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[2012] ZAKZDHC 27
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Muddiman v Registrar of Deeds, Kwazulu-Natal and Others (3097/2012) [2012] ZAKZDHC 27 (18 May 2012)
IN THE KWAZULU-NATAL
HIGH COURT, DURBAN
REPUBLIC OF SOUTH
AFRICA
CASE NO. 3097/2012
In the matter between:
OLIVER JOHN MUDDIMAN
….................................................
APPLICANT
and
REGISTRAR OF DEEDS,
KWAZULU-NATAL
…...............................................
FIRST
RESPONDENT
STANDARD BANK OF
SOUTH AFRICA LIMITED
…...............................
SECOND
RESPONDENT
SHERIFF FOR LOWER
TUGELA
….......................
THIRD
RESPONDENT
DERRICK GEORGE BAIRD
…............................
FOURTH
RESPONDENT
JUDGMENT
Delivered
on 18 May 2012
______________________________________________________
SWAIN J
[1] The applicant was the
registered owner of an immovable property, being the residence of the
applicant, which was encumbered
by a mortgage bond registered in
favour of the second respondent, as security for money loaned and
advanced by the second respondent,
to the applicant.
[2] The applicant
breached the terms of the loan agreement and as a consequence:
[2.1] The second
respondent instituted action against the applicant claiming judgment
for the amount outstanding, together with
an order declaring the
property executable and costs on the attorney and client scale.
[2.2] The applicant
alleges that the summons did not come to his attention and the action
was accordingly not defended.
[2.3] The Registrar of
this Court consequently granted default judgment against the
applicant on 24 May 2011.
[2.4] The second
respondent then launched an application to declare the property
executable, which the applicant alleges also did
not come to his
attention, and the relevant order was consequently granted without
opposition on 11 July 2011.
[2.5] The second
respondent’s attorneys caused a writ of attachment to be issued
and served.
[2.6] The property was
sold in execution to the fourth respondent, on 07 October 2011, for a
purchase price of R1,950,000.00.
[2.7] Registration of
transfer of the property was effected into the name of the fourth
respondent on 15 November 2011.
[3] The applicant seeks
orders rescinding and setting aside the judgment, the order declaring
the property executable, the writ
of attachment and the sale in
execution. An order is also sought directing the first respondent,
being the Registrar of Deeds,
to expunge from his records any
reference to the transfer of the property to the fourth respondent,
together with any encumbrance
upon the property which was registered
simultaneously with, or subsequent to, the transfer to the fourth
respondent.
[4] The applicant relies
upon a number of grounds for the relief sought. As regards the order
sought rescinding the judgment, it
is common cause that the notice in
terms of Section 129 of the National Credit Act, was sent by the
second respondent to the wrong
address. It is clear that the notice
in terms of Section 129 of the Act is a mandatory requirement prior
to litigation to enforce
a credit agreement. It is a compulsory step
in the proceedings.
Nedbank v National
Credit Regulator
2011 (3) SA 581
(SCA) at pg 586 para 8
[5] At the time when the
Registrar granted judgment by default, a certificate was filed by the
second respondent’s attorney
certifying that the provisions of
Section 129 had been complied with, which was erroneous.
[6] I accordingly agree
with the submission of Mr. Pillay S C, who
together with Ms Singh,
appeared for the applicant, that the judgment was erroneously sought
and erroneously granted by the Registrar
in accordance with the
meaning of those terms contained in Rule 42 of the Rules of this
Court. It is clear that because of the
failure of the second
respondent to comply with the provisions of Section 129 of the Act,
it was not legally competent for the
Registrar to have granted
judgment.
[7] By virtue of the fact
that the order of this Court declaring the property executable and
the writ of attachment depended for
their validity upon the validity
of the judgment, they must consequently suffer the same fate of
invalidity, as the judgment.
[8] As regards the sale
in execution, it is common cause that before the sale took place, the
applicant caused notice of the voluntary
surrender of his estate, as
provided for in Section 4 of the Insolvency Act No. 24 of 1936 (the
Act), to be published in the Government
Gazette. It is also common
cause that this notice was brought to the attention of the second
respondent’s attorney, as well
as the third respondent, being
the Sheriff who conducted the sale, before the sale took place.
Despite such knowledge the sale
proceeded and the property was sold
to the fourth respondent.
[9] The applicant relies
upon the provisions of Section 5 (1) of the Act, which reads as
follows:
“
5
Prohibition of sale in execution of property of estate after
publication of notice of surrender and appointment of
curator
bonis
(1) After the publication of a notice
of surrender in the
Gazette
in terms of section
four
,
it shall not be lawful to sell any property of the estate in
question, which has been attached under writ of execution or other
process, unless the person charged with the execution of the writ or
other process could not have known of the publication: Provided
that
the Master, if in his opinion the value of any such property does not
exceed R5 000, or the Court, if it exceeds that amount,
may order the
sale of the property attached and direct how the proceeds of the sale
shall be applied”.
