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[2012] ZAKZDHC 63
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ABSA Bank Ltd v Pillay and Another (4552/2012) [2012] ZAKZDHC 63 (23 October 2012)
7
IN THE KWAZULU-NATAL HIGH COURT,
DURBAN
REPUBLIC OF SOUTH AFRICA
CASE NO: 4552/2012
In the matter between:
ABSA BANK LTD FIRST
.................................................................................
APPLICANT
And
JENNIFER ESTER PILLAY
.............................................................
FIRST
RESPONDENT
JENNIFER ESTER PILLAY N.O
.................................................
SECOND
RESPONDENT
JUDGMENT
Heard:16 October 2012
Delivered:23 October 2012
______________________________________________________________________
DHAYA PILLAY J
[1] In this application for summary
judgment, the applicant instituted an action for foreclosure of a
mortgage bond registered over
the immovable property of the first
respondent and her late husband who passed away on 16
th
December 2008. The mortgaged property is the primary residence of the
first respondent and her two children. Upon her husband’s
death
the first respondent took over the running of their bakery. She uses
the income from the bakery to service the bond. The
bond is not in
arrears. During his lifetime the deceased paid more than the minimum
instalment stipulated in the bond. Consequently
the bond is in credit
in the amount of R125 986.42
[2] The applicant’s cause of
action therefore is not based on any default by the respondent. For
reasons not advanced in the
pleadings the applicant alleges that the
respondents’ liability to the plaintiff will not be liquidated
within a reasonable
period without having to execute against the
respondents. The applicant also alleges that it has no knowledge as
to whether the
immovable property is currently occupied by the first
respondent as her family residence, whether she will lose access to
housing
as a result of the execution against the mortgaged property
and what the position of the first respondent’s dependants is.
Considering that the applicant could easily have obtained this
information from the first respondent, the applicant’s careless
disregard for the plight of its customers and people defined in the
National Credit Act 34 of 2005 (the ‘NCA’) as
historically disadvantaged persons
1
is disappointing.
[3] On 23 March 2012 it delivered
notices in terms of s 129 of the NCA in which it falsely notified the
respondents that:
‘
the
estate is in default under the Credit Act Agreement due to the
estate’s failure to make regular and required payments
due in
terms of the Credit Agreement and that the estate has remained in
default for more than (twenty) 20 business days
.’
[4] The notice added that ten (10)
business days after the delivery of the notice it intended to
approach a court for an order to
enforce the credit agreement. The
full outstanding amount on the credit agreement at the time was
allegedly R268 457.87 plus interest
at 9.75% which the applicant
claimed had ‘become due and payable’. They were also
informed that a judgment obtained
against the estate followed by
execution ‘will usually lead to your eviction from such home’.
[5] On the facts it was common cause
that the respondents were not in default and that the first
respondent had continued to service
the bond after her husband’s
passing. Precisely what the basis was for foreclosure was not
apparent from the pleadings. Ms
De Klerk who appeared for the
applicant clarified that the applicant relied on clause 8 of the
mortgage bond which provides:
‘
Unless
otherwise agreed in writing if the Mortgagor fails to observe or
confirm any of the terms or conditions of any written agreement
or
agreements between the Mortgagor and the Bank in respect of any
amounts which are secured under this bond or if the Mortgagor
fails
to observe or perform any of the terms and conditions of this bond
or
of the Standard Mortgage Conditions herein after referred to or if
the Mortgagor upon demand by the Bank fails to pay the Bank
any
amount which is legally claimable
by
the Bank
or
if the Mortgagor fails to discharge any obligation or liability to
the Bank on the due date thereof, then all the amounts which
are
secured under this mortgage bond shall, at the option of the Bank and
without the Bank being required to give notice to the
Mortgagor,
immediately become payable in full, notwithstanding the exercise by
the Bank of any other rights, and the Bank
shall
be entitled thereupon to institute proceedings for the recovery of
all such amounts and for a court order declaring the mortgaged
property executable
.
’
[6]
The applicant interpreted the highlighted portion of
clause 8 to enable it to demand payment, even when the respondents
were not
in default, and foreclose the bond. By no stretch of any of
the tools of interpretation can clause 8 lend itself to such an
interpretation.
Without default the amount cannot be ‘legally
claimable’ on mere demand. If the applicant’s
interpretation were
to prevail then on a sheer whim or fancy a
creditor can foreclose a bond without even notifying the consumer.
Such interpretation
renders clause 8 unfair, inequitable and even
unconstitutional as I expatiate below.
[7] Notwithstanding the
bond pre-dating the NCA, as a pre-existing agreement, Item 4 (2) of
Schedule 3 of the NCA, which deals with
transitional provisions,
extends the application of Chapter 1 of the NCA to the bond.. Chapter
1 sets out the interpretation, purpose
and application of the NCA. I
have analysed these sections under the rubric of the Constitution of
South Africa in
Standard Bank v Mbuyiseni Dlamini
Case No
2877/2011dated 23 October 2012 (unreported). However, the following
emphasises the policy objective underpinning the NCA
to substantively
promote socio-economic equality and prevent discrimination:
‘
3.
