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[2020] ZAGPJHC 335
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National Urban Reconstruction and Housing Agency NPC v Morula Resources CC and Others (21247/2018) [2020] ZAGPJHC 335 (16 November 2020)
SAFLII
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Certain
personal/private details of parties or witnesses have been
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IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL DIVISION,
JOHANNESBURG
CASE
NO:
21247/2018
In
the matter between:
NATIONAL URBAN
RECONSTRUCTION & HOUSING AGENCY NPC
Applicant
and
MORULA
RESOURCES
CC
First Respondent
TSHIRELETSO
HAROLD
DIRA
Second Respondent
CITY
OF JOHANNESBURG
MUNICIPALITY
Third Respondent
J
U D G M E N T
MAIER-FRAWLEY J
:
Introductory
background
1.
The applicant, as judgment creditor,
seeks an order authorising execution against two immovable properties
owned by the first respondent
(judgment debtor) in satisfaction of a
judgment debt. One of the properties sought to be declared specially
executable is allegedly
occupied by the second respondent, who
maintains that it is his primary residence. The other property is
vacant.
2.
The applicant loaned monies to the first
respondent, a juristic entity, in terms of a commercial loan
transaction. The second respondent
stood surety for the first
respondent’s indebtedness arising from the latter’s
obligations under a loan agreement concluded
with the applicant. When
the first respondent defaulted on its obligations under the loan
agreement, the applicant instituted action
against the first
respondent (principal debtor) and the second respondent (surety) for
the recovery of the first respondent’s
indebtedness then owing
to it. On 25 June 2019, summary judgment was granted against the
first and second respondents, jointly
and severally, the one paying,
the other to be absolved, for payment of the sum of R4,599 929.51
together with interest and costs
on the scale as between attorney and
client (the judgment debt).
3.
The applicant seeks satisfaction of the
judgment debt only as against the first respondent through execution
levied against the
latter’s immovable assets in these
proceedings. It is common cause that no attempt was made by the
applicant to execute against
the movable property of the first
respondent before seeking an order of special executability in terms
of Rule 46(1)(a)(ii) of
the Rules of Court. It is further common
cause that Standard bank, who was not joined to the proceedings, is
the registered bondholder
over the first respondent’s
properties, in which capacity it is both a secured and preferent
creditor
.
4.
The second respondent, Mr Tshireletso
Harold Dira, deposed to the answering affidavit both in his personal
capacity and on behalf
of the first respondent
.
As the third respondent took no part in these proceedings, any
reference to ‘the respondents’ in this judgment is
in
reference to the first and second respondents.
Grounds of opposition
5.
The respondents oppose the application
based on the following points raised
in
limine:
(i)
That the application is ‘fatally
defective’ because the applicant failed to deal with ‘certain
vital jurisdictional
facts’ in its papers for purposes of
enabling this court to consider the setting of a reserve price for
any sale in execution
of the properties, such as failing to provide
documentation in the form of a sworn valuation in support of the
market value of
‘the immovable property’ (presumably a
reference to the property presently occupied by the second
respondent) or any
document evidencing the amounts owing to the local
authority as rates and other dues and ‘any other factor which
may be necessary
to enable the court to give effect to sub-rule (8)’
of Rule 46A, and as such, failed to comply with the provisions of
Rule
46A(5);
(ii)
That the applicant failed to notify
the Registrar of Deeds and the registered bondholder of the
application as required by Rule
46A(3)(b) and/or failed to join such
parties, both of whom are alleged to have a ‘vested interest’
in the proceedings
and as such, are ‘essential parties’
(notification of interested parties and non-joinder of essential
parties defence);
(iii)
That one of the properties sought to
be declared specially executable (Erf 1313 Greenstone Hill, Ext 15,
Johannesburg) comprises
the primary residence of the second
respondent and his family (wife and three minor children) and if it
is declared executable,
the second respondent and his family will
have ‘no home and be on the street’ in that ‘they
have no alternative
accommodation available to them’; and
(iv)
The applicant failed to explore
alternative remedies ‘to satisfy the
arrear
amount
,’ which are ‘less
drastic’ than the relief sought to declare the one property
(comprising the second respondent’s
primary residence)
executable, such as by means of execution first levied against the
movable property of the first respondent,
as envisaged in Rule
46(1)(a)(i) of the Rules of Court.
6.
In addition, the respondents state that
they ‘dispute the judgment granted against them and reserve
their rights to proceed
with an application for leave to appeal,
alternatively, an application for rescission of judgment.’
Relevant facts
7.
The following facts were either common cause or not disputed
and not refuted on the papers:
8.
