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[2023] ZAGPJHC 967
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Absa Bank Limited v Lekhethoa (33086/2019) [2023] ZAGPJHC 967 (28 August 2023)

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IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG LOCAL
DIVISION, JOHANNESBURG
Case Number: 33086/2019
NOT REPORTABLE
NOT OF INTEREST TO OTHER
JUDGES NOT REVISED
28.08.23
In the matter between:
ABSA BANK LIMITED
Applicant
and
LEKHETHOA NTSHADI
BRIDGET
Respondent
JUDGMENT
FORD, AJ
Introduction
[1]
This matter concerns the reconsideration of
a reserved price in terms of Rule 46(9).
[2]
The
application comes pursuant to an unsuccessful sale of execution of
the immovable property, owned by the respondent, previously
declared
executable
[1]
, which was on
auction on 23 November 2022, with a reserve price set at R 240
000.00.
[2]
[3]
In
the present application, the applicant seeks the following relief as
per the notice of motion.
[3]
1.
That the applicant be authorised to
instruct the Sheriff of the District in which the property described
as:
SECTION NO. […]as
shown and more fully described on Sectional Plan no. SS270/1998 in
the scheme known as CARON ROAD in respect
of the land and building or
buildings situated at [...] EXTENSION 12 TOWNSHIP, Local Authority:
CITY OF JOHANNESBURG METROPOLITAN
MUNICIPALITY of which section the
floor area, according to the said sectional plan is 50 (fifty) square
meters in extent, and an
undivided share in the common property in
the scheme apportioned to the said section in accordance with the
participation quota
as endorsed on the said sectional plan, held
under Deed of Transfer ST40169/2006,
be sold without reserve
,
on public auction to the highest bidder in accordance with Rule 46 of
the Uniform Rules of Court, prior [to] its amendment on
22 December
2017.
2.
Costs only in the event that the
respondent opposes the relief sought.
[4]
The
respondent, after being served with the application personally
[4]
,
did not oppose the matter and the application proceeds on an
unopposed basis.
[5]
The way in which the relief in the notice
of motion is framed, is such that a property, sold without a reserved
price, is capable
of being auctioned for pittance. I am of the view,
for reasons that appear later in this judgment, that unless judicial
oversight
is maintained in the execution of immovable property, such
a possibility would undermine the ethos behind Rule 46A.
History of the matter
[6]
On
20 August 2020, this court granted an order in which
inter
alia,
the property described in paragraph 3, was declared specially
executable, and the Sheriff was authorised to sell the immovable

property on public auction with a reserve price set at R375
000.00.
[5]
[7]
The
property was put up for auction on 27 January 2022, but no bid was
received, despite 30 prospective bidders attending the auction.
The
reason advanced by the Sheriff, was that the reserve price was higher
than the market value, and the outstanding rates and
levies of R22
048.00 and R100 000.00 respectively, were too high.
[6]
[8]
As
a result of the unsuccessful auction, and no bids having been
received, the applicant approached this court on 11 August 2022
and
obtained an order in terms of which the reserve price was reduced to
R240 000.00.
[7]
[9]
A
second auction was held on 23 November 2022, subject to a new reserve
price of R240 000.00, but this proved unsuccessful as well,
as no
bids of any amount were received from any of the registered bidders
that were present at the auction.
[8]
[10]
The applicant approached this court in the
present application to authorise the sale of the immovable property
without a reserve
price.
Reconsideration of the
reserve price in terms of rule 46(9)
[11]
The very purpose of Rule 46A is to avoid a
homeowner's investment, in his or her property from being impinged
upon, and to protect
indigent debtors who are in danger of losing
their homes, and ultimately give effect to Section 26 of the
Constitution.
[12]
The court is tasked to take the factors set
out in Rule 46A(9)(b) into account, in deciding (i.e. exercising
discretion) whether
to set a reserve price for the sale of immovable
property, that was declared executable, on public auction.
[13]
In circumstances where the reserve price is
not achieved at the sale in execution, the court is to proceed in
terms of subrules
46(9)(c), (d), and (e), which provisions read as
follows:
(c)   If the reserve
price is not achieved at a sale in execution, the court must, on a
reconsideration of the factors in paragraph
(b) and its powers under
this rule, order how execution is to proceed.
(d)   Where the
reserve price is not achieved at a sale in execution, the sheriff
must submit a report to the court, within
5 days of the date of the
auction, which report shall contain—
(i) the date, time and
place at which the auction sale was conducted;
(ii) the names, identity
numbers and contact details of the persons who participated in the
auction;
(iii)   the highest
bid or offer made; and
(iv)  any other
relevant factor which may assist the court in performing its function
in paragraph (c).
