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[2017] ZAGPPHC 155
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Chikala and Others v Tovani Trading 269 CC and Others (56834/15) [2017] ZAGPPHC 155 (15 March 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 56834/15
15/3/2017
Reportable:
Yes
Of
interest to other judges: No
In
the matter between:
MATIKI
SAMUEL
CHIKALA
First
Applicant
MATIKI
SAMUEL CHIKALA
NO
Second
Applicant
MALEBO
DESIREE MAPONYANE-CHIKALA
NO
Third
Applicant
and
TOVANI
TRADING 269
CC
First
Respondent
OSCAR
JABU MTHIMUNYE
NO
Second
Respondent
THOMAS
ABRAM MHLANGA
NO
Third
Respondent
MABUTI
SOLOMON MTHIMUNYE
NO
Fourth
Respondent
THE
SHERIFF: PRETORIA SOUTH
WEST
Fifth
Respondent
REGISTRAR
OF
DEEDS
Sixth
Respondent
JUDGMENT
Tuchten
J:
1.
In the application presently before me, the applicants seek a number
of orders pursuant to a notice of motion dated 21 July 2015.
Firstly,
they seek an order declaring invalid and setting aside a writ of
execution (the writ) taken out by the first respondent
(the execution
creditor) against a property owned by the KK Trust (the execution
debtor). The second and third applicants are the
trustees of the
execution debtor. The first applicant has joined in the application
in his personal capacity.
2.
Secondly, the applicants seek an orders setting aside the transfer of
the property, pursuant to what purported to be a sale under
the writ,
to the Mthimunye Trust (the execution purchaser) and directing the
re transfer of the property to the execution
debtor. The second,
third and fourth respondents are the trustees of the execution
purchaser.
3.
Thirdly, the applicants ask
that the execution creditor be directed to repay the moneys paid to
It pursuant to the sale in execution
to the fifth respondent (the
sheriff).
[1]
4.
Fourthly, the applicants ask
for an order directing themselves
[2]
to settle a judgment debt owed by the execution debtor to the
execution creditor at a time after the grant of the order sought.
[3]
5.
In addition to its opposition to the application on its merits, the
execution purchaser brought a conditional counter-application,
which
I shall discuss below.
6.
To place the present application in context, considerable background
will have to be given. Under an oral agreement the execution
debtor,
as owner of the property, engaged the execution creditor to build a
house on the property. The execution creditor says
the agreement was
concluded on 15 August 2007. The execution debtor says that the
contract was concluded during the period August
2007 to March 2008.
Nothing tums on this.
7.
The parties fell into dispute. The execution creditor issued summons
in this court under case no. 62171/11againstthe execution
debtor on
31 October 2010, claiming payment of R1 407 540,61, interest and
costs. The execution debtor defended the action. It
was set down for
trial on 13 March 2013. On the day of the trial, the execution debtor
applied for a postponement, which was granted.
The execution debtor
was ordered to file expert notices within a stated time and to pay
the wasted costs on the attorney and client
scale.
8.
The expert notices were not filed by the execution debtor as directed
and on 30 April 2013 the execution creditor gave notice
of an
application for the execution debtor's defence to be struck out.
However, on 15 July 2013, Matojane J gave the execution
debtor a
further 60 days within which to file its expert notices.
9.
In the meantime, the execution creditor sought to execute on its
costs order. But on 3 July 2013, the sheriff's return reported
that
the writ against movables could not be executed because the premises
were constantly locked and the second applicant did not
react to
written messages. On 30 August 2013, the execution creditor applied
for an order that the property be declared specially
executable. The
execution debtor opposed the special execution application.
10.
On 12 November 2013, Vorster AJ ordered that the execution debtor's
defence against the execution creditor's claim for payment
be struck
out and granted default judgment against the execution debtor for R1
244 028,54, interest and costs. On 12 February 2014,
the execution
debtor applied for rescission of the default judgment.
11.
On 10 March 2014, under case no. 62171/11,Hassim AJ declared the
property specially executable at the instance of the execution
creditor and authorised the issue of a warrant of execution for the
purpose of obtaining an attachment over and ultimately the
sale in
execution of the property.
12.
On 18 August 2014, the execution debtor's application for rescission
of the judgment in favour of the execution creditor was
dismissed by
Strauss AJ with costs as between attorney and client. The execution
creditor then proceeded to execution.
13.
I need not detail the several
steps which the execution creditor and the sheriff took towards
effecting the attachment of the property,
except to say that on 8
October 2014 the sheriff purported to serve the notice of attachment
contemplated in rule 46(3)(a) on the
execution debtor by affixing a
copy to the principal door of the premises. It was common cause at
the hearing before me that this
mode of service was not permissible
in terms of the Rules.
[4]
14.
