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[2023] ZAECQBHC 10
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Standard Bank of South Africa Limited v Le John and Another (1540/2020) [2023] ZAECQBHC 10 (28 February 2023)
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IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE DIVISION, GQEBERHA)
Case No. 1540/2020
In the matter between:-
THE
STANDARD BANK OF SOUTH AFRICA LIMITED
Applicant
(Registration Number:
1[...])
and
VERGIL
BENEDICT LE
JOHN
First Respondent
GAYROONEESA
LE JOHN
Second Respondent
JUDGMENT
BANDS
AJ:
[1]
The right
to have adequate access to housing, enshrined in section 26 of the
Constitution of South Africa, is amongst the justiciable
socio-economic rights included in the Bill of Rights. The
purpose of Uniform Rule 46A, which was inserted into the Uniform
Rules of Court, and which came into operation on 22 December 2017,
[1]
is to provide for a uniform procedural approach by our courts
regarding the nature of the enquiry and the factors to be considered
when exercising judicial oversight over orders of execution against
residential immovable property.
[2]
[2]
This application concerns the reconsideration of a reserve price,
fixed
in an order of this court, granted by default, on 27 October
2020, pursuant to an application seeking,
inter alia
, leave to
execute against the respondents’ property. In terms of
the order, judgment was granted against the first
and second
respondents, as defendants, jointly and severally, in the sum of
R604,814.16, together with interest thereon at 10.75%
per annum from
5 March 2020. The mortgaged property, which forms the subject
matter of these proceedings, was declared specially
executable to
satisfy the judgment debt. The court, exercising its discretion
in accordance with Uniform Rule 46A(9)(b) set
a reserve price in the
amount of R671,521.03.
[3]
A writ of attachment in respect of the mortgaged property was issued
on
10 December 2020, whereafter the sale in execution took place
on 8 April 2022. The reasons for the delay are not apparent
from the papers before court save that the Applicant had made various
attempts to enter into an EasySell agreement with the respondents.
Whilst the first respondent was amenable thereto, the second
respondent, who now resides in the United Kingdom, was not.
[4]
In view of the second respondent’s unwillingness to co-sign the
EasySell agreement, the sale in execution proceeded. According
to the sheriff’s report, filed in accordance with Rule
46A(9)(d), four bidders attended the sale in execution at the
sheriff’s office in Gqeberha. Bids were called for at
the
reserve price of R671,521.03, however no bids were received.
The mortgaged property was thereafter put up for auction
without a
reserve price, subject to an Order of this court that the property
may be sold to the highest bidder. The highest
bid received was
in the amount of R522,000.00.
[5]
In terms of clause 2.1 of the conditions of sale:
“
If
the sale is subject to a reserve price then should the highest bid be
less than the reserve price, the highest bid will be provisionally
accepted subject to the purchaser complying with clauses 3.1, 4.1 and
4.8; and confirmation by the court. Should the sale
not be
confirmed by the court all amounts paid by the highest bidder will be
refunded.
”
[6]
Clause 3.1 provides that:
“
The Purchaser
shall, as soon as possible after the sale and immediately on being
requested by the Sheriff, sign these conditions.”
[7]
In terms of clause 4.1:
“
The Purchaser
shall on completion of the sale, pay a deposit of 10% (TEN PERCENT)
of the purchase price immediately on demand by
the Sheriff and on the
same day of the sale.
[8]
Clause 4.8 provides for the payment of the Sheriff’s commission
in due course.
[9]
The conditions of sale were duly signed by the purchaser on 8 April
2022
in accordance with clause 3.1. It is unclear whether there
has been compliance with clause 4.1 and whether the Sheriff has
called for the payment of commission as provided for in clause 4.8.
[10]
The provisions of the Rules relevant to
proceedings of this nature are as follows. In terms of Rule
46A(9)(b):
“
In
deciding whether to set a reserve price and the amount at which the
reserve is to be set, the court shall take into account-
(i)
the market value of the immovable property;
(ii)
the amounts owing as rates or levies;
(iii)
the amounts owing on registered mortgage bonds;
(iv)
any equity which may be realised between the reserve
price and the market value of the property;
(v)
reduction of the judgment debtor’s indebtedness on
the judgment debt and as contemplated
in subrule (5)(a) to (e),
whether or not equity may be found in the immovable property, as
referred to in subparagraph (iv);
(vi)
whether the immovable property is occupied, the persons
occupying the property and the circumstances
of such occupation;
(vii)
the likelihood of the reserve price not being realised
and the likelihood of the immovable property
not being sold;
(viii)
any prejudice which any party may suffer if the reserve
price is not achieved; and
(ix)
any other factor which in the opinion of the court is
necessary for the protection of the interests
of the execution
creditor and the judgment debtor.
”
[11]
In circumstances where a reserve price is not
achieved at a sale in execution, Rule 46A(9)(c) provides that:
“
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.”
