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[2019] ZAGPPHC 336
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Nedbank v Trustees for the time being of The Mthunzi Mdwaba Family Trust and Others (7901/2017) [2019] ZAGPPHC 336 (9 July 2019)
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IN THE HIGH COURT OF SOUTH
AFRICA
GAUTENG DIVISION, PRETORIA
CASE NO: 7901/2017
9/7/2019
In
the matter between:
NEDBANK
APPLICANT
and
THE
TRUSTTES FOR THE TIME BEING OF
THE
MTHUNZI MDWABA FAMILY TRUST
FIRST RESPONDENT
PERRY-MASON
MTHUNZI MDWABA N.O. (ID: [….])
SECOND
RESPONDENT
PERRY-MASON
MTHUNZI MDWABA N.O.
THIRD RESPONDENT
IN
HIS CAPACITY AS TRUSTEE OF THE
MTHUNZI
MWABA FAMILY TRUST
JOY
MGI MDWABA N.O. IN HER CAPACITY
AS
TRUSTEE OF THE MTHUNZI MDWABA
FAMILY
TRUST (TRUST NUMBER:
IT009471/2005)
FOUTH RESPONDENT
ZUKO
MPUMELELO MDWABA IN HIS
CAPACITY
AS TRUSTEE OF THE
MTHUNZI
FAMILY
TRUST
FIFTH RESPONDENT
JUDGMENT
Ramapuputla AJ
INTRODUCTION
[1]
This is an application for money
judgment and a declaratory order arising from the loan agreement
between the applicant and the
respondents.
BACKGROUND
[2]
On 28 November 2005 the applicant and
first respondent concluded a loan agreement, in terms of which the
applicant lent and advanced
monies to the first respondent. On 25
March 2006 a mortgage bond was registered, at the Deeds Office in
Pretoria, as security for
the loan agreement over Erf 593 Kosmos
Uitbruiding 5 Township, Registration Division J.Q, North-West
Province, measuring 500 (five
hundred) square meters, held by deed of
transfer number T032102/06 and subject to conditions contained
therein, especially, as
to the reservation of mineral rights.
[3]
Amongst the most important terms of the
agreement is that the loan agreement is for an amount of R2 500
000,00. Parties agreed that
the loan would be payable by way of
monthly instalments of R21 934,00 over a period of 240 months.
[4]
On 14 December 2005 the second
respondent signed a suretyship agreement, in terms of which he bound
himself in
solidum
and
as a co-principal debtor for the due fulfilment of the first
respondent 's obligations in terms of the loan.
[5]
The first respondent failed to effect
payment of the instalments due in terms of the loan agreement. As at
01 September 2016 the
first respondent's indebtedness to the
applicant was R2 206 712, 24. The arrears on the first respondent 's
account was R55 466,
16 thereby making the account 1.99 months in
arrears. On or about 10 November 2016 the applicant sent a notice in
terms of
Section 129(1)(a)
of the
National Credit Act 34 of 2005
to
the first respondent by registered post.
RELIEF
SOUGHT
[6]
"[2] The applicant seeks orders in
the following terms: 2.1. Payment of the R 2 206 712.24; 2.2.
Interest on the aforesaid
amount at a rate of 8.65% per annum
calculated and capitalized monthly in arrears from 01 September 2016
to date of final payment;
2.3. An order declaring the first
respondents' immovable property to be especially executable for the
aforesaid sum and costs;
2.4. An order authorizing the Registrar of
the above Honourable Court to issue a warrant of execution in respect
of the property
referred above; 2.5. An order for costs on attorney
and client scale; 2.6. Further and/or alternate relief."
RESPONDENT'S
OPPOSITION
The
respondents ' opposition was mainly based on a point
in limine.
I
find it futile to pronounce on the point
in limine
as on 17
April 2018, my Sister Madam Justice Teffo ordered the applicant to
serve this application on all the trustees.
The
rest of the answering affidavit contains bare denials.
