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[2013] ZAFSHC 164
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Mbebe and Another v Absa Bank Ltd and Others (3874/2012) [2013] ZAFSHC 164 (19 September 2013)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No. : 3874/2012
In the matter between:-
THAMSANQA JOSEPH
MBEBE
.........................................
1
st
Applicant
MATSHABALALA LAVINA
MBEBE
..................................
2
nd
Applicant
and
ABSA BANK LIMITED
....................................................
1
st
Respondent
WESSEL DU PLESSIS
...................................................
2
nd
Respondent
BAREND DU PLESSIS
...................................................
3
rd
Respondent
NEELOFAIR ISSA
...........................................................
4
th
Respondent
JUNAID ISAA
..................................................................
5
th
Respondent
THE SHERIFF FOR THE
HIGH COURT,
BLOEMFONTEIN
............................................................
6
th
Respondent
REGISTRAR OF DEEDS
– FREE STATE
......................
7
th
Respondent
_____________________________________________________
HEARD ON:
28 AUGUST 2013
_____________________________________________________
DELIVERED ON:
19 SEPTEMBER 2013
_____________________________________________________
JUDGMENT
_____________________________________________________
MOCUMIE, J
[1] This is an
application for a rescission of a default judgment granted on 7
September 2009. The judgment was granted by the Registrar
of this
High Court in terms of Rule 35(1)(b) for payment of monies and a
declaration of property as executable. The application
is that this
Court should declare that the declaration issued under case number
3965/2009 be set aside as invalid; the sale in
execution of property
held on 24 November 2011 together with all subsequent sales of the
property be set aside as unlawful pending
the finalisation of these
proceedings; an order directing the Registrar of Deeds to transfer
the property back to the applicants
and an order directing Absa to
restore the applicants’ bond on the same terms and conditions;
and an interdict preventing
further transfer of the property.
The application was
opposed by 1
st
, 4
th
and 5
th
respondents.
[2] On 24 January 2005
the 1
st
respondent (“Absa”) granted the 1
st
and 2
nd
applicants (“the applicants”) a loan
to build a house on Erf No 1310, Bloemfontein, Free State. The loan
was secured
by a mortgage bond. On 24 July 2006, a second mortgage
bond was registered over the same property. Two mortgage bonds were
therefore
registered in favour of Absa over the applicants’
immovable property. The applicants undertook to repay the loan at a
consolidated
amount of R8300,00 monthly. During 2008, the applicants
failed to pay Absa the instalments due in terms of the mortgage bonds
and
fell in arrears. On 7 August 2007 Absa issued summons against the
applicants and sought default judgment, in terms of Rule 35(1)(b).
The applicants failed to enter an appearance to defend by 8 September
2009. On the same day the Registrar granted judgment by default
including an order declaring Erf No 1310, Bloemfontein, executable.
[3] On 24 November 2010
after two sales in execution were postponed at the instance of the
applicants pursuant to alternative arrangements
by the applicants, to
make further payments had failed, the property was sold for
R545 000,00. As on 7 February 2011 the outstanding
balance was
R884 013, 40 plus interest at the rate of 11% p.a. from 2 July
2009 to date of final payment.
[4] In support of the
relief sought the applicants relied on the following:
4.1. They made
arrangements with Absa to pay it later than agreed upon in the loan
agreement and Absa, despite such arrangements
issued summons on 7
August 2009;
4.2. The property was
declared executable by the Registrar and not by a competent court;
4.3. When the Registrar
declared the property executable (s)he did not have the authority to
do so and did not comply with the provisions
of the Constitution;
4.4. That the sale did
not comply with the provisions of section 66(i)(a) of the Magistrates
Court Act and Rule 45 read with Rule
46 of this Court;
4.5. The applicants had
and still have sufficient movable property or assets against which no
attachment was made;
4.6. The amount for which
the house was sold was far below its market value.
[5] The applicants
further relied on two unreported judgments of this Court, Case no
1267/2010
MG Keikekame and Another v Wilson Thombela and Others
delivered on 17 November 2011 and Case no 794/2012
Madisebo
Franscina Mokharumetso v First Rand Bank Ltd and Others
delivered on 11 October 2012.
