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[2015] ZAGPJHC 270
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Firstrand Bank Limited t/a RMB Private Bank v 1301 Myrtle Road, Fourways Gardens CC and Others (2014/13867) [2015] ZAGPJHC 270 (17 November 2015)
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Note: Certain personal/private details of parties or witnesses
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IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NUMBER: 2014/13867
DATE:
17 NOVEMBER 2015
In
the interlocutory application between:-
FIRSTRAND
BANK LIMITED t/a RMB PRIVATE
BANK
................................................
Applicant
And
1301
MYRTLE ROAD, FOURWAYS GARDENS
CC
.............................................
First
Respondent
KOKOSIOULIS,
VASILOIS
...................................................................................
Second
Respondent
KOKOSIOULIS,
EVANGELIA
................................................................................
Third
Respondent
KOKO
IMPORTERS AND DISTRIBUTORS (NATAL)
CC
..............................
Fourth
Respondent
JUDGMENT
NALANE
AJ:
INTRODUCTION
[1]
Applicant seeks judgment for payment of the sum of R5 850 485.05
and interest at the rate of 11% per annum from 26
March 2014 to date
of final payment, calculated daily and compounded monthly.
[2] Applicant seeks
another order declaring certain immovable property specifically
executable. The property is Erf [1…..]
[F……]
[Ext …..] township registration division JR, the Province of
Gauteng in extent 1069 (ONE THOUSAND AND
SIXTY NINE) square metres
held under deed of transfer [T……..] (“the
property”).
[3] The material
facts are largely common cause. Applicant is a bank and advanced
certain monies to the Respondents over a period
of time commencing 13
December 2000. Applicant and Respondents concluded agreements which
are styled a single facility agreement.
A series of these agreements
were concluded over a period of time.
[4] On 12 August
2010 the Applicant and Respondents concluded another credit facility
agreement for the sum of R4 652 000.00
(“the
agreement”). This is the agreement which is alleged to have
been breached by the Respondents.
[5] The Second,
Third and Fourth Respondents executed deeds of suretyship (‘the
deeds’) on behalf of the First
Respondent which is a close
corporation. The Fourth Respondent which is a close corporation has
been liquidated.
[6] The Respondents
fell into arrears and the Applicant commenced legal proceedings
claiming payment. On 18 March 2013, prior to
the issuing of legal
action the Applicant sent a letter of demand to the Respondents.
[7] Respondents
raised the following defences viz that the Applicant is obliged to
have referred the dispute to the Banking Ombudsman
(“the
ombudsman”); the certificate of indebtedness is incorrect; and
that the property should not be declared specifically
executable. I
will deal with each of the defences individually.
The
ombudsman
[8] The import of
this defence is that the dispute between the parties should have been
referred to the ombudsman in terms of clause
13.3.4 of the agreement
prior to the issuing of the present application.[9] Clause 13.3.4
provides as follows:
“
13.3.4
The following process will be followed should your facility remain in
default for a period longer than
20 (twenty) days;
13.3.4.1
The bank will draw such default to your notice in writing by prepaid
registered mail affording you 7 (seven) days
to rectify such default,
alternatively proposing that you refer this Facility to a Debt
Counselor, alternatively a Dispute Resolution
Agent, a Consumer Court
or Ombud with jurisdiction;
13.3.4.2
Should you not rectify your default within the requisite time period
as set out in the aforesaid paragraph, alternatively
avail yourself
of any other measure as set out above, your Facility will be handed
to attorneys for recovery
.”
[10] According to
the Respondents they referred a dispute about the agreement to the
ombudsman in March 2013. They submit that the
parties had to follow
the process prescribed by the ombudsman and only after the dispute
could not be settled by the parties through
this process, could the
ombudsman intervene.
[11]
This
defence is not supported by a reading of clause 13.3.4.
The
basic rule of interpretation is that the intention of the parties
must be sought in the words they used and that their words
must be
given their ordinary grammatical meaning
[1]
.
[12] Clause 13.3.4
provides in essence that if the Respondents are in default they may
refer the agreement to an ombud with jurisdiction.
Nowhere does the
clause state that if the dispute cannot be settled by the parties
through the process prescribed in the clause
that the ombudsman could
then intervene.