(e)   The court may,
after considering the factors in paragraph (d), and any other
relevant factor, order that the property
be sold to the person who
made the highest offer or bid.
[14]
In a
judgement by Fisher J of our division, she attempted to address
the
lack of uniformity that arises, where a reconsideration of a reserve
price is sought in terms of Rule 46A(9)(c), by providing
procedural
guidelines to be followed.
[9]
[15]
The
trigger for the reassessment / reconsideration, is that the reserve
price has not been achieved at the sale of execution, and
whilst a
court is given a wide discretion under rule 46A(c) – (e), such
discretion can only be exercised in accordance with
the facts put
forward by the parties, or one of them and the Sheriff.
[10]
[16]
The
reconsideration application works from the perspective, that there
has been a change in the facts before the court. This change
is found
only in the fact that the property has been subject to the sale in
accordance with the conditions of the court order,
and there have
been no bids at the reserve price set.
[11]
[17]
The only new facts that really arise, and
that can be put before court for the reconsideration of the reserve
price, are the
prima facie
contents of the Sheriff's return of service, and the contents of his
or her report, notifying the court of the fact that the reserve
price
was not achieved, and that it needs to be either reduced or set to
zero.
[18]
In
addition, the applicant, where in a position to do so, is to provide
the court with the updated amounts pertaining to the arrears,
rates,
taxes and levies. The court, after considering the new facts, must,
on a reconsideration of the factors in sub-paragraph
(b) of Rule 46A,
order how execution is to proceed.
[12]
[19]
In
practice, the lack of uniformity and a framework as to how the
reconsideration must take place, was highlighted by Binns-Ward
J, of
the Western Cape division of this court in the matter of
Standard
Bank of South Africa Ltd v Tchibamba and Another
[13]
where the learned judge held as follows:
[11] Van
Loggerenburg, Erasmus, Superior Court Practice Vol 2 (Juta)
observes   ‘[p]aragraphs (c), (d)
and (e) of subrule (9)
are not clearly worded’. I regret to say that I have to agree.
It is not so much that the individual
paragraphs do not   read
clearly enough when each is considered on its own; it is that, read
together, they fail, conspicuously,
to provide any procedural
framework in terms   of which the mandatory reconsideration
prescribed in paragraph (c) is to happen.
As the current matter and
others to which I shall refer illustrate, such a framework is plainly
required.
[12]
The
shortcoming in the subrule was recognised in Changing Tides 17
(Proprietary) Limited N.O. v Kubheka; Changing Tides 17
(Proprietary)
Limited N.O. v Mowasa; Changing Tides 17 (Proprietary) Limited N.O. v
Bucktwar; Changing Tides 17 (Proprietary) Limited
N.O. v
Horsley [2022] ZAGPJHC 59 (15 February 2022), in which Fisher J,
sitting in the Gauteng Division (Johannesburg), in
four
‘applications’ by a judgment creditor that were placed
before her in chambers, sought to remedy the situation
by providing
some procedural guidelines to be followed in such cases in that
jurisdiction. The learned judge recorded that in her
own experience
practitioners dealt with the means of obtaining the prescribed
reconsideration of a reserve price under rule 46A(9)(c)
in a variety
of ways that showed up an undesirable lack of uniformity.
[20]
Fisher
J
mentioned,
in
Changing
Tides 17,
that
the reconsideration of a reserve price in terms of rule 46A(9)(c),
should be sought by way of application in open court, and
not by
approaching a judge in chambers
[14]
.
This is currently the practice in this division, however, being in
the correct forum (i.e. open court) this is not an issue to
be
determined in this matter. The issue to be determined is the court's
discretion to set no reserve price after considering the
new facts
before it.
[21]
Although Fisher J recognised, correctly in
my view, the lack of uniformity in the application of Rule 46A in
practice, she did not
make any suggestions as to the approach to be
taken in determining the new reduced reserve value.
[22]
The challenge, however, is the calculation
or formula to be used to reduce the reserve price, to a new figure,
or not to set a reserve
price at all, especially in circumstances,
such as the present, where the reserve price was already reduced on a
previous occasion,
and where the auction resulted in a "
no
bid no sale
".
[23]
In
Nedbank
Limited v Mabaso and Another
[15]
Moultrie
AJ relied on a statement made by the applicant in its affidavit. He
stated as follows in paragraph 20 of his judgment:
In my view, the most
sensible approach to the setting of the reserve price in the current
matter is the statement in the founding
affidavit that “the
real-life scenario” that played out at the auction “is
the clearest and most accurate indication
yet of the property's
value”. I agree. The reserve price should be set at the amount
of the highest bid submitted at that
auction, namely R300,000.
