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[1999] ZACC 16
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Lesapo v North West Agricultural Bank and Another (CCT23/99) [1999] ZACC 16; 2000 (1) SA 409; 1999 (12) BCLR 1420 (16 November 1999)

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CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 23/99
CHIEF DIREKO LESAPO Applicant
versus
NORTH WEST AGRICULTURAL
BANK First Respondent
MESSENGER OF THE COURT, DITSOBOTLA Second
Respondent
Heard on : 14 September 1999
Decided on : 16 November
1999
JUDGMENT
MOKGORO J:
[1] This case raises important questions
concerning the principle against self help, which is an aspect of the rule of
law. It concerns
the constitutionality of section 38(2) of the North West
Agricultural Bank Act 14 of 1981 (“the Act”) which permits the
North
West Agricultural Bank (“the Bank”) to seize a defaulting
debtor’s property, without recourse to a court
of law, and to sell it by
public auction in defrayal of the debt owed to the Bank. On 20 May 1999 in the
Bophuthatswana High Court,
Mogoeng J granted Chief Direko Lesapo (“the
applicant”) an order invalidating section 38(2) of the
Act
[1]
on account of its inconsistency
with the Constitution and granting certain consequential relief. The matter
came before this Court
for confirmation pursuant to section 172(2)(a) of the
Constitution.
[2]
[2] In
response to directions issued by the President of this Court, the first
respondent filed written submissions opposing the
confirmation of the order of
Mogoeng J. The applicant however submitted no written argument in support of
confirmation of the order.
This Court therefore appointed Mr Freund as amicus
curiae to advance argument in support of the order and to raise any other issues
which might assist this Court. The Court is indebted to Mr Freund for his
helpful argument.
[3] The applicant, a farmer, had borrowed R60 000 from
the first respondent, the Bank, to enable him to buy certain farming implements.
The loan was made in terms of a written agreement pursuant to the provisions of
the Act. When he fell into arrears with his payments,
the Bank, acting in terms
of section 38(2) of the Act, gave notice to the applicant and, upon his
continued failure to pay, wrote
a letter to the Messenger of the Court for the
district of Ditsobotla (“the messenger”), authorising him to seize
and
sell by auction movable property which the applicant had pledged as security
for the loan.
[3]
In an effort to
prevent the messenger from proceeding in terms of the notice, the applicant
applied, amongst other things, for urgent
relief and for an order declaring
section 38(2) of the Act to be in conflict with the
Constitution.
[4] Section 38(2) of the Act provides:
“The Board may, in the circumstances contemplated by subsection (1) where
the loan or advance has already been paid over to
the debtor, by written notice
addressed to the debtor, recall the said loan or advance in whole, and require
the debtor to repay
such loan or advance together with interest thereon up to
the date of such notice within the time specified therefor in such notice,
and
in the event of default of payment on such specified date, the Board may in
writing and under the official seal of the Bank,
require the messenger of the
court or any other person designated by the Board to
seize-
(
a
) in the case where such loan or advance has been secured by mortgage,
the immovable property encumbered thereby; or
(
b
) in the case where such loan or advance has been secured by a deed of
hypothecation of
movable property
, or where any other form of security
has been given, the property encumbered by such deed or constituting such other
form of security,
without recourse to a court of law
, and, irrespective of whether or not
such messenger of the court or such other person is a licensed auctioneer, to
sell such property
by public auction on such date, and at such time and place
and on such conditions as the Board may determine, of which at least fourteen
days notice has been given in the Provincial
Gazette
and in a newspaper
circulating in the district where the said property is situated or, as the case
may be, where the said property
was kept or used before such seizure, or the
Board may itself sell the property so seized by public tender on such conditions
as
it may determine: Provided that the provisions of this section shall not be
construed so as to derogate from the provisions of subsection
(4).”
[emphasis supplied]
Section 38(1) deals with the preconditions
for the Bank to withdraw its approval of an advanced loan or refuse payment
thereof. Ten
circumstances are identified, encompassing: the debtor’s
failure “to pay any amount payable in respect of a loan . .
