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[2021] ZAECPEHC 63
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Absa Bank Limited v Botha and Another (2504/2020) [2021] ZAECPEHC 63 (30 November 2021)
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
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SAFLII
Policy
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE LOCAL
DIVISION, PORT ELIZABETH)
CASE NO.: 2504/2020
Not reportable
In the matter between:
ABSA BANK
LIMITED Plaintiff
/ Applicant
and
REGINOLD JAMES
BOTHA First
Defendant / Respondent
DANIELLE
BOTHA Second
Defendant / Respondent
JUDGMENT
Goosen J:
[1] The
applicant seeks a judgment by default in terms of Rule 31(5)(b) of
the Uniform Rules of Court. It also
seeks an order in terms of Rule
46, alternatively Rule 46A, declaring the immovable property
hypothecated as security for its loan
to the defendants, executable.
At the hearing of the application the first respondent appeared in
person to oppose the application.
Mr Botha had filed an affidavit
setting out the basis of opposition and heads of argument to similar
effect. After hearing argument,
I reserved judgment so as to set out,
briefly, my reasons for the order that appears below.
[2] The
applicant issued summons against the defendants on 20 October 2020.
It appears that the combined summons
was amended to reflect a new
address for service upon the second respondent on 15 December 2020.
Service of the summons and particulars
of claim was effected upon the
first respondent personally on 28 October 2020. Service was effected
on the second respondent personally
on 21 January 2021.
[3] The
applicant and the respondents concluded a written mortgage loan
agreement during 2008 in terms of which
the applicant afforded to the
respondents a mortgage loan account facility. The cash amount loaned
and advanced was R600 000 and
the total of the principal debt
amounted to R607 944.04. The loan was to be repaid over a period 240
months, at an agreed monthly
instalment, subject to variation upon
either escalation or reduction of the bank’s prime lending
rate. Pursuant to the loan
agreement the respondents caused a
mortgage bond to be registered over two immovable properties, in
favour of the applicant for
the capital amount of R1 000 000 together
with an additional amount of R200 000. The two properties were Erf
[…] Swartkops,
Nelson Mandela Bay and Erf […]
Swartkops, Nelson Mandela Bay. In terms of the bond it served as
continuing covering security
for any amounts that may be due to the
applicant.
[4] In
its combined summons the applicant alleged that the defendants were
in breach of the terms of the loan agreement,
having failed to honour
the obligation to make payment of the monthly instalment due to the
applicant. It alleged that, as at 6
August 2020, the arrear amount
due to the applicant was R45 587.85. The balance of the principal
debt outstanding as at 27 August
2020 was R440 379.78. The applicant
accordingly claimed payment of said amount together with interest on
that amount from 27 August
2020 to date of payment.
[5] Prior
to instituting action the applicant caused a notice to be delivered
to the respondents in terms of s
129 (3) of the National Credit Act
(NCA)
[1]
.
The notice was dispatched by registered mail to the
domicilium
address, being the street address of the hypothecated erven (14
Station Road, Swartkops); to the first respondent’s residential
address ([…], Westering, Port Elizabeth) and was served on
both respondents personally
[2]
.
[6] Neither
of the respondents filed a notice to defend the action instituted
against them. Nor did the respondents
elect to proceed in accordance
with any of the available remedies provided by the National Credit
Act. It is upon this basis that
the applicant duly sought judgment by
default.
[7] It
must be mentioned that the particulars of claim contain all of the
usual averments regarding the factors
relevant to determining whether
or not to declare the mortgaged properties executable. I shall return
briefly to these hereunder.
[8] As
indicated the first respondent appeared in opposition to the
application. The second respondent took no
part in the proceedings.
The first respondent’s affidavit, which was filed together with
heads of argument does not take
issue with any of the procedural or
substantive prerequisites for default judgment. There is thus no
challenge relating to the
applicant’s compliance with the
provisions of the National Credit Act. Importantly, the first
respondent also did not seek
leave to cure his default of appearance
to defend and to enter upon a defence of the action.