[13] The
Respondents’ main argument is that until such time that the
ombudsman has adjudicated on the dispute between the
parties, the
Applicant is precluded from referring the default to its attorneys
for recovery.
[14]
This argument cannot be sustained. In the first place the Respondents
referred a dispute
to the ombudsman on 19 March 2013 prior to the
Applicant’s letter of demand dated 18 November 2013 and even
before the current
application was launched on 15 April 2014. This is
one of the common cause facts.
[15]
The dispute which was referred to the ombudsman was not a response to
the letter of demand
of 18 November 2013. The letter of demand
recorded that the First Respondent was in breach of the agreement in
that the account
was in arrears in the amount of R1 166 509.92
as at 23 October 2013. The letter of demand advised the Respondents
of
their rights in terms of clause 13.3.4.
[16]
The dispute referred to the ombudsman was summarized in a letter by
the ombudsman dated
2 December 2013 directed to the Second and Third
Respondents. It is not the dispute forming the subject matter of this
application.
The dispute referred to the ombudsman was a complaint
that the Applicant acted prejudicially in an investigation regarding
some
irregularities in the sale of the Second and Third Respondents’
Cape Town property (Brillianto) through Auction Alliance.
Another
complaint was that a representative of the Applicant coerced them
into signing a special power of attorney and prejudiced
them through
delaying the process of transfer of the Cape Town property for a
number of months.
[17]
The letter of 2 December 2013 further advised that the ombudsman had
considered the Applicant’s
response to the complaint. In the
assessment of the ombudsman the amount involved exceeded the limits
of jurisdiction of the ombudsman
in that it was in excess of R2
million, and the Applicant had not agreed in writing to the
limitation being exceeded.
[18]
The ombudsman further advised that in its opinion, despite the fact
that it lacks jurisdiction,
there is a clear dispute of fact which
can only be tested in a court of law which is a more appropriate
forum to determine the
dispute. The ombudsman concluded that the
claim was based on consequential damages and it did not have a
mandate to make a finding
on these kinds of matters. The ombudsman
advised that it could not pursue the matter further and closed its
file.
[19]
In short therefore the Respondents never referred a dispute to the
ombudsman in response
to the letter of demand of 18 November 2013. At
the time of the letter from the Applicant the Respondents had already
referred
another dispute to the ombudsman.
[20]
Although the Respondents argued that the two disputes are linked in
that they sought to
dispose of the Cape Town property and to use the
proceeds to settle their arrears arising from the agreement on which
they are
currently sued. In my opinion this argument cannot be
accepted in that the ombudsman was never asked to determine the
dispute regarding
the arrears. The ombudsman was asked to resolve a
different dispute relating to the Cape Town property.
[21]
The Respondents argued that in an email dated 1 December 2013 a
certain Helena van der
Merwe of the ombudsman had advised them that
she had received their letter dated 5 December 2013 and confirmed
that she would be
reviewing their case.
[22]
I enquired from the Respondents’ counsel what the desired
outcome of the review by
the ombudsman is. The response was that the
Respondents still persist with the complaint regarding the alleged
under selling of
their Cape Town property by the Applicant and the
alleged coercion to sign the special power of attorney. This is in
spite of the
fact that the dispute was referred to the ombudsman more
than a year ago on 19 March 2013 and the Respondents have done
nothing
concrete to have the dispute resolved. This is the selfsame
dispute which was referred to the ombudsman prior to the letter of
demand dated 18 November 2013, and which the ombudsman did not
entertain due to lack of jurisdiction.
[23]
It is my view that the process prescribed in clause 13.3.3.4 does not
bar the Applicant
from instituting action but is simply a mechanism
to allow the Respondents to refer their default to an alternative
dispute resolution
institution, prior to the commencement of legal
action.
[24]
It could never have been the intention of the parties that all that
the Respondent had
to do was to refer a dispute to the ombudsman and
do absolutely nothing to finalise it and that this would have the
effect of preventing
the Applicant from instituting any legal action
until the ombudsman finalizes the dispute.
[25]
In any event as the evidence shows the ombudsman did consider the
dispute and did not uphold
it.