The sale in execution itself was fixed to take place by public
auction on 16 October 2014. On 15 October 2014, the first applicant
decided to take steps to stop the sale of the property. He provided
the execution debtor's then attorney with cheques to the amount
of R1
250 000. The attorney was instructed to pay the cheques into the
attorney's own trust account and pay the money over to the
attorneys
for the execution creditor once the cheques had been cleared. The
execution debtor's then attorney asked the execution
creditor to
postpone the sale. The execution creditor refused to postpone the
sale and it went ahead.
15.
The property was sold on that
day to the execution purchaser for R1,8 million. Under the conditions
of sale (the Conditions), with
which I shall deal below, the
execution purchaser had to pay a deposit of R180 000 to the sheriff.
Condition 4.3 made it a condition
of the sale (in the technical sense
of the term
condition)
that
if the execution purchaser should fail to pay the deposit
on
completion of the sale,
the
sale would be null and void and the sheriff must immediately put the
property up for auction again.
[5]
16.
The next relevant event is unique in my experience: the
execution
debtor then
paid the precise amount of the deposit, R180 000, to
the execution purchaser. It did so with the very purpose that the
money so
paid by the execution debtor would be used by the execution
purchaser to pay the deposit required under the Conditions. And that
is what happened. On 16 January 2015, the execution purchaser's
attorney paid over the sum of R180 000 to the sheriff.
17.
The cheques provided by the first applicant to the execution debtor's
then attorney were cleared. But on 23 January 2015, the
execution
creditor attached the sum represented by the cleared cheques, R1 250
000, in the trust account of the execution debtor's
then attorney.
18.
If there were any residual doubt about the intention of the execution
debtor actually to facilitate the sale in execution of
its own
property, that will be dispelled by the following fact which I shall
recount: on 3 March 2015 the execution debtor's then
attorney, on the
instructions of the execution debtor, paid to the attorneys for the
execution creditor the sum of R90 000 in respect
of the costs of
transfer of the property into the name of the execution purchaser.
19.
On 22 June 2015 the property was transferred by the sheriff to the
execution purchaser against payment of the balance of the
execution
purchase price with interest. The balance of the execution purchase
price was provided by the execution purchaser from
its own means. The
sheriff then framed a distribution account dated 24 June 2015.
According to the distribution account, there
was an amount, after
payment to the execution creditor of what the sheriff had on hand,
still due to the execution creditor on
its writ or writs. According
to the sheriffs distribution account, only R1 915 694,25 was paid to
the execution creditor, leaving
a balance still owing to the
execution creditor on the judgment debt.
20.
The present application was instituted on 21 July 2015, less than a
month after the transfer of the property. The reason the
applicants
brought the application is that the execution debtor and the
execution purchaser had fallen out. They had apparently
made an
arrangement in regard to the property but had not reduced the
arrangement to writing. Now they were in dispute as to the
terms of
their oral arrangement.
21.
The execution debtor relied upon a number of grounds for the relief
sought. One of those grounds was that the notice of attachment
was
not served on the execution debtor at least one month before the date
of the sale. This prompted a formal counter-application
by notice of
motion dated 22 September 2015 by the execution purchaser,
conditional upon the success of the main application. The
counter
application seeks the repayment, by one or both the execution
creditor and the execution debtor, of the amounts paid
by the
execution purchaser in order to secure transfer of the property into
its name. The ground for the claim for repayment was
said to be
enrichment.
22.
During the hearing before me, the attorney representing the execution
purchaser formally abandoned any relief against the execution
creditor. So relief on this score is now sought only against
the execution debtor. He also undertook to provide, and shortly
after
the conclusion of the hearing before me did provide, a formal consent
to the cancellation of the bond which the execution
purchaser caused
to be registered against the property.
23.
The adjudication of this case was considerably hampered by the way
the that the applicants conducted themselves during the litigation.
The driving force behind the applicants was the first applicant. This
case came before this court on 17 November 2016. On that
day,
Strijdom AJ acceded to an application by the applicants for the
postponement of the case on the ground that the ground that
the
applicants had fallen out with their then attorney. On that occasion,
the court made a punitive costs order against the applicants.
24.
When this case was called before me, there was no appearance on
behalf of the applicants. The first applicant however appeared
in
person. The execution creditor had, as was Its right, succeeded in
having the case placed on the roll for hearing on 27 February
2017
and, as is the practice in this Division, the rest of the week.
25.
When the case began, the first applicant submitted a notice asking
for the hearing of the case to be delayed until after 24
April2017. I
heard submissions on the request for postponement and refused It in
an
ex tempore
judgment. The case then proceeded. Although
heads of argument had been filed on behalf of the applicants, the
first applicant was
not able to contribute meaningfully to the
adjudication of the issues which arose for decision. I shall
therefore respond to the
arguments raised in the heads of argument
which were submitted on behalf of the applicants.