On 5 June 2018, the applicant issued a combined summons out of
this court against the respondents, seeking the following relief:
8.1. Payment of the sum of R4 599
929.51’
8.2. Interest thereon calculated at
the rate of prime plus 2.5% from 1 May 2018 to date of final payment;
8.3. Costs of suit on the scale as
between attorney and own client.
9.
After the action became
defended, the applicant applied for summary judgment to be entered
against the respondents. The summary
judgment proceedings, which were
opposed, were postponed on several occasions at the instance of the
respondents
[1]
until it was finally determined a year later, with the second
respondent appearing in person on the day of hearing to oppose the
grant of summary judgment.
10.
On 25 June 2019, summary judgment was entered against the
respondents. An order was granted by Nobanda AJ, which accorded with
the
prayers outlined in paragraph 8 above (the court order).
11.
The respondents’ underlying indebtedness to the
applicant is not disputed in the answering affidavit. Although they
reserve
their right to do so, the respondents have, to date, taken no
steps to initiate or prosecute an application for leave to appeal
the
summary judgment and order, nor have they applied for rescission of
judgment. As such, the court order stands as unchallenged
and the
judgment debt remains wholly unpaid.
12.
Despite demand, the respondents were unable (or have refused)
to satisfy the judgment debt.
13.
The second respondent owns neither of the two properties
against which an order of special executability is sought. The first
property
is situate at […](‘K property’). The
second property, which is situate at […] (S property), is the
property
which is said to be the second respondent’s primary
residence. According to the Sherriff’s returns of service filed
in the application (the contents of which were not disputed), the K
property was found to be vacant by the Sherriff on 2 March
2020. The
S property was found to be occupied by one, Mr Mahan, whose employee
(Ms Moyo), accepted service on his behalf on 24
February 2020. The
Sherriff’s return reflects that Ms Moyo confirmed to the
Sherriff that her employer, Mr Mahan, was the
current occupant at the
address. Both properties comprise residential immovable property,
although it is uncertain from the papers
as to whether or not the K
property comprises vacant land, albeit zoned for residential use, or
has a vacant building situate on
the land.
14.
The applicant has chosen to excuss the
principal debtor (first respondent) without, at this stage,
proceeding with recovery of the
judgment debt against the subsidiary
debtor (second respondent) personally.
15.
The judgment debt forming the subject
matter of these proceedings was incurred extraneous to the
indebtedness incurred by the first
respondent towards the registered
bondholder.
Condonation
16.
Before turning to the merits of the
respondents defences, it is convenient to deal with the respondents;
application for condonation
for the late filing of the answering
affidavit. The application for condonation was not opposed at the
hearing of the matter.
The respondents
have advanced satisfactory reasons for the late filing of their
papers and the delay occasioned by the late filing
of the answering
affidavit is slight. Suffice it to say that the respondents
encountered certain difficulties during stage 1 of
the national
lockdown in South Africa, declared in terms of the National Disaster
Act, least of all by the restriction of movement
imposed on citizens
at the time, which hampered the ability of the second respondent to
locate relevant documents to enable him
to consult with the
respondents’ legal representatives or the timeous retrieval by
the respondents’ legal representatives
of relevant documents
contained in the court file at the High court, Johannesburg. There
was also no prejudice suffered by any
of the parties as a result of
the late delivery of the papers. It is therefore in the interests of
justice to grant condonation.
Evaluation of the
respondents defences
Non-compliance
with the requirements of Rule 46A Is Rule 46A applicable?
17.
The applicant submits that the protections afforded to
judgment debtors in terms of the provisions of Rule 46A are not
available
to the respondents in these proceedings, given that the
first respondent is a juristic entity and that for obvious reasons,
neither
property is its primary residence. Moreover, since these
proceedings are aimed at excussing only the first respondent and
absent
recourse being sought against the second respondent, the
latter is not the judgment debtor for purposes of these proceedings
and
hence the provisions of Rule 46A of the Rules of court do not
find application.
18.
For the respondents, it was submitted that although the
provisions of Rule 46A do not ‘technically apply’ in the
present
matter, the court should nonetheless, in performing an
oversight role, accord to the second respondent the benefit of the
procedural
protections afforded in Rule 46A to debtors who are
natural persons and who are at risk of losing their primary homes,
such as
the second respondent.
19.
Rule 46A (1) and (2) provides as follows:
“
(1) This rule
applies whenever an execution creditor seeks to execute against the
residential immovable property of a judgment debtor.
(2)(a) A court
considering an application under this rule must –
(i)
establish whether the immovable property which the
execution creditor intends to execute against is the primary
residence of the
judgment debtor; and
(ii)
consider alternative means by the judgment debtor of
satisfying the judgment debt, other than execution against the
judgment debtor’s
primary residence.
