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[2016] ZAGPJHC 203
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Firstrand Bank Limited t/a First National Bank v Zwane; Firstrand Bank Limited t/a First National Bank v Hyslop and Another, Nedbank Limited v Nkuna and Another (18581/2016, 19362/2016, 30634/2015) [2016] ZAGPJHC 203; 2016 (6) SA 400 (GJ) (29 July 2016)
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REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
In
the matter between:
Matter
67 on 27/07/2016:
CASE
NO. :
18581/2016
FIRSTRAND
BANK LIMITED t/a FIRST NATIONAL
BANK Plaintiff
and
ZWANE,
SIFISO
(IDENTITY
NUMBER:
[........])
Defendant
Matter
68 on 27/07/2016:
CASE
NO. : 19362/2016
FIRSTRAND
BANK LIMITED t/a FIRST NATIONAL
BANK
Plaintiff
and
HYSLOP,
KEITH WILLIAM
(IDENTITY
NUMBER:
[........])
First Defendant
HYSLOP,
AINE MOIRA
(IDENTITY
NUMBER:
[........])
Second Defendant
Matter
98 on 27/07/2016:
CASE
NO. : 30634/2015
NEDBANK
LIMITED
Applicant
and
NKUNA,
BILLY
First
Respondent
NKUNA, SIPHOKAZI
NWABISA
Second Respondent
Summary
–
Foreclosure – application
for money judgment for accelerated full outstanding balance as well
as order declaring property
executable – on the facts, order
declaring property executable to be postponement – applicant
bank arguing that court
has no discretion but to grant default
judgment for accelerated full outstanding balance – legitimacy
of Motion Court Directive,
Chapter 10.17, paragraph 4 in contention –
held court has discretion as application for accelerated full
outstanding balance
integrated with order declaring property
executable.
JUDGMENT
Van
der Linde, J:
[1]
These are two applications for default
judgments for repayment of capital amounts lent, as well as for
declarations rendering immovable
property bonded as security for the
loans executable; and one application for only a declaration that the
property be rendered
executable. In all three instances the
property is a primary residence currently occupied by the debtor, and
it may be accepted
that the property was acquired with funds availed
by the applicant on its security, the parties by their agreement
especially hypothecating
the property for the debt.
[2]
The loan agreements are all three subject
to the National Credit Act 34 of 2005 (“NCA”), and have
not been cancelled
in terms of that Act; the applicants’
declaring that the full outstanding balance will have become payable
by reason of the
acceleration clause is not of itself tantamount to a
cancellation. That is relevant because in each instance the debtor
may still
re-instate the loan agreement by paying the arrears; once
cancellation has occurred, this is no longer possible under the NCA.
[3]
When the matters were called in the
unopposed motion court I raised with the attorney for applicants in
the first two matters, and
counsel for the applicant in the third
matter that, subject to argument, in view of the fact that in some
instances the debtors
were only around three months' in arrears, I
was disinclined to declare the properties executable without more,
and instead minded
to postpone the applications for an appropriate
period to afford the debtors the opportunity to purge their default.
I had in mind
paragraph 10.17 of the local Practice Manual.
[4]
The applicants both submitted that although
I have a discretion to postpone the application for the declaratory
relief sought, I
have no discretion to do so in respect of the
applications for default judgment for the capital amounts. Reliance
was specifically
placed on the unreported judgment given in this
Division in FirstRand Bank Ltd v Stand 949 Cottage Lane Sundowner
(Pty) Ltd and
Another [2014] ZAGPJHC 117 (4 June 2014), and
also more generally on the principle that contracts deliberately
entered into
must be honoured. This latter principle underlies, of
course, the reliance on acceleration clauses which in typical home
loan agreements
found the right to cancel even when the arrears are
few or small.
[5]
In other words, the submission brings into
stark relief the question as to what happens when a court, acting
under the power afforded
in terms of rule 46(1)(a)(ii), declines
immediately to grant an order for execution against the debtor's home
because the arrears
are too few and small, but the full accelerated
outstanding balance large; and instead postpones the application for
executability
say six months; and the debtor then pays all the
arrears.
[6]
Is the court obliged nonetheless
immediately to grant default judgment for the full accelerated
outstanding balance, leaving the
creditor free, armed with the
judgment, to seek execution by other means?
[7]
At a practical level, the immediate answer
for the present three applications, is that the Practice Manual
proposes postponement
of the application for judgment for the capital
amount as well, otherwise “… this will defeat the object
of postponing
the matter i.e. to allow the consumer to take advice
and seek to make arrangements to bring the arrears up to date or
purge the
default.”
[8]
The provisions of the Practice Manual that
propose a postponement of the application for executability survived
a validity attack
before the full court of this Division in Absa bank
Ltd v Lekulu, [2014] ZAGPJHC 244 (14 October 2014), decided
incidentally after
Stand 949 Cottage Lane. The Practice Manual now
expressly refers also to the application for judgment for the capital
amount in
the context of a postponement. FirstRand submits that the
Practice Manual as justified by Lekulu (i.e. before the insertion of
the express reference to the money judgment aspect) is contrary to
the tenets of substantive law. Here it refers to the Anton Pillar
cases for the general proposition that courts may not make law.