26.
It was argued that the execution debtor had sufficient movable assets
to meet the judgment debt and that no effort had been
made to execute
against the execution debtor's movables. The answer to this
contention is that the property had been declared specially
executable at the instance of the execution creditor. Execution
against movables was therefore not an essential prerequisite to
execution against the property.
27.
It was submitted that the
property constituted the primary residence of the first and third
applicants and that therefore the execution
creditor was precluded by
the proviso to rule 46(1)(a)(ii) which precludes such execution
unless the court in the exercise of its
constitutionally mandated
oversight function, directs that such execution proceed.
[6]
No such direction was obtained in this case. The short answer to this
contention is that the protection of the proviso extends
only to a
property which is the primary residence of the judgment debtor and
not to a property which is made available to a person
as his or her
primary residence by the judgment debtor. See
Firstrand
Bank v Folscher and Another, and Similar Matters
.
[7]
28.
An argument of substance
advanced on behalf of the execution debtor is that the sale in
execution is rendered invalid by the failure
to serve the notice of
attachment on the execution debtor at least one month before the
sale. It will be recalled that the notice
was indeed served on the
execution debtor on the day of the sale. This is therefore not a case
in which no such notice was served
on the debtor at all. In such a
case it seems settled that a sale in execution is null and void. See
Campbell v Botha and
Others.
[8]
29.
The question in the present
case, it seems to me, is whether the sheriff substantially fulfilled
the requirements required for a
sale on the date in question. In
Todd
v First Rand Bank Ltd and
others,
[9]
the rule of the common law was affirmed that non-fulfilment of a
requirement will not vitiate a sale in execution if it does not
go to
the root of the matter. The question is whether the non-compliance
defeated the object or purpose of the measure or whether
prejudice
was caused.
30.
The purpose of the measure in the present context is to ensure that
the execution debtor gets a specified time period in which
to
regulate its affairs, whether by making arrangements to pay the
judgment debt or to attack the legal foundation of the attachment.
Against that background, the late service of the notice of attachment
caused the execution debtor no prejudice at all. The execution
debtor
wanted
the sale in execution to go ahead. Its attempts to set
aside the judgment on which execution had issued failed when the
application
for rescission was dismissed. The execution debtor had,
after its offer of cheques which required clearance had been
declined,
abandoned any attempt to make payment of the judgment debt
in the conventional sense. It had no intention of trying to stop the
sale.
31.
So in the present context, the late service of the notice of
attachment did not cause the judgment debtor prejudice. The papers
demonstrate that even after the sale was concluded the execution
debtor paid substantial sums of money in respect of transfer costs
to
ensure that transfer took place pursuant to the sale.
32.
I therefore conclude that the late service of the notice of
attachment in the circumstances described did not go to the root
of
the matter as contemplated in
Todd
and that it does not
constitute a ground for setting the sale aside.
33.
The final question to be decided in this part of the case arises from
clause 4.3 of the Conditions. Condition 4, under the heading
CONDITIONS OF PAYMENT, reads as follows:
4.2
[10]
Payment shall be made in cash, by bank guaranteed cheque or by way of
an electronic transfer, provided that satisfactory proof
of payment
be furnished immediately on demand to the Sheriff.
4.3 Should the Purchaser fail to pay
the deposit on completion of the sale, then the sale shall be null
and void and the Sheriff
shall immediately put the property up for
auction again.
4.4 The balance of the purchase price
shall be paid to the Sheriff against transfer and shall be secured by
a bank guarantee, to
be approved by the Plaintiff's Attorney, which
shall be furnished to the Sheriff within 21 days after the date of
sale.
4.5 The deposit will be deposited
immediately by the Sheriff into a trust account held in terms of
Section 22 of the Sheriff's Act
90 of 1986.
4.6 The purchaser shall be liable for
payment of interest at the rate of 15.5% nominal annual compounded
daily to the Plaintiff
and to any other bondholder at the rate due to
them on the respective amounts of the award in the plan of
distribution, as from
the expiration of 1 month after the date of
payment.
4.7 The Purchaser shall be responsible
for payment of all costs and charges necessary to effect transfer,
including but not limited
to conveyancing costs, transfer duty or VAT
attracted by the sale and any Deeds Registration Office levies. The
Purchaser shall
further be responsible for payment of all outstanding
rates, taxes and other amounts due to the Municipality in respect of
the
property or levies due to a Body Corporate in terms of the
Sectional Titles Act No 95 of 1986
or Home Owners Association, within
7 days after being requested to do so by the Plaintiff's attorney.
4.8 The Purchaser shall, immediately
on demand by the Sheriff, pay the Sheriff's commission as follows:
4.8.1. 6% on the first R30 000,00 of
the proceeds of the sale; and
4.8.2. 3.5% on the balance thereof.