[24]
When setting a reserve price at the initial
hearing when the debtor's immovable property is declared executable,
this division,
to a great extent, adopted the so-called "
Opperman
formula
" to set a reserve price,
by taking the average of the market valuation and the municipal
valuation, less 30%, less the outstanding
municipal charges.
[25]
By the time the Court is approached in
terms of Rule 46A(9)(c) for an order varying the previous orders, so
as to allow the property
to be sold in execution without a reserve
price, the court will, in most instances, also be made aware of the
updated outstanding
rates, taxes and levies (if applicable), that
have (in most circumstances) increased since the immovable property
was declared
executable, and the initial reserve price set.
[26]
As
these types of applications are served on the execution debtors, they
have an opportunity to place facts before court, which
facts may also
include submissions regarding the reserve price proposed by the
applicant. If a debtor fails to place facts before
the court despite
being afforded the opportunity to do so, the court is bound to
determine the matter without the benefit of the
debtor’s
input.
[16]
[27]
The applicant contends that, the court's
discretion can only be exercised in accordance with the facts put
forward by the parties,
or one of them and the Sheriff.  To this
end, Rule 46A(9)(d) directs that the court must consider the facts
disclosed by the
Sheriff in its report, in exercising its discretion
to order that the property be sold to the person who made the highest
offer
or bid.
[28]
In the matter before me, the Sheriff's
return and report are clear on its inability to successfully auction
the immovable property
at the reserve price set by this court, on two
different occasions.
Analysis
[29]
An order that a property be sold without a
reserve price, has the effect and possibility of the property being
sold for pittance,
which defeats the purpose of the auction to begin
with, especially in circumstances where the debtor will be held
liable for the
shortfall in any event.
[30]
In
Standard
Bank v Mokebe
and related cases
[17]
, it was
held:
The reasoning behind the
amendments to rule 46A and the need for judicial oversight are to
protect the constitutional rights guaranteed
in s 26 and to inter
alia ensure a person is not evicted from their home without an order
of the court and after consideration
of all of the circumstances
relevant to a particular case.
[31]
The
Supreme
Court of Appeal in
Petrus
Johannes Bestbier and Others v Nedbank Ltd
[18]
held that:
Rule 46A was meant to
protect indigent debtors who were in danger of losing their homes and
give effect to section 26 of the Constitution.
The sole purpose of
judicial oversight in all cases of execution against immovable
property is to ensure that the orders being
granted did not violate
section 26(1) of the Constitution and that the judgment debtor is
likely to be left homeless as a result
of the execution.
[32]
The applicant argues that
the facts
in support of the application to declare the immovable property in
question executable, were taken into consideration
when the initial
reserve price of R375 000.00 was set. Further, that this court
reduced the reserve price to R240 000.00, based
on "new facts"
made available to the court to enable it to exercise its discretion,
namely;  the facts flowing from
the Sheriff's report as to what
transpired at the first auction that was held on 27 January 2022.
[33]
It is unclear on what basis the court went about in reducing
the reserve price from R375 000.00 to R240 000.00.
[34]
In the current application before me,
the only new facts, that are presented in support of the relief
sought are the following:
34.1.
the Sheriff was again unable to obtain
bids to satisfy or achieve the reserve price set as there were no
bids, for the exact same
reasons advanced at the first auction;
34.2.
the outstanding rates and taxes
increased from R 22 048,60 since the first auction to R 25 252.66;
34.3.
the outstanding levies increased from
R100 397.52 since the first auction to R 125 476,47.
[35]
Due to the fact that no bids were
received at the last auction, this court is not in a position to
follow the approach by Moultrie
AJ as alluded to above, by taking the
highest bid at the auction into consideration, as the new proposed
reserve price.
[36]
The applicant and respondent for that
matter, are faced with a situation where every time the applicant
approaches the court for
a reconsideration of the reserve price, the
municipal charges, and the interest payable on the amount due by the
respondent (execution
debtor) have all increased. This is besides the
Sheriff's costs associated with each (in this case) unsuccessful
auction.
[37]
Ultimately both the applicant and
respondent are prejudiced by the delay in the applicant's inability
to realise the property, more
than two and a half years since the
property was declared executable.
[38]
The applicant contends further, that the
likelihood of recovering its judgment debt decreases, as prospective
buyers are already
disinterested in the property due to the high
municipal and body corporate amounts outstanding. On the other hand,
the respondent's
exposure and liability towards the applicant
increases daily. This unfortunate situation will continue until such
time that the
immovable property is successfully sold at an auction.
