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[2016] ZAKZDHC 22
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Firstrand Bank Limited v Mdletye and Another (8145/2015) [2016] ZAKZDHC 22; 2016 (5) SA 550 (KZD) (1 July 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
Case
No: 8145/2015
DATE:
01 JULY 2016
REPORTABLE
In
the matter between:
FIRSTRAND
BANK
LIMITED
..............................................................................................
Applicant
And
NZIMENDE
MONTGOMERY
MDLETYE
.................................................................
1
st
Respondent
ABEGAIL
NONTUTHUZELO
MDLETYE
................................................................
2
nd
Respondent
JUDGMENT
Gorven
J:
[1]
This application is for default judgment.
The applicant claims a money judgment along with a prayer to declare
executable an immovable
property (the property) owned by the
respondents. The property is their primary residence. The applicant
granted a loan to the
respondents to purchase the property. A
mortgage bond in favour of the applicant provides security for this
loan.
[2]
The amount loaned to the respondents was
R358 000. The agreement governing the loan was concluded on 5
December 2005. The mortgage
bond was registered and secures the
capital sum and an additional amount of R72 000. The repayment
period of the loan is 20
years. It was agreed that if the respondents
defaulted on any payments, the applicant would be entitled to invoke
an acceleration
clause and declare the full amount then outstanding
under the loan to be due, owing and payable.
[3]
The respondents admittedly defaulted on
their loan obligations by not paying a number of monthly instalments.
On 14 July 2015, the
applicant sent a letter to the respondents
indicating that the arrears in their instalments totalled R13 747.49.
Demand was
made that the arrears be brought up to date, failing which
the applicant would invoke the acceleration clause and approach the
court for an order declaring the property executable. The respondents
failed to bring the arrears up-to-date. The applicant then
invoked
the acceleration clause. The agreement has not been cancelled.
[4]
An action was instituted on 20 August 2015
by the applicant against the respondents for the sum of R291 634.33,
interest, costs
and an order declaring the property executable. The
summons claimed that R291 634.33 was the total amount then
outstanding
under the loan. The respondents did not defend the
action. On 2 October 2015 the applicant launched this
application claiming
that sum. A further affidavit was deposed to on
26 January 2016 alleging that the outstanding balance as at
25 January 2016
was R297 148.34 and that the arrears
were R16 550.49.
[5]
The application is opposed by the
respondents. The first basis of opposition is that the amount claimed
by the applicant is incorrect.
In their answering affidavit, deposed
to on 18 February 2016, they challenge debits on the statement for
legal costs and an amount
debited against the entry ‘Renew
Hoc’. They say that three payments in the respective amounts of
R5 000, R4 000
and R1 000 were made on 2 February 2016
and thus not taken into account in the statement of 25 January 2016.
[6]
Due to these challenges, the matter was
adjourned and the applicant was given leave to deliver an affidavit
clarifying the position
(the supplementary affidavit). This affidavit
satisfactorily clarified the debits and put up a statement of the
account up to 14
June 2016. The total amount then outstanding was
R275 315.04, down about R22 000 from the end of January. In
argument,
after delivery of the supplementary affidavit, it was
conceded by the respondents that the applicant is entitled to
judgment in
this amount along with interest and costs.
[7]
The
second basis of opposition relates to the prayer to declare the
property executable. It is this which forms the crisp issue
in the
application with the respondents arguing that judicial oversight
should be exercised by refusing the prayer. In
Gundwana
v Steko Development & others
,
[1]
the Constitutional Court held:
‘
[W]
here
execution against the homes of indigent debtors who run the risk of
losing their security of tenure is sought, after judgment
on a money
debt, further judicial oversight by a court of law, of the execution
process, is a must.’
[2]
The
issue of execution in such circumstances was dealt with as follows:
‘
It
must be accepted that execution in itself is not an odious thing. It
is part and parcel of normal economic life. It is only when
there is
disproportionality between the means used in the execution process to
exact payment of the judgment debt, compared to
other available means
to attain the same purpose, that alarm bells should start ringing. If
there are no other proportionate means
to attain the same end,
execution may not be avoided.’
[3]
[8]
In
Jaftha
v Schoeman & others; Van Rooyen v Stoltz & others
,
[4]
the
Constitutional Court referred to certain factors to take into account
when a court exercises such judicial oversight
.
There is no closed list, but those referred to may be summarised as
follows:
·
Whether the rules of court have been
complied with;
·
Whether there are other reasonable ways in
which the judgment debt can be satisfied;
·
Whether there is any disproportionality
between this form of execution and other possible means to exact
payment;
·
The circumstances under which the debt was
incurred;
·
Any attempts made by the judgment debtor to
pay off the debt;
·
The financial position of the parties;
·
The amount of the judgment debt;
·
Whether the judgment debtor is employed or
has a source of income to pay off the debt;
·
Whether the sale of the property is likely
to render the debtor and her or his family homeless;
·
Any
other factors relevant to the particular case.