[26]
The parties presented two conflicting versions of an email dated 11
December 2013 from
Helena van der Merwe (“van der Merwe”)
of the office of the ombudsman. The version of the email relied upon
by the
Respondents simply states that van der Merwe had received the
complaint and was reviewing their case. The one relied upon by the
Applicant has the following additional sentence, “…
however,
I reiterate that the review does not prohibit the bank from taking
legal action against you in the interim
”.
[27]
I was asked by the Applicants to find that the email version relied
upon by the Respondents
has been manipulated to exclude the sentence
to which I have just referred to. I need not definitively make a
finding. Van der
Merwe did not file an affidavit confirming that her
email had been manipulated. However on the other hand the Respondents
did not
deny the version relied upon by the Applicant.
[28]
The Applicant argued that the complaint that was lodged by the
Respondents was not upheld.
In support the Applicant attached to its
replying affidavit an email dated 23 February 2015 from Helena van
der Walt of the ombudsman’s
office stating that the complaint
was dealt with and not upheld. The Respondents have not challenged
the email from Helena van
der Walt. They did not file any affidavit
refuting this. I accept that the ombudsman advised the Applicant that
the complaint of
the Respondents was dealt with and not upheld.
[29]
If I am wrong and the referral to the ombudsman prevents the
Applicant from instituting
legal action prior to resolution of the
complaint, then I am satisfied that the ombudsman has dealt with the
dispute / complaint
referred to it by the Respondents. Clause 13.3.4
does not bar the Applicant from instituting action. In any event as I
have found,
the dispute which was referred and dealt with by the
ombudsman is not the dispute which arose as a result of the letter of
demand
of 18 November 2013.
[30]
I therefore dismiss the defence based on the referral to the
Ombudsman.
Certificate of
indebtedness
[31]
The next defence raised related to the certificate of indebtedness.
This defence was not
pursued further in that the parties agree that
the Applicant rectified the initial certificate of indebtedness which
was attached
to the founding affidavit. In any event in argument the
Respondents’ counsel conceded that the amount contained in the
certificate
of indebtedness is not in issue.
Deeds of
suretyship
[32]
The other ground of challenge was based on the deeds of suretyship.
The defence is that
the single credit facility letter dated 11
December 2000 required suretyships to be signed and yet those
suretyships were not attached
to the founding papers. The Respondents
do not deny that in respect of the latest agreement on which the
Applicant relies, they
signed suretyships. The suretyships referred
to in the facility agreement of 11 December 2000 are therefore
irrelevant. This defence
based on the deeds of suretyship is
therefore not sustainable and dismissed.
Primary
residence
[33]
The
last defence is that the property cannot be declared specifically
executable because it is the primary residence for the Second
and
Third Respondents, their two children (one of them being a minor) and
the Third Respondent’s elderly mother. It is submitted
on
behalf of the Respondents that on the strength of
Mkhize
v Umvoti Municipality
[2]
judicial oversight is required in all cases of execution against
immovable property aiming to ensure that the constitutional
rights to
adequate housing is not violated
[3]
.
It is submitted that should the property be sold in execution, the
Second and Third Respondents, their children and the Third
Respondent’s mother will be left destitute and that the court
should exercise its discretion in its judicial oversight in
favour of
denying the prayer to have the property specifically executable.
[34]
On the other hand Applicant argues that the First Respondent is a
legal entity and as the
owner of the property, it is separate from
the Second and Third Respondents and enjoys no right to adequate
housing. Another submission
is that there is no bar to the judgment
being granted and that considerations of adequate housing will only
become relevant in
the event that an eviction order is sought.
Therefore at this stage the issue of access to adequate housing does
not arise.
[35]
The
issue of access to adequate housing in the context of execution of
judgments has enjoyed judicial attention.
[4]
[36]
Rule 46 of the Uniform Rules of Court applies to execution of
immovables. The relevant
rule reads as follows:
“
46
Execution – immovables
“
1.