[6] It was common cause
between the parties that the applicants were in default of their
payments when Absa issued summons; obtained
a judgment in its favour
as set out above and sold the property at a sale in execution in
November 2010. It was also common cause
that the writ of execution
was granted by the Registrar of this Court and that when this writ
was granted the applicants still
owed Absa the amount as set out
above.
[7] What was in dispute
and had to be determined was whether the writ of execution and the
subsequent sale of the applicants’
property were irregular and
null and void.
[8] During September 2009
when the default judgment was granted and the warrant of execution
was issued Rule 45(1) was applicable.
The Rule provides:
“
The party in
whose favour any judgment of the court has been pronounced may, at
his own risk, sue out of the office of the registrar
one or more
writs for execution thereof as near as may be in accordance with Form
18 of the First Schedule: Provided that, except
where immovable
property has been specifically declared executable by the court or,
in the case of a judgment granted in terms
of Rule 31(5), by the
registrar, no such process shall issue against the immovable property
of any person until a return shall
have been made of any process
which may been issued against his movable property, and the registrar
perceives there from that the
said person has not sufficient movable
property to satisfy the writ.”
[9] On 24 November 2010
when the applicants’ property was sold at a public auction,
Rule 45(1) was already amended in its
entirety and replaced with Rule
46(1) to prohibit the issue of warrants of execution against
immovable property, being the primary
residence of the debtor, until
such time as a court had declared the property executable, after
considering all relevant circumstances.
The Rule has been in effect
since its amendment on 19 November 2010. Respective High Court
Divisions amended their practice rules
accordingly.
[10] Rule 46(1)(a)(ii)
provides:
“
No writ of
execution against the immovable property of any judgment debtor shall
issue until –
(a) a return shall
have been made of any process which may have been issued against the
movable property of the judgment debtor
from which it appears that
the said person has not sufficient movable property to satisfy the
writ: or
(b) Such immovable property shall have
been declared to be specifically executable by the court, or in the
case of a judgment granted
in terms of rule 31(5), by the registrar:
Provided that, where the property sought to be attached is the
primary residence of the
judgment debtor, no writ shall issue unless
the court, having considered all the relevant circumstances, orders
execution against
such property.”
[11] The Rule is read
with section 26 of the Constitution which provides:
“
11.1
Everyone has the right to have access to adequate housing;
11.2. The State must take reasonable
legislative and other measures within its available resources, to
achieve the progressive realization
of this right;
11.3. No one may be evicted from their
home, or have their home demolished, without an order of court made
after considering all
the relevant circumstances. No legislation may
permit arbitrary evictions.”
[12] Earlier in 1999/2000
the Constitutional Court challenged the sale of the debtors’
primary residence without court supervision
and stated so much in at
least two main decisions,
Chief Lesapo v North West
Agricultural Bank and Another
[1999] ZACC 16
;
2000 (1) SA 409
(CC) and
First
National Bank v Land and Agricultural Bank of South Africa and
Another
[2000] ZACC 9
;
2000 (3) SA 626
(CC).
[13] Finally ,in 2011 the
Constitutional Court in
Gundwana v Steko Development and Others
2011 (3) SA 608
(CC) considered the constitutionality of the
Registrar’s powers under Rule 45 to declare mortgaged property
which was a debtor’s
primary residence executable. The
Constitutional Court declared that Rule 45 was unconstitutional. The
effect of the
Gundwana
decision was that the judgments
in
Nedbank Ltd v Mortinson
[2005] ZAGPHC 85
;
2005 (6) SA 462
(W)
[2006] 2
All SA 506
(W) and
Standard Bank of SA v Saunderson and Others
2006 (2) SA 264
(SCA)
2006 9 BCLR 1022
[2006] 2 All SA 382
were
overruled, to the extent that they held that a Registrar was
constitutionally competent to make execution orders when granting
default judgments in terms of Rule 35(1)(b). In respect of the
validity of writs of execution against immovable property in the
Magistrates court in terms of section 66(1) of the Magistrates Court
Act, 32 of 1944, see
Japhta v Schoeman & Others
and
Van Rooyen v Stoltz & Others
[2004] ZACC 25
;
2005 (2) SA 140
(CC).
