the deeds registry office (in the case of
immovable property).
[42]
In
any event, sight must not be lost of the truth that the higher the
price fetched at public auctions, the better it is for both
credit
providers and consumers: the higher the price, either the less the
residual indebtedness of the consumer or the greater
her surplus.
Whichever of these two possible outcomes ensues, both the credit
provider and the consumer may be said to ‘win’.
The more
interested buyers that attend an auction, the higher the price is
likely to be. Facile judicial intervention in sales
in execution will
discourage interested buyers from attending these auctions. Why bid,
if it is considered likely that a court
will set the sale aside?
[36]
Sight should also not be lost of the fact that, as Mr Gautschi
correctly submitted, a re-instatement of a credit agreement,
necessarily entails a revisiting, a revision thereof and,
consequently, its amendment. The credit provider’s ‘permitted
default charges and reasonable costs of enforcing the agreement up to
the time of re-instatement’ are added to the amount
which the
consumer must pay. In terms of
s 116
of the NCA, a change or
amendment to a credit agreement (unless it reduces the consumer’s
liabilities or increases the credit
limit) is void unless ‘the
change is recorded in writing and signed by the parties’.
[43]
Not only is formality required when an agreement is re-instated but
any change or amendment to a credit agreement after a
sale in
execution would generate a conflict between the purchaser at a sale
in execution, on the one hand and the credit provider
and the
consumer, on the other. No such formalities occurred in the present
case.
[37]
As Innes J keenly recognised long ago in
Walker
v Syfret NO,
[44]
when it comes to finding
the point of no return in matters concerning the enforcement of a
transaction, the interests of innocent
third parties are
paramount.
[45]
He said: ‘[N]o
authority directly in point has been quoted to us, but the matter
seems clear upon principle’. This
provides another clue in the
process of analysis of what ‘execution’ in
s 129(4)
(b)
might
mean.
[38]
Yet another pointer to the fact that ‘execution’ in
s
129(4)
(b)
refers
to the moment of sale at the public auction is to be found in the
fact that, in terms of
s 129(4)
(a)(i)
,
re-instatement may not occur after the
sale
of any property pursuant to an attachment order. (Emphasis added). An
order of attachment differs from a writ issued from the office
of the
registrar, in terms of Rules 45 and 46 of the Uniform Rules of Court,
after a court has given judgment requiring a litigant
to make a
payment of money. An order of attachment commonly arises where the
court grants it in order to protect a litigant’s
interest in
property that is the subject of a dispute. In this regard, the
judgment of Millin J in
Loader
v De Beer
,
[46]
which has been followed in numerous instances thereafter, is
instructive. The order is often called an attachment
pendent
lite.
The judgment of Margo J in
Van
Rhyn v Reef Developments A (Pty) Ltd
[47]
provides a good example.
[48]
An order of attachment of property need not, of course, be confined
to a situation where there is a
lis
pending between the parties. Therefore it would seem, if s 129(4)
(b)
is read not only consecutively but also in harmony with s 129
(4)(
a)(i),
that the mischief at which these two subsections were directed was
re-instatement after a sale in execution.
[39]
Furthermore, if the high court’s conclusion that execution only
takes place when the proceeds of the sale in execution
are paid over
to the judgment creditor is correct, it would mean that the
provisions of s 129(4)
(a)(i)
are not only nugatory but also
superfluous. If it was the legislator’s intention that it is
the transfer of immovable property,
followed by payment to the credit
provider of the proceeds – and, by parity of reasoning,
delivery and then payment to the
credit provider in the case of
movables – which is decisive, why then have a provision that
prohibits re-instatement after
the ‘sale of any property
pursuant to an attachment order’?
[40]
There is still further reason why the construction which the bank
wishes to place on the interpretation of ‘execution’
in s
129(4)
(b)
is correct. Rule 46(13) of the Uniform Rules of
Court provides that:
‘
The
sheriff conducting the sale
shall
give transfer to the purchaser against payment of the purchase money
and upon performance of the conditions of sale and may for
that
purpose do anything necessary to effect registration of transfer, and
anything so done by him or her shall be as valid and
effectual as if
he or she were the owner of the property.’
[49]
(Emphasis added.)
As
Hoexter JA said in
Finbro
Furnishers (Pty) Ltd v Registrar of Deeds, Bloemfontein &
others
:
[50]
‘
It
is usual to credit the Legislature with a knowledge of the existing
law on the subject dealt with. In order properly to interpret
a
statute a court is entitled, and in some cases bound, to look at
earlier statutes dealing with the same subject-matter. That
for
purposes of judicial construction of a more recent statute an
examination of earlier statutes dealing with like topics affords
a
useful aid is an established principle of our law.’