No writ of execution against immovable property of any judgment
debtor shall issue until
(i)
…………
. ; or
(ii)
such immovable property shall have been declared to be
specifically executable by the court or, in the case of the judgment
granted
in terms of rule 31(5), by the registrar:
Provided
that, where the property sought to be attached is the primary
residence of the judgment debtor
,
(own
underlining)
no writ shall issue unless the court, having
considered all the relevant circumstances, orders execution against
such property.”
[37]
The
Applicant referred the court to the decision of
Firstrand
Bank v Folscher
[5]
for the authority that constitutional considerations referred to in
section 26 of the Constitution in declaring immovable property
specially executable, do not apply as the First Respondent is a
juristic person.
[38]
The proviso to the rule, as I read it, does not require that the
property sought to be
attached should be owned by the judgment
debtor. All that the rule requires is that the property should be the
primary residence
of the judgment debtor.
[39]
In the
Folscher
matter the court was specifically asked
by the Honourable Deputy Judge President of the North Gauteng High
Court to interpret rule
46(1)(a) (ii) in so far as it refers to all
relevant circumstances that must be considered before issuing a writ
of a warrant of
execution.
[40]
The
court held that execution levied against immovable property that is a
judgment debtor’s home constitutes a significant
limitation
upon the fundamental right to access to the roof over a person’s
head.
[6]
Furthermore the court
held that subsection 26 (3) protects the homeowner and the “
home
occupier
”
(my emphasis) against arbitral eviction or demolition and ensures
judicial oversight before an order of eviction or demolition
may
issue.
[41]
The court further held that the protection afforded to owners and
occupiers, of their dwellings,
in section 26, is rooted in section 34
of the constitution, which establishes the general right for every
person living in the
Republic “
to have any dispute that can
be resolved by the application of law in a fair public hearing before
a court, or where appropriate,
another independent and impartial
tribunal or forum
”.
[42]
In
Folscher
it was held that a primary residence is the same concept as a home of
a person
[7]
. The Applicant has
denied the allegation by the Respondent by the Respondents that the
property is utilized as a primary residence
of the Second, Third
Respondents and their family. This is a bare denial and in any event
the Applicant adds that this is irrelevant
because the property is
owned by the juristic entity.
[43]
The
judgment in
Folscher
suggests that the term “
judgment
debtor”
in the context of rule 46 (1)(ii) refers to an individual, a person
and that “
it
is therefore the primary residence owned by a person that falls
within the purview of rule
.”
[8]
[44]
The introductory part of rule 46(1)(a) reads as follows : “
No
writ of execution against the immovable property of any judgment
debtor shall issue until - …”
The rule thus
applies in respect of immovable property owned by the judgment
debtor. However the proviso to rule 46(1)(a)(ii)
provides for
judicial oversight where the property sought to be attached “
is
the primary residence of the judgment debtor”
. The proviso
requires only that the property should be the primary residence of
the judgment debtor and not that the latter should
be the owner.
[45]
The
court in
Folscher
also held that immovable property owned by a company, close
corporation or a trust, of which the member, shareholder or
beneficiary
occupier, is not protected by the amended rule requiring
judicial oversight by way of an order of court authorizing a writ of
execution,
even if the immovable property is the shareholder’s,
member’s or beneficiary’s own residence.
[9]
[46]
The proviso to the rule refers to the primary residence of the
judgment debtor. The reference
to the judgment debtor can only be to
a natural person as only a natural person can have a primary
residence.
[47]
A distinct factor in this matter is that although the immovable
property is owned by the
First Respondent, a juristic person, the
Applicant seeks judgment against the Second and Third Respondents as
well as are natural
persons. The Respondents are therefore entitled
to the protection of rule 46(1)(a) (ii).
[48]
In
Jaftha
[10]
the
court noted that the circumstances under which a debtor incurred a
debt is important in considering whether to order a property
executable and that if the judgment debtor willingly put his or her
house up in some or other manner as security for the debt,
a sale in
execution should ordinarily be permitted where there has not been an
abuse of court procedure.
[11]
This noting was accepted by the court in
Standard
Bank of South Africa Ltd v Saunderson and Others.
[12]
In the latter case the court held that the sole fact that the
property is residential in character is not enough to found the
conclusion that an infringement of s 26(1) will necessarily occur.
