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[2010] ZAECPEHC 75
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First Rand Bank Ltd v Siebert and Another, First Rand Bank Ltd v Nel and Another (2635/2010, 2219/2010) [2010] ZAECPEHC 75 (17 December 2010)
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE – PORT
ELIZABETH)
Case
No.: 2635/2010
Date
heard: 7 December 2010
Date
delivered: 17 December 2010
In the matter between:
FIRSTRAND
BANK LIMITED
Plaintiff
and
CHRISTIAAN
SIEBERT
First
Defendant
MARIA
MARGARET SIEBERT
Second
Defendant
AND
Case
No.: 2219/2010
In the matter between:
FIRSTRAND
BANK LIMITED
Plaintiff
and
WAYNE
LEIGHTON NEL
First
Defendant
MAURITTA
NEL
Second
Defendant
JUDGMENT ON APPLICATION FOR
SUMMARY JUDGMENT
DAMBUZA, J
:
On 2 August 2010 Rule of Practice 14A
of the Joint Rules of Practice for the High Court in the Eastern
Cape Province came into
effect. This Rule of Practice provides
that:
“
a) In
all applications for default judgment where the creditor seeks an
order declaring specially hypothecated immovable property
executable,
the creditor shall aver in an affidavit filed simultaneously with the
application for default judgment:
The
amount of the arrears outstanding as at the date of the application
for default judgment.
Whether
the immovable property which it is sought to have declared
executable was acquired by means of or with the assistance
of a
State subsidy.
Whether,
to the knowledge of the creditor, the immovable property is
occupied or not.
Whether
the immovable property is utilised for residential purposes or
commercial purposes.
Whether
the debt which is sought to be enforced was incurred in order to
acquire the immovable property sought to be declared
executable or
not.
All
applications for default judgment where the creditor seeks an
order declaring specially hypothecated immovable property
executable, where the amount claimed falls within the jurisdiction
of the magistrate’s court, shall be referred by
the
Registrar for consideration by the Court in terms of Rule
31(5)(b)(vi).
A
warrant of execution which is presented to the Registrar for
issue, pursuant to an order made by the Registrar declaring
immovable property executable, shall contain a note advising the
debtor of the provisions of Rule 31(5)(d).”
This Rule of
Practice follows a similar Rule of Practice in the South Gauteng
High Court. Both Rules, it would appear, are founded
on a number of
Court judgments on the impact of section 26 of the Constitution of
South Africa Act, Act 108 of 1996 (“the
Constitution”)
regarding the procedure for obtaining default judgment and executing
in pursuance thereof, on immovable
property owned by a judgment
debtor where such immovable property has been hypothecated in favour
of the judgment creditor.
1
The judgments include:
Jaftha v
Schoeman and Others, Van Rooyen v Stoltz and Others
[2004] ZACC 25
;
2005 (2) SA
140
(CC);
Nedbank Ltd v Mortinson
[2005] ZAGPHC 85
;
2005 (6) SA 462
(W);
Standard Bank of South Africa Ltd v Saunderson and Others
2006
(2) SA 264
(SCA) and
ABSA Bank Ltd v Ntsane and Another
[2006] ZAGPHC 115
;
2007
(3) SA 554
(T).
In
Jaftha
(supra)
the
Constitutional Court declared unconstitutional and invalid section
66(1)(a) of the Magistrate’s Court Act 32 of 1944,
for failure
to provide judicial oversight over sales in execution against
immovable property of judgment debtors.
2
To remedy the defect, the Constitutional Court ordered that this
section be read as though the words
“a
Court, after consideration of all relevant circumstances may order
execution”
appeared in the section before the words
“against
the immovable property of the party”
;
the consequence being that a warrant of attachment of immovable
property on receipt of a
nulla
bona
return in respect of the movable property, could only be issued by a
Court
after
consideration of all relevant circumstances
.
The practical effect of the judgment is that the process of
obtaining a judgment and execution against a judgment debtor’s
movable property remains the same. However once a sheriff has
issued a
nulla
bona
return indicating that insufficient movables exist to discharge the
debt the creditor will need to approach a court to seek an
order
permitting execution against the debtor’s immovable property.