(b)
A court shall not authorise execution against immovable
property which is the primary residence of a judgment debtor unless
the
court, having considered all relevant factors, considers that
execution against such property is warranted.
(c)
The registrar shall not issue a writ of execution
against the residential immovable property of any judgment debtor
unless a court
has ordered execution against such property.”
20.
Rule 46(1) regulates the process for executing against the
immovable property of a judgment debtor, which process includes
execution
against residential immovable property of a judgment
debtor, subject however to the provisions of rule 46A where such
residential
property constitutes the primary residence of the
judgment debtor. If it does, Rule 46A(2)(b) enjoins the court to
consider all
relevant factors to determine whether execution is
warranted, with the aim of safeguarding the rights of the debtor
where the execution
process would amount to a deprivation of the
right to access adequate housing as enshrined in section 26 of the
Constitution.
21.
Rule 46A accords the protection of judicial oversight to
debtors who are at risk of losing their primary residence, as a
safeguard
against attempts by unscrupulous creditors to exact payment
of a debt through execution against the primary residence of a debtor
when other reasonable and less invasive avenues of payment may be
pursued and to ensure that execution is proportionate, having
regard
to all relevant circumstances. The safeguards afforded by the
procedural mechanisms contained in Rule 46A to individual
consumers
who are at risk of losing their homes are further aimed at preventing
an abuse of the process.
22.
The difficulty with
counsel’s submission (recorded in paragraph 18 above), however,
is that in
Folscher,
[2]
the Full Court in this
division held that ‘
Immovable
property owned by a company and a close corporation or a trust of
which the member, shareholder or beneficiary is the
beneficial
occupier is not protected by the amended Rule
[a
reference to Rule 46(1)(a)(ii)]
requiring
judicial oversight by way of an order of court authorising a writ of
execution, even if the immovable property is the
shareholder’s,
member’s or beneficiary’s only residence.’
The
court also held that the term ’judgment debtor’ refers to
an individual person (not a juristic person).
[3]
The Full Court distinguished between a judgment debtor who resides in
a home and who is in danger of losing that home in unfair
circumstances and a judgment debtor which is a legal entity where the
right to access adequate housing is not implicated regardless
of who
occupies the property. It held that ‘judgment debtor’
refers to ‘an individual, a person’ and concluded
that
“
It is therefore the
primary residence owned by a person
[judgment
debtor]
that falls within
the purview of the rule.’
[4]
23.
In
Investec,
[5]
the court had occasion to
consider whether constitutional considerations and protections are
available to a beneficial occupier
of property owned by judgment
debtor who is not a natural person and concluded, in reference to
cases such as
Folscher
and
Mokebe
that
‘the provisions of rule 46A are not applicable as the property
sought to be executed against is registered in the name
of the Trust
and it is irrelevant that the trustee and her children reside on the
property and consider it their home. Since the
Trust, being the
judgment debtor, is not a natural person, the constitutional
safeguards are not available to it where execution
is sought against
its immovable property.’
[6]
24.
The practical
application of the principle of
stare
decisis
(doctrine of
judicial precedent) is that courts are bound by their previous
judicial decisions (unless satisfied that the decision
is clearly
wrong) as well as the decisions of courts superior to them (unless
distinguishable on the facts).
[7]
In accordance with the doctrine of judicial precedent I am bound by
the decision of
Folscher.
I
am in any event unable to find that the decision in
Investec
is wrong apropos the
applicability of Rule 46A to beneficial occupiers of immovable
property that are owned by a judgment debtor
who is a juristic person
(such as the first respondent
in
casu
).
25.
Insofar as the respondents rely, in their heads of argument,
on the following extract in
Erasmus:
“
It would seem that if
immovable residential property is merely
nominally
registered
in the name of a legal person or trust, but used as a dwelling by the
shareholder(s) or the trustees/trust beneficiaries (depending
on the
nature of the trust deed), as the case may be, the property falls
within the ambit of rule 46A in the event that the legal
person or
the trustees in their official capacity are the judgment debtors and
the judgment creditor wants to execute against the
property.
Otherwise the provisions of the rule could easily be circumvented by
the judgment creditors.”
[8]
there
is no evidence before me that the properties in question are ‘merely
nominally registered’ in the name of the
first respondent so
that the second respondent is to be regarded as the judgment debtor
in his official capacity. Moreover, as
pointed out in
Investec
,
[9]
although the quoted passage from Erasmus refers to the
nominal
registration
of the property in the name of a legal persona, it is not clear how
this type of legal persona differs from the type
contemplated in
Folscher,
such
that it should be treated differently.
26.
Although the second respondent is notionally a debtor in
respect of the judgment debt, the applicant is not seeking to obtain
satisfaction
of the judgment debt against him personally. His assets
are not sought to be attached or executed against by means of these
proceedings.