[10] Mr. Troskie S C, who
appeared for the second and fourth respondents, submitted that in the
light of the fact that it was common
cause that the applicant had
failed to publish notice of the surrender of his estate, in a
newspaper circulating in the district
of the applicant’s
residence in terms of Section 4 (1) of the Act, the provisions of
Section 5 (1) of the Act, were not applicable.
I disagree. The
provisions of Section 4 (1) which require publication in the Gazette
as well as a local newspaper, are in terms
of Section 6 (1),
requisites for the acceptance by the court of the surrender of the
debtor’s estate, save and in so far
as any failure in this
regard, may be regarded as a formal defect or irregularity, in terms
of Section 157 (1) of the Act.
ex parte Harmse
[2004]
1 All SA 626
(N)
cf ex parte
Oosthuysen
1995 (2) SA 694
(T)
This is because Section 6
(1) specifically provides as follows
“
If the court
is satisfied that the provisions of Section 4 have been complied
with”.
In addition, if the
debtor wishes to withdraw a notice of surrender after having obtained
the consent of the Master to do so, Section
7 (2) provides that the
debtor is obliged to publish the notice of withdrawal and the
Master’s consent, in the Government
Gazette as well as the
local newspaper, in which the notice of withdrawal appeared. It is
therefore clear that publication in the
Gazette, as well as the local
newspaper, is required for an acceptance of the surrender of the
estate, as well as a withdrawal
of the surrender.
[11] Contrasted with this
are the provisions of:
(a) Section 5 (1) where
after
“publication of a notice of surrender in the
Gazette in terms of Section 4”
it shall not be
lawful to sell any property of the estate, which has been attached
under writ of execution or other process and
(b) Section 5 (2) where
after
“publication of a notice of surrender as aforesaid
in the Gazette”
the Master may appoint a
curator
bonis
to the debtor’s estate.
What is immediately
apparent is that the provisions of Section 5 (1) and 5 (2), deal with
urgent interim matters in connection with
the debtor’s estate.
The object of Section 5 (1) is to conserve the debtor’s
property, for the benefit of all the debtor’s
creditors,
pending the determination by the court of the application for
surrender.
Meskin –
Insolvency Law pg 3 – 14 (1) para 3.7
Although no period is
fixed for the duration of the prohibition, it seems that such
prohibition continues only until the day the
application is, or
should have been, adjudicated upon by the court, either on the day
advertised, or upon the date to which the
application was postponed,
by the court at the first hearing thereof.
Mars – The
Law of Insolvency in South Africa 9
th
Ed pg 54
This will obviously only
be the case, where the surrender of the estate is not accepted by the
Court on the advertised date, or
any adjourned date. In addition, if
the application lapses in terms of Section 6 (2), or is withdrawn in
terms of Section 7 (2),
the prohibition will no longer be operative.
In order to prevent abuse of creditor’s rights, by virtue of
the provisions
of Sections 5 (1), time periods are provided for in
Section 4 (1), within which publication must take place, and a
maximum interval
between publication of the notice and the hearing,
is provided for.
Oosthuysen
supra
at 698 C - D
A failure however to
comply with these time limits is a formal defect or irregularity in
terms of Section 157 (1) of the Act, and
the extent of any failure is
a factor to be considered by the court, in exercising its discretion
in terms of Section 6 (1) whether
to accept the surrender.
ex parte
Harmse pg 634 d - e
cf Oosthuysen
supra
698 F – G
[12] It is however
important that there be certainty as to the effect of publication in
the Gazette because it “
would be untenable if creditors
were left in doubt as to whether a proposed sale would be lawful”.
Oosthuysen at 698 E
It would equally be
untenable if
“the person charged with the execution of
the writ or other process”
was left in doubt in
this regard.
When regard is had to the
interim nature of the provisions of Section 5 (1), the need as a
matter of urgency to preserve property
of the debtor for the benefit
of all creditors, and for certainty on the part of creditors and
persons charged with the execution
of writs, as to the application of
Section 5 (1), publication of the notice of surrender in a local
newspaper, as well as the Government
Gazette, is not a pre-requisite
of Section 5 (1) of the Act. To require publication in a local
newspaper, in addition to the Gazette,
serves only to introduce a
further avenue of uncertainty and delay, contrary to the objectives
and express provisions of Section
5 (1). The validity of the
application for surrender is a separate enquiry, distinct from the
objectives sought to be achieved
in terms of Section 5 (1). If there
has not been publication of the surrender in a local newspaper, with
the result that the surrender
is not accepted by the Court, then the
prohibition will fall away. That Section 7 (1) provides that
“a
notice of surrender published in the Gazette may not be withdrawn
without the written consent of the Master”
is
consistent with the interpretation that I have placed upon Section 5
(1). If only publication in the Gazette is sufficient to
bring about
the serious consequences of Section 5 (1), then it is obvious why a
notice published only in the Gazette, may not be
withdrawn without
the Master’s consent.