APPLICANT'S
SUBMISSION
[7]
The applicant submits that in order for
the court to declare a mortgaged property executable, it is required
to take the following
relevant facts into consideration:
7.1.
that the mortgaged property sought to be
executed is to the knowledge of the applicant , not the primary
residence of the respondents;
7.2.
that the mortgaged property was bonded
as security for the respondents' debt under the loan agreement;
7.3.
that in the event that the respondent
object to the property, in the event of it being its primary
residence being declared executable,
the respondents must place facts
and submissions before the court to enable the court to consider them
in terms of Rule 46(1)(a)(ii)
of the Uniform Rules of the Court; and
7.4.
that in terms of rule 46(1)(c) (ii) of
the Uniform Rules , no writ of execution shall be issued against a
primary residence unless
the court having considered all the relevant
circumstances orders execution against such property.
[8]
Counsel for the applicant further
submits that:
8.1.
the immovable property is registered in
the name of the Mthunzi Mdwaba Family Trust and a trust is a juristic
person;
8.2.
although the immovable property is used
as primary residence of one of the trustees and his children, the
procedure prescribed by
Rule 46A of the Uniform Rules
[1]
is not applicable because the property has been bought in the name of
a trust which is a juristic person and such procedure does
not apply
to juristic persons.
RESPONDENTS'
SUBMISSION
[9]
Counsel for the respondent submits that:
9.1
Rule 46A does not apply when execution creditor seeks to execute
against immovable property
of a judgment debtor hat does not perform
the function of a form of dwelling or shelter for humans (e.g.
commercial immovable property)
or that is occupied by juristic
persons or legal entities other than humans (e.g. trusts) for use
other than dwelling;
9.2.
if immovable residential property is
merely nominally registered in the name of a legal person or trust
but used as a dwelling by
the trustee or trust beneficiaries
(depending on the nature of the trust deed), as the case maybe, 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.
[2]
9.3.
It is common cause that the property is
used for residential purposes by a natural person).
9.4.
the immovable property is used as a
primary residence of the first respondent (who is cited in this
application in his capacity
as both a trustee and a surety) and his
children , therefore Rule 46A procedure is applicable .
9.5.
This application is premature as not all
remedies have been exhausted by the applicant in that the applicant
has not attached movable
property of the judgment debtor. Rule
46(1)(a)(i) provides that no writ of execution against the immovable
property of any judgment
debtor shall be issued unless a return has
been made of any process issued against any movable property of the
judgment debtor
from which it appears that the said person has
insufficient movable property to satisfy the writ.
9.6.
That the bank knew that the property was
purchased with the purpose of being used as a shelter and dwelling
for one of the trustees.
THE
LEGAL POSITION
[10]
Firstly, this court has to deal with the question as to whether a
trust is a juristic person
for the purpose of the applicability of
Rule 46A. Without getting into the discussion of the nature of
trusts, it is trite law
that a trust is not a legal
persona
but
a legal institution
sui generis.
I take judicial notice of the
fact that a trust is used as an integral part of protecting assets in
the general scheme of estate
planning. One characteristic of such
schemes is the naming of the primary beneficiary as a trustee. For a
trust to become a juristic
person it must be so clothed by
legislation.
The
court held that "Except where statute provides otherwise, a
trust is not a legal person. It is an accumulation of assets
and
liabilities. These constitute the trust estate, which is a separate
entity. But though separate, the accumulation of rights
and
obligations comprising the trust estate does not have legal
personality. It vests in the trustees, and must be administered
by
them - and it is only through the trustees , specified as in the
trust instrument , that the trust can act.
[3]
In
Land and
Agricultural Bank of South Africa v
Parker
[4]
Cameron JA
elaborated: '[A trust] is an accumu lation of assets and liabilities.
These constitute the trust estate, which is a separate
entity. But
though separate, the accumulation of rights and obligations
comprising the trust estate does not have legal personality.
It vests
in the trustees, and must be administered by them - and it is only
through the trustees, specified as in the trust instrument
, that the
trust can act."
As
a general principle, the accumulation of rights and obligations
vested in all the individual trustees of the Mthunzi Mdwaba Trust.