Should the applicant succeed in obtaining satisfaction
of the judgment debt through execution levied against the immovable
assets
of the first respondent, the liability of the second
respondent will be extinguished, if not wholly, then in part, in
which latter
event, the judgment creditor would be entitled to pursue
further remedies against the first or the second respondent, or both,
in separate proceedings. In my view, the second respondent, assuming
the correctness of his averment that he occupies the S property
as
his primary residence, is therefore in no different position to the
ordinary beneficial occupier who is not a debtor, as envisaged
in
Folscher.
27.
In so far as a higher court may be persuaded to disagree with
the conclusion arrived at in para 26 above, I consider it prudent to
adopt a cautious approach regarding the position of the second
respondent and will therefore consider relevant factors in
determining
whether execution should be authorised in respect of the
S property. For purposes of this enquiry, I will assume the
correctness
of the allegation that the second respondent is currently
resident at the S property together with his wife and minor children
and that they consider such property to be their primary residence.
28.
It would be wise to
reflect upon relevant guiding judicial dicta in matters involving
execution against a debtor’s primary
home. Starting with
Jaftha,
[10]
the Constitutional Court
cautioned that, in considering whether execution is justifiable or
not, the interests of creditors must
not be overlooked. Thus, for
example, where the creditor’s advantage in execution outweighs
the harm caused to the debtor,
it may be justifiable to execute. The
court put it thus: ‘…
a
consideration of the legitimacy of a sale in execution must be seen
as a balancing process.’
This
balancing exercise is aimed at determining whether execution will be
unjustifiable because the advantage that attaches to a
creditor who
seeks execution will be far outweighed by immense prejudice and
hardship that will be caused to the debtor. The size
of the debt will
be a relevant factor for a court to consider and whether the sale of
the home is likely to render the ‘judgment
debtor’ and
his or her family completely homeless.
[11]
Factors such as the circumstances in which the debt arose; whether or
not there has been any abuse of court procedure; the availability
of
alternatives which might allow for the recovery of debt but do not
require the sale in execution of the debtor’s home;
and
attempts made by the debtor to pay off the debt are all relevant
factors.
29.
In
Saunderson
[12]
it was said that ‘…
When
judgment is given against a debtor and the debtor fails to satisfy
the judgment debt the process for recovery of the judgment
debt is by
execution against the judgment debtor’s belongings. It is a
long-standing practice of our courts that execution
must be directed
first against the debtor’s movable property and only
thereafter, if the movables are insufficient, against
immovable
property,
but
a court may alter that sequence
…When
an order is granted declaring executable the property specially
hypothecated that order permits the grantee, the creditor,
to take
his execution straightaway against the immovable property.’
(footnotes omitted) (own emphasis).
[13]
The court in
Saunderson
clarified
that
Jaftha
did
not decide that s26(1) of the Constitution (which enshrines a right
of access to
adequate
housing
– and the impact of that right on execution against residential
property) is compromised in every case where execution
is levied
against residential property. More importantly, the SCA highlighted
that a plaintiff is called to justify an infringement
of a
constitutionally protected right only once it has been established
that infringement has in fact occurred.
[14]
30.
In
Gundwana
,
[15]
Froneman J stated that ‘it must be accepted that execution in
itself is not an odious thing. It is part and parcel of normal
economic life. It is only when there is disproportionality between
the means used in the execution process to exact payment of
the
judgment debt, compared to other available means to attain the same
purpose, that alarm bells should start ringing. If there
are no other
proportionate means to attain the same end, execution may not be
avoided.’
31.
In
NPGS
,
[16]
the SCA reiterated that ‘…there is an onus on the
debtor, at the very least, to provide the court with information
concerning whether the property is his or her personal residence,
whether it is a primary residence, whether there are other means
available to discharge the debt and whether there is a
disproportionality between the execution and other possible means to
exact
payment of the judgment debt.’ The NPGS case did not
involve a mortgage bond needed to acquire a personal residence. The
relevant loan was a commercial loan, to be employed in the business
of the Close Corporation. Davis AJA stated, at para 61 of the
judgment, that ‘
these
facts alone may not be sufficient to justify a full inquiry into
whether an execution of a residential property should take
place
.’
32.
In
Nkola,
[17]
the SCA held that a
judgment creditor may execute against immovable property if a
judgment debtor has failed to point movables out
and make them
available. In that case, the movable assets of the debtor were
alleged to exceed the value of the judgment debt.