. on or before
due date”; the commission of an act of insolvency or the debtor’s
sequestration; being sentenced to a
term of imprisonment without the option of a
fine; if the debtor “in the opinion of the
Board
[4]
arrived at after the carrying
out of any inspection in terms of section 36 does not apply the loan . . . for
the purposes for which
. . . [it] was granted”; failure by the debtor to
comply with a section 37 notice;
[5]
breach of the loan conditions; the debtor’s being declared mentally ill or
incompetent; in the case of a company, liquidation;
failure by the debtor to
apply the loan “on a substantial scale” within a reasonable time or
a time specified by the
Board; and conviction of various offences under the
statute.
[6]
[5] Mogoeng J
held that section 38(2) was inconsistent with the provisions of 34 of the
Constitution which provides:
“Everyone has the right to have any dispute that can be resolved by the
application of law decided in a fair public hearing
before a court or, where
appropriate, another independent and impartial tribunal or
forum.”
According to Mogoeng J, this section embodies a
fundamental rule of natural justice, according to which everyone has the right
to
have a dispute settled by a court of law or an unbiased, independent and
impartial tribunal, where appropriate; and nobody should
be allowed to take the
law into his or her own hands or to usurp the functions of a court of law.
[6] In the High Court the Bank contended that the applicant had not
disputed that the debt was due and that there was accordingly
no averment that
there was a dispute between the parties. Mogoeng J held that it was not
necessary that a dispute be raised against
the Bank’s claim. The
applicant had been summarily dispossessed of property and was aggrieved thereby.
That was sufficient
to entitle him to challenge the constitutionality of the
legislation.
[7] When the matter came before this Court, Mr Lever,
counsel for the Bank, correctly conceded that the approach to be adopted for
determining questions of constitutionality is
objective.
[7]
Whether there was in
fact a dispute between the parties in this case is thus irrelevant to the
present inquiry. The subjective
position in which the parties find themselves
cannot affect the constitutional status of the law under attack.
[8] The Bank contended that the right had not been infringed on two
bases. First, Mr Lever submitted that there is no conflict between
section
38(2) of the Act and section 34 of the Constitution. Section 38(2), he argued,
pertains to the attachment and subsequent
sale of property, while section 34
concerns the adjudication of disputes. Central to this argument was the
contention that section
34 applies only where a dispute exists that can be
resolved by the application of law. The extraordinary execution procedure
authorised
by the impugned provision, he argued, comes into operation only
within a narrow compass - where there is no dispute. Thus if there
was a
dispute, section 38(2) could not be invoked.
[9] Mr Lever conceded that
if section 38(2) allows for seizure and sale where there is a dispute, this
would be contrary to section
34. He however contended that it is possible and
desirable that section 38(2) be interpreted as being applicable only where there
is no dispute. Section 38(2) does not appear to be reasonably capable of such a
restrained interpretation. Thus, properly construed,
the application of section
38(2) is not limited to circumstances where there is no dispute, nor is the
requirement of the absence
of a dispute anywhere implied. If the legislature
had indeed intended such a prerequisite, there seems to be no reason why it
should
not have provided so expressly.
[10] Mr Lever further contended
that because the notice to the messenger authorising the attachment is preceded
by a notice of demand
to the debtor, if there is a dispute, there is an
opportunity for the debtor to raise it in response to the notice. That,
however,
is no answer to the challenge to the constitutionality of the section.
Section 38(2) allows the Bank to bypass the courts. Without
any judgment or
order from any court and without any of the statutory or other safeguards
applicable to the attachment and sale in
execution of a judgment debt, section
38(2) authorises the Bank itself to bypass the courts and these other safeguards
and to seize
and sell the debtor’s property of which the debtor was in
lawful and undisturbed possession. This is so even where, under
section 38(2),
the messenger of the court is required by the Bank to seize and sell the
property because under the subsection the
messenger can only be acting as the
Bank’s agent and not, as is normally the case, as an officer of the
court.
[8]
His instructions and
authority emanate solely from the Bank and not from any court or court
order.
[11] A trial or hearing before a court or tribunal is not an end
in itself. It is a means of determining whether a legal obligation
exists and
whether the coercive power of the state can be invoked to enforce an obligation,
or prevent an unlawful act being committed.