Subject to a maximum commission of R9
655,00 plus VAT and a minimum of R485,00 plus VAT.
4.9 The Purchaser may obtain transfer
forthwith if the Purchaser pays the whole purchase price and complies
with conditions 4.7
and 4.8 within one month from the date of sale in
which case any claim for interest shall lapse, otherwise transfer
shall be passed
only after the Purchaser has complied with the
provisions of conditions 4.1, 4,7 and 4.8 thereof.
4.10 The Purchaser must furnish the
transferring attorneys with all documents and information required by
them to effect transfer
into the name of the Purchaser, within 7
(SEVEN) days after having been requested to do so by the transferring
attorneys.
34.
The interpretation of condition 4.3 was the subject of considerable
debate during argument and counsel for the execution creditor
and the
execution purchaser submitted additional written argument on the
point.
35.
I must first determine at the level of language, properly
interpreted, what condition 4.3 means. Counsel submitted that
condition
4.3 should be read together with condition 2.5, which
provides:
If the Sheriff suspects that a bidder
is unable to pay either the deposit or the balance of the purchase
price, he may refuse to
accept the bid of such bidder, or accept it
provisionally until the bidder satisfies him that he is in a position
to pay both such
amounts. On the refusal of a bid under such
circumstances, the property may immediately again be put up for
auction.
36.
To my mind, however, conditions 4.3 and 2.5 deal with somewhat
different situations. Condition 2.5 deals with a situation which
may
arise during the process of bidding and therefore before the
"completion of the sale". In the condition 2.5 situation,
the sheriff may halt the bidding process or accept a bid
provisionally until the bidder satisfies the sheriff that the bidder
is able to pay both the deposit and the balance of the purchase
price. If the sheriff refuses the bid under these circumstances,
the
bidding process may be started again ("... may immediately again
be put up for auction.") If the sheriff accepts
the bid
provisionally, then the sale remains uncompleted until the bidder
satisfies the sheriff that the bidder can pay the execution
purchase
price.
37.
There is however no suggestion
in the present case that the sheriff acted under condition 2.5. On
the contrary, the sheriff has
set out facts which demonstrate his
state of mind at the relevant time. I quote from his affidavit:
[11]
... [l]n terms of
rule 46
, read with
Form 21, I have discretion to accept or reject a bid or accept it
provisionally until the bidder has satisfied me that
he is in a
position to pay the amounts due in terms of the sale.
... I accepted the 2nd respondent's
bid of R1,800,000.00 on behalf of the [execution purchaser] and ...
the sale was completed on
the fall of the hammer.
[T]he 2nd respondent, on behalf of the
[execution purchaser] and I are well acquainted with one another as
he purchases properties
at auctions conducted by me, on a regular
basis.
38.
The discretions conferred by condition 2.5 arise for exercise
if
the Sheriff suspects that
a
bidder is unable to pay.
Manifestly, the sheriff had no such suspicion. He did not suspect
that the second respondent or the execution purchaser might be
unable
to pay the purchase price; on the contrary, the sheriff's evidence
shows that he had confidence in its creditworthiness.
The sheriff did
not purport to act under condition 2.5.
39.
Counsel correctly submit that
the interpretation of a contract, indeed any document having legal
effect, is a unitary process involving
a consideration of the text,
its context and its purpose. In
Bothma-Batho
Transport (Edms) Bpk v S Bothma
&
Seun Transport (Edms)
Bpk,
[12]
the court held in relation to the interpretation of a
provision in a contract:
Whilst the starting point remains the
words of the document, which are the only relevant medium through
which the parties have expressed
their contractual intentions, the
process of Interpretation does not stop at a perceived literal
meaning of those words, but considers
them in the light of all
relevant and admissible context, including the circumstances in which
the document came into being. The
former distinction between
permissible background and surrounding circumstances, never very
clear, has fallen away. Interpretation
is no longer a process that
occurs in stages but is 'essentially one unitary exercise'.
40.
The context of condition 4.3 is
that it is a provision in a scheme where judicial power is employed
to redress an imbalance which
arose because the execution debtor had
been ordered by a court to pay a sum of money to the execution
creditor but had failed to
do so. In such a situation and at the
instance of the creditor, the court, through its officer the sheriff,
lays its hand on the
property of the execution debtor and, against
the will of the debtor but in accordance with a process prescribed by
law, realises
such property by public auction. The proceeds of the
property when realised are then applied to meet the duly proven
claims not
only of the execution creditor but also of other persons
with interests in the property.
[13]
These include persons who hold securities over the property in the
broad sense of an entitlement to preferent payment from the
proceeds
of its sale such as bondholders, the municipal authority into whose
area of jurisdiction the property falls and even bodies
corporate and
home owners' associations, as well as other creditors of the
execution debtor who have lodged writs of execution
with the sheriff
in due time.
