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[2017] ZAGPPHC 162
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Pedlar and Another v First Rand Bank Limited and Others (2010/53126) [2017] ZAGPPHC 162 (14 February 2017)
IN
THE GAUTENG DIVISION OF THE HIGH COURT OF SOUTH AFRICA, PRETORIA
CASE
NO: 2010/53126
DATE:
14 February 2017
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
NOT
REVISED
In
the matter between
ARTHUR
PETER
PEDLAR
FIRST
APPLICANT
SANDRA
JOANNA
PEDLAR
SECOND
APPLICANT
And
FIRST
RAND BANK
LIMITED
FIRST
RESPONDENT
CHRISTIAN
VAN HEERDEN
N.O
SECOND
RESPONDENT
CRISTEL
STEYN
N.O
THIRD
RESPONDENT
REACHOUT
TRUST AND LEGAL (PTY)
LTD
FOURTH
RESPONDENT
JUDGMENT
TSATSAWANE
AJ
Introduction
1
The applicant seeks an order in the following terms -
"1. Setting
aside the order granted on 21 June 2011.
2.
An order declaring
void and setting aside the power of attorney dated 20 June 2011.
3.
Setting aside any
sales pursuant to the power of attorney dated 20 June 2011."
2
In the event that they are successful, the applicants seek a costs
order against
those opposing the relief which they seek.
3 In
September 2010, the first respondent
("the bank")
issued
summons against the applicants for payment of an amount of R2 369
336,94 being monies lent and advanced by the bank to the
first
applicant in terms of a loan agreement. As security for the loan, a
mortgage bond was registered in favour of the bank over
the
"Remaining Extent of Holding 53 Raslouw Agricultural
Holdings, Registration Division J.R., Province of Gauteng'
("
the
property
").
The property is the applicants'
primary residence.
4 In
addition to the aforesaid security, the second applicant executed a
deed of suretyship in
terms of which she bound herself as surety and
co-principal debtor for the due and punctual performance of the first
applicant's
obligations towards the bank in terms of the aforesaid
loan agreement. The bank's claim against the second applicant was
based
on this deed of suretyship.
5 The
applicants' claim that they were initially not aware of the bank's
summons due to the fact
that the summons was not personally served
upon them. They do not, however, seriously rely on this issue for
purposes of the relief
which they seek. In any event, they did become
aware of the action proceedings before the order sought to be set
aside was granted.
The
settlement agreement
6
On 20 June 2011, the applicants and the bank concluded a settlement
agreement
with the intention to settle the bank's aforesaid claim
("the settlement agreement").
7
In terms of the settlement agreement, the parties, i.e. the bank and
the applicants,
agreed as follows -
"(a)
The First Defendant will make payment to the Plaintiff of an amount
of R30 000,00 per monthfrom the 30'h of June 2011;
(b) Should
however the normal instalment of the facility agreement surpasses the
amount of R30 000,00, the First Defendant will
then pay the normal
instalment;
(c)
The arrangement in
terms of this settlement agreement will be reviewed every six
monthsfrom 30 June 2011;
(d)
The First Defendant
will sign a Special Power of Attorney infavour of the Plaintiff in
respect of the abovementioned immovable property;
(e)
The First and
Second Defendant will sign Authority to Debit Legal Fees;
(j)
That this settlement agreement is made an order of this Court;
(g)
That the Summary Judgment ispostponed sine die;
(h) That should the First
Defendant and/or Second Defendant fail to comply with this settlement
agreement, the Plaintiff will be
entitled to Summary Judgment."
8 On
the same day that the parties concluded the settlement agreement, the
first applicant executed
a special power of attorney in terms of
which he irrevocably nominated, constituted and appointed the bank,
amongst others, to
"sell the property by wiry of private
treaty or public auction ..."
The special power of attorney
is attached to the settlement agreement.