This means the applicant is obliged to serve all court processes on
all the trustees from the onset. This includes all Rule 46A
procedures. Furthermore, the Mthunzi Mdwaba Trust is not clothed by
any legislation to be regarded as a juristic person. Therefore,
this
trust is not a juristic person for the purpose of this inquiry.
[11]
Rule 46A applies whenever an execution
creditor seeks to execute against the residential immovable property
of a judgment debtor.
Subrule (3) states that "every notice of
application to declare residential immovable property executable
shall be- (a) substantially
in accordance with Form 2A of Schedule 1;
(b) on notice to the judgment debtor and to any other party who may
be affected by the
sale in execution, including the entities referred
to in rule 46(5)(a): Provided that the court may order service on any
other
party it considers necessary; (c) supported by affidavit which
shall set out the reasons for the application and the grounds on
which it is based; and (d) served by the sheriff on the judgment
debtor personally: Provided that the court may order service in
any
other manner. Subrule (4)(a) further states that "the applicant
shall in the notice of application- (i) state the date
on which the
application is to be heard; (ii) inform every respondent cited
therein that if the respondent intends to oppose the
application or
make submissions to the court, the respondent must do so on affidavit
within 10 days of service of the application
and appear in court on
the date on which the application is to be heard". Subrule (5)
of Rule 46A reads as follows:
"Every application shall be
supported by the following documents, where applicable, evidencing-
(a) the market value of the
immovable property;
(b)
the local authority valuation of the immovable property; (c) the
amounts owing on mortgage bonds registered over the immovable
property; (d) the amount owing to the local authority as rates and
other dues; (e) the amounts owing to a body corporate as levies;
and
(f) any other factor which may be necessary to enable the court to
give effect to subrule (8): Provided that the court may
call for any
other document which it considers necessary."
ANALYSIS
OF THE MATTER
[12]
The applicant's submission is that since
the residential immovable property is registered in the name of the
Mthunzi Mdwaba Family
Trust and not in the name of a natural person,
the protection afforded with regard to primary residence is not
applicable. The
applicant supports his reasoning on the basis of what
the court said in
Absa v Mokebe
[5]
case. Paragraph 50 of the case
reads: "We cannot stress enough that this matter concerns and
applies only to those properties
which are primary homes of debtors
who are individual consumers and natural persons". This
submission is flawed because I
have already concluded that a trust is
not a juristic person for the purposes of the applicability of Rule
46A and therefore all
steps prescribed in terms of this rule were
supposed to be followed.
[13]
Furthermore, section 26 of the
Constitution accords every individual the right to access adequate
housing.
[6]
The Constitutional Court in
Jaftha v
Schoeman and Others, Van Rooyen v Stoltz and Others
[7]
stated that:
"Section 26 must be seen as
making that decisive break from the past. It emphasises the
importance of adequate housing and
in particular security of tenure
in our new constitutional democracy. The indignity suffered as a
result of evictions from homes,
forced removals and the relocation to
land often wholly inadequate for housing needs has to be replaced
with a system in which
the state must strive to provide access to
adequate housing for all and, where that exists, refrain from
permitting people to be
removed unless it can be justified."
[14]
It is clear from the
Jaftha
case that the
emphasis is immovable property that is used as a primary residence.
The test is the purpose for which the property
is acquired and used.
The
persona
used
to acquire the property is irrelevant. In order to determine whether
or not the primary residence of a judgement debtor is
executable, I
have to consider whether the rules of court have been complied with;
whether there are alternative ways of recovering
the judgement debt;
further take into account , among other things, the circumstances in
which the judgement debt was incurred;
attempts made to pay off the
debt; the financial position of the parties; the amount of the
judgement debt; whether the judgement
debtor is employed or has a
source of income to pay off the debt; and other factors relevant to
this case. These circumstances
were set out in the case of
Jaftha.
[8]
Further, the
applicant must state the manner in which it dealt with the
respondents when it became clear that the latter was defaulting.
The
process of reaching the conclusion that execution was a last resort
must also be disclosed.