It serves other purposes as well,
including that of institutionalising the resolution of disputes, and preventing
remedies being
sought through self help. No one is entitled to take the law
into her or his own hands. Self help, in this sense, is inimical to
a society
in which the rule of law prevails, as envisioned by section 1(c) of our
Constitution, which provides:
“The Republic of South Africa is one, sovereign, democratic state founded
on the following values:
. . . .
(c) Supremacy of the constitution and the rule of
law.”
Taking the law into
one’s own hands is thus inconsistent with the fundamental principles of
our law.
[9]
[12] There are
circumstances in which the coercive power of the state may be invoked without
the sanction of a court. For instance,
arrest and detention for the purposes of
trial, are permitted if there are reasonable grounds
therefor.
1
[0]
There may even be
circumstances where self help might be
permissible,
1
[1]
but once again good
reasons must exist for this to be permitted. Whether good reasons must exist
for the provisions of section 38(2)
is an issue that can be decided later. What
has to be decided first is whether section 38(2) is inconsistent with section 34
of
the Constitution.
[13] An important purpose of section 34 is to
guarantee the protection of the judicial process to persons who have disputes
that
can be resolved by law. Execution is a means of enforcing a judgment or
order of court and is incidental to the judicial process.
It is regulated by
statute
1
[2]
and the rules of court
and is subject to the supervision of the court which has an inherent
jurisdiction
1
[3]
to stay the
execution if the interests of justice so
require.
1
[4]
[14] If the
debt itself is disputed, the seizure of property in execution of the debt must
equally be disputed. To permit a creditor
to seize property of a debtor without
an order of court and to cause it to be sold by the creditor’s agent on
the conditions
stipulated by the creditor to secure payment of a debt, denies to
the debtor the protection of the judicial process, and the supervision
exercised
by the court through its rules over the process of execution. Yet this is what
section 38(2) purports to do. It entitles
the Bank to seize and sell property
in execution whether the debt alleged to be due is disputed or
not.
[15] The judicial process, guaranteed by section 34, also protects
the attachment and sale of a debtor’s property, even where
there is no
dispute concerning the underlying obligation of the debtor on the strength of
which the attachment and execution takes
place. That protection extends to the
circumstances in which property may be seized and sold in execution, and
includes the control
that is exercised over sales in execution.
[16] On
this analysis, section 34 and the access to courts it guarantees for the
adjudication of disputes are a manifestation of
a deeper principle; one that
underlies our democratic order. The effect of this underlying principle on the
provisions of section
34 is that any constraint upon a person or property shall
be exercised by another only after recourse to a court recognised in terms
of
the law of the land. Dicey’s first principle of the rule of law is
that:
“. . . no man is punishable or can be lawfully made to suffer in body or
goods except for a distinct breach of law established
in the ordinary legal
manner before the ordinary courts of the land. In this sense the rule of law is
contrasted with every system
of government based on the exercise by persons in
authority of wide, arbitrary, or discretionary powers of
constraint.”
1
[5]
So,
too, in
De Lange v Smuts NO and
Others
,
1
[6]
Ackermann J
held:
“In a constitutional democratic state, which ours now certainly is, and
under the rule of law (to the extent that this principle
is not entirely
subsumed under the concept of the constitutional State) ‘citizens as well
as non-citizens are entitled to rely
upon the State for the protection and
enforcement of their rights. The State therefore assumes the obligation of
assisting such
persons to enforce their rights, including the enforcement of
their civil claims against debtors.’
”
1
[7]
[17] The
Bank, as an organ of State, should be exemplary in its compliance with the
fundamental constitutional principle that proscribes
self help. Respect for the
rule of law is crucial for a defensible and sustainable democracy. In a modern
constitutional state
like ours, there is no room for legislation which, as in
this case, is inimical to a fundamental principle such as that against self
help. This is particularly so when the tendency for aggrieved persons to take
the law into their own hands is a constant threat.