[13] On similar grounds
of urgency and certainty, Section 7 (2) only requires that there be
publication in the Gazette of the notice
of surrender, before the
Master may appoint a
curator bonis
to the estate of the
debtor, to take the estate into his or her custody and take over the
control of any business, or undertaking,
of the debtor. In such a
case the
curator
is a caretaker of the debtor’s
property.
Meskin
supra
at para 3.8
and will continue to
control the estate after the surrender has been accepted, and until a
trustee or provisional trustee has been
appointed, unless the Master
gives instructions to the contrary.
Mars pg 57
[14] It is for the above
reasons that a distinction must be drawn between the publication
required for a surrender and withdrawal
of the debtor’s estate,
in terms of Section 4 (1) and 7 (2) of the Act (both the Gazette and
the local newspaper) and the
publication which renders sales of the
debtor’s property in execution unlawful and entitles the Master
to appoint a
curator bonis
to the debtor’s estate, in
terms of Section 5 (1) and Section 5 (2) (publication in the Gazette
alone).
[15] The effect of
Section 5 (1) of the Act is that the subsequent sale in execution was
unlawful and a nullity. As stated in the
case of
Menqa and another v
Markom and others
2008 (2) SA 120
(SCA) at 130 A – B
“
If the sale
in execution is null and void because it violates the principle of
legality, as in the present case, then the Sheriff
can have no
authority to transfer ownership of the property in question to the
purchaser who will thus not acquire ownership despite
registration of
the property in his or her name”.
The registration of the
property into the name of the fourth respondent accordingly did not
make him the owner of the property.
Menqa
supra
at 130 B
[16] In argument Mr.
Troskie relied upon the decision in
Legator McKenna
Incorporated and another v Shea
2010 (1) SA 35
SCA
in which the SCA held
that there had been a valid transfer of property by way of
registration in the Deeds Office, where although
the agreement of
sale was invalid in terms of
Section 2
(1) of the
Alienation of Land
Act 68 of 1981
, there were no defects in the
“real
agreement”.
The abstract theory of transfer
required that there be delivery (by way of registration of transfer),
and a real agreement, the
essentials of which were an intention on
the part of the transferor to transfer ownership and the intention on
the part of the
transferee to become the owner of the property. I
understood his argument to be that the third respondent had the
intention to
transfer ownership and the fourth respondent had the
intention to acquire it and consequently the fourth respondent had
acquired
ownership of the property. However, it is clear in the
present case, that the third respondent possessed no authority to
sell the
property, because the sale in execution violated the
principle of legality. Consequently, there was no
“real
agreement”.
[17] The main thrust of
Mr. Troskie’s argument was that I should not exercise my
discretion in favour of the applicant to
rescind the judgment because
he submitted that the applicant knew
“of its impending
occurrence or under circumstances where applicant knowingly elected
not to oppose”
the grant of the judgment. He also
submitted that the applicant had wilfully sought to mislead this
Court as to his lack of knowledge
of events. Although there may be
some merit in these submissions, what must also be considered is the
conduct of the second respondent
in obtaining judgment on an entirely
erroneous certificate in terms of Section 129 of the Act, as well as
proceeding with the sale
in execution, contrary to the provisions of
Section 5 (1) of the Act. Of further concern is that a representative
of the second
respondent, in an affidavit filed in support of the
application for leave to execute against the immovable property,
stated the
following:
“
A forced
sale valuation was done of the property. I advise the above
Honourable Court that this valuation is R4,400,000.00, which
is more
than the amount owing by the respondent under the bond”.
[18] However, the
property was sold at the sale in execution to the fourth respondent
for R1,950,000.00, where the only bidders
were a representative of
the second respondent and the fourth respondent. By virtue of the
judgment debt being R3,115,899.60, it
is clear that there is a
considerable shortfall owed by the applicant to the second
respondent, as a consequence of the sale. The
applicant alleges that
it is unexplained why the second respondent stopped bidding so early,
as it would be expected that the second
respondent would continue
bidding until the debt was exceeded. Of significance in this regard
is that the fourth respondent had
made three offers to purchase the
property before the sale, the last of which was made on 29 September
2011 for the sum of R4,300,000.00,
which was forwarded by the
applicant to the second respondent’s attorney. This offer was
not accepted because the second
respondent required proof of the bond
granted and the seller’s pro-forma account. Regardless of the
reasonableness or otherwise
of the rejection of this offer, it is
clear that the second respondent, via its attorney, was aware before
the sale in execution,
that the fourth respondent had offered
R4,300,000.00 for the property. Why the second respondent was
accordingly prepared to stop
bidding and allow the fourth respondent
to acquire the property for R1,950,000.00, is incomprehensible in the
absence of any explanation
by the second respondent.