[15]
The respondents case meets the above test because of the fact that
the second respondent is living
in the immovable property with his
children.
[16]
The judgment creditor knew beforehand
that the immovable property is acquired for use as a residential
primary residence. Such prior
knowledge is not only a requirement but
also places an obligation on the applicant to establish whether any
of the respondents
are using the residential immovable property as
their primary residence before any legal steps are commenced .
Therefore the applicant's
assertion that it has not established
whether any of the respondents are staying in the property clearly
indicates that the correct
procedure was not followed before the
institution of these legal proceedings.
[17]
The respondents' Counsel submission that
Rule 46A does not apply when execution creditor seeks to execute
against immovable property
of a judgment debtor that does not perform
the function of a form of dwelling or shelter for humans (e.g.
commercial immovable
property) or that is occupied by juristic
persons or legal entities other than humans for use other than
dwelling is correct.
[9]
[18]
Her further submission 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 shareholders or
trustee or trust beneficiaries (depending on the nature of the trust
deed), as the
case maybe, 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 is also correct. The property
will still fall within the ambit of Rule 46A even if the trustees in
their official capacity are not the judgment debtors. The
trustees in
their official capacity are not required to be the judgment debtors
for the property to fall within the ambit of Rule
46A. The fact that
the trustees in their official capacity are the judgment debtors is
not a requirement but it only signifies
commitment towards payment of
the debt by the trustee.
REASONS
FOR JUDGMENT
[19]
The underlying principle is that the
judgment debtor must perform the function of a form of a dwelling or
shelter for humans. The
legal persona
of the judgement debtor is of no
significance. It is immaterial whether the judgment debtor is a
juristic person or a natural person.
The trustees in their official
capacity do not have to be the judgment debtors for Rule 46A to be
applicable. The second respondent
is a trustee and a surety to the
loan granted to the Trust. It is not essential for the judgment
debtor to be a surety to the loan
granted to the Trust for Rule 46A
to be applicable.
[20]
The right to housing is recognised as a
fundamental human right by section 26(3). I also have to determine
the purpose for which
the immovable property was purchased and used
and by whom it was used. In this case, the immovable property which
is registered
in the name of the trust, is purchased as a residential
property and is being used as a dwelling or shelter for one of the
trustees
or trust beneficiary and his children. These are natural
persons. What is important is that the property must be used as a
dwelling
by the trustee or trust beneficiaries (or by the
shareholders of a company).
[10]
As a consequence, an obligation is placed on the judgment creditor to
conduct an investigation as to the purpose for which the
property is
being used for and by whom.
[21]
Counsel for the applicant stated that at
the time of hearing of this application the respondent was in arrears
for a period of more
than 21 months and the arrears ran in the amount
of more than R 700 000.00. He further submitted that the judgment
creditor has
been in contact with the judgment debtor in attempt to
resolve and assist the judgment debtor to get out of the problematic
situation
and nothing has been resolved so far. However, no details
of contact have been brought to the court's attention for
consideration.
The reason as to why this process was not disclosed to
this court to enable it to consider the suitability for granting an
execution
order remains unclear. This clearly indicate that the
circumstances in the
Jaftha
case
were not considered by the applicant.
[22]
The applicant has during the hearing of
this case, handed up a reserve price but failed to serve it on the
respondents for their
consideration and comment despite the fact that
the determination of a reserve price is an issue which is provided
for in the Rules
of Court.
[11]
[23]
Counsel for the respondents, argues that
this application is premature because not all remedies have been
exhausted by the applicant
and the applicant has not yet, for example
not attached the respondents' movable property. Counsel for the
applicant, on the other
hand, is opposed to this view because he
says, the argument was addressed under Question 6(e), paragraph 50 of
the
Mokebe
case
wherein the court stated that "the attachment of movables after
judgment and before the realisation of the sale in execution
of the
mortgaged property is of no consequence due to the interpretation of
s 129(4)(b) of the NCA."I must state that the
view of the
applicant's Counsel is completely wrong because it is clear that
paragraph 50 of the
Mokebe
case
only refers to instances where judgment for execution has been
granted. In this case that no such judgment has been granted.