[18] This rule
against self-help is necessary for the protection of the individual against
arbitrary and subjective decisions and
conduct of an adversary. It is a
guarantee against partiality and the consequent injustice that may arise. In
Bernstein and Others v Bester and Others
NNO
,
1
[8]
this Court, per
Ackermann J, held:
“When s 22 is read with s 96(2), which provides that ‘(t)he
judiciary shall be independent, impartial and subject only
to this Constitution
and the law’, the purpose of s 22 seems to be clear. It is to emphasise
and protect generally, but also
specifically for the
protection of the
individual
, the separation of powers, particularly the separation of the
Judiciary from the other arms of the State. Section 22 achieves this
by
ensuring that the courts and other
fora
which settle justiciable dispute
are independent and impartial. It is a provision fundamental to the upholding
of the rule of law,
the constitutional State, the ‘regstaatidee’ . .
.”
[emphasis supplied]
[19] As discussed
above,
1
[9]
the ordinary way of
securing execution in settlement of debts due is through the court process, and
the seizure of property against
the will of a debtor in possession of such
property for that purpose without an order of court amounts to self help. This
is an
infringement of section 34. It would be unacceptable to construe section
34 in such a way that it permitted self help which infringed
a person’s
property rights, provided that such self help was carried out in such a way that
it precluded a dispute from being
raised by the debtor. This would in fact be
an a fortiori case where the section ought to operate in protection of the rule
of law
underlying its provisions.
[20] Section 38(2) authorises the
Bank, an adversary of the debtor, to decide the outcome of the dispute. The
Bank thus becomes
a judge in its own cause. The authority to adjudicate over
justiciable disputes and to order appropriate relief and the enforcement
of the
order by attachment and sale of the debtor’s goods in a civil matter,
vests in the courts of the land.
2
[0]
Section 38(2), however, limits the debtor’s rights in section 34 by
vesting that authority in the Bank. The Bank itself decides
whether it has an
enforceable claim against the debtor; the Bank itself decides the outcome of the
dispute and the subsequent relief;
and the Bank itself enforces its own
decision, thereby usurping the powers and functions of the courts. The fact
that the debtor
may have recourse to a court of law after the attachment takes
place does not cure the limitation of the right; it merely restricts
its
duration.
2
[1]
For the period of
limitation, the debtor has been deprived of possession of the assets in question
without the intervention of a
court of law and in a manner inconsistent with
section 34.
2
[2]
I am thus in
agreement with Mogoeng J that section 38(2) is to that extent inconsistent with
section 34.
[21] Having found that section 38(2) of the Act limits
section 34 of the Constitution, what remains to be considered is whether this
is
justifiable in terms of section 36(1) of the
Constitution.
2
[3]
[22] In
this analysis, an important consideration in terms of section 36(1)(a) is the
nature of the right impaired. The right of
access to courts is important in the
adjudication of justiciable
disputes.
2
[4]
In
Concorde
Plastics (Pty) Ltd v NUMSA and
Others
,
2
[5]
Marcus AJ expressed
the importance of the right as follows:
“In my view, access to the courts of law is
foundational to the
stability of society. It ensures that parties to a dispute have an
institutionalised mechanism to resolve their
differences without recourse to
self-help. The nature of civil proceedings has been eloquently described by
Eduardo Couture
The Nature of Judicial Process
(1950) 25
Tulane Law
Review
1
at 7 in the following way.
‘The facts tells [sic] us that when a plaintiff wants to instigate a suit,
he can do so although the defendant does not want
him to do so, nor even the
judge. This is a fact derived from legal experience, from the life of law.
Those who have been able to see this fact in historical perspective and have
noted its slow but steady growth, have realised that
the law has proceeded in
this direction from necessity, not from expediency. Primitive man’s
reaction to injustice appears
in the form of vengeance, and by
“primitive” I mean not only primitive in a historical sense, but
also primitive in the
formation of moral sentiments and impulses. The first
impulse of a rudimentary soul is to do justice by his own hand. Only at the
cost of mightly
[sic]
historical efforts has it been possible
to
supplant in the human soul the idea of self-obtained justice by the
idea of justice entrusted to authorities
.