[51]
The
high court’s interpretation of ‘execution’ runs
contrary to the peremptory provisions of Rule 46(11) relating
to the
effecting of transfer upon payment by the purchaser who was at a sale
in execution.
[41]
In his concluding remarks, Brits says:
‘
One
can accordingly conclude that reinstatement is possible in the
mortgage context and that foreclosure will be prevented and reversed
if the debtor purges the default (along with the permitted charges).
However, reinstatement can only occur up until the point that
the
auction sale is concluded. After this point, and up until
registration takes place, only redemption (paying the full
outstanding
debt) can save the debtor’s home.’
[52]
I
disagree that after the sale in execution but before registration of
transfer has taken place, redemption can occur by paying
the full
amount of the debt. No such inference is possible from reading the
NCA and the proposition is contrary to the common law.
I otherwise
agree with what Brits has said in this passage.
[42]
There is yet another reason that the high court’s
interpretation of ‘execution’ is, in my respectful
opinion,
incorrect: it would mean that whenever a credit provider
settles a matter to allow a debtor a rescheduled arrangement for
repayment,
after an execution order has been obtained, the execution
order ipso facto lapses. This would entail such a disincentive for
settling
on such a basis that it would be unlikely that credit
providers would enter into such arrangements. The rescheduling or
restructuring
of debt is, however, one of the features of modern
credit provision, which the NCA is designed to promote.
[53]
The impracticality of the high court’s interpretation must
weigh heavily against its being correct.
[54]
[43]
In
Ferris
& another v FirstRand Bank Limited & another
[55]
Moseneke ACJ, delivering the unanimous judgment of the Constitutional
Court, affirmed the principle that the NCA does not exist
merely to
advance the interests of consumers but also of credit providers as
well.
[56]
Endless
cat-and-mouse games between credit providers and consumers serve the
interests of neither class. Indeed, they undermine
the whole system
of credit provision in the country. Added to Moseneke’s ACJ’s
judgment in
Ferris
,
is the fact that the interests of the general public, when they bid
at public auctions, are relevant as well.
[44]
The provisions of s 129(4)
(b)
of the NCA are peremptory. In
clear terms they provide that a consumer may not re-instate a credit
agreement after the execution
of any court order enforcing that
agreement. Reinstatement can only occur prior to a sale in
execution at a public auction.
The debtor fell foul of this
provision. The short answer for a consumer in distress is that she
must timeously re-instate the credit
agreement and, where this is
required by the circumstances, apply for and successfully obtain a
rescission of the judgment and
the setting aside of the writ of
attachment and a stay of execution before that sale has taken place
in order to avoid the fall
of the axe.
[45]
Accordingly, t
he high court’s conclusion that execution
only takes place when the proceeds of the sale in execution are paid
over to the
judgment creditor is erroneous.
The
order of the high court was wrongly made. The appeal must succeed.
The appeal has dealt with weighty matters. The costs
of two
counsel are justified.
[46]
The following order is made:
1.
The appeal is upheld with costs, including the costs of two counsel.
2.
The following is substituted for the order of the high court:
‘
The
application is dismissed with costs.’
_________________________
N
P WILLIS
JUDGE
OF APPEAL
A
PPEARANCES:
For
the Appellant:
A Gautschi SC (with him D Van
Reenen)
Instructed
by:
Cohen
Shevel & Fourie, Cape Town
c/o
Honey Attorneys
, Bloemfontein
For
the Respondent:
L Dzai
Instructed
by:
Nolundi
Nyati
,
Cape Town
c/o
Maduba Attorneys
, Bloemfontein
[1]
See
R Brits ‘Purging mortgage default: Comments on the right to
reinstate credit agreements in terms of the
National Credit Act’
(2013
)
24
Stellenbosch
Law Review
Vol 1, 165 at 178-9.
[2]
Nedbank
Ltd v Fraser & another and Four Other cases
2011
(4) SA 363 (GSJ).
[3]
Supra,
fn 1
.
[4]
Nedbank
Ltd v Fraser & another and Four Other cases
2011 (4) SA 363 (GSJ).
[5]
Para 40.
[6]
Liquidators
Union and Rhodesia Wholesale Ltd v Brown & Co
1922
AD 549
at p558-9.
[7]
Simpson
v Klein NO & others
1987 (1) SA 405
(W) at 409-11.
[8]
Shalala
v Bowman NO & others
1989 (4) SA 900
(W) at 905
.
[9]
Reid
& another v Godart & another
1938 AD 511.
[10]
At
514.
[11]
An
attachment by an officer of a court, consequent upon an order of the
court.
[12]
At
559.
[13]
Simpson
v Klein NO & others
1987
(1) SA 405
(W).
[14]
At
411C-D.
[15]
At
411B.
[16]
At
411C.
[17]
At
p410H.