[12]
Rule 46A(9)(d), which makes provision for the
submission of a report to the court, prescribes as follows:
“
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).
”
[13]
In terms of Rule 46A(9)(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]
The
apparent shortcomings in the above quoted Rules and their failure to
provide for a procedural framework in terms of which the
mandatory
reconsideration in accordance with
Rule
46A(9)(c) is to happen, was dealt with by Binns-Ward J in
Standard
Bank of South Africa Ltd v Tchibamba and Another
[3]
with reference to the comments of van Loggerenburg,
Erasmus,
Superior Court Practice
Vol
2 (Juta)
[4]
and
Changing
Tides 17 (Proprietary) Limited N.O. v Kubheka; Changing Tides
(Proprietary) Limited N.O. v Mowasa; Changing Tides (Proprietary)
Limited N.O. v Horsley.
[5]
I am in agreement therewith. For present purposes, it is
perhaps apposite to give a recount of the proper approach
to
applications of this nature as articulated by Binns-Ward J at
paragraph [43] of
Tchibamba
(supra).
“…
In my
opinion,
the prescribed reconsideration
must take place in open court, rather than only ‘ideally’
so. For the reasons I
have sought to articulate, it is an
extension of the proceedings commenced in terms of rule 46A(3).
Such proceedings are
ordinary motion proceedings, and thus subject to
the general requirements of
s 32
of the
Superior Courts Act 10 of
2013
. I cannot in any event imagine how a court could properly
undertake a consideration of the factors set out in
rule 46A(9)(b)
other than in open court with regard to the submissions thereanent by
the interested parties.
”
[15]
In terms of
section 32
of the Superior Court’s Act:
“
S
ave
as is otherwise provided for in this Act or any other law, or
proceedings in any Superior Court must, except insofar as any
such
court may in special cases otherwise direct, be carried on in open
court.
”
[16]
I return to the facts of the present matter.
[17]
The report prescribed by
Rule 46A(9)(d)
was
duly compiled and
lodged with the registrar. Respective
copies were provided to the respondents and the purchaser. The
Sherriff, in accordance
with Rule
46A(9)(d)(iv)
stated as follows:
“
It
is very rare to sell the immovable property on our auction for more
than the amount that we received. I believe that the
price was
pushed up by the Reserve price that was on the conditions of sale.
The
sheriff of the above Honourable Court accordingly requests, in terms
of
Rule 46A(9)(c)
read with
Rule 46A(9)(e)
that a Judge in Chambers
reconsider the factors presented to the Court in the Buyer’s
Application in terms of
Rule 46a
(sic) and the above Honourable
Court’s Order and that the above Honourable Court may confirm
whether the sale of the immovable
property in the above matter sold
on the 08
th
April 2022 for a purchase price of R522 000.00 may be confirmed
in terms of
Rule 46a(9)(e)
(sic).
”
[18]
I have dealt with the appropriate mode of hearing of applications of
this nature.
The present proceedings were properly dealt with
in open court.
[19]
Of significance is that whilst the mortgaged property constitutes
residential immovable
property of the respondents, it is not their
primary residence. From a perusal of the papers, which served
before the court
on 27 October 2020, this fact appears to have been
unknown to the applicant at the relevant time, same having only come
to the
fore in the present proceedings.
[20]
As
previously stated, the second respondent resides in the United
Kingdom. The second respondent does not oppose these
proceedings.
According to the first respondent, he vacated the
mortgaged property in 2019 when his father suffered a severe stroke,
rendering
him wheelchair bound. The first respondent and his
son, who is currently a grade 7 learner, moved in with the first
respondent’s
parents to assist in caring for his father.
The first respondent is gainfully employed. The mortgaged
property was
retained by the respondents purely for investment
purposes and is currently tenanted.
[6]
Prior to April 2022, the mortgaged property yielded a monthly rental
of approximately R9,000.00 per month. That
the tenants
have not honoured their rental agreement since the sale in execution,
during April 2022, is of no consequence.
[21]
It was argued on behalf of the first respondent that I ought to read
into the first respondent’s
papers that the mortgaged property
is for all intents and purposes his primary residence, and that the
only reason why he vacated
the property was due to his inability to
cover the monthly instalments due to the applicant. Not only is
this contention
not born out from the facts before court, but it is
contrary to the position expressly adopted by the first respondent in
his answering
affidavit.
[22]
The mortgaged property, according to a sworn valuation obtained by
the applicant, dated
31 August 2022, has a market value of
approximately R850,000.00 and a forced sale value of approximately
R700,000.00. The
sworn valuer was denied access into the
mortgaged property by the tenants for the purposes of inspection.
Accordingly, only
an external inspection was conducted. It was
noted that the timber structure to the rear of the main building has
disintegrated,
lowering the estimated market value from R870,000.00
to R850,000.00. Without dealing with the evidential value of
the market
valuation placed before the court by the first respondent,
such valuation is in the amount of R823,400.00 and is accordingly, in
any event, not too dissimilar to that obtained by the applicant.