[39]
Aside
from the aforementioned prejudice to be suffered by both parties,
this court should also take the factors
[19]
,
already canvassed before this court in August 2020
[20]
,
(in the papers in terms of which the property was declared
executable) into consideration, which supports the applicant's
submission
that the court's intervention, for a third or fourth time,
resulting in a gradually reducing reserve price is, according to the

applicant, not tenable.
[40]
It is submitted by Mr. Erasmus, that the Sheriff should be
authorised to sell the property to the highest bidder at no reserve
price.
[41]
Prior to the introduction of Rule 46A, and
this is public knowledge, in a number of instances, South Africans
had their homes sold
significantly below the true value of their
properties.
[42]
Nxazonke
and Another v Absa Bank Ltd and Others
[21]
(Davis
J) is but one example, where a sale in execution resulted in a home
being sold for a disproportionately low price, compared
to the true
value of the property. In
Nxazonke
,
the property was sold for R10, when the municipal value of the
property was R81 000. In that instance, the court held that
the
valuation of the property, and specifically the fact that it was sold
for R10, inferred that there had been a simulated or
fraudulent
transaction, and that in the absence of any plausible explanation
there had been an abuse of process. The court held:
The first argument of
abuse of process runs along the following lines. It is common cause
that in 2001, the municipal value of the
property was R81 000,00.
According to the papers which have been placed before this court,
after the fifth respondent, in the form
of Nedcor Bank, obtained the
default judgment on 1 August 2001, the property was sold in execution
to Nedcor Bank itself for R10,00.
Mr Hathorn correctly
characterised this sale as an abuse of process
.
There is something
disturbing about an act in which property, on a municipal valuation
(which is obviously a conservative one),
which is valued at R81
000,00 is sold for R10,00
. Consider the consequences: Applicants
owed approximately R28 000,00 to the bank. If the property had been
sold for say R50 000,00,
they would have been able to receive R22
000,00, which presumably would have allowed them to put a deposit
down on another house.
By virtue of the property being sold on the
basis of what appears to be a simulated transaction, the rights which
applicant may
have enjoyed to any surplus, were destroyed. Absent any
plausible explanation, this is an abuse of process.
[43]
The fact that a property could be sold for
R10 highlighted a serious and pervasive problem in the previous sale
in execution process,
prior to the enactment of Rule 46A.
[44]
Where properties are sold without a reserve
price, there still appears to be room for abuse, as properties could
still be sold for
unrealistically low prices. How does this court
balance the fact that legitimate pursuits of a reserve price may
prove difficult
against the possibility of abuse as displayed in
Nxazonke
,
especially when after the sale, the debtor will in all probability be
left homeless, yet still be held liable for any shortfall
on the
mortgage debt?
[45]
Rule 46A(9) provides that the court ‘may’
set a ‘reserve price’ for a sale in execution. The
principle purpose
behind the amendment was to ensure that debtors do
not end up having their homes sold for extremely low prices. However,
as Fischer
J, correctly pointed out, when the sale in execution is
scheduled and the reserve price is not achieved, such may be
attributable
to a myriad of reasons, not specifically related to the
reserve price itself.
[46]
Where a court considers whether or not to
grant an order for a property to be sold by way of a sale in
execution, without a reserve
price, the court should take into
account any relevant information, so as to retain judicial oversight,
and such relevant information
should include:
46.1.
The report from the Sheriff, setting out:
46.1.1.
the date, time and place at which the auction sale was
conducted;
46.1.2.
the names, identity numbers and contact details of the persons
who participated in the auction;
46.1.3.
the highest bid or offer made; and
46.1.4.
any other relevant factor which may assist the court in
performing its function in paragraph 46(9)(c);
46.2.
A supplementary affidavit from the
applicant setting out why the property is to be sold without a
reserve price;
46.3.
A supplementary affidavit from the
respondent(s) setting out why the property should not be sold without
a reserve price.
[47]
Where the court, having regard to the
papers before it, is not satisfied that an order be granted for the
sale of the property without
a reserve price, a further reserved
price should be determined, depending on the circumstances of each
case.  The previous
reserved price of R240 000,00 was not
achieved. I have decided to apply, in line with the
Opperman
Formula
, a further 30% reduction
instead of granting a zero-rated reserve price, as prayed for by the
applicant.
[48]
I am not satisfied that there are
sufficient facts before me to grant an order for sale of the property
by sale of execution, without
a reserve price.