[9]
Those judgments predate the Constitution
which has introduced the concept of a supreme law, to which others
are subject, and in
the light of which all others must be
interpreted. The submission, with respect, also does not acknowledge
the constitutional imperatives
with which every court is now charged,
to develop the common law by promoting the spirit, purport and
objects of the Bill of Rights;
and, more pertinently, to consider all
relevant circumstances before ordering the eviction of a person from
his or her home.
[10]
That brings one back to Lekulu, which implicitly overruled Stand 949
Cottage Lane, and to which this court is bound by the
force of
precedent. It is so that the express money judgment aspect of the
Practice Manual postdates Lekulu but, for reasons that
I mention
below, that aspect and the aspect of executability are two sides of
the same coin, and both involve, conceptually, an
inroad to some
extent into unbridled contractual sanctity.
[11]
In any event, this court would have reasoned that absent the express
insertion in the Practice Manual of the postponement of
the money
judgment aspect, it has a discretion to postpone the application for
default judgment for the capital amount, for the
reasons that follow.
[12]
The starting point of the discussion is that the loan agreements all
have acceleration clauses. These, and their having been
triggered,
are essential for the success of the applicants' applications,
because in the light of rule 46(1)(a)(ii) and of section
26(3) of the
Constitution, a court is unlikely to grant executability for a say
mere three months' arrears in a say 240 month loan
repayment scheme.
[13]
This last observation already shows how integrated the claim for
default judgment for the capital amount is with the claim
for a
declaratur for executability. The claim for the full outstanding
balance under the home loan agreement is only possible because
the
acceleration clause enables it; and in turn the claim for a
declaration of executability would likely not have been successful
had it not been preceded by a claim for the accelerated full
outstanding balance.
[14]
Put it this way: if executability is postponed for say six months,
and if during that period the debtor finds funds to pay
the arrears,
and is able thereafter to continue paying the regular monthly bond
instalments as required, it is unlikely that a
court will then
nonetheless declare the property executable. But although on the
hypothesis the bond arrears will have been fully
paid up, the full
outstanding balance of the loan will still have been rendered
immediately payable by virtue of the acceleration
clause.
[15]
And yet the fact that the full outstanding balance will have been
rendered immediately repayable, will then be meaningless,
because the
arrear instalments will have been paid, the property will not be
declared executable, and the hypothetical debtor likely
has no other
assets by means of which to pay in one go a debt that he or she will
have scoped for repayment over 20 years.
[16]
If in this scenario a court will already have given a default
judgment for the accelerated full outstanding balance of the
loan
before the debtor will have had the purging opportunity, this will
bring into tension the existence of that judgment, ordinarily
fully
enforceable, with the protection the courts are enjoined to afford to
the debtor who has purged the arrears.
[17]
That is a situation that is unsatisfactory, if only because it will
diminish respect for the enforceability of court orders
and
concomitantly for the rule of law. It is unsatisfactory for another
reason: the creditor may seek to apply that judgment to
obtain access
to the debtor’s movable assets, possibly depleting resources
that could have been applied to paying the arrear
home loan
instalments.
[18]
On the other hand, for a court to decline to give judgment for the
accelerated full outstanding balance may be viewed as signalling
inroads into the principle that agreements must be honoured, because
it will in effect have rendered meaningless the effect of
an
acceleration clause and perhaps even a cancellation following on it.
[19]
That result can be avoided if, in the specific context of section
26(3) of the Constitution, the courts have a discretion in
an
appropriate case to defer immediate enforcement of contractual
entitlements flowing from breach, as is now already, to a degree,
afforded by rule 46(1)(a)(ii) in the case of declarations of
executability.
[20]
Put differently, there is little purpose, in view of the foregoing,
in the power to postpone declarations of executability
for say six
months, if there is not also a power concomitantly to postpone the
granting of default judgment for the accelerated
full outstanding
balance where, as here, the two concepts are so integrated.
[21]
If the debtor then pays the arrears in that period, thereby securing
his or her home (since the court will then decline executability),
the creditor may choose to abandon its acquired contractual
acceleration (and possibly also cancellation) rights. Either that,
or
it may be left with a right which is practically unenforceable; but
that will have been the consequence of the protection afforded
under
section 26(3) of the Constitution. The contractual right to claim
acceleration must then be viewed as having been rendered
subsidiary
to the debtor’s fundamental right under section 26 of the
Constitution.
[22]
That is not to draw a line through the principle that contracts must
be adhered to. It is rather to give meaningful effect
to the need to
constrain the enforcement of private contracts where this would lead
to a result that offends the rights in the
Bill of Rights.