9 The
special power of attorney and the settlement agreement do not mention
the circumstances under
which the bank would be entitled to sell the
property. When regard is had to the context in which the power of
attorney was executed
and given to the bank, it cannot be that the
bank became entitled to sell the property at any time and for
whatever reason it deemed
fit. There is no evidence to support such a
conclusion. Of importance, there is no evidence to support the
conclusion that the
first applicant granted the special power of
attorney to sell the property even if he was not in default of the
settlement agreement.
In the event of default, the settlement
agreement provides a remedy to which the bank shall be entitled, and
such remedy is not
to sell the property - it is to seek summary
judgment.
10 On 21 June
2011, the day after the settlement agreement and special power of
attorney were executed, the settlement
agreement was made an order of
this Court. It is this order which the applicants seek to set aside.
It is important to note that
the order does not authorise
the·execution of the property.
The
basis of the application
11 The
Court order which is sought to be set aside simply reads as follows -
"THAT the Settlement
Agreement between the parties filed of record and marked
"X" be and is hereby
made an order of Court."
12 The above
being the case, it means that the Court order is what is set out in
the settlement agreement. Accordingly,
I must have regard to the
contents of the settlement agreement, which is the Court order, to
determine whether the bank was entitled
to sell the property.
13 Before the
settlement agreement was concluded, there were summary judgment
proceedings pending between the parties
in which the bank sought the
relief sought by it in its summons. Such relief included an order
declaring the property ·
executable (as set out in paragraph 3
of the notice of application for summary judgment).
14 In
paragraph (g) of the settlement agreement, the bank agreed that
"the
Summary Judgment is postponed sine die."
The applicants also
concluded the settlement agreement on that basis -and of importance,
on the basis that the Court was not going
to be asked to declare the
property executable. On 21 July 2011 when the matter came to Court,
the bank did not seek the relief
sought in the notice of summary
judgment application - it sought an order and was granted an order in
terms of which the settlement
agreement was made an order of Court.
15 In
their founding affidavit, the applicants based their application on
the grounds that -
15.1 the settlement agreement was
negotiated in bad faith in an attempt to avoid compliance with the
Practice Manual of this Court;
15.2 the settlement agreement was
prepared under
"the threat of execution and
eviction";
15.3 their attention was never
drawn to the provisions of section 26(1) of the Constitution;
15.4 they were not informed or
placed in a position to place relevant circumstances within the
meaning of section 26(3) of the Constitution
and Rule 46(1) of the
Uniform Rules of Court;
15.5 the settlement agreement
constitutes a novation of the bank's claim and constitutes a fresh
agreement;
15.6 the special power of
attorney constitutes
paratie executie.
16 The
correspondence between the first applicant and the bank's
representatives show that the settlement agreement
was freely and
voluntarily negotiated between the parties. The bank may have taken a
hardline approach in the negotiations in trying
to reach a settlement
which was most favourable to it even though such may have been too
onerous to the applicants. This, however,
is not unlawful and does
not constitute a ground to grant the relief which the applicants
seek.
17 In a letter
dated 15 June 2011, a few days before the settlement agreement was
concluded and made an order of
Court, the applicants, though their
attorneys advised the bank that -
"It is our instructions
to settle this matter in that a payment of R30 000,00, all inclusive,
per month, be made, paid directly
to RMB.
It is farther our instructions
that our client will accept that the settlement be made an order of
Court on the 21'1 and that the
application be postponed sine die."
18 The
applicants do not deny that they instructed their attorneys to advise
the bank in the manner quoted above.
The applicants also do not deny
that they signed the settlement agreement at the offices of their
attorneys as alleged by the bank.
In the premises, I reject the
applicants' suggestion that they were pressurised to conclude the
settlement agreement and that the
settlement was negotiated in bad
faith. There is simply no sufficient evidence placed before me to
reach that conclusion. In fact,
the evidence before me shows that the
parties and their respective attorneys engaged with each other over a
period of time culminating
in the above quoted letter of 15 June 2011
and there is no allegation of duress by the applicants.