3
In
Mortinson
(supra)
the
Full Court of the WLD (as it then was), held, per Joffe J, that
where a debtor had specifically hypothecated his or her immovable
property
and
there was no abuse of court procedure
,
the limitation on the debtor’s right in terms of section 26 of
the Constitution was reasonable and justifiable as contemplated
in
section 36(1) of the Constitution (and that the Registrar was
therefore permitted to grant an order declaring specially
hypothecated property executable in terms of Rule 31(5) of the Rules
of Court).
4
In
Saunderson
(supra)
the
Supreme Court of Appeal held that, the essence of the judgment
Jaftha
was that a warrant of execution that would deprive a person of
“adequate”
housing
would compromise his or her rights under section 26(1) of the
Constitutions and would therefore need to be justified as
contemplated in s 36(1) of the Constitution. The Court
distinguished
Jaftha’s
case
in that in
Jaftha
,
what was in issue was not section 26(3) of the Constitution
5
but section 26(1) thereof
6
and, until the judgment debtor could show infringement of section
26(1) of the Constitution the bank was not called upon to justify
the grant of the orders declaring the defendants’ hypothecated
property specifically executable. The Court, in
Jaftha
,
so it was held, did not decide that Section 26(1) was compromised in
every case where execution was levied against residential
property.
Further, in
Jaftha
the
judgment creditor had not been a mortgagee, with rights over the
property that derived from an agreement with the owner.
The Court
held further that the effect of the registration of a mortgage bond,
is that the borrower, by his or her will, compromises
his or her
rights of ownership until the debt is repaid. His or her rights of
ownership and occupation depend on repayment,
and the bond curtails
his/her rights to property as the bondholder’s rights are
fused into the title itself.
In
Ntsane
(supra)
Bertelsmann
J considered an application for default judgment and for immovable
property used as the defendants’ home to
be declared
executable where the defendants were in arrears of R18,46 with their
repayments of a mortgage bond. The Learned
Judge held, amongst
others that the plaintiff’s right to enforce lawful agreements
had to be balanced against the defendant’s
constitutional
right to adequate housing, and that the proportionality of the harm
that each party would suffer should be weighed
up against each other
by taking the value of the bonded property, the past history of
payments made by the debtor; the amount
outstanding on the bond; any
assets the debtor might possess other than the immovable property,
particularly movable assets capable
of easy attachment and sale in
execution; any other debts of which the bondholder was aware, such
as arrear rates and municipal
taxes and whether the debtor was or
was not employed. The Court held that a Court should inquire from a
bondholder why a small
sum that is in arrears on a bond over a
moderate property could not be collected by execution against
movable assets. The principle
laid down in
Ntsane’s
case
has been summarized as follows:
7
“…
whenever
a bondholder calls up the bond, or seeks an order declaring the
bonded property specially executable, while the amount
in arrears at
date of application for (default) judgment is so small that it should
really be capable of settlement by execution
against movable assets,
taking all circumstances into account, the declaration of immovable
property as executable would constitute
an abuse of the process of
the court and an infringement of the debtor’s fundamental right
to adequate housing in terms of
s 26 of the Constitution of the
Republic of South Africa, 1996. Consequently, judgment to declare
the immovable property executable
should be refused unless and until
the plaintiff has persuaded the court by means of acceptable evidence
that no other reasonable
alternative exists to enforce its right.”
It was in this
context that I invited counsel in the matters under consideration to
make submissions on why the provisions of
Rule of Practice 14A
should not apply in applications for Summary Judgment. What was of
particular concern to me was the absence
in the preceding summons
and applications seeking to have the defendants’ hypothecated
properties declared executable,
of the amount of arrears. In both
applications the defendants had only filed appearances to defend.
No affidavit had been
filed setting out their defence. My concern
was that I would not be able, on what was before me, to determine
whether there
was (no) abuse of the court procedure and whether it
was proper, in the circumstances, to declare executable the
hypothecated
property.
In both applications before me
allegations are made in the summons, of a loan by the plaintiff to
the defendant and a related
Mortgage Bond registered over the
property sought to be declared executable. The plaintiff pleads in
the Summons that the,
“… amount (the loan amount and
the amount additional thereto in terms of the mortgage bond) is now
payable…
by reason of the failure of the defendants within
ten days from delivery to the Defendants of written notice from the
Plaintiff
to do so to pay an amount or amounts due by the Defendants
in terms of the Agreement …”
. A further allegation
in the summons is that
“the defendants are in default under
the credit agreement that is being reviewed in terms of section 86
of the Act (the
debt review) and the plaintiff has given notice …
to terminate the review…”.