[14] In considering the
prospective and retrospective implications of the decision the
Constitutional Court held that going forward
(prospectively) the
amended Rule 46(1) will regulate the procedure for writs against
immovable property and in respect of warrants
authorised by the
Registrar; and prior to this decision and the amendment to Rule
46(1), the declaration of unconstitutionality
would apply
retrospectively without any limitation.
[15] To dispel fears that
the retrospectivity order would result in a flood of applications to
set aside unlawful sales in execution,
Froneman
J stated the
following in paragraph [58]:
“
[58] There
may be a fear that the decision in this matter will lead to
large-scale legal uncertainty about its effects on past matters,
where homes were declared specially executable by the registrar, and
sales in execution and transfers followed. The experience
following
Jaftha
may be an indication that this fear is overstated. It must be
remembered that these orders were issued only where default
judgments
were granted by the registrar. In order to turn the clock back in
these cases,
aggrieved
debtors will first have to apply for the original default judgment to
be set aside.
In other words, the mere constitutional invalidity of the rule, under
which the property was declared executable, is not sufficient
to undo
everything that followed. In order to do so
the
debtors will have to explain the reason for not bringing a rescission
application earlier, and they will have to set out a defence
to the
claim for judgment against them.
It may be that in many cases those aggrieved may find these
requirements difficult to fulfil.”
(Own
underlining)
[16] Further at para [59]
and [60] he stated:
“
[
59]
From what has been stated above, in relation to the legitimacy
of resorting to execution in order to obtain satisfaction
of
judgment debts sounding in money, and that only deserving cases would
justify other means to satisfy the judgment debt, it follows
that a
just and equitable remedy, following upon the declaration of
unconstitutionality, should seek to ensure that only deserving
past
cases benefit from the declaration. I consider that this
balance may best be achieved by requiring that aggrieved debtors,
who
seek to set aside past default judgments and execution orders granted
against them by the registrar,
must
also show, in addition to the normal requirements for rescission,
that a court, with full knowledge of all the relevant facts
existing
at the time of granting default judgment, would nevertheless have
refused leave to execute against specially hypothecated
property that
is the debtor's home
.(Own
underlining)
[60] Once these
hurdles have been cleared, and it is determined that special
execution should not have been allowed,
the
question of the effect of invalid execution sales and subsequent
transfers will have to be considered as a next step.
It is not possible to lay down inflexible rules to deal with all
the permutations that may arise in these cases. Existing
legal
principles and rules will be sufficient to deal with most cases in a
just and equitable manner
.
”
(Own underlining)
[17] To avoid large scale
legal uncertainty and achieve a balance between the interests of
creditors on the one hand and defaulting
debtors on the other hand,
Froneman, J
at paras [58]-[60] of the judgment as set out
above directed that in order for aggrieved debtors to succeed in
setting aside past
default judgments and execution orders granted
against them by the Registrar the following requirements must be met:
17.1. The aggrieved
debtor must apply for rescission of the default judgment which
resulted in the offending warrant of execution;
17.2. The aggrieved
debtor will have to explain why the rescission was not sought
earlier;
17.3. The aggrieved
debtor will have to set out a defence;
17.4. The aggrieved
debtor will also have to show that a court, with full knowledge of
all the relevant facts existing at the time
of granting default
judgment, would have refused leave to execute against specially
hypothecated property.
17.5.
As I understand the
Gundwane
decision, in addition to the obvious
requirements set out above the aggrieved defaulter must also show
that to set aside the writ
of execution will be ‘a
just
and equitable remedy, [and that (s)he] is a deserving past case which
should benefit from the [unconstitutionality] declaration.’
[18] There are three ways
in which a judgment taken in the absence of one of the parties may be
set aside:
(i) In terms of Rule
31(2)(b);
(ii) In terms of Rule
42(1)(a); or
(iii) In terms of the
common law.
(See
Erasmus, Superior
Court Practice
B1-200).
[19] Rule 31(2)(b)
provides:
“
(b) A
defendant may within 20 days after he has knowledge of such judgment
apply to Court upon notice to the plaintiff to set aside
such
judgment and the Court may, upon good cause shown, set aside the
default judgment on such terms as to it seems meet.”