[18]
At
p412D-G.
[19]
At
411I-312A.
[20]
Syfrets
Bank Ltd & others v Sheriff of the Supreme Court, Durban
C
entral,
& another; Schoerie NO v Syfrets Bank Ltd & others
1997
(1) SA 764
(D).
[21]
At
777B-782F.
[22]
At
779F-780C.
[23]
Strydom
NO v MGN Construction (Pty) Ltd & another: In re Haljen (Pty)
Ltd (in Liquidation)
1983
(1) SA 799 (D).
[24]
Rennie
No v Registrar of Deeds & another
1977
(2) SA 513
(C
).
[25]
At
803A-G.
[26]
At
513C-G.
[27]
Maharaj
Brothers v Pieterse Bros
Construction
(Pty) Ltd
&
another
1961 (2) SA 232 (N).
[28]
At
238C-D.
[29]
In
re: Overseas Aviation Engineering (G.B) Ltd
[1963]
Ch. 24 (C.A.); [1962] 3 All ER 12 (C.A.).
[30]
At
39-40.
[31]
Blackman
v Fysh
[1892]
3 Ch 209 (C.A.).
[32]
At
217.
[33]
Fagot
v Gaches
[1943]
1 KB 10 (C.A.).
[34]
At
12.
[35]
R
Brits ‘Purging mortgage default: Comments on the right to
reinstate credit agreements in terms of the
National Credit Act’
(2013
)
24
Stellenbosch
Law Review
Vol 1, 165. See fn 1.
[36]
At
p175.
[37]
At
p175.
[38]
At
p177.
[39]
ABSA
Bank Limited v Van Eeden & others
2011
(4) SA 430 (GSJ).
[40]
1952 (4) SA 568
(A)
.
[41]
I
n
Sookdeyi
&
a
nother
v Sahadeo &
a
nother
1952
(4) SA 568
(A) at 571H-572A, Van Den Heever JA said, in a unanimous
judgment
,
that
:
‘It was a principle in the Netherlands that a perfected sale
in execution should after transfer or delivery of the subject
matter
not be lightly impugned
quoniam
fiscalis hastae fides facile convelli non debeat
.
(Groenewgen
de
Legib. Abrogate, ad C.
4.44.16;
ad
C.
8.44
(
sibi
45)
13; Neostad
Decisiones
,
Decis.75;
Voet
6.1.13
and, dealing with execution
in
rem
,
Bynkershoek
Observ.
Tumult
.
Cas 45;
Cf
Voet
42.1.31
verbis:
Et quamvis nec arbiter...
).
This reluctance to rescind perfected sales
sub
hasta
has
been received in our case law (
Lange
and Others v Leisching and Others
,
1880 Foord 55
;
S.A.
Association v van Staden
,
S.C. 95 at 98;
Conradie
v Jones
1917
O.P.D. 112).
These authorities indicate that in certain exceptional
circumstances a sale in execution may nevertheless be impugned. The
rules
in regard to this qualified inviolability of a sale in
execution were in so far as magistrates’ courts are concerned,
codified
in
sec. 70.
It has to be construed in harmony rather than
conflict with the Common Law.’
[42]
Ibid.
[43]
Subsection
116(
c)
of
the NCA.
[44]
Walker
v Syfret NO
1911
AD 141.
[45]
At
166.
[46]
Loader
v De Beer
1947 (1) SA 87
(W)
.
[47]
Van
Rhyn
v
Reef
Developments A (Pty) Ltd
1973
(1) SA 488
(W)
.
[48]
A
t
492B-F
.
[49]
See
the remarks in Erasmus’
Superior
Court Practice
Service Edition 32 (2009) at B1 333-334 concerning the
formulation of this rule.
[50]
Finbro
Furnishers (Pty) Ltd v Registrar of Deeds, Bloemfontein & others
1985
(4) SA 773 (A).
[51]
At
805G. See also
Falcon
Investments Ltd v CD of Birnam (Suburban) (Pty) Ltd & others
1973 (4) SA 384
(A) at 401B and the judgment of Van Winsen J in
Bellville-Inry
(Edms) Bpk v Continental China (Pty) Ltd
1976 (3) SA 583
(C) at 588C-D.
[52]
At
p182.
[53]
See
for example
ss 86(8)
and
87
(1)
(b)(ii)
of the NCA.
[54]
See
for example
Bothma-Batho
Transport (Edms) Bpk v Bothma & Seun Transport
(Edms) Bpk
2014 (2) SA 494
(SCA) para 12, read with
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012
(4) SA 593
(SCA) para 18.
[55]
Ferris
&
another
v FirstRand Bank L
imi
t
e
d
&
another
2014
(3) SA 39 (CC).
[56]
Paras
14 to 17.