19 The Court
order does not authorise the execution of the property. The order to
declare the property especially
executable is sought in the summary
judgment application which was postponed
sine die
and was not
granted. For this reason, the applicants' contentions that they were
not given an opportunity to place their relevant
circumstances before
the Court as contemplated in section 26 of the Constitution are
irrelevant.
20 The
applicants also complain that the bank has disclosed the contents of
their settlement discussions
which were made without prejudice. There
is no merit in this complaint in that a settlement agreement was
eventually concluded
and then made an order of Court. The bank was
entitled to place evidence of the settlement negotiations before the
Court to show
how the settlement agreement was arrived at. The
situation would have been different if a settlement agreement had not
been concluded.
21 In
the view which I have taken, it is not necessary to consider the
other basis on which the relief sought
is based other than the
applicants' contention that the special power of attorney which they
signed amounts to
paratie executie.
I consider this ground
below.
Paratie
executie
22 In
paragraph 19.3 of their founding affidavit, the applicants say that
the special power of attorney to
sell the property amounts to
paratie
executie
and that it is unlawful. It is for this reason that the
applicants seek an order in terms of which the special power of
attorney
is set aside and the sale in execution concluded in terms
thereof set aside.
23 In
its answering affidavit, the bank says that it sold the property by
way of an auction
"Due to the default of the First and/or
Second Applicant and in term of the settlement agreement and by
virtue of the special
power of attorney..."
Accordingly, the bank's position
is that a default under the settlement agreement (the Court order)
entitled it to sell the property.
I do not agree.
24 The
bank did not first obtain a Court order declaring the property
executable before selling the property
by way of an auction. It by
itself considered that there was a default of the Court order
sufficient to justify it to sell the
property. Of importance, it
concluded that a default under the settlement agreement (Court order)
entitled it to sell the property.
25 The
Court order does not say as to when and under what circumstances the
bank would be entitled to act
in terms of the special power of
attorney. The bank cannot therefore take it upon itself that it could
act in terms of the power
of attorney at any time and under
circumstances determined by it because the Court order does not say
so.
26 There is
nothing in the Court order to suggest that whenever there is a
default, regardless of the amount by
which the applicants are in
default and regardless of where the applicants go after the sale of
the property which is their primary
residence, the bank is entitled
to sell the property. I certainly cannot read that into the Court
order.
27 Paragraph
(h) of the Court order provides a different remedy in the event of
default. It says that -
"That should the First
Defendant and/or Second Defendant fail to comply with this settlement
agreement, the Plaintiff will
be entitled to Summary Judgment”
28 There
is nothing in the above quoted paragraph (h) to suggest that the bank
would be entitled to both
summary judgment and execution of the
property in the event of default. There is only one remedy available
to the bank and it is
a summary judgment. It is not the bank's case
that it obtained summary judgment before selling the property by way
of an auction.
29 For the
reasons best known to the bank, it agreed to postpone the summary
judgment application
sine die.
That application remains
pending in this Court. In my view, it is for this reason (that the
summary judgment application was postponed)
that the Court made an
order in terms of which it provided that the bank shall be entitled
to summary judgment in the event of
a default which would require the
bank to come back before the Court and make out a case for the relief
which it might be advised
to seek, obviously with the applicants
being entitled to be heard before such an order is made.
30 The bank's
contention in paragraph 8.3 of its heads of argument that the
applicants voluntarily provided it
with authority to execute upon the
property
"should they default in terms of the settlement
agreement"
is accordingly wrong. The settlement agreement
clearly says that the bank shall be entitled to summary judgment in
the event of
a default and not execution of the property (without
judicial supervision). There is no reason why the Court would have
made provision
for the bank to come back to it for summary judgment
if at the same time the Court authorised the sale of the property
without
any reference to it. It clearly did not do so.