(See
Grant v
Plumbers (Pty) Ltd
1949 (2) SA 470
(O))
[20] Rule 42(1)(a)
provides:
“
(1)(a) The
Court may, in addition to any other powers it may have,
mero
moto
or upon the application of any party affected, rescind or vary an
order or judgment erroneously sought or erroneously granted in
the
absence of any party affected thereby.”
[21] At common law
judgment may be set aside on the following grounds:
(a) fraud;
(b) Justus error;
(c) when new documents
have been discovered;
(d) where judgment has
been granted by default;
(e) In the absence
between the parties of a valid agreement to support the judgment;
(f) On the ground of
justa causa
.
(See
Erasmus,
Superior
Court Practice
, B1-307,
Chetty v Law Society, Transvaal
1985 (2) SA 756
(A).)
[22] As indicated already
on 7 August 2007 when Absa issued summons against the applicants and
sought default judgment, in terms
of Rule 35(1)(b) the applicants
failed to enter an appearance to defend by 8 September 2009. On the
same day the Registrar granted
judgment by default including an order
declaring the property executable.
[23] The applicants have
up to date failed to give any reason why they failed to enter an
appearance to defend the original judgment
as prescribed by the
practice rules of this Court. The applicants have not disclosed a
bona fide
defence to Absa’s claim, i.e. what made them
fail to pay Absa as they undertook to do or put in another way what
justified
them from withholding payment due to Absa. All that was
submitted on their behalf was that they had sufficient assets to
satisfy
the claim which assets where still available.
[24] This cannot be
correct because those assets except one do not belong to the
applicants but a close corporation, Nzuzo Trading
509. The applicants
have not explained how this property could have been realised to
satisfy Absa’s claim in 2009. The properties
identified are old
and valued as when they were bought not as on the date on which Absa
took action against the applicants or in
2013 when this matter came
before the court. No valuation certificate has been attached to
indicate the real value of the properties.
The properties in any
event belong to the Nzuzo Trading 509 and can never be regarded as
those of the directors unless indicated
so specifically. Which means,
contrary to the argument raised on their behalf that the Sherriff did
not look for assets which could
be sold off first and did not return
a
nulla bona
return, it was clear that such exercise would
have been in futility. Nzuzo Trading 509 was never a party to the
loan agreement
between Absa and the applicants. Moreover this defence
was raised when the applicants had all the opportunity to do so
within the
prescribed days set out in Rule 31.
[25] In his affidavit Mr
Mbebe explained that after their house was sold on auction, they went
to different attorneys for advice.
At least two attorneys could not
help them until the current attorney came on board. Mr Khang, on
behalf of the applicants, could
not explain how seeking legal advice
or assistance could take three years and about eleven months before
the applicants approached
this Court. Suffice to submit that, as far
as he knew there was no obligation on the applicants to explain each
and every day of
the delay in approaching the Court as prescribed in
R31. This delay is clearly inordinate and unjustified because the
applicants
have not once indicated that they did not have money to
pay for legal representation so that they should challenge the
default
judgment within the prescribed period or at least in the same
year the default judgment was granted. They had by conduct acquiesced
with the judgment granted in 2009. To that extent the applicants have
failed to satisfy the first requirement for an application
for
rescission of the default judgment.
[26] Furthermore after
the loan was granted in 2005, and the bond was registered over the
property in 2006, the applicants made
regular payments until in 2008
when they started to default. On 7 July 2009 their arrears were
already running at R68 696,68.
On 15 April 2009 the applicants
paid R8 500, 00. On 18 November 2009 to avoid the first sale in
execution of their house the
applicants paid R10 000,00. The
applicants thereafter failed to pay any amount. Between 7 July 2009
and 18 November 2009 the
applicants had paid Absa R18 500, 00
only out of the R68 696.68 that they owed Absa as on 7 July
2009.
[27] On the day of the
sale of execution, 24 November 2010, the applicants approached Absa
to stop the sale pending them paying
Absa what was due to it. But by
the time agreed upon, 10h30, the applicants had failed to raise the
money and the sale went through.