The issue arising
for determination was whether a judgment creditor was entitled, in
those circumstances, to have two immovable
properties belonging to
the debtor declared specially executable. Lewis JA concluded that in
all cases where a debtor’s home
is in issue, a court must look
at the circumstances of the debtor and exercise a discretion. The
learned Judge went on to state
that “Rule 46(1)(a)(ii) was
amended so as to include a proviso that ‘where the property
sought to be attached is the
primary residence of the judgment
debtor, no writ shall issue unless the court, having considered all
the relevant circumstances,
orders execution against such property’.
The proviso reflects the principle that a poor person who runs the
risk of losing
a home should not be placed in jeopardy without a
proper consideration of his or her circumstances.” The court
found that
the judgment debtor, who was a person of considerable
means (on his own version) was not the kind of person who qualified
for the
protection required by
Gundwana
.
The fact that execution was sought against a house that was his
primary residence was of no consequence as the judgment debtor
had
the means to avert the execution of the judgment debt and chose not
to pay his admitted liability. The learned Judge thus concluded
that
“There is no justification in this matter to read the
requirements of rule 45(1)(a) conjunctively. ‘Or’
need
not be read as ‘and’ save where a debtor is indigent, has
insufficient assets to satisfy the debt and is at risk
of losing his…
primary residence.”
[18]
33.
In
Nkola,
the judgment debtor’s stance was that
the judgment creditor must seek out the movables and sell them before
attempting to
execute against his immovable properties. The learned
Judge observed that the judgment debtor ‘would place the duty
on the
judgment creditor instead of resolving his financial problems
himself’ and went on to state, at para 11 of the judgment, that
‘I consider that the common law and the rules place no
obligation on a creditor to execute against movable assets where a
judgment debtor has failed to point these out and make them
available.’
34.
With these guiding principles in mind, I now turn to a
consideration of the relevant circumstances.
35.
The
underlying loan that formed the subject matter of the judgment debt
was not utilised to acquire either of the first respondent’s
properties. The relevant loan was a commercial loan, to be employed
in the construction business (residential sector) operated
by the
first respondent. The respondents’ indebtedness to the
applicant has not been disputed and the court order of 25 June
2019
presently stands unchallenged. In any event, from a perusal of the
answering affidavit filed by the respondents in the summary
judgment
proceedings, it is clear that no defence was raised in relation to
the respondents’ liability apropos the indebtedness
that was
claimed to be due, payable and owing to the applicant – the
only defence raised, was in relation to the alleged
business rescue
status of the first respondent, which defence itself remained
unsubstantiated.
36.
The respondents have been aware of their indebtedness since
2018 and of the judgment debt since 25 June 2019, but have taken no
steps to pay the judgment debt. They have also not put forward
concrete reasonable proposals for paying off the judgment debt, nor
have they disclosed or offered up any movable assets that could be
utilized towards realization of the debt. The respondents managed
to
ward off the grant of summary judgment for a period of a year,
without making any attempt to settle what emerged to be an admitted
indebtedness.
37.
A claim of primary residence has only been raised as against
the S property and not the other property, which is zoned as
‘residential,’
but appears to be a small holding that is
vacant. It is uncertain whether this property contains a residence as
such. As regards
the S property, as at 24 February 2020, the
Sherriff’s return reveals that a third party tenant was in
occupation of the
residence, and not the second respondent. This
carries the necessary inference that the property was being let out
by the first
respondent, ostensibly for financial gain. The second
respondent baldly avers in the answering affidavit that he occupies
the S
property together with his family and that it constitutes their
primary residence. Vital information regarding the circumstances
under which the second respondent came to occupy such property, i.e.,
whether in terms of a lease agreement or on some other basis;
whether
he is paying for such occupancy and if so, in what amount, was not
disclosed by him, nor were any specifics of his financial
circumstances disclosed, as was incumbent upon him to do. It was
mentioned by counsel from the bar during presentation of oral
argument that the second respondent relocated to the S property only
after service of the application upon the respondents. One
cannot but
wonder whether this was a calculated move designed to avoid or delay
execution against the first respondent’s
property. Despite
having been given notice in terms of section 26 of the Constitution
and despite having been notified,
inter alia,
that the
respondents were required to place evidence of relevant facts before
the court, the deponent to the answering affidavit
chose to disclose
only the bare minimum of information to this court by means of bald
allegations without providing evidence in
substantiation of the
averments.
38.
The respondents take the
technical point that the applicant has failed to explore alternative
means to satisfy the judgment debt,
namely, by means of attachment of
the first respondent’s movable assets in circumstances where
the respondents have not disclosed
the nature, extent, value and
location of any such movables. As will be demonstrated later, the
second respondent is not indigent
and none of the other factors
mentioned in
Nkola
[19]
find application. This
point therefore lacks merit.
39.