[9] The
first respondent’s affidavit raises three issues. During oral
argument these were repeated in submissions
made by the first
respondent. The first concerns a complaint about the applicant’s
failure to deliver statements of account
to him and, so I understood,
a concomitant lack of knowledge of the status of the loan account.
According to the first respondent
the problem arose when the
applicant dispatched monthly account statements to his ex-wife’s
address (i.e. that of the second
respondent). Despite repeated
attempts to rectify the address this it was not done.
[10] The
second issue relates to a fire that occurred at one of the
properties. It should be noted here that the
first respondent
explained that neither of the properties were his (or second
respondent’s) primary residence. They are properties
which
were
acquired as an investment so that they may be let for rental income.
The first respondent resides at […], Westering,
an unrelated
property which, he stated in argument, he owns.
[11] His
affidavit explains that the fire occurred at the one Swartkops
property in 2015. It spread to the other,
adjacent property. They
were damaged extensively. The properties were insured. Although no
details were provided the first respondent
asserted that it was
insured by the applicant. At the time he lodged an insurance claim.
According to the first respondent the
property was assessed as being
‘underinsured’. He was paid out an amount which was R120
000 less than the costs of
repairs. As a result, he has had to
undertake the repairs himself. The affidavit does not explain whether
the repairs were completed
and what the present state of the property
is.
[12] As
a result of his troubles with the insurance claim, the first
respondent made repeated efforts to ascertain
why the property was
underinsured by the bank. He also sought explanations from the bank
on why the insurance premiums escalated
and why, notwithstanding
regular bond payments, the amount due by him did not substantially
reduce. He stated that the bank officials
constantly gave him ‘the
run around’. It was this which caused him to stop paying his
bond instalments. He has continued
to withhold payment because he
remains unsatisfied with his treatment by the applicant’s
officials. The application for default
judgment indicates that the
respondents are almost 18 months in arears.
[13] The
third issue raised in the affidavit is related to the insurance
payment issue. He contends that because
of the underpayment of the
insurance claim he has been unable to repair the damaged property
and, was therefore unable to earn
an income from that property. Based
on this he asserts that he has a claim against the applicant
for
such loss of income. It should be noted here that the first
respondent stated during argument that the second property is
occupied
by a tenant and that he continues to earn a rental income
from that property.
[14] The
‘defences’ raised by the first respondent do not,
properly construed, amount to defences which
would preclude a court
from granting judgment against him. The ‘dispute’
regarding the insurance claim dates back to
2015. The ‘dispute’
is framed in very broad terms. No detail is provided as to the
identity of the insurer and its
relationship, if any, to the
applicant. The assertion that the applicant was responsible for the
insurance of the property is in
direct conflict with the terms of the
Mortgage Loan Agreement. In this regard two clauses are relevant.
[15] The
first is, Clause 3.1.10 of the Agreement which provides that the
granting of the loan is subject to:
“
The
property to be mortgaged being insured for not less than the total
amount reflected below being the Bank’s (Lender’s)
estimated replacement value of the property.
Insured amount: R1, 246
2300.00”
The second is clause 12
which provides that:
“
12.1
The Borrower shall maintain during the entire duration of this
agreement-
12.1.1 life insurance in
an amount equal to the total of the Borrower’s outstanding
obligation to the Bank in terms of this
agreement (if applicable
having regard to clause 12.5)
12.1.2 insurance cover in
respect of the property for all risks against which any such property
will normally be insured in an amount
equal to the full asset value
of the property; and
12.1.3 such insurance as
is contemplated in clause 15.1.9 (if applicable), by an insurance
company and in terms of a policy acceptable
to the Bank.
12.1 The
Borrower confirms having been informed of his right to waive a policy
of insurance proposed by the Bank
and substitute a policy of his own
choice.