[23]
It is true that if a default judgment were granted at the outset,
that judgment might in any event ultimately be rendered nugatory
if
the debtor pays the arrears; why then refuse the judgment? The only
difference is that if in the interim period there is no
default
judgment for the accelerated full outstanding capital amount, the
creditor is precluded from seeking execution against
movables during
the period when the debtor will be trying to pay the arrears. That is
a far more preferable situation and, as the
Practice Manual says, it
fits the purpose of the postponement of the application for a
declaration of executability.
[24]
There is another way of reaching the same result. The inherent
power and obligation under section 173 to regulate own
process,
taking into account the interests of justice, justifies the court
postponing also the applications for default judgment
for the
accelerated full balance, for the reasons advanced above.
[25]
It follows that, apart from the provisions of the Practice Manual, in
my view in these types of applications the court has
a discretion to
postpone the applications for default judgment for the accelerated
capital amounts, and so to tie those applications
in with the
applications for declarations of executability. The consequences of
this conclusion for the specific applications are
as follows.
[26]
In FirstRand Bank Ltd v Zwane (16/18581) (no. 67 on the roll) the
following considerations are pertinent. The bond instalments
are
R7694.95, and the arrears as of 23 June 2016, R23410.29. That
reflects just over three months’ instalment arrears. The
accelerated full balance is R708452.85. In this context, arrears of
just over three monthly instalments are in my view “few”,
in the context of paragraph 4 of chapter 10.17 of the Practice
Manual.
[27]
The home loan agreement has not been cancelled, and the respondent is
thus still able to re-instate it under section 129(3)(a)
of the NCA.
If a judgment for the accelerated balance is given now, the applicant
could take out a writ against movables and the
respondents will be
prejudiced under section 129(4)(b) of the NCA.
[28]
Consequently I make the following order in this matter:
(a)The application is
postponed sine die, and may not be set down before the expiry of four
months.
(b)When set down again,
the notice of set-down must be served in accordance with the
provisions of chapter 10.17 of the Practice
Manual, and must be
accompanied by an affidavit as envisaged therein.
(c)The costs of the
postponement are costs in the cause.
[29]
In FirstRand Bank Ltd v Hyslop (16/19362) (no. 68 on the roll) the
following considerations are pertinent. The bond instalments
are
R11205.79, and the arrears as of 29 June 2016, R33194.75. That
reflects just under three months’ instalment arrears.
The
accelerated full balance is R953399.28. In this context, arrears of
just under three monthly instalments are in my view “few”,
in the context of paragraph 4 of chapter 10.17 of the Practice
Manual.
[30]
The home loan agreement has not been cancelled, and the respondents
are thus still able to re-instate it under section 129(3)(a)
of the
NCA. If a judgment for the accelerated balance is given now, the
applicant could take out a writ against movables and the
respondents
will be prejudiced under section 129(4)(b) of the NCA.
[31]
Consequently I make the following order in this matter:
(a)
The application is postponed sine die, and
may not be set down before the expiry of four months.
(b)
When set down again, the notice of set-down
must be served in accordance with the provisions of chapter 10.17 of
the Practice Manual,
and must be accompanied by an affidavit as
envisaged therein.
(c)
The costs of the postponement are
costs in the cause.
[32]
In Nedbank Ltd v Nkuna (15/30634) (no. 98 on the roll) the following
considerations are pertinent. The applicant has before,
on 11 May
2016, obtained a money judgment for the accelerated balance of
R840255.46. The bond instalments are R7770.76, and the
arrears as of
24 August 2015, R46800.89. That reflects just over six months’
instalment arrears, and at a point in time some
nine months before.
In this context, arrears of just over six months’ instalments,
nine months before the application was
made, are not in my view
“few”, in the context of paragraph 4 of chapter 10.17 of
the Practice Manual.
[33]
The court did not declare the property executable, but it is unclear
whether it was in fact asked to do so. That part of the
relief sought
was simply not granted, and according to the court order itself not
postponed, which rather leaves the impression
that executability was
not asked. Either way, I expect that the applicant will report to the
court what has transpired since then
because the affidavit supporting
the application is already somewhat dated.
[34]
It follows that in this matter, if the bond arrears have not been
purged, I will likely grant a declaratur that the property
be
rendered executable, and costs; and a suitable draft order may be
prepared.
WHG van der Linde
Judge, High Court
Johannesburg
For
the applicant in matters 67 and 68: Mr. C. Cilliers (011 325
4500)
Charl
Cilliers Inc Attorneys
1
st
Floor No 1 Albury Park
Cnr
Jan Smuts Avenue and Albury Road
Johannesburg
Tel:
011 325 4500
Ref:
CC/bw/FF002840
For
the applicant in matter 98: Adv. V. Fine
Instructed
by: Lowndes Dlamini
Ground
Floor
56
Weirda Road East
Cnr.
Albertyn Road
Sandton
Tel:
011 292 5651
Ref:
P Lagarto/M Hanreck/ MAT 12091/AN
Date
argued: 27 July 2016
Date
judgment: 29 July 2016