31 In
De
Beer v Keyser and Others
2002 (1) SA 827
(SCA)
at 838 paragraph
26, it was held that -
"[26]
...
paratie
executie occurs where a creditor has the right to sell the property
of a debtor in satisfaction of a debt. The principal
objection to the
practice is that without judicial control the property might be sold
by the creditor on terms that are unduly
prejudicial to the debtor…”
32 In this
case, the Court order does not say that the bank is entitled to sell
the property in the event
of default. The special power of attorney
also does not say this. The Court order says that the bank shall be
entitled to summary
judgment in the event of non-compliance -and
nothing more.
33 In
Bock
and Others v Duburoro Investments CPty) Ltd
2004 (2) SA 242
(SCA)
to which the bank referred me, the Court was dealing with facts which
are different from the facts of this case. In any event,
at paragraph
7 of the judgment, the court restated the legal position that it is
after default
that a mortgagor may grant the bondholder the
necessary authority to realise the .bonded property. In this case,
the purported
authority was in fact given
before the default
,
i.e. on the very same date that the parties concluded the settlement
agreement and signed the special power of attorney. There
was no
default in terms of the settlement agreement on the date on which it
was concluded.
34 Furthermore,
the bank did not in any event purport to act in terms of the original
security (mortgage
bond) - because it did not make provision for the
sale of the property without judicial supervision as was the case in
Duburoro
where the creditor relied on a pledge and did not in
fact
"exercise its right of paratie executie"
but
took over the shares in issue relying on a separate agreement
contemplated in the pledge which made provision for the shares
in
issue to be taken over at a fair price - to which fair price the
debtor agreed. Accordingly,
Dubororo
does not support the
bank's case on the facts before me.
35 Pursuant
to the special power of attorney, the bank sold the property to Mama
Mia Trust which is represented
herein by the second, third and fourth
respondents. It is this sale which the applicants seek to set aside
on the basis that the
power of attorney in terms of which the sale
was concluded is unlawful as stated above. When regard is had to the
basis on which
the bank says it sold the property, i.e. that the
applicants were in default of the settlement agreement, it is not
necessary to
decide whether the power of attorney is valid. This is
so due to the fact that the basis on which the bank says it sold the
property
is wrong in law for the reason stated above, i.e. that the
applicants' default did not entitle it to sell the property -their
default
entitled it to summary judgment, the proceedings of which it
postponed
sine die.
36 In
the light of the above, I am of the view that the bank was not in law
entitled and competent to sell
the property as it did. In the event
that there was a default in terms of the Court order (settlement
agreement) the bank ought
to have applied for summary judgment, this
being the remedy provided for in the Court order (settlement
agreement) which it asked
the Court to give it when it moved the
Court to make the settlement agreement an order of Court on 21 June
2011.
37 In
the premises, the bank cannot act contrary to what is provided for in
the Court order.
Costs
38 The
applicants have not made out a proper case for the Court order
granted on 21 June 2011 to be set aside.
The bank came to Court to
oppose the setting aside of the Court order. The bank has been
successful in opposing the setting aside
of the Court order.
39 Insofar
as the bank was only entitled to obtain summary judgment in the event
of there being a default
in terms of the Court order (settlement
agreement), it therefore follows that the sale of the property by the
bank cannot stand.
In this regard, the applicants have been
successful.
40 The
second, third and fourth respondents also came to Court to oppose the
setting aside of the order granted
on 21 June 2011 and the sale of
the property to them. In my view, they were entitled to come to Court
to present their case in
this regard and I am of the view that they
ought not to be mulcted in costs. No case has been made to the effect
that their opposition
of this application was unnecessary or
unreasonable.
41 For the
reasons stated above, the following order is made -
41.1 the
sale of the property described as the Remaining Extent of Holding 53
Raslouw
Agricultural Holdings, Registration Division J.R. Province of
Gauteng by the First Rand Bank Limited to Mamma Mia Trust on 25
February
2015, is set aside;
41.2 the
costs of this application shall be paid by the applicants.
____________________
Kennedy
Tsatsawane
Acting
Judge of the Gauteng Division of the High Court of South Africa,
Pretoria.