The answering affidavit was deposed to by the second
respondent on 8 June 2020. The second respondent alleged that ‘
As
a result of the Covid-19 lockdown and the restrictions imposed
thereby, the First Respondent has not been able to conduct its
business operations from 26 March 2020 until such time as the country
enters Alert Level 1 of the lockdown restrictions. This resulted
in
myself not having been able to earn an income for the last two
months, and I am still not earning an income due to the fact
that the
First Respondent will only be able to conduct its business operations
when Alert Level 1 of lockdown is declared. As a
result, I will not
be able to relocate my family and myself, should the above Honourable
Court authorize the properties to be sold
on public auction. My
family and I will be left on the street with nowhere else to go,
should the Applicant be successful in its
application in terms of
Rule 46A.’
40.
Lockdown level 3 commenced on 31 May 2020. Level 2 commenced
on 17 August 2020, whilst level 1 commenced on 21 September 2020.
Information
widely publicized in the public domain indicated that the
commercial construction sector was scheduled to operate at level 3
whilst
the residential construction sector was scheduled to operate
at level 2 of the lockdown. I mention this merely to illustrate that
on the second respondent’s own version, he was in gainful
employ and earning an income at least until the 26 March 2020,
which
probably resumed prior to the country moving to level 2 of the
lockdown but at worst, on 21 September 2020 when level 1 was
declared. The second respondent has not disclosed where he lived
prior to his occupancy of the S property (sometime after February
2020), nor has he indicated why he will be deprived of access to
adequate
housing located elsewhere, as he had indeed enjoyed
prior to February 2020, should execution ensue. He has failed to
demonstrate
that execution will result in an unjustifiable
infringement of his section 26 rights.
41.
No abuse by the applicant of the execution process has been
alleged or demonstrated in these proceedings.
42.
Given that the issue of the first respondent being placed or
having been placed in business rescue (due to financial distress) was
on the cards as long ago as 2018, well before the advent of Covid-19,
and given that there exists no evidence to show that there
is a real
prospect that the judgment debt might yet be paid, the submission by
the applicant that there exists no reasonable likelihood
that the
judgment debt will be paid in full or partially within a reasonable
period, apart from execution, is not without measure
of force.
43.
Objective values
obtained from the two respective Windeed Property reports attached to
the papers reveals that the K property has
an estimated market value
of R2.950 million. The municipal value is indicated as R2.488
million. There is a covering mortgage bond
registered over the
property in favour of Standard bank for the sum of R1.4 million. The
bond was registered in November 2006.
The outstanding municipal
charges owed to the third respondent is R96,336.28.
[20]
A reserve price set at R1787 568.00 would be reasonable.
[21]
44.
The S Property has an estimated market value of R3.215 million
and a municipal value of R4.102 million. There is a covering mortgage
bond registered over the property in favour of Standard bank for the
sum of R1.6 million. The bond was registered in March 2007.
The
outstanding municipal charges owed to the third respondent is
R158,404.75. The applicant submits however, that the interests
of the
City of Johannesburg and those of the existing bondholder over the
properties are guaranteed, given that they are both preferent
creditors with the registered bondholder being a secured creditor
too. A reserve price set at R2,409.118.00 would be reasonable.
45.
Both properties were purchased some 13 years ago. The
applicant submits that after 13 years of servicing the bond, the
properties
will both likely have equity in excess of the amount due
to Standard bank. The applicant furthers avers that despite the fact
that
the properties are encumbered, it is highly probable that it
will realise sufficient proceeds from the sale of the properties to
discharge a substantial portion of the judgment debt. The outstanding
bond liability in respect of the properties as not been disclosed
on
the papers. Whilst the amount of the outstanding bond liability would
likely fall within in the knowledge of the second respondent,
he too,
failed to disclose same.
46.
The respondents baldly deny the values ascribed to the
properties by the applicant or that equity will be retained on a
forced sale
of the properties. They have not suggested alternate
values, nor have they put up objective valuations to refute the
allegations
in the applicant’s papers.
47.
Although the valuations
obtained by the applicant are not attested to under oath, I remain
doubtful as to whether the facts of this
matter are sufficient to
justify a full inquiry into whether an execution of a residential
property should take place. With that
in mind, I consider that
sufficient evidence has been placed before the court to consider
whether the relief sought is disproportionate
to the judgment debt. I
conclude that it is not. Sufficient facts have also been disclosed in
the applicant’s papers to determine
whether a reserve price
ought to be set for the sale of the properties. It is in any event
not in dispute on the papers that a
reserve price should be set, even
though the precise value of the outstanding bond liability is not
presently known. That effectively
puts paid to the defence that the
applicant has failed to deal with ‘jurisdictional’ facts
required for the setting
of a reserve price. The court retains a
discretion to determine the amount of the reserve price. On the
evidence available, a reserve
price that caters for the full amount
of the bond liability will not be prejudicial to the bondholder and
will ultimately inure
to the benefit of the respondents. The merit or
value of setting a reserve price for purposes of a sale in execution
was underscored
in
Mokebe
[22]
Ultimately, the setting of a reserve price inures to the benefit of a
debtor in that it safeguards against the property being sold
at an
inordinately low price, unrelated to the true value of the property,
resulting in the situation whereby a debtor loses his
home and
remains saddled with a larger than necessary outstanding liability to
the judgment creditor.