The message was clear that they
could not raise such a huge amount which had accumulated over a year
and about five months, within
a few hours. Even after, as they
alleged, they were awarded a tender of R7 million during 2010, they
did not put aside any money
to pay Absa. They have not stated during
these proceedings that they have money set aside to liquidate this
claim, if given an
opportunity to do so apart from tendering Nzuzo
Trading 509’s property for liquidation of Absa’s claim.
[28] This background and
dearth of facts clearly showed that armed with the same facts a Court
would not have refused to grant leave
to execute against the
applicants’ property. To the contrary, a Court faced with these
facts would have done just that because
it would have considered what
other reasonable options were left for Absa before taking such a
drastic step and would have come
to the conclusion that Absa had no
other alternative. In addition the applicants have failed to place
any facts before this Court
to justify protection under section 26 of
the Constitution. I say so because there was no averments made that
the property in issue
was the applicants’ primary residence.
Neither were there any averments made of how many children or elders
were affected
by Absa’s action. Instead subsequent to the sale
in execution the applicants moved somewhere else where they have been
staying
to date.
[29] The applicants’
reliance on the two unreported judgment of the Free State cannot be
correct.
Keikekame and Another v Wilson Thombela and Others
was delivered on 17 November 2011 prior to the
Gundwane
decision which gave courts vast room not to adhere to the strict
requirements set out by
Froneman J
in order to avoid all
defaulters from coming to courts years later after the default
judgment had been granted.
[30]
Madisebo
Franscina Mokharumetso v First Rand Bank Ltd and Others
delivered on 11 October 2012 came after the
Gundwane
decision. The facts of this case are distinguishable from the facts
of this one. The Court considered what
Froneman J
stated but
relied on the unreported judgments of Case no: 1195/06
Menqa &
Another v Markom & Others
(CPD) and
Keikekame
to
come to the conclusion that
“
It is clear
from the papers and applicants’ uncontested statements that she
had sufficient movable property as the time of
judicial attachment
whereupon First respondent could attach for settlement or utilise as
further security for the debt. In paragraphs
4.12 and 4.16 of the
founding affidavit, she mentions amounts of R900 000, 00 and
R201 101.81 being progress payment
due to her for services
rendered. Such payments had not as yet realised…The surplus on
payment would according to her be
used to settle the debt. I am
therefore of the view that, a court, with full knowledge of all the
relevant facts existing at the
time of granting default judgment,
would have refused leave to execute.”
These facts are clearly
distinguishable from the current ones as set out in paras [25]-[28]
of this judgment.
[31] I have already
indicated that Absa had no other alternative back in 2009 or 2010.As
Mokgoro J
stated in
Japhta
“
[O]nly where
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 alarms bells should
start ringing…
If there are no other proportionate
means to attain the same end, execution may not be avoided”
(Own
underlining)
In the
overall, the applicants have not shown that to set aside the writ in
execution in these circumstances is ‘a
just
and equitable remedy’
and
that they are ‘
deserving
past case(s) which should benefit from the [unconstitutionality]
declaration.’
[32] Having come to the
conclusion as set out in the above paragraphs it was unnecessary to
consider the issues raised and addressed
in Case no:1195/06
Menqa
& Another v Markom & Others
(CPD) and
Menqwa &
Another v Markom & Others
2008 (2) 120 (SCA) i.e. The
fact that the 2
nd
and 3
rd
respondent had
already taken transfer of the property; and whether it would be
appropriate for this Court to order the Registrar
of Deeds to
re-register the property in the applicants name taking into account
what the 2
nd
and 3
rd
respondent had already
paid for the property after obtaining a loan from Standard Bank and
whether Standard Bank would be reimbursed
and by whom as well as the
applicants’ unjust enrichment.
[33] In the result, the
following order is granted.
ORDER
The application is
dismissed
The applicants to pay
the costs of this application.
________________
B. C. MOCUMIE, J
On behalf of the
applicants: Attorney M. Khang
Instructed by:
Mphafi Khang Inc.
BLOEMFONTEIN
On behalf of the 1
st
Respondent: Adv. J. Els
Instructed by:
E G Cooper Majiedt Inc.
BLOEMFONTEIN
On behalf of the
4
th
and 5
th
respondents: Adv. J. M. C. Johnson
Instructed by:
Phatshoane Henney
BLOEMFONTEIN
/eb