A civil action, in final analysis, then, is civilisation’s
substitute for vengeance. In its present form, this civilised substitute
for vengeance consists in a legal power to resort to the
court praying for
something against a defendant. Whether the claim is well-founded or not, is a
totally different and indifferent,
fact.’ ”
The right of access to court is indeed
foundational to the stability of an orderly society. It ensures the peaceful,
regulated and
institutionalised
mechanisms
2
[6]
to resolve disputes,
without resorting to self help. The right of access to court is a bulwark
against vigilantism, and the chaos
and anarchy which it causes. Construed in
this context of the rule of law and the principle against self help in
particular, access
to court is indeed of cardinal importance. As a result, very
powerful considerations would be required for its limitation to be
reasonable
and justifiable.
[23] When the importance of the purpose of section
38(2) of the Act in terms of section 36(1)(b) is evaluated, what needs to be
considered
at this stage is not the purpose of the Act (although it may be of
some relevance), but the purpose of the impugned provision itself.
Mr Lever
submitted that its` purpose was “to provide a quick, effective and
inexpensive procedure” that enables the
Bank to protect whatever real
rights it has in the secured property. He contended that the use of this
procedure avoids the delays
and costs associated with the normal legal
procedures.
In this way, he argued, more money would be available to
service loans. He further argued that the North West Agricultural Bank is
not a
commercial concern, but a statutory body entrusted with public
funds.
2
[7]
Because public funding
is scarce, the protection of the Bank’s
funds becomes particularly
important
.
[24] That the Bank needs to recover its property from
defaulting debtors in a manner that saves time and costs is indeed an important
consideration. The risks to which the Bank is exposed and the fact that it is
entrusted with a scarce public resource, to be utilised
for the development of
agriculture in the North West Province, emphasise the value of its ability to
protect its resources. The
importance of these time and cost-saving measures in
the interests of the Bank and other debtors does not, however, detract from
the
importance of the public interest served by the need for justiciable disputes to
be settled by a court of law.
[25] When considering the nature and
extent of the limitation,
2
[8]
it is
apparent that section 38(2) does not permanently limit the right in section 34,
since a debtor may apply to court to restrain
the Bank from proceeding in terms
of section 38(2) until a court has adjudicated upon the debtor’s alleged
defences.
2
[9]
The nature of the
limitation is that section 38(2) deprives the debtor of her or his right of
access to courts in that it allows
the Bank to resort to self help by by-passing
the courts in enforcing its claim, instead of utilising normal court procedures.
The
extent of the limitation is substantial in relation to the harm it causes.
Limitation of proprietary or possessory rights in the
manner contemplated by the
impugned provision may be extremely prejudicial to debtors. If the goods
subject to seizure and sale
are farming implements (as in the present case), and
the Bank proceeds against the debtor without the safeguards of the judicial
process, such a debtor may be unfairly deprived of her or his livelihood.
Moreover, security over property and the seizure and sale
thereof, need not only
be limited to farming
implements.
3
[0]
It is conceivable
that household property or any other goods may be pledged. However, even if the
debtor has agreed to the terms
of seizure and is in breach of contract, the
seizure could make serious inroads into her or his proprietary rights. The
measures
adopted by the legislation are thus too drastic for their
purposes.
[26] It was contended by the Bank that there would be little
purpose in the legislation having been enacted in the first place if
the time
and costs saved were so minimal as to not justify a departure from normal
procedures of court. The Bank thus argued that
the section 38(2) procedure
saves time and costs to such a degree that the infringement of section 34 is
justified. However, if
one evaluates the ostensible purpose of the limitation
(to save time and money) in relation to the effect of the provision itself,
it
is apparent that the section does not really achieve its objective: the extent
to which it succeeds in its purpose is at best
minimal. It is true that, by
proceeding in terms of section 38(2), the Bank may avoid the
“reasonable” summons period
which would be necessary if it were
required to approach the court to obtain a default judgment as well as an
interim interdict preventing
the debtor from abusing and/or disposing of the
secured property after the summons has been received. However, the Bank would
still
have to give the debtor reasonable time to respond to the notice of demand
prior to the seizure by the messenger. Not much time
is saved. Additionally,
the property seized by the Bank is subject to a pledge and/or hypothec in terms
of section 27 of the Act.
3
[1]
It
also enjoys a preferential claim against all other
debtors.
3
[2]
The Bank is thus armed
with security.