[5]
[9]
In
Nkata
v FirstRand Bank Limited & others
,
[6]
the provisions of s 129(3) and (4) of the
National
Credit Act
[7]
received
attention. At the time, these subsections read:
‘
(3)
Subject to subsection (4), a consumer may—
(a)
at any time before the credit provider has cancelled the agreement
re-instate a credit agreement that is in default by paying
to the
credit provider all amounts that are overdue, together with the
credit provider’s permitted default charges and reasonable
costs of enforcing the agreement up to the time of re-instatement;
and
(b)
after complying with paragraph (a), may resume possession of any
property that had been repossessed by the credit provider pursuant
to
an attachment order.
(4)
A consumer may not re-instate a credit agreement after —
(a)
the sale of any property pursuant to —
(I)
an attachment order; or
(ii)
surrender of property in terms of section 127;
(b)
the execution of any other court order
enforcing that agreement; or
(c)
the
determination thereof in accordance with section 123.’
[8]
In
that matter, default judgment had been granted against the applicant
for
R1 472 506.89, together with
interest from 1 June 2010 to the date of payment.
The
bank had not cancelled the agreement.
An
order had been granted declaring the immovable
property over which the bank held a mortgage bond to be executable. A
sale in execution
had taken place but transfer was interdicted
pending the outcome of an application to rescind the default
judgement.
[10]
The
high court refused rescission.
[9]
Rogers J then of his own accord raised the issue of whether the
applicant was entitled to the reinstatement of the credit agreement
and to repossess the property on the basis of s 129(3). This
turned on what was meant by the requirement that payment must
be made
of the ‘
permitted
default charges and reasonable costs of enforcing the agreement up to
the time of re-instatement’.
[10]
The
high court found in favour of the applicant.
The
Supreme Court of Appeal overturned that judgment
[11]
but the Constitutional Court held that the agreement had been
re-instated.
[12]
The
Constitutional Court also held that re-instatement ‘
means
that the default judgment and subsequent attachment would be rendered
without force or effect.’
[13]
[11]
Accordingly,
if the arrears can be eliminated and the other amounts referred to in
s 129(3) paid, the agreement will be re-instated.
From the date
of re-instatement, the default judgment will have ‘
no
legal force’.
[14]
I
f
the property is sold by virtue of an attachment following a
declaration of executability, the agreement will not be capable of
being re-instated and the respondents will lose their home.
[15]
The potential for this to occur must therefore be a factor to be
taken into account in an application to declare the property
executable. This factor must be placed in the scale along with all
other relevant factors in deciding such an application. The
significance of this is that, unlike many of the other factors which
relate to alternative ways of satisfying the entire judgment
debt,
re-instatement does not require payment of the full judgment debt,
only the arrears and other specified charges.
[12]
In their answering affidavit, the
respondents tender to maintain the monthly instalment plus pay an
additional R1 000 per month
until the arrears are eliminated.
They aver that one of their sons, who lives with them in the
property, recently obtained employment
and has undertaken to pay
R3 000 towards the arrears. Their other two children are not
employed. The 2
nd
respondent suffered a stroke in December 2015 and now struggles with
severe depression requiring treatment. They are pensioners
with a
joint pension of R15 000 per month, arising from their previous
employment with the Department of Correctional Services.
They say
that, in all the circumstances, the property should not be declared
executable.
[13]
The supplementary affidavit dealing with
the payment history of the respondents since delivery of the
answering affidavit shows
that they have complied with their tender.
This much the applicant accepts. It is clear that they have reduced
both the total amount
outstanding and the arrear instalments. No
indication has been given as to the amount likely to be needed to pay
the ‘
prescribed default
administration charges and reasonable costs of enforcing the
agreement’.
Despite this, I am of the
view that there is a reasonable prospect that the agreement is
capable of being
re-instated
within a relatively short period of time.
[14]
Other relevant factors mentioned in
Jaftha
and which must be weighed in the balance are as follows. There are no
other ways to satisfy the entire judgment debt. As indicated,
the
respondents have made attempts to bring the arrears up to date. The
respondents have a source of income by way of their pensions
and any
contributions made by family members who are employed and able to do
so. The respondents are 2.04 months in arrears with
their
instalments. The property is their primary residence and that of
their family members. An additional factor is the age of
the
respondents which makes it unlikely that they will be able to
purchase another property if the property is lost to them.