41.
For sound reasons of public policy, such sales have always been
attended by a considerable degree of public notice. This transparency
is consistent with the values of openness and good administration
which lie at the core of the Constitution. Not only must the
process
be open for the good of the public; it must also have regard to the
interests of the execution debtor which is to be deprived
of its
property against its will and must thus be attended by a measure of
deliberateness. Time periods are prescribed for each
step in the
process to enable members of the public and the debtor to consider
their positions and raise finance. This is because
the public
interest recognises as the best outcome of the execution process that
the process should not reach completion; that
the debtor should
discharge his obligation to or reach an accommodation with the
creditor so that the debtor be not deprived of
his property. But
where the process does reach completion, the policy of the law is
that the best price the process can achieve
should be realised.
42.
Where the debtor's immovable property is identified for execution,
rule 46 prescribes an elaborate process. Notices must be
served on or
sent to identified stakeholders and the fact of the process must be
made known to the general public. The identities
of those with
preferent rights over the property must be identified.
43.
While the policy of the law does not require that conclusion of the
contract arising from the public auction process be dependent
upon
the execution of a written contract, the law nevertheless requires
that the bidding for the immovable property which is up
for auction
be conducted subject to a set of written conditions. This is set out
in rule 46(8):
(a)(i) The conditions of sale shall,
not less than 20 days prior to the date of the sale, be prepared by
the execution creditor
corresponding substantially with Form 21 of
the First Schedule, and the said conditions of sale shall be
submitted to the sheriff
conducting the sale to settle them.
(Ii) The execution creditor shall
thereafter supply the said sheriff with two copies of the conditions
of sale, one of which shall
lie for inspection by interested parties
at his or her office and the sheriff conducting the sale shall
forthwith furnish a copy
of the conditions of sale to all other
sheriffs appointed in that district.
(b) Any interested party may, not less
than 1O days prior to the date of the sale, upon twenty-four hours'
notice to the execution
creditor and the bondholders apply to the
magistrate of the district in which the property is to be sold for
any modification of
the conditions of sale and the magistrate may
make such order thereon, including an order as to costs, as to him
may seem meet.
44.
The body of form 21 reads as follows:
1. The property shall be sold by the
sheriff of ........... at ....................... to the highest
bidder without reserve/with
a reserve price of ................
2. The sale shall be for rands, and no
bid for less than one rand shall be accepted.
3. If any dispute arises about any bid
the property may be again put up to auction.
4. If the auctioneer makes any mistake
in selling, such mistake shall not be binding on any of the parties,
but may be rectified.
If the auctioneer suspects that a bidder is
unable to pay either the deposit referred to in condition 6 or the
balance of the purchase
price he may refuse to accept the bid of such
bidder, or accept it provisionally until the bidder shall have
satisfied him that
he is in a position to pay both such amounts. On
the refusal of a bid under such circumstances, the property may
immediately be
again put up to auction.
5. The purchaser shall, as soon as
possible after the sale, and immediately on being requested by the
.......... , sign these conditions,
and if he has bought
qua
qualitate,
state the name of his principal.
6(a) The purchaser shall pay a deposit
of ten per cent of the purchase price in cash on the day of sale, the
balance against transfer
to be secured by a bank or building society
guarantee, to be approved by plaintiff's attomey, to be furnished to
the sheriff within
......... days after the date of sale.
(b) If transfer of the property is not
registered within one month after the sale, the purchaser shall be
liable for payment of
interest to the plaintiff at the rate of ......
per cent p.a. and to the ........... bondholder at the rate of ......
per cent
p.a. on the respective amounts of the award to the plaintiff
and the ............. bondholder in the plan of distribution as from
the expiration of one month after the sale to date of transfer.
7. Inasmuch as the defendant is a
member of the .............. Group, no bids will be accepted by or on
behalf of a person who is
not a member of such Group, unless such
person exhibits to the auctioneer at the sale a permit from the
Minister of the Interior
authorizing him to acquire such property.
8. If the purchaser fails to carry out
any of his obligations under the conditions of sale, the sale may be
cancelled by a judge
summarily on the report of the sheriff after due
notice to the purchaser, and the property may again be
put
up for sale; and the purchaser shall be
responsible for any loss sustained by reason of his default, which
loss
may, on the application of any aggrieved creditor whose name
appears on the sheriff's distribution account, be recovered from him
under judgment of the judge pronounced summarily on a written report
by the sheriff, after such purchaser shall have received notice
in
writing that such report will be laid before the judge for such
purpose; and if he is already in possession of the property,
the
sheriff may, on seven days' notice, apply to a judge for an order
ejecting him or any person claiming to hold under him therefrom.