Counsel appearing for the plaintiffs
in both matters submitted that applications for summary judgment are
distinguishable from
default judgment applications in that in
summary judgment applications the defendant, who is, in most cases
legally represented,
places his or her defence(s) on record.
Consequently, so it was argued, if the defendant sought to advance,
as a defence, abuse
of Court procedure or impropriety of execution
on the immovable property, they would have set out such a defence in
opposition
to the application for summary judgment. The provisions
of Court Rule 14A should therefore not be applicable in applications
for summary judgments, where infringement of section 26(1) of the
Constitution is not advanced by a defendant who opposes summary
judgment, so it was argued. The court should grant judgment,
including an order declaring the hypothecated property executable,
without further ado. In this regard reliance was placed on the
Mortinson
and the
Saunderson
decisions. It was
specifically submitted that it was incumbent upon a defendant, where
he/she considered his rights under section
26(1) of the Constitution
to have been infringed (or under threat) or where he/she thought
there was abuse of Court process to
expressly plead such
infringement.
Although I agree
with the distinction between applications for summary judgment and
default judgments, I do not think that is
the end of the matter. My
view is that whilst the principle emanating from the decisions
referred to above is that there is
no duty on a plaintiff who seeks
execution of a specifically hypothecated immovable property to prove
non-infringement of the
debtors rights under section 26 of the
Constitution, an equally relevant principle that emanates from the
decisions is that there
is a duty on the Courts, when considering
applications to declare hypothecated immovable property executable,
to guard against
abuse of the court process. Such duty does not, in
my view, cease with the filing of an appearance to defend or even
the filing
of an affidavit in opposition to an application for
summary judgment. This is particularly so where, as in the cases
before
me, the amount of arrears does not appear in the summons.
In this context a clause in the summons calling upon the defendants
to place before Court information supporting a claim of infringement
of section 26(1) of the Constitution, if any, is of no assistance
to
a court in the exercise of its discretion as to whether to declare
the properties in question executable. The duty of the
Court to
take
into account all the relevant circumstances
,
and
to
determine whether there is no abuse of Court procedure
,
can only be properly discharged where all relevant factors are
placed before the court. Where a plaintiff, relies on a
defendant’s
failure to make repayments, it seems to me that it
is incumbent upon the plaintiff to set out clearly facts or
circumstances
from which the court can make a determination as to
whether there is abuse of court process or not. Such a requirement
is not,
in my view, in conflict with the decisions in
Mortinson
and
Saunderson
because
the relevant determination can, for example, be made by simply
considering the amount of arrears and the period for which
the
arrears have been outstanding. In
Ntsane
(supra)
Bertelsmann
J held that:
8
“…
the
Court could and should inquire from the bondholder why a small sum
that is in arrears on a bond over a moderate property could
not be
collected by execution against movable assets. Even if the bond
provides for acceleration of the bond upon non-payment,
the Court is
entitled to refuse to grant execution against immovable property
where the result is so seemingly iniquitous or unfair
to the house
owner that the enforcement of the full rights to execution would
amount to an abuse of the system”
In
Ntsane
Bertelsmann J referred to the
plaintiff’s decision to enforce the bond amount of arrears as
“morally and ethically
questionable and strongly reminiscent of Shylock insisting upon
every single ounce of his pound of
flesh”
.
I agree.
In his written
heads of argument,
Mr
Scott
who
appeared for the plaintiff against Siebert referred, correctly in my
view, to principles emanating from
Jaftha
(supra)
9
as
follows:
“
5.3.1 It
is difficult to see how the collection of trifling debts can be
sufficiently compelling to allow existing access to adequate
housing
to be totally eradicated.
The
interests of creditors (which) must not be overlooked.
If
there are other reasonable ways in which a debt can be paid an
order permitting a sale in execution will ordinarily be
undesirable. However, if the requirements of the rules of court
have been complied with and if there is no other reasonable
way by
which the debt may be satisfied, an order authorising the sale in
execution may ordinarily be appropriate unless the
ordering of
that sale in the circumstances of the case would be grossly
disproportionate.