[15]
The applicant persists in the prayer for
executability. It submits that the execution process takes time and
that, if the respondents
continue the tendered payments, the
agreement may be re-instated before the property is sold in
execution. It is so that execution
takes time but s 129(4)
prohibits re-instatement of the agreement once a sale pursuant to an
attachment has taken place. This
would close the door to the
respondents if that happens before re-instatement.
[16]
In
my view, proper judicial oversight would not be served by leaving
that to chance. In all the circumstances, it seems to me that
granting the order declaring the property executable at this stage
would amount to ‘disproportionality between the means
used in
the execution process to exact payment of the judgment debt, compared
to other available means to attain the same purpose’.
[16]
[17]
I say ‘at this stage’. I do not
say that the applicant will never be entitled to such an order. Much
will depend on
the track record of the respondents in the ensuing
period. For this reason, it is also not appropriate to dismiss the
application
to declare the property executable. An adjournment of
this aspect of the application along with an order that the matter
not be
set down sooner than six months from the date of judgment,
along with other procedural directions, seems to me to meet the
exigencies
of the matter.
[18]
In the result:
1.
Judgment is granted in favour of the
applicant against the respondents jointly for:
a.
Payment in the sum of R275 315.04;
b.
Interest on the said sum from 15 June 2016
to date of payment at the rate of 10.65% per annum, calculated daily
and compounded monthly;
c.
Costs of suit on a scale as between
attorney and client.
2.
The application to declare the immovable
property executable is adjourned sine die. The application may not be
set down sooner than
six months from date of judgment. If the matter
is set down;
a.
Notice must be given to the respondents;
b.
The applicant is given leave to deliver an
affidavit setting out the payment history, the steps taken to execute
and any other relevant
matter no later than 10 court days prior to
the date of set down; and
c.
The respondents are given leave to answer
to this affidavit.
GORVEN
J
DATES
OF HEARING: 7, 21 June 2016.
DATE
OF JUDGMENT: 1 July 2016.
FOR THE
APPLICANT: P Bramdhew, Instructed by Glover Kannieappan Inc.
FOR
THE
RESPONDENT:
MP Mhlongo, Instructed by Durban Justice Centre.
[1]
Gundwana
v Steko Development & others
2011
(3) SA 608
(CC).
[2]
Paragraph
41.
[3]
Paragraph
54.
[4]
Jaftha
v Schoeman & others; Van Rooyen v Stoltz & others
[2004] ZACC 25
;
2005
(2) SA 140
(CC).
[5]
Jaftha
para 56-60.
[6]
Nkata
v FirstRand Bank Limited & others (Socio-Economic Rights
Institute of South Africa as
Amicus
Curiae)
[2016] ZACC 12
;
2016 (6) BCLR 794
(CC).
[7]
National
Credit Act 34 of 2005
.
[8]
These
subsections were amended with effect from 13 March 2015 by s 32(a)
of the National Credit Amendment Act 19 of 2014.
They now read:
‘
(3)
Subject to subsection (4), a consumer may
at any time before the credit provider has cancelled the agreement,
remedy a default
in such credit agreement by paying to the credit
provider all amounts that are overdue, together with the credit
provider's prescribed
default administration charges and reasonable
costs of enforcing the agreement up to the time the default was
remedied.
(4)
A credit provider may not reinstate or
revive a credit agreement after-
(a)
the sale of any property pursuant to-
(I)
an attachment order; or
(ii)
surrender of property in terms of section 127;
(b)
the execution of any other court order
enforcing that agreement; or
(c)
the termination thereof in accordance
with section 123.
’
[9]
Nkata
v FirstRand Bank Limited & others
[2014]
ZAWCHC 1
;
2014 (2) SA 412
(WCC).
[10]
Now
‘prescribed default administration charges and reasonable
costs of enforcing the agreement up to the time of re-instatement’.
[11]
FirstRand
Bank Limited v Nkata
[2015]
ZASCA 44
;
2015 (4) SA 417
(SCA).
[12]
The
high court
dealt
with the matter prior to the amendment of s 129 (3) and (4).
The Supreme Court of Appeal heard the appeal on 6 March
2015. The
amendment came into effect on 13 March 2015. Judgment in the Supreme
Court of Appeal was handed down on 26 March 2015.
The Constitutional
Court mentioned the amendment but considered the matter on the basis
of the subsections prior to amendment.
[13]
Nkata
para
131.
[14]
Nkata
para
(d)(i) of the order of the Constitutional Court.
[15]
Before
the amendments to s 129(4), the section provided that a
‘consumer’ may not reinstate after the sale of
a
property pursuant to an attachment order. This was amended to
provide that a ‘credit provider’ may not reinstate
thereafter. The import of this amendment has not been determined but
it seems to me that it is not material for the purposes
of this
judgment. No argument was advanced which dealt with this.
[16]
Gundwana
para
54.