The reference to clause
12.5 in the quoted clause 12.1.1 above draws to the attention of the
borrower that life insurance is not
compulsory but that it has been
explained that it is to the borrower benefit to maintain such policy.
The first respondent sought
to suggest that the applicant was under
some obligation to provide life insurance cover but did not. There
was a suggestion that
this would have provided him with income
protection in the event of disability. There is plainly no merit in
such contention. Clause
15.1.9 to which reference is made is not
presently relevant since it relates to a Building Loan which does not
apply.
[16] The
first point to highlight from these provisions is that it is the
borrower’s (i.e. the first respondent’s)
obligation to
maintain insurance and not that of the applicant. The second is that
to the extent that there is some dispute regarding
the entitlement to
payment of an insurance benefit (e.g. a payment upon a claim) such
dispute plainly does not bear upon the underlying
obligation to
effect payment of the loan agreement. Thus to the extent that there
exists a cognisable complaint regarding the payment
of the insurance
claim in respect of the fire, it does not absolve the first defendant
from the obligation to effect re-payment
of the loan.
[17] There
is, however, a further difficulty insofar as the first respondent
contends that he is dissatisfied with
the manner in which his account
has been managed. The
notice issued to the
first respondent in terms of s 129 of the NCA specifically drew to
the attention of the first respondent his
right to refer any dispute
relating to the loan to an appropriate dispute resolution body or
Ombud. He did not act upon that notice.
It also alerted him to the
opportunity to enter into a debt restructuring arrangement or to
reach agreement regarding a re-payment
plan which could take into
account his financial circumstances. This too was not acted upon.
[18] The
consequence is that there is no discernible basis upon which I can
refuse to enter judgment in favour
of the applicant. That leaves the
question of execution against the properties. As indicated earlier in
the judgment, the applicant
sets out averments usually made in
relation to factors to be considered regarding execution against the
properties. These include
averments concerning the basis upon which
the respondents acquired the property; the prospect of recovery of
the debt by means
other than execution and the purpose of the
security held by the applicant.
[19] It
is common cause that the two hypothecated properties, although
residential in character, are not the primary
residence of either of
the respondents. Indeed, as I understood the first respondent’s
concession during argument: the properties
were acquired as an
investment in order to provide a source of rental income. Presently
one of the properties is tenanted and rental
income is being received
by the first respondent.
[20] Despite
the first respondent’s investment in the properties being an
essentially commercial investment,
the first respondent asserted in
his heads of argument that execution against the properties would
infringe his right to housing
as enshrined in the Constitution. The
assertion is devoid of any merit. The sale in execution of the
hypothecated properties will
in no way infringe upon the first
respondent’s occupation of his residential home. Nor will it
have any bearing upon the
rights of the
tenants
occupying the properties. They, in any event, are vested with rights
which may be enforceable against the new owners of
the property.
[21] As
I have indicated earlier in the judgment, the first respondent has no
defence against the applicant’s
recovery of the debt due to it.
Once judgment is entered in favour of the applicant, its rights to
execute based on its security
is subject only to the supervision of
the court as provided by Rules 46 and 46A. The primary purpose of
such supervision is to
protect, as far as may be possible, persons
from homelessness and to ensure fairness and equity in the execution
process.
[22] In
this instance the first respondent has not indicated the existence of
a means other than execution by which
the debt may be settled. I
accept, upon the undisputed facts alleged by the applicant, that the
only means available to the applicant
to secure payment of the amount
due to it is to order execution against the properties. I am
satisfied that execution against the
properties would not be
disproportionate having regard to the extent of the indebtedness and
the lack of alternative means to settle
the debt. The fact that the
first respondent has, by reason of a dispute regarding an insurance
payment, deliberately withheld
payment of the monthly instalments due
in terms of the loan agreement and the fact that he has continued to
earn rental income
from one of the properties weigh very heavily in
favour of ordering execution. It is to be noted that the first
respondent did
not raise an inability to pay as the basis for his
breach of the mortgage loan agreement. His heads of argument suggest
that he
“cannot afford” to make payment since he has been
unemployed for 20 years and his only income is in the form of a
disability
payment. It is perhaps only necessary to point out that he
acquired the properties within the last 20 years and earns an income
from them.