[49]
Although
the court in
Saunderson
did not decide the application of the right of access to adequate
housing in the case of bonded property it observed that it is
possible that s 26(1) may be infringed by execution.
[13]
[50]
In
Gundwana
v Steko Development
[14]
the Constitutional Court held that to agree to a mortgage bond does
not, without more, entail agreement to forfeit one’s
protection
under s 26(1) and (3) of the Constitution.
[15]
The court held that execution orders relating to a person’s
home all require evaluation
[16]
.
Gundwana
overturned
Saunderson
and
Nedbank
Ltd v Mortinson
[17]
to the extent that they found that the registrar was constitutionally
competent to make execution orders when granting default
judgment in
terms of rule 31(5)(b) of the Uniform Rules
[18]
.
The Constitutional Court thus established that in the case of
execution of a person’s home judicial oversight must be
exercised.
[51]
In
Mkhize
[19]
the court held that the only way to determine whether the right to
adequate housing has been compromised is to require judicial
oversight in all cases of execution against immovable property on a
case-by-case basis.
[20]
[52]
I am therefore satisfied that in the circumstances of this case where
judgment is sought
against the Second and Third Respondents and the
property sought to be attached is their primary residence that I
should exercise
my discretion not to authorize the property
executable until all the relevant circumstances have been properly
ventilated before
the court.
[53]
Having regard to the circumstances of this matter, it is undeniable
that the Second and
Third Respondents reside in the property and this
is their primary residence. This matter implicates the fundamental
rights of
the Second and Third Respondents. It may well be that upon
consideration of all relevant circumstances execution is appropriate.
However in the absence of all the relevant circumstances as required
by rule 46, I am not satisfied that declaring the property
executable
would be appropriate at this stage.
Conclusion
[54]
Accordingly I am satisfied that the Applicant has made out a case for
the money judgment.
I am not satisfied that a case has been made for
an order declaring the property executable.
[55] I therefore
grant the following order:
1.
First, Second, Third and Fourth Respondents
(jointly and severally the one paying the other to be absolved) are
ordered to pay the
sum of R5 850 498.05 to the Applicant;
2.
Interest is payable on the aforementioned
amount at the rate of 11% per annum from 26 March 2015 to date of
final payment, calculated
daily and compounded monthly;
3.
Respondents
are to pay costs of the application on the attorney and client
scale.
[21]
Nalane,
F J
Acting
Judge of the High Court of South Africa
Appearances:
For
Applicant: Adv L Van Tonder
Instructed by:
Lowndes Dlamini Attorneys
For
Respondents: Adv Van Rhyn Fouche
Instructed by:
David Bayliss Attorneys
Date
of hearing: 06 October 2015
Date of
judgment: 17 November 2015
[1]
Law of South Africa Volume 12(1) - Second Edition Volume
[2]
2012 (1) SA 1
[3]
section 26 of the Constitution provides as follows : “
26
Housing
(1) Everyone has
the right to have access to adequate housing.
(2) The state
must take reasonable legislative and other measures, within its
available resources, to achieve the progressive
realisation of this
right.
(3) No one may
be evicted from their home, or have their home demolished, without
an order of court made after considering all
the relevant
circumstances. No legislation may permit arbitrary evictions.
[4]
see for instance
Jaftha
v Schoeman and Others; Van Rooyen v Stoltz and Others
2005(2) SA 140 in which it was held that section 66(1) of the
Magistrates’ Court Act 32 of 1944 constitutes a violation
of
section 26(1) of the Constitution to the extent that it allows
execution against the homes of indigent debtors, where they
lose
their security of tenure ( see p160 par 52 I-J
[5]
2011
(4) SA 314
[6]
p.323
at par 12(h)
[7]
p329 par 29
[8]
p329 par 31H
[9]
p.329
para 32(i)
[10]
supra
[11]
p162 par 58F
[12]
2006 (2) SA 264
at 274H
[13]
p276 par 25 F
[14]
2011(3) SA 608
[15]
p625 A-D
[16]
p625 par 50F
[17]
2005(6) SA 462 (W)
[18]
pp625 par 52 – p626A
[19]
supra
[20]
p13 A-B
[21]
The
agreement provides for costs on attorney and client scale