[27] As shown above, the purpose of saving time and costs
is achieved by section 38(2) only minimally, while it makes serious inroads
into
the rights of debtors. There are other less invasive remedies in the ordinary
procedures of court which are commonly available
to the Bank to realise its
purpose, but do not prejudice debtors to the extent that the section 38(2)
procedure does. In appropriate
circumstances an interdict against the
alienation of the goods could be obtained on an urgent basis. The concerns of
the Bank are
common to all comparable land or agricultural banks throughout the
Republic. If the concerns for a speedy remedy are indeed so great,
no reason
was advanced and no good reason suggests itself why national legislation could
not be passed to make provision in the rules
of courts for simplified procedures
for obtaining interdicts or attachment orders which nevertheless do not limit a
debtor’s
section 34
rights.
3
[3]
[28] We were
referred in argument to
Hindry v Nedcor Bank Ltd and
Another
,
3
[4]
where the High
Court held that the statutory provision permitting the internal revenue service
to resort to a measure of self help
to collect taxes, with only a subsequent
opportunity for the determination of legal rights, was not unconstitutional.
However, the
decision in the present case must be understood in the context of
its particular circumstances, which differ from those of the revenue
cases. We
are not called upon to decide the correctness or otherwise of the conclusion in
Hindry
and we refrain from doing so.
[29]
[ Application of the
section 36(1) limitations analysis involves a process set out in
S v
Makwanyane and Another
3
[5]
as
a:
“. . . weighing up of competing values, and ultimately an assessment based
on proportionality . . . . which calls for the balancing
of different
interests.”
In the process of balancing such interests
and in the proportionality evaluation:
“. . . one is enjoined to consider the relation between the limitation and
its purpose as well as the existence of less restrictive
means to achieve this
purpose.”
3
[6]
The
limitations inquiry and the requirements that must be considered aim to
“strike the appropriate balance of proportionality
between means and
end.”
3
[7]
Applying the above
analysis in the present matter, the importance of the purpose of section 38(2) -
i.e., the interest of the Bank
in speedy and inexpensive realisation of its
securities - may only properly be evaluated by considering its weight relative
to the
interest of its debtors in having disputes that can be resolved by the
application of law decided before a court, and the importance
of the principle
against self help. In addition,
3
[8]
the Bank is able to utilise less restrictive means to achieve its purpose. The
purpose and significance of section
38(2),
3
[9]
when weighed against the
object and importance of section
34,
4
[0]
make it clear that section
38(2) is not a justifiable limitation of the right of access to court. Thus it
is clear that section
38(2) is unconstitutional and cannot stand. I therefore
agree with Mogoeng J that it is invalid. The above finding makes it unnecessary
to consider whether section 38(2) of the Act is in conflict with the right to
privacy in section 14(c) or any other right in the
Constitution.
4
[1]
[30] It
was the submission of Mr Lever that, should section 38(2) be found to be
unconstitutional, and therefore invalid, this Court
should exercise its powers
under section 172(1)(b) of the
Constitution,
4
[2]
suspending the
invalidity, to afford the provincial legislature of the North West reasonable
opportunity to remedy the defect in
the legislation. Striking down section
38(2) would, he submitted, bring down with it all other non-offending advantages
in the provision.
Mr Freund’s approach was that the order of Mogoeng J
should be varied and that the portion of section 38(2) beginning with
“and
in the event of default of payment”, up to the end of the subsection,
should be declared inconsistent with the Constitution
and severed. He
recognised, however, that this might require a consequential amendment of
sections 38(3) and 38(4)(b),
4
[3]
as
these sections are premised on the assumption that the sale of property has been
in terms of section 38(2). His alternative submission
was that if the phrase
“without recourse to a court of law” were to be found to be
necessarily implied in the whole of
section 38(2) and therefore not severable
from the section, he would support a striking down
of section 38(2) with
an ancillary order of suspension
of a declaration of invalidity, thereby
availing the legislature the opportunity of correcting the law.