The mortgaged property, as of 14 February 2022, is valued
at
R780,000.00 on the municipal valuation roll. The first
respondent is silent on what he contends to be a fair forced sale
value in respect of the mortgaged property.
[23]
The purpose of a sale in execution is to satisfy the judgment debt.
It does not safeguard
a judgment debtor’s interest in obtaining
a market-related price, which interest is guarded to a greater extent
when following
alternative avenues, such as entering into the
EasySell program, which the respondents failed to do. The
comments of Binns-Ward
J at paragraph [48] of
Tchibamba (supra)
,
in respect of forced sale values, bears repetition:
“
The forced sale
value of a property is very much a matter of opinion. What a property
will fetch in a forced sale is determined
by what happens when the
property is auctioned. In the current matter, it is clear that there
was bidding interest and that, even
in a competitive context, the
highest bid obtained nine months ago was well below what the pundits’
estimates suggested would
likely be forthcoming. The purpose of the
sale in execution is to achieve the satisfaction of the judgment. The
procedure does
not safeguard the judgment debtor’s interest in
obtaining a market-related price; on the contrary, involving a forced
sale,
it inherently does quite the opposite. The purpose
of
rule
46A
,
on the other hand, is to ensure that execution against a judgment
debtor’s primary residence does not occur in a manner
inconsistent with s 26 of the Constitution, which is an entirely
different matter. To the extent that para 10 of the judgment
in Changing Tides might be read to conflate the two
considerations, I must respectfully differ. Clearly, however, the
disposal of anyone’s home on an exploitative or starkly unfair
basis would unjustifiably impinge on that person’s right
to
access to housing, and it is that connection that the fixing of a
reserve price in terms of rule 46A comes into play.”
[24]
Pursuant to a competitive bidding process, the highest bid received
was in the amount of
R522,000.00. The Sheriff, having
acknowledged this fact, is of the view that the amount received was
pushed up by the reserve
price on the property; and further commented
that it would be rare to sell the property on auction for more than
the amount reached.
In the event that the current reserve price
of R671,521.03 were not too dissimilar to the forced sale value, one
could reasonably
have expected the property to sell for that price.
The fact that the highest bid is some R150,000.00 lower than the
reserve
price, is indicative of the fact that the forced sale value
of R700,000.00, as contended for by the applicant’s valuer, is
incorrect.
[25]
The amounts owing to the local authority for rates and other duties
in respect of the mortgaged
property is in the amount of R44,344.07
as of 22 September 2022. This amount has increased in excess of
R35,000.00 from R8,478.91
since 14 August 2020.
[26]
On consideration of the aforesaid factors, I am satisfied that it
would be proper that
the mortgaged property be sold to the person who
made the highest bid. The effect of the Order which I intend
making is to
confirm the agreement of sale, which was subject to this
court’s approval by virtue of clause 2.1 of the conditions of
sale.
I am satisfied that the costs should follow the result
insofar as the first respondent is concerned.
[27]
In the result, I make the following order:
1.
The property described as:
ERF 1[…] M[...]
ROAD IN THE NELSON MANDELA BAY METROPOLITAN MUNICIPALITY, DIVISION OF
PORT ELIZABETH, PROVINCE OF THE EASTERN
CAPE, IN EXTENT 4[…]
(F[…] H[…] AND N[…] E[…]) SQUARE METERS,
HELD BY DEED OF TRANSFER NUMBER
T6[…] SUBJECT TO THE
CONDITIONS CONTAINED THEREIN, be sold to the person who made the
highest bid at the auction held at
the offices of the Sheriff for
Gqeberha West, situated at 6[…] P[…] Street, North End,
Gqeberha on 8 April 2022 at
10h00.
2.
The first respondent is ordered to pay the applicant’s
costs.
I
BANDS
ACTING
JUDGE OF THE HIGH COURT
Appearances:
For
the applicant:
Ms
Desi
Instructed
by:
Joubert
Galpin Searle
173
Cape Road, Mill Park, Gqeberha
For
the first and second respondents:
Mr
Moorhouse
Instructed
by:
Melissa
Marais Hoffman Attorneys
c/o
Market & Graham Streets, Africa House, North End, Gqeberha
Coram:
Bands
AJ
Date
heard:
1
December 2022
Delivered:
28
February 2023
[1]
GNR 1272, dated 17 November 2017.
Published
in GG No. 41257 of 17 November 2017.
[2]
Petrus
Johannes Bestbier and Others v Nedbank Limited
(150/2021)
[2022] ZASCA 88
(13 June 2022).
[3]
2022 (6) SA 571 (WCC).
[4]
RS 18,2022, D1-632W.
[5]
2022 (5) SA 168 (GJ).
[6]
Albeit that there were periods during which the mortgaged property
was not tenanted.