[23] Rule
46A(9) requires the court to consider setting a reserve price. Some
of the
factors to be considered are those
set out in the sub-rule. In this instance there are two properties
which serve as security for
the payment of amounts due to the
applicant. The capital sum claimed is an amount of R440 379.78. As at
3 August 2021 the arear
amount due in terms of the loan agreement had
grown to an amount of R120 765.52 and the outstanding balance to R475
551.13. On
the same date the amounts due to the Nelson Mandela
Bay
municipality amounted to R948.36 in respect of Erf […]
Swartkops and R12 308.55 in respect of Erf […] Swartkops.
[24] According
to the valuation reports submitted in support of the applications,
Erf […] has a municipal
valuation of R440 000 and Erf […]
a value of R420 000. The market valuation (the expected value) of
each erf is an amount
of R560 000. It is not indicated what value is
likely to be realized upon a forced sale, although the expected low
market value
is reflected to be the municipal value in each case.
[25] It
appears from these facts that there is, relative to the debt secured
by the properties, equity in a not
insubstantial amount which is
likely to be realized upon the sale of the properties. The
comparative sales data indicates a value
of between R500 000 and R700
000 for comparable properties. However, the number of sales has
declined between 2018 and 2020 when
the valuation was done. Thus,
while there is equity to be realized the low number of sales suggest
it may not be readily realizable
at a forced sale. I nevertheless
consider that setting a reserve price would be fair and appropriate.
There is no discernable difference
between the properties as far as
can be ascertained. Setting a reserve price at a value too high would
undoubtedly limit the prospect
of a sale with concomitant ongoing
prejudice to the respondents as debtors. Based on the data disclosed
in the valuation reports
and taking into account the debt to equity
ratio it seems to me that a reserve price of 50% of the market value
would ensure realization
of sufficient funds to meet the
respondents’
debt obligations. In the event that the reserve price is not attained
the applicant is at large to rely upon
Rule46(9)(c).
[26] In
the result I make the following order:
1.
The respondents are ordered to pay to the
applicant:
1.1.
The
sum of R440 379.78;
1.2.
Interest
on the amount of R440 379.78 at the rate of 5.4% per annum from 27
August 2020 to date of payment, both dates inclusive;
2.
An order declaring the following property
specially executable:
ERF […] SWARTKOPS,
NELSON MANDELA BAY METROPOLITAN MUNICIPALITY, DIVISION OF PORT
ELIZABETH, EASTERN CAPE PROVINCE in extent
981 (NINE HUNDRED AND
EIGHTY-ONE) square metres.
ERF […] SWARTKOPS,
NELSON MANDELA BAY METROPOLITAN MUNICIPALITY, DIVISION OF PORT
ELIZABETH, EASTERN CAPE PROVINCE in extent
465 (FOUR HUNDRED AND
SIXTY-FIVE) square metres.
3.
An order declaring that the immovable
properties of the first and second respondents may be sold in
execution subject to the reserve
price of R280 000 in respect of each
property.
4.
Costs of suit as between attorney and
client.
G.G. GOOSEN
JUDGE OF THE HIGH
COURT
APPEARANCES
Obo the
Applicant: Adv
N. Barnard
Instructed
by: McWilliams
& Elliott Inc.
152
Cape Road, Mill Park, Port Elizabeth
Obo the
Respondents: First
Respondent in Person
Heard: 16
November 2021
Delivered: 30
November 2021
[1]
Act
No. 34 of 2005.
[2]
It
appears from the papers that the first and second respondents were
divorced in 2013. The mortgaged properties were (and remain)
registered in the name of both respondents.