9. The purchaser shall pay
auctioneer's charges on the day of sale and in addition, transfer
dues, costs of transfer, and arrear
rates, taxes and other charges
necessary to effect transfer, upon request by the attorney for the
execution creditor.
10. The property may be taken
possession of immediately after payment of the initial deposit, and
shall after such deposit be at
the risk and profit of the purchaser.
11. The purchaser may obtain transfer
forthwith if he pays the whole price and complies with condition 9,
in which case any claim
for interest shall lapse, otherwise transfer
shall be passed only after the purchaser has complied with the
provisions of conditions
6 and 9 hereof.
12. The sheriff may demand that any
buildings standing on the property sold shall be immediately insured
by the purchaser for the
full value of the same, and the insurance
policy handed to him and kept in force as long as the whole price has
not been paid:
and if he does not do so, the sheriff may effect the
insurance at the purchaser's expense.
13. The property Is sold as
represented by the title deeds and diagram, the sheriff not holding
himself liable for any deficiency
that may be found to exist and
renouncing all excess. The property is also sold, subject to all
servitudes and conditions specified
in the deed of transfer.
14. The execution creditor shall be
entitled to appoint an attorney to attend to transfer.
45.
I turn to consider the meaning of the phrase "on completion of
the sale" in condition 4.3. In my view the phrase means
on the
fall of the hammer. It is at that moment that a sale by auction is
concluded. Counsel submitted that the effect of the condition
was to
make the sale subject to a resolutive condition. I agree.
46.
A condition is an uncertain
future event. A resolutive condition does not suspend the coming into
effect of the contract in which
it is embodied; but on fulfilment of
a resolutive condition, the contract will be terminated. In the realm
of contract a suspensive
condition suspends the full operation of the
obligation and renders it dependent on the occurrence of an uncertain
future event;
whereas in the case of a resolutive condition the
normal consequences flow from the contract, but on the happening of
an uncertain
future event these consequences are annulled.
[14]
47.
I see no absurdity if the phrase is given its literal meaning. A
public auction makes it possible for commercial chancers, speculators
who lack the financial means to make good on their bids, to bid for a
property in the hope that after a successful bid they can
raise
finance which they do not have at the fall of the hammer. Both Form
21 and the Conditions include provisions which are meant
to reduce or
eliminate the risks to the sheriff, and therefore those who are
financially interested in the outcome of the sale,
that a bidder
might not be good for the purchase price at the fall of the hammer.
There would be no commercial absurdity at the
level of interpretation
if the phrase were to require the purchaser immediately on the fall
of the hammer to make payment of the
deposit to the sheriff. Under
condition 4.2, payment might be made by means which include cash and
electronic transfer; so the
provision does not give rise to a
commercial absurdity. But even if that interpretation is wrong, I do
not think that the condition
can contemplate a delay in paying the
deposit any longer than the actual business day of the sale.
48.
From that it follows, as I see it, that if the execution purchaser
fails to pay the deposit as required by condition 4.3, the
condition
visits the failure so to pay with the nullity of the sale itself. In
such a case, the condition contemplates that the
sheriff must
immediately put the property up for auction again. As the sale then
fails by operation of law, the sheriff is not
required to approach a
court under rule 46(11)(a) for cancellation of the sale. Form 21
recognises other situations in which the
property may again be put up
for auction without the intervention of the court.
49.
Can the sale and subsequent
transfer survive the fulfilment of the suspensive condition in
condition 4.3? Counsel addressed this
issue in their supplementary
argument. It was submitted that the Conditions did not correspond
substantially with Form 21. In this
regard counsel referred to rule
46(12)
[15]
and rule 46(8)(a)(i).
[16]
In support of the argument, counsel referred to
Shoprite
Checkers Ltd Va Megasave v Khan and Another.
[17]
In that case a sale in
execution was subject to the consent of the judgment creditor which
refused consent. The majority held that
the condition providing for
the consent of the judgment creditor was invalid and thus could not
validly have been relied upon by
the judgment creditor to avoid the
sale which had been concluded. The minority held that the condition
was valid but that if the
clause were invalid, it could not be
severed from the remainder of the contract which arose from the fact
that the bid of the execution
purchaser was successful.
50.
Both the majority and the
minority dealt with the first question, ie whether the condition
offended against the scheme contemplated
by rule 46. The majority did
not deal with the second question, that of severability. The minority
judgment dealt with severability
at length. On the first question,
the majority held that the test for compliance with the requirement
in rule46(8)(1)(a)(i) that
the conditions as framed correspond
substantially with Form 21 was whether the conditions as so framed
included "inappropriate,
unfair or invalid conditions" or
"were in conflict with the rules or another law".
[18]
The minority held that the test was whether any of the conditions
imposed were contrary to the
boni
moms
or public policy.