48.
I turn to deal with the
other technical defences raised by the respondents in these
proceedings. As to the point of non-joinder
of the bondholder in
these proceedings, it is trite that before a party has to be joined
as of necessity, it must be shown that
such a party has an interest
in the right which is the subject matter of the litigation which is
not merely a financial or indirect
interest in such litigation.
[23]
Standard bank, by reason of its financial interest, is thus not a
necessary party to these proceedings. In any event, Rule 46(5)
expressly provides that no immovable property which is subject to any
preference shall be sold in execution unless the executing
creditor
has advised the preferent creditor in writing of the intended sale
and the latter has been afforded an opportunity to
agree to a sale
with a reasonable reserve price or a sale without reserve. The
bondholder’s position is thus secured without
any necessity for
it to be joined in these proceedings. Although the bondholder has not
yet presented its views on what a reasonable
reserve price should be,
the order which I intend to make will cater for this eventuality.
Both parties hold the view that a reserve
price should be set in the
event that an order authorising execution is made herein.
49.
As for the Registrar of Deeds, Rule 46(3) and 46(8) inform the
processes to be followed preceding a sale in execution after
attachment
has been secured. I am not persuaded that the Registrar of
Deeds is an ‘essential’ party, as the application has no
bearing on the registration of any deed, but simply a declaration of
special executability in respect of the immovable properties.
50.
The applicant submits
that it will be prejudiced in the event that it is prevented from
obtaining relief, as, in such event, the
respondents will be in a
position to either dispose of or further encumber the properties.
Such conduct will prejudice the applicant’s
chances of recovery
of the judgment debt and without the security of an attachment the
applicant will lose any security of repayment
of the judgment debt. I
am inclined to agree, given that several facile defences, which, to
borrow from the words of Davis AJA
in
NPGS,
[24]
‘were dressed up as
being technically proficient’, were the only ones presented to
resist an order of special executability.
51.
On the second respondent’s own version, he has been in
fixed, gainful employment, which, on his version, would have resumed
during level 1 of the lockdown. Given the relaxation of lockdown
restrictions in both levels 1 and 2, there is no reason to believe
that the second respondent is not presently able to generate income
with which to procure adequate alternative accommodation. On
the
facts, the second respondent does not fit the demographic of an
indigent, vulnerable or poor debtor. He was able to employ
the
services of counsel and attorneys in the matter, no doubt, at a
considerable cost. In today’s economic climate, that
is no
small feat. He is living in accommodation to which he relocated only
after service of this application, a property which
is valued in
excess of R2 million and which is located in an upmarket estate.
Whether he lived in similar accommodation prior to
his relocation to
the first respondent’s property has not been disclosed by him.
Having regard to the peculiar circumstances,
I am not persuaded that
there are any factors or circumstances which militate against a
finding that execution is justifiable.
52.
For all the reasons given, the applicant has established its
entitlement to relief sought by it. The order that I propose making
will afford the applicant to approach the court, on the same papers,
duly supplemented, should the reserve price (as determined
in the
papers and agreed to by the parties) in respect of a future sale in
execution of the properties require revision once the
registered
bondholder has been given an opportunity to express its views.
53.
The general rule is that costs follow the result. I see no
reason to depart therefrom.
54.
Accordingly, the following order is
granted:
ORDER
1.
The late filing of the answering
affidavit is condoned.
2.
The following Immovable Properties are
declared specially executable:
2.1
Erf […] Greenstone Hill Ext 12, Johannesburg, held
under Title Deed T151793/2006; and
2.2
Erf […] Greenstone Hill, Ext 15, Johannesburg, held
under Title Deed T33053/2007.
(“the Immovable Properties”)
3.
The Registrar of Court is authorised to issue a writ of
execution in respect of the Immovable Properties in order to give
effect
to the order granted in prayer 1 supra;
4.
The sale in execution of the aforesaid immovable properties
shall be subject to a reserve price, which is set as follows:
4.1
For Erf […] Greenstone Hill Ext 12, Johannesburg, held
under Title Deed T151793/2006, the reserve price is set at R1 787
568.00; and
4.2
For Erf […] Greenstone Hill, Ext 15, Johannesburg, held
under Title Deed T33053/2007, the reserve price is set at R2 409
118.00.
5.