In any
event this paragraph relates to reinstatement of the agreement and
reinstatement has not been canvassed by both parties.
[24]
When considering an application under
Rule 46A, I must establish whether the immovable property which the
execution creditor intends
to execute against, is the primary
residence of the judgment debtor. If that is so, I must further
consider whether the judgment
debtor has at his disposal alternative
means of satisfying the judgment debt. I must also consider whether
execution against the
judgment debtor's primary residence is the last
resort. The execution creditor must have complied with all court
rules and processes.
I can only authorise execution against immovable
property which is the primary residence of a judgment debtor, after
having considered
all relevant factors. All considered factors must
confirm that execution against such property is warranted.
[25]
The applicant has failed to protect the
investment built up by the judgment debtor over many years. The
applicant has not only disregarded
the fact that the respondent is
only two months in arrears when they started legal proceedings but
also the fact that the respondents
have been staying in the property
for more that 11 (eleven) years. The period of the arrears as
compared to the period of time
the respondents have been staying in
the residential property is infinitesimal. The fact that the
applicant instituted action against
the respondent when the
respondents were only two months in arrears, demonstrates the abuse
that the Constitutional court intends
to eliminate. I find that such
approach not violates the objectives of the Constitution but it is
also anachronistic.
[26]
The court had on several occasions had
to request the applicants to comply with procedure. In particular ,
the court had to order
the applicant to serve processes on all the
trustees. The court had to request the applicant to provide full
information which
will enable it to determine the reserve price. The
information provided in the applicant's affidavit pertaining to the
reserve
price completely differs with the information provided in the
supplementary heads of argument. The respondents have not been given
an opportunity to respond to the information provided by the
applicant pertaining to the setting of the reserve price.
[27]
The information required in terms of
Rule 46A (5) was not included. I am not placed in a position to
consider all circumstances
which will enable me to declare the
property executable. I find it difficult to exercise my proper
mandate of judicial oversight.
In an effort to equipoise the right to
housing, security of tenure and the dignity that comes with housing
ownership and the judgement
creditor's right to execution, I consider
the fact that the residential immovable property is used by one of
the trustees or trust
beneficiaries with his children to be of
paramount importance.
[28]
I therefore conclude that sections 26(1)
and (3) of the Constitution rights are implicated; this case falls
under the ambit of Rule
46A and enjoys all the protections mentioned
in the
Mokebe
case;
this application is prematurely before the court; and the applicant
did not follow the procedure as prescribed by Rule 46A
and has
therefore failed to comply with the rules of this court.
ORDER
1.
Application is dismissed with costs on
attorney and own client scale.
N.E. RAMAPUPUTLA
Acting Judge, Gauteng Division
of
the High Court of South Africa,
Pretoria
Heard
on:
25 April 2019
Date
of Judgment:
09 July 2019
APPEARANCES
On
behalf of Applicant:
Adv J Minnaar
Counsel
:
Hammond Pole Attorneys
On
behalf of Respondent:
Adv.
Counsel:
Kekana Hlatshwayo Attorneys
[1]
Herein referred to as Ru le 46A.
[2]
The commentary on the Supreme Court Practice by Erasmus on the High
Court Ru les Volume 2, Service 8, 2019 D l -632Q (the Commentary).
[3]
Commissioner for Inland Revenue v MacNeillie's Estate
1961
(3) SA 833
(A) 840D-H;
Commissioner for Inland Revenue v Friedman
NO
[1992] ZASCA 190
;
1993 (1) SA 353
(A) 370E -l.
[4]
[2004] 4 ALL SA 261 (SCA)
[5]
2018 (6) SA 492 (GJ).
[6]
Section 26(1) of the Constitution.
[7]
[2004] ZACC 25
;
2005 (2) SA 140
(CC) par 29.
[8]
Supra
pl61-163B.
[9]
The Commentary
supra.
[10]
The Commentary
supra.
[11]
Mokebe
case (n I ) par 53.