[49]
I do however note this court’s
special appreciation for the well written heads of argument drafted
by Mr. Erasmus. The heads
were insightful, well-researched and
extremely helpful.
[50]
In the result, I make the following order:
Order
1.
SECTION No. […] as shown and more
fully described on Sectional Plan no. SS270/1998 in the scheme known
as CARON ROAD in respect
of the land and building or buildings
situated at [...] EXTENSION 12 TOWNSHIP, Local Authority: CITY OF
JOHANNESBURG METROPOLITAN
MUNICIPALITY of which section the floor
area, according to the said sectional plan is 50 (fifty) square
meters in extent, and an
undivided share in the common property in
the scheme apportioned to the said section in accordance with the
participation quota
as endorsed on the said sectional plan, held
under Deed of Transfer ST40169/2006, be sold by the Sheriff of this
Court, on public
auction at a reserve price of
R192 000.00
(ONE HUNDRED AND NINETY-TWO THOUSAND RAND) in accordance with Rule 46
of the Uniform Rules of Court
2. The applicant is
ordered to advise the respondent in writing (by way of personal
service) of the scheduled date and time of the
sale of execution.
3. The sale in execution
may be set aside, in the event that the respondent settles what is
owed to the applicant in full, prior
to the date of the sale in
execution.
B. FORD
Acting Judge of the High
Court
Gauteng
Division of the High Court, Johannesburg
Delivered:  This
judgment was prepared and authored by the Judge whose name is
reflected on 28 August 2023 and is handed down
electronically by
circulation to the parties/their legal representatives by e mail
and by uploading it to the electronic file
of this matter on
CaseLines.  The date for hand-down is deemed to be 28 August
2023
Date of hearing:   3
May 2023
Date of judgment:
28 August 2023
Appearances:
For
the applicant:
Adv.
C. Erasmus
Instructed by:
Smit Sewgoolam
Incorporated
For the respondent:
No
appearance
[1]
Court
Order dated 20 August 2020 declaring property executable at p.003-1
- 003-  3;
[2]
Court
Order dated 11 August 2022 p. 001-30; The original reserved price of
R 375 000.00 was reduced to R240 000.00 by this Court
in an
application similar to this application, granted on 11 August 2022,
during oral argument.
[3]
Notice
of motion, p. 001 -15 - 001-17;
[4]
Sheriff's
return of service,  p. 002-1;
[5]
Court
Order of 20 August 2020 declaring the property executable at p.003-1
- 003-3;
[6]
Sheriff's
return of service and report marked "MA3" and "MA4"
to the Founding Affidavit CaseLines  p
001-28 - 001-29;
[7]
Court
Order of 11 August 2022 marked "MA5" to the Founding
Affidavit CaseLines p 001-30 - 001-32;
[8]
Sheriff's
return of service and report marked "MA7" and "MA8"
to the Founding Affidavit p 001-35 - 001-36;
[9]
Changing
Tides 17 (Proprietary) Limited N.O. v Kubheka; Changing Tides 17
(Proprietary) Limited N.O. v Mowasa; Changing Tides
17 (Proprietary)
Limited N.O. v Bucktwar;
and
Changing
Tides 17 (Proprietary) Limited N.O. v Horsley
[2022]
ZAGPJHC 59 (15 February 2022) para 28 [2022] ZAGPJHC 59 (15 February
2022). (hereinafter referred to as "
Changing
Tides 17 -matter
").
[10]
Changing
Tides 17 -matter
-
para 28. Own emphasis.
[11]
Changing
Tides 17 -matter
-para
31.
[12]
Rule
46A(9)(d).
[13]
2022 (6) SA 571
(WCC) (2 September 2022).
[14]
Changing
Tides 17 -matter
-
para 26.
[15]
Nedbank
Limited v Mabaso and Another
(2019/17887) [2022] ZAGPJHC 782;
2023 (2) SA 298
(GJ) (14 October
2022). In this matter counsel referred to the "
usual
formula
".
Para 20
[16]
Absa
Bank Limited v Mokebe and Related Cases
2018
(6) SA 492
(GJ) para 59.
[17]
2018(6)
SA 492(GJ) para 12
[18]
Case
No 150/2021
[2022] ZASCA 88
(13 June 2022)
[19]
‘
(c)
If the
reserve price is not achieved at a sale in execution, the court
must, on a reconsideration of the factors in paragraph
(b)
and
its powers under this rule, order how execution is to proceed.
[20]
Founding
Affidavit p02-28 - 02-29 para 12.9.1 to 12.9.10;
[21]
(WCC)
(unreported case no 18100/2012, 4-10-2012) unnumbered para 13 - `4