The
size of the debt will be a relevant factor for the court to
consider. It might be quite unjustifiable for a person to
lose
his or her right to adequate housing where the debt involved is
trifling in amount and significance to the judgment
creditor…”
These are the
guidelines that in these cases I am not able to properly apply
because of the absence of allegations as to the extent
of the
defendants’ default.
I agree with the
submission on behalf of the applicants that the number and content
of affidavit(s) in support of a summary judgment
is limited, and
that verification of the cause of action is generally done by simply
referring to the facts alleged in the summons;
it is generally
unnecessary to repeat all the particulars.
10
But on the principles set out above, where non-payment of
instalments is the cause of action, and the amount of arrears is
not
apparent from the summons no proper case has been made for an order
declaring executable an immovable property specifically
hypothecated.
It has been held
that the discretion conferred on the Court by Rule 32(5) should not
be exercised on the basis of mere conjecture
or speculation; it
should be exercised on the basis of the material before the Court.
11
Where such material is
lacking in material respects there can be no proper exercise of
discretion.
I am satisfied, however, that, based
on the allegation of default by the defendants, the plaintiff is
entitled to judgment in
its favour, for the amount due under the
loan agreement.
Consequently the following orders
shall issue:
18.1
Case No.: 2635/2010
(a) Payment of the amount of
R850,106.82;
(b) Payment of interest on the said
amount of R850,106.82, calculated and compounded monthly, at the rate
of 9.6% per annum with
effect from 31 July 2010 to the date of
payment, both dates inclusive;
(c) Costs of suit
to be taxed.
Case No.: 2219/2010
(a)
Payment
of the amount of R69,951.96;
(b) Payment of interest on the said
amount of R69,951.96, calculated and compounded monthly, at the rate
of 12.5% per annum with
effect from 20 June 2010 to the date of
payment, both dates inclusive;
(c) Costs of suit as between Attorney
and Client to be taxed.
_________________________
N. DAMBUZA
JUDGE OF THE HIGH COURT
Case No.: 2635/2010
Appearances
:
For the plaintiff: Adv P.W.A. Scott SC
instructed by Spilkins Attorneys of Port Elizabeth
For the defendants: No appearance –
unopposed
Case No.: 2219/2010
Appearances
:
For the plaintiff: Adv. N. Mullins
instructed by Spilkins Attorneys of Port Elizabeth
For the defendants: No appearance –
unopposed
1
Execution Against Immovable Property: Negotiating the Tightrope of
s 26; Christo Smith and SJ Van Niekerk).
2
The section provides that:
“
Whenever
a court gives judgment for the payment of money or makes an order
for the payment of money in instalments, such judgment,
in case of
failure to pay such money forthwith, or such order in case of
failure to pay any instalment at the time and in the
manner ordered
by the court, shall be enforceable by execution against the movable
property and, if there is not found sufficient
movable property to
satisfy the judgment or order, or the court, on good cause shown, so
orders, then against the immovable property
of the party against
whom such judgment has been given or such order has been made.”
3
See Jones & Buckle: The Civil Practice of the Magistrate’s
Courts in South Africa, Vol 1, 9
th
Edition.
4
It is in this context and to assist the Registrar in determining
whether there was abuse of procedure and whether a particular
matter
should be referred to open Court for consideration that the practice
directive was issued in the South Gauteng High Court).
5
Section 26(3) of the Constitution provides that:
“
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.”
6
Section 26(1) of the Constitution provides that:
“Everyone
has the right to have access to adequate housing.”
7
Jones & Buckle
(supra).
8
A
t paragraph 79.
9
At pages 5 and 6.
10
Rule 32(4) of the Uniform Rules of Court provides that no evidence
may be adduced by the plaintiff other than the affidavit referred
to
in sub-rule (2). Sub-rule 2 limits the content of the
plaintiff’s/creditor’s affidavit to facts verifying the
cause of action and the amount claimed if any and stating that in
his (her) opinion there is no
bona fide
defence to the action
and that the notice of intention to defend has been delivere3d
solely for the purpose of delay.
11
Vitamax (Pty) Ltd v Executive Catering Equipment CC and Others
1993 (2) SA 556
(W).