The purposes of this Act are to promote and advance the social and
economic welfare of South Africans, promote a fair, transparent,
competitive, sustainable, responsible, efficient, effective and
accessible credit market and industry, and to protect consumers,
by—
.
. .
(
d
)
promoting equity in the credit market by balancing the respective
rights and responsibilities of credit providers and consumers;
(
e
)
addressing and correcting imbalances in negotiating power between
consumers and credit providers by –
.
. .
(iii)
providing consumers with protection from deception, and from unfair
or fraudulent conduct by credit providers and credit bureaux.
’
[8] In response to probing from the
court to establish what could possibly have prompted the action in
absence of default by the
respondents, Ms De Klerk submitted that the
applicant was concerned that it had a mortgage bond with a deceased
person which was
untenable in law. However, the death of a mortgagor
does not result in untenable legal consequences as a study of the
Administration
of Estates Act 66 of 1965 (the ‘AEA’) will
show.
[9] The joint estate of the first
respondent and the deceased, who were married in community of
property, is under administration
in terms of the AEA. In terms of s
35 (12) of the AEA, creditors of a deceased estate are paid only
after the liquidation and distribution
account has lain open for
inspection and is free of objections. Although an executor may pay
creditors earlier, usually if the
estate is solvent, but she runs the
risk of being held accountable if the payment is erroneous.
Furthermore, s 38 (1) enables a
surviving spouse to take over the
deceased spouse’s share in the immovable property with the
authority of the Master.
[10] On 11 February 2009, barely two
months after the passing of the deceased, the first respondent was
appointed as executrix.
What stage the winding up of the estate has
currently reached is not apparent from the pleadings. If the children
have a claim
to the property and they are minors, then the first
respondent has to satisfy the Master that their interests are
protected. If
they are minors she has to comply with s 43 of the AEA
to secure the minors’ portions. Therefore, in terms of the AEA,
the
second respondent cannot be compelled to pay creditors until the
account is free of objections and the applicant can show that there
is no prejudice to other creditors or the children if they are
minors.
[11] If the applicant was genuinely
concerned about the security of its bond being weakened following the
passing of one of the
mortgagors who might also have been the
principal breadwinner, it had no reason to be as the bond was not in
arrears. Even if its
concerns were justified then the remedy it seems
to be seeking is to substitute the deceased.
[12] Ms De Klerk conceded that the
application for summary judgment should fail but that costs should be
reserved for determination
at the trial. The applicant was not
prepared to withdraw the action as the pleadings could be amended in
due course.
[13] The original amount of the bond
was R560 000. The outstanding balance as at 2 May 2012 was R226 823.
The summons issued on
4 May 2012 is for R268 457.87. Significantly,
the respondents and not the applicant attached the statements to
their affidavit.
As the bond is over the primary residence of the
first respondent and her children, (a fact the applicant did not
trouble itself
to establish before launching this action), she will
be homeless. This action constitutes nothing short of bullying
tactics by
one of South Africa’s largest financial institutions
against a widow who is a historically disadvantaged person as defined
in s 2(6) of the NCA. The applicant’s conduct is premature and
predatory.
[14] In respect of the issue of
jurisdiction, the bond records the first respondent’s and the
deceased’s consent to
the jurisdiction of the Magistrates’
Court. However, notwithstanding such consent the applicant reserved
for itself the right
to institute legal proceedings against the
respondents in any competent court having jurisdiction in the matter.
Precisely why
it elected to proceed in the High Court is not evident
from the papers. Notably, proceeding in the High Court is more
intimidating
and costly than in the Magistrates’ Court. The
Magistrates’ Court has jurisdiction and the applicant should
have instituted
the action in that court, assuming it has a valid
cause of action.
[15] With regard to legal costs, the
applicant reserved for itself in the mortgage bond the right to claim
costs on an attorney
and client scale. The bond does not record a
similar countervailing right favouring the respondents.
[16] As a standard term mortgage bond,
the clauses on jurisdiction and costs distort the balance that the
NCA strives to establish
between credit providers and consumers.
Unless the applicant has a rational basis for proceeding in the High
Court and for claiming
costs on an attorney client scale these
clauses in the mortgage bond are unfair and inequitable. The absence
of rationality and
the harsh impact of these clauses on the
respondents also violate s 9 (1) of the Constitution.
2
[17] As regards costs of the
application, as the particulars of claim fails to disclose a cause of
action the summary judgment application
was wholly unjustified. The
applicants compounded the first respondent’s grief and
hardships following the loss of her husband
with this action and the
summary judgment application. The applicant should therefore
compensate her fully for all costs she has
incurred for opposing the
application for summary judgment.
Order
The application for summary judgment
is dismissed.
The applicant shall pay the
respondent’s costs on the scale as between attorney and
client.
_________________
D PILLAY J
APPEARANCES
For the Applicant : M G De Klerk
Instructed By Johnson & Partners
25 Claribel Road
Morningside
Durban
Counsel for the First and Second
Respondents : M Manikam
Instructed By Gounder & Associates
Suite 1600
Nedbank House
30 Albert Street
Durban
1
S
2 (6) of the NCA
2
Van
der Merwe v Road Accident Fund
and
another (Women’s Legal Centre Trust as A
micus
Curiae
)
[2006] ZACC 4
;
2006
(4) SA 230
para 54 and 55