The Plaintiff is entitled to approach this Court on the same
papers, duly supplemented, for a variation of the reserve price if a
change in the factors influencing the reserve price necessitates a
change of the reserve price, or in the event that the reserve
price
is not obtained at the sale in execution.
6.
The First and Second Respondents are ordered to pay the costs
of this application on an attorney and own client scale, jointly and
severally, the one paying the other to be absolved.
A.
Maier-Frawley
JUDGE
OF THE HIGH COURT
GAUTENG
DIVISION OF THE HIGH COURT, JOHANNESBURG
Electronically
submitted therefore unsigned
Delivered:
This judgement was prepared and authored by the Judge whose name is
reflected and is handed down electronically by circulation
to the
Parties/their legal representatives by email and by uploading it to
the electronic file of this matter on CaseLines. The
date for hand-
down is deemed to be 16 November 2020.
Date
of virtual hearing: 8 October
2020
Judgment
delivered:
16 November 2020
APPEARANCES:
Counsel
for Applicant: Ms KA Wilson
Attorneys
for Applicant: DMO Attorneys
Counsel
for Respondent: Mr JJ Venter
Attorneys
for Respondent: Morne Coetzee Attorneys
[1]
On one occasion, a postponement eventuated when the respondents
indicated their willingness to settle the indebtedness to the
applicant (which indebtedness was not in dispute) but failed to act
thereon. On another occasion, the second respondent appeared
in
person (notwithstanding that the respondents were legally
represented at the time), and informed the court that the first
respondent had been placed in business rescue. Despite requests by
the applicant for proof of either a resolution or a court
order
confirming the business rescue proceedings and status of the
respondents, none was forthcoming. Three sets of attorneys
were
appointed by the respondents over the course of the summary judgment
proceedings, with all three sets of attorneys withdrawing
from
representing the respondents at different periods.
[2]
Firstrand Bank ltd v Folscher and another, and Similar Matters
2011
(4) SA 314
(GNP), para 32
[3]
Id, para 31. See too: Absa Bank Ltd v Mokebe and Related Cases
2018
(6) SA 492
(GJ), para 69; Investec Bank Limited v Fraser N.O. and
Another (33437/2019) [2020] ZAGPJHC 107 (6 May 2020), paras 35 &
36.
[4]
Folscher, para31.
[5]
Investec Bank Limited v Fraser N.O. and Another (33437/2019) [2020]
ZAGPJHC 107 (6 May 2020).
[6]
Investec, para 55.
[7]
Camps Bay Ratepayers’ and Residents’ Association and
Another v Harrison and Another
2011 (4) SA 42
(CC), para 28; Patmar
Explorations (Pty) Ltd v Limpopo Development Tribunal (1250/2016)
[2018] ZACC 19
(16 March 2018), paras 3 & 4.
[8]
Erasmus, Superior Court Practice, Vol 2, 2nd ed, page 632R.
[9]
Investec, cited in fn 5 above, par 60.
[10]
Jaftha v Schoeman and Others; Van Rooyen v Stoltz and Others
[2004] ZACC 25
;
2005
(2) SA 140
(CC), para 42.
[11]
Jaftha, paras 56 & 57.
[12]
Standard bank of South Africa Ltd v Saunderson and Others
2006 (2)
SA 264
(SCA), para 3. See too;
[13]
As to the alteration of the sequence alluded to in Saunderson, see:
Changing Tides 17 (Pty) Ltd N,O. v neal Frasenburg, Case
No.
19353/2019, an unreported judgment of Rogers J in the Western Cape
Division of the High court, delivered on 2 July 2020,
at paras 17 to
21.
[14]
Saunderson, par 20.
[15]
Gudwana v Steko Development CC and others
2011 (3) SA 608
CC, para
54.
[16]
NPGS Protection and Security Services CC and another v FirstRand
Bank Ltd
2020 (2) SA 494
(SCA), per the majority judgment of Davis
AJA, paras 53 & 55.
[17]
Nkola v Argent Steel Group (Pty) Limited t/a Phoenix Steel 2019 (2)
SA 216 (SCA).
[18]
Nkola, para 17.
[19]
Nkola, at para 17, quote in para 32 above.
[20]
The respondents have no put up any evidence to refute the market
values provided in respect of either of the properties.
[21]
I have calculated the reserve price according to a formula commonly
employed by banks in foreclosure matters, namely, market
plus
municipal value to obtain an average value, less outstanding
municipal charges, less 30% (using figures rounded off to nearest
even number).
[22]
Mokebe, cited in fn 3 above.
[23]
See: Strydom v Engen petroleum Limited
2013 (2) SA 187
(SCA) at
paras 23 and 24.
[24]
NPGS, cited in fn 15 above.