[31] In
Coetzee v Government of the Republic of South Africa; Matiso and Others v
Commanding Officer, Port Elizabeth Prison, and
Others
,
4
[4]
the severance test
was set out as follows:
“[I]f the good is not dependent on the bad and can be separated from it,
one gives effect to the good that remains after the
separation if it still gives
effect to the main objective of the statute. The test has two parts: first, is
it possible to sever
the invalid provisions and, second, if so, is what remains
giving effect to the purpose of the legislative
scheme?”
4
[5]
Although
severance is a constitutionally plausible option in questions of
legislative invalidity,
4
[6]
it does not seem to be a viable choice in this matter. If this Court severs
the provisions of section 38(2) in the manner proposed
by the amicus, it would
indeed require a consequential amendment of sections 38(3) and 38(4)(b).
Whereas section 38(3) provides
for the application of the proceeds of the sale
of property in terms of section 38(2), section 38(4)(b) gives authority to the
Board
to act in terms of sections 38(2)
and 38(3)
.
Thus section
38(2), read with sections 38(3) and 38(4)(b), creates a system of debt recovery
where, once a debtor has been subjected
to the provisions of section 38(2), the
debt recovery process, including distribution of the proceeds of the sale of the
property,
is placed under the control of the Bank instead of a court, where the
court itself should be determining whether the substance and
process of debt
recovery is fair.
[32] Severing the proposed portions of section 38(2),
as suggested by the amicus,
4
[7]
is
therefore hardly viable. It is legitimate for the Bank to enforce a legal
claim, but not by by-passing the courts at the expense
of the constitutional
rights of the debtor and in the manner of section 38(2). The need for the Bank
to recover its property from
defaulting debtors in a manner that saves time and
costs is inextricably woven
with the notion of the Bank by-passing the
courts. Severing the words “without recourse to a court of law”, as
proposed
by the amicus in the alternative, will also not provide the Bank with a
“quick, effective and inexpensive” remedy against
its debtors.
Striking down is thus the only viable option. Section 38(2) must therefore, in
its entirety, be declared invalid.
Although striking down section 38(2) also
has implications for sections 38(3) and 38(4)(b), the constitutionality of these
sections
is not before us. Amending these provisions accordingly is a matter
for the legislature, not this Court.
[33] Counsel agreed that, should
section 38(2) be found to be unconstitutional and invalid, this Court would need
to suspend its
order of invalidity in terms of section 172(1)(b)(ii) of the
Constitution. However, there was no evidence to support that submission,
nor
are there any other grounds for so doing. This Court has, in several of its
judgments, stressed the importance of laying a proper
foundation for the
granting of ancillary orders of suspension of invalidity, retrospectively or
prospectively.
4
[8]
Although the
rule was formulated in terms of section 98(6) of the interim
Constitution,
4
[9]
which required
this Court to take into account “the interests of justice and good
government” before suspending an order
of invalidity, these requirements
are included in section 172(1)(b)(ii) of the Constitution, which provides that
an order made must
be “just and equitable”. Such evidence would
relate to what the effect of the order would be on the successful litigant
and
on those prospective litigants in positions similar to that of the former, as
well as the effect on the administration of justice
or state machinery. No such
evidence is before this Court.
5
[0]
There is therefore no basis for this Court to suspend an order of
invalidity.
[34] In the result, the following order is made:
1. The order of the Bophuthatswana High Court, declaring section 38(2) of the
North West Agricultural Bank Act 14 of 1981 as amended,
inconsistent with
section 34 of the Constitution and invalid, is confirmed.
2. In terms of section 172(1)(b) of the Constitution, it is ordered that the
declaration of invalidity confirmed in paragraph 1 shall
invalidate any
application of section 38(2) of the North West Agricultural Bank Act 14 of 1981
to attachments of the property of
the first respondent’s debtors, carried
out in terms of section 38(2) of the Act, provided that on the date of this
judgment,
such property has not yet been sold in execution.
3. There is no order as to
costs.
Chaskalson P, Langa DP, Ackermann
J, Goldstone J, Madala J, Ngcobo J, Sachs J, Yacoob J and Cameron AJ concur in
the judgment of Mokgoro
J.
For the first respondent: H Lever SC and D Spitz instructed by Deneys
Reitz.
Amicus curiae: AJ Freund.
[1]
The Act was amended by the
North West Agricultural Bank Amendment Act 8 of
1995.