[19]
Assuming, without deciding, that the more stringent test of the
majority is applicable, I consider that the resolutive condition
in
Condition 4.3 does not offend against that test.
51.
Form 21
caters for the problem inherent in sales in execution that
the purchaser may not have the means to pay the purchase price by
providing
for the situation where the sheriff suspects during the
bidding that the purchaser may not be able to pay. Condition 4.3 as
framed
caters for the situation which arises at the conclusion of the
bidding process (on completion of the sale or at the fall of the
hammer) when it appears that the purchaser is not immediately able to
pay the deposit. There is to my mind nothing about condition
4,3 that
is inappropriate, unfair, in conflict with the rules or another law
or otherwise invalid.
52.
In the present case, I
similarly consider that the resolutive condition in clause 4.3 of the
Conditions is not severable. To excise
it would be to create a new
contract for the parties. In the language of
Sasfin
v
Beukes,
[20]
the resolutive condition goes to the principal purpose of the contra
and is not merely subsidiary or collateral to that purpose.
The
purpose is to achieve a sale of the property to a purchaser who if
financially in a position to comply with its obligations.
53.
If this is correct, then it follows that either the sale in execution
failed because the resolutive condition in condition 4.3
was
fulfilled or because the agreement of sale contained an illegal term
which was not severable from the remainder of the agreement.
On
either basis, the sale in execution could form no valid basis for the
subsequent juristic act of the sheriff in transferring
the property
to the execution purchaser.
54.
Counsel nevertheless submit
that the invalidity of the sale in execution cannot effect the
validity of the real agreement (saaklike
ooreenkoms) of transfer of
the property to the execution purchaser. The argument is based on the
principle expressed in
Legator
Mckenna Inc vShea:
[21]
Broadly stated, the principles
applicable to agreements in general also apply to real agreements.
Although the abstract theory does
not require a valid underlying
contract, eg sale, ownership will not pass - despite registration of
transfer - if there Is a defect
in the real agreement ... .
55.
In
Legator,
the SCA found that the agreement of sale was
invalid but that, nevertheless, the ensuing real agreement of
transfer was valid. In
that case, while the person who sold the
property (a curator appointed by the court) lacked authority to
conclude the sale, by
the lime the curator came to transfer the
property, that defect in authority had been cured. The curator thus
had the necessary
authority to transfer. The fact that the curator
lacked authority to sell had, in accordance with the abstract theory
of acquisition
of ownership, no impact on the capacity of the curator
to transfer and therefore no impact on the validity of the real
agreement.
56.
But the present case is different. The capacity of a sheriff to
transfer a property in execution away from its owner, the execution
debtor, arises only if a valid sale in execution has taken place.
Absent such a valid sale, the sheriff has no greater power to
transfer the property than any other person. As I have found that the
sale failed because the resolutive condition was fulfilled,
the
sheriff had no power to transfer. The Conditions provided for what
the sheriff had to do when the resolutive condition was
fulfilled: he
had immediately to put the property up for auction again.
57.
I therefore conclude that the transfer of the property by the sheriff
to the execution purchaser was invalid and must be cancelled.
58.
Counsel for the execution purchaser submitted that the execution
debtor was estopped from asserting his right of ownership to
the
property or that it had waived its right to vindicate it. These
submissions were based only on the facts that the
execution purchaser took active steps to facilitate the sale in
execution and did not take steps to vindicate before transfer was
passed even though the execution purchaser called upon it to do so.
In my view, this delay cannot constitute either an estoppel
or a
waiver of a right to rely on the invalidity of the transfer.
59.
Finally, the execution purchaser argued that the execution debtor
lacked standing to pursue the relief sought in the application.
When
one appreciates, as I think one must, that the relief sought is in
essence vindicatory, it must follow that this contention
is without
merit. The owner of a thing is preeminently the party vested by law
with standing to vindicate.
60.
It follows that some of the relief sought in the main application
must issue. I tum to the counter-application brought by the
execution
purchaser.
61.
The ground on which the
counter-application is brought is unjust enrichment. The execution
purchaser submits that if the sale and
transfer of the property are
set aside, it will be impoverished. It correctly abandoned its prayer
for relief in this regard against
the execution creditor. This is
because the execution creditor was not enriched at the expense of the
execution purchaser. Before
the distribution by the sheriff of the
proceeds of the sale, the execution creditor had a claim against the
execution debtor. Commercially,
this claim was equivalent to its
nominal face value because the execution debtor had assets sufficient
satisfy the claim. The effect
of the distribution to the execution
creditor was to discharge the execution creditor's claim,
pro
tanto,
against the
execution debtor. The execution creditor was therefore not enriched
by the distribution. Its asset position before and
after the
distribution was the same.
[22]
62.