[19] When all of the
above is considered, I am satisfied I should not exercise my
discretion against the applicant for the reasons
advanced by Mr.
Troskie. I am also satisfied that I should not order any award of
costs against the second respondent to be on
the attorney and client
scale, as requested by Mr. Pillay.
[20] As regards the
relief sought against the fourth respondent, Mr. Troskie submitted
that an order should not be granted in terms
of which the first
respondent was ordered to expunge from his records any reference to
transfer of the property into the name of
the fourth respondent. His
submission was based upon certain
dicta
in Menqa, where the
Supreme Court of Appeal declined in that case to grant an order
directing the Registrar of Deeds to register
the property in the
applicant’s name. The reason why the Supreme Court of Appeal
declined to do so was based upon constitutional
considerations
relevant to the facts of that case.
Menqa at 129 F –
G
It is clear that the
judgment debtor (applicant) as owner of the property would be
entitled to recover the property by way of a
rei vindicatio.
Joosub v J. I. Case
SA (Pty) Ltd.
1992 (2) SA 665
(N)
at 674 G – H
Menqa at 130 B
The concern of the
Supreme Court of Appeal in Menqa was that Markom would be
unjustifiably enriched at the expense of Menqa, who
had purchased the
property and as a consequence paid money to the bond holder, thereby
reducing Markom’s debt. On the present
facts however it is
clear that on the setting aside of the sale in execution and the
deletion of the registration of the property
in the name of the
fourth respondent, the second respondent would be obliged to return
the purchase price to the fourth respondent.
The fourth respondent
has not in his affidavit averred that he has passed any encumbrances
over the property in the interim and
consequently there can be no
prejudice to the fourth respondent if an order is granted as prayed,
declaring that any encumbrance
upon the property be likewise
expunged. Any other claims that the parties may have against each
other as a consequence of the order
I intend making, I need not
speculate upon.
[21] The fourth
respondent also instituted proceedings against the applicant for his
eviction from the property (under Case No.
695/2012). Mr. Troskie
submitted that this application should be adjourned
sine die
pending the outcome of the present application. By virtue of the
decision I have reached in this application, there would be no
point
in adjourning the other application which falls to be dismissed, with
the applicant in that application (fourth respondent
in the present
application) to be ordered to pay the respondent’s costs
(applicant in the present application).
[22] Although it is clear
that the second respondent should be
ordered to pay the
applicant’s costs, in the present application, I am not
satisfied that the fourth respondent should also
be ordered to do so,
albeit that the fourth respondent also opposed the application. The
fourth respondent however was not privy
to what preceded the sale in
execution and should simply be ordered to pay his own costs.
The order I grant is the
following:
The default judgment
granted by the Registrar of this Court on 24 May 2011 against the
applicant in favour of the first respondent
under Case No. 3054/2011
is rescinded and set aside.
The order of this Court
between the parties and under the case number as aforesaid granted
by default on 11 July 2011 which
inter alia
declared
executable the immovable property situated at 15 Baobab Crescent,
Salt Rock, KwaZulu-Natal and fully described as:
“
Erf 795 Salt
Rock (Extension No. 4) Registration Division FU, Province of
KwaZulu-Natal in extent of 1200 (one thousand two hundred)
square
metres, held under Deed of Transfer No. T25792/08 (“the
property”)
then registered in the
name of the applicant is rescinded and set aside.
The writ of attachment
of the property issued out of this Court on 21 July 2011 in
consequence of the said judgment is set aside.
The sale in execution of
the property by the third respondent to the fourth respondent at the
instance of the second respondent
on 07 October 2011 is set aside.
The first respondent is
directed to expunge from the records under his control, any
reference to the transfer of the property
to the fourth respondent
and any encumbrance upon the said property which was registered
simultaneously with, or subsequent to,
the said transfer to the
fourth respondent.
The second respondent is
ordered to pay the applicant’s costs.
The fourth respondent is
ordered to pay his own costs.
In the application for
eviction (Case No. 695/2012), the application is dismissed, and the
applicant (in that application) is
ordered to pay the respondent’s
(in that application) costs.
___________
K. SWAIN J
Appearances: /
Appearances:
For
the Applicant :
Mr. L. Pillay S C with
Ms
R. Singh
Instructed by
:
K. Maharaj Incorporated.
Durban
For 2
nd
& 4
th
Respondents
:
Mr.
A.J. Troskie S C
Instructed
by :
Goodrickes Attorneys
Durban
Date of Hearing
:
07 May 2012
Date of Filing of
Judgment :
18 May 2012