The position in this regard as between the execution purchaser and
the execution debtor is different. Effectively, and through
the
intermediation of the sheriff, the execution purchaser discharged
debts owed by the execution debtor
sine causa.
These debts
included the amounts paid to the execution creditor (R1 915 694,65
less R180 000 provided by the execution debtor) and
the rates due to
the local authority (R79 060,20). But I do not think that the
execution debtor was enriched by the payments by
the execution
purchaser of the sheriffs fees in relation to sale and transfer which
I have held to be abortive. The award to the
execution purchaser must
carry interest from date of registration of transfer into the name of
the execution purchaser, ie 22 June
2015.
63.
I heard no argument as to costs but it seems to me that all parties
who contested the matter have enjoyed a measure of success.
I
consider that the fairest would be to make no order as to costs.
64.
The execution creditor asked that I give directions regarding the
attachment of the money held in the trust account of the execution
debtor's former attorney. But there is no relief sought in that
regard. In the absence of any agreement between the parties, the
law
must simply take its course. The effect of my judgment is that the
attachment of the property was valid. I am not called upon
to
pronounce on the validity of the attachment of the money in the trust
account. I think the parties would be wise to agree how
that matter
should be finally resolved. But it is a matter for them, not the
court.
65.
I make the following order:
1. The prayer for a declaration of
invalidity in relation to the writ of execution against the immovable
property of the KK Trust
(the execution debtor), being Holding 89
Laezonia Agricultural Holdings (the property), is dismissed.
2. The sale in execution of the
property is declared to have become null and void by reason of the
fulfilment of the resolutive
condition in condition 4.3 of the
Conditions of Sale (pp35-44 of the papers).
3. The transfer of the property into
the name of the Mthimunye Trust (the execution purchaser) is hereby
set aside.
4. The six respondent is hereby
authorised and directed to
4.1 cancel the registration of the
property in the name of the execution purchaser;
4.2 cancel all bonds registered over
the property by the execution purchaser; and
4.3 re-register the property in the
name of the execution debtor.
5. The execution debtor is ordered to
pay the execution purchaser the sum of R1 814 754,85, together with
interest on that sum at
9% per annum from 22 June 2015 to date of
payment.
6. There will be no order as to costs.
_________________
NB
Tuchten
Judge
of the High Court
13
March 2017
For
the first applicant:
In
person
For the first respondent:
Adv BC Stoop SC
Instructed
by KR Attorneys
Pretoria
For the second to fourth
respondents:
Mr MD Mitchell of
MD
Mitchell Attorneys
Pretoria
[1]
In the alternative, this prayer seeks that the execution creditor
repay these moneys to "the first respondent", ie
itself.
This alternative prayer makes no sense.
[2]
More accurately. the first and second respondants.
[3]
The prayer is internally contradictory. The prayer refers to "thirty
(90) days".
[4]
Rule 46(3)(a) provides in relevant part: "The mode of
attachment of immovable property shall be by notice in writing by
the sheriff served upon the owner thereof ...” Rule46(3)(b)
requires that such a notice be served on the owner in accordance
with rule 4.
[5]
Clause 4.3 reads: "Should the Purchaser fail to pay the deposit
on completion of the sale, then the sale shall be null and
void and
the Sheriff shall immediately put up the property for auction
again.”
[6]
The proviso to rule "8(1)(a)(I reads: "Provided that,
where the property sought to be attached Is the primary residence
of
the judgment debtor, no writ shall issue until the court, having
considered all the relevant circumstances, orders execution
against
such property."
[7]
2011 4 SA 314
GNP para 32
[8]
2009 1 SA 238
SCA paras 19-20
[9]
[2013] 3 All SA 500
SCA paras 11-12
[10]
There is no clause 4.1.
[11]
Record pp275-6; paragraph numbers omitted.
[12]
2014 2 SA 494
SCA para 12
[13]
Stakeholders, in the modem Idiom.
[14]
McAlpine v McAlpine NO and Another
1997 1 SA 736
A 752
[15]
"Subject to the provisions of subrule (5), the sale shall be
without reserve and upon the conditions stipulated under subrule
(8), and the property shall be sold to the highest bidder."
[16]
"The conditions of sale shall, not less than 20 days prior to
the elate of the sale, be prepared by the execution creditor
corresponding substantially with Form 21 of the First Schedule, and
the said conditions of sale shall be submitted to the sheriff
conducting the sere to settle them.”
[17]
Unreported; a judgment of a full bench of the Eastern Cape Division,
delivered on 8 July 2004 under case no. CA520/2003.
[18]
Para 24
[19]
Para 14
[20]
1989 1 SA 1A
para 11
[21]
2010 1 SA 35
SCA para 22
[22]
Absa Ltd v Moore and Another 2017 1SA 255 CC para 49