[2]
Section 172(2)(a)
reads:
“The Supreme Court of Appeal, a High Court or a court of similar status
may make an order concerning the constitutional validity
of an Act of
Parliament, a provincial Act or any conduct of the President, but an order of
constitutional invalidity has no force
unless it is confirmed by the
Constitutional
Court.”
[3]
The
property in question comprised two tractors, a planter, a ten-ton trailer, a
chisel plough and a soil master.
[4]
In s 2(d) of the Act, the Board
is defined as “the Board of Directors of the Bank contemplated by and
constituted in terms
of section 4".
[5]
Section 37 empowers the Board
by written notice to order a debtor to apply the loan amount in accordance with
the loan term or to
repay it to the Bank “[w]henever, after an inspection
in terms of section 36 has been made the Board is satisfied that any
sum of
money . . . has not been applied for the purposes for which . . . such loan . .
. was granted”.
[6]
These are listed in s 44 of the
Act, and include applying the loan for a purpose other than that for which it
was granted; failing
to disclose material information or giving false
information; obtaining the Bank’s financial assistance though fraud;
destroying,
disposing of or damaging the secured property; and breach of the
terms of the loan agreement.
[7]
Ferreira v Levin NO and
Others; Vryenhoek v Powell NO and Others
1996 (1) SA 984
(CC);
1996 (1) BCLR
1
(CC) at para 26.
[8]
See
Weeks and Another v
Amalgamated Agencies Ltd
1920 AD 218
at 225;
Syfrets Bank Ltd and Others
v Sheriff of the Supreme Court, Durban Central, and Another; Schoerie NO v
Syfrets Bank Ltd and Others
1997 (1) SA 764
(D&CLD) at 773E-774A; and
Sedibe and Another v United Building Society and Another
1993 (3) SA 671
(T) at 674H-676C.
[9]
See
Bon Quelle (Edms) Bpk v
Munisipaliteit van Otavi
1989 (1) SA 508
(A) at 511H-512A and
Nino Bonino
v De Lange
1906 TS 120
at 122.
1
[0]
See also the discussion in
De Lange v Smuts
NO and Others
[1998] ZACC 6
;
1998 (3) SA 785
(CC);
1998 (7) BCLR
779
(CC) at paras 99-100.
[1]
1
See
Yeko v Qana
1973
(4) SA 735
(AD) at 739B-D.
1
[2]
See for example ss 36-40 of
the Supreme Court Act 59 of 1959. Similar provisions exist for the execution of
the orders of other
courts.
1
[3]
See s 173 of the
Constitution.
1
[4]
See s 45A of the Supreme
Court Act; Erasmus
Superior Court Practice
(Juta) at B1-330 and
ss 62(2)
and (3) of the
Magistrates’ Courts Act 32 of 1944
.
1
[5]
Dicey
An Introduction to
the Study of the Law of the Constitution
10 ed (Macmillan, London 1959) at
188.
1
[6]
Above n 10 at para 31.
1
[7]
Footnotes omitted.
1
[8]
[1996] ZACC 2
;
1996 (2) SA 751
;
1996 (4)
BCLR 449
(CC) at para 105. This case concerned s 22 of the Interim
Constitution. Although the wording of s 22 differs somewhat from that
of s 34
of the Constitution, this is irrelevant for present purposes.
1
[9]
See para 13 above.
2
[0]
See
Bernstein
above n
18 at para 105; and
De Lange
above n 10 at paras 128-131.
2
[1]
Compare
De Lange
above n 10 at para 90.
[2]
2
Compare
De Lange
above n 21.
2
[3]
Section
36(1) reads:
“The rights in the Bill of Rights may be limited only in terms of law of
general application to the extent that the limitation
is reasonable and
justifiable in an open and democratic society based on human dignity, equality
and freedom, taking into account
all relevant factors, including -
(a) the nature of the right;
(b) the importance of the purpose of the limitation;
(c) the nature and extent of the limitation;
(d) the relation between the limitation and its purpose; and
(e) less restrictive means to achieve the purpose.”
2
[4]
See in this regard
Beinash and Another v Ernst & Young and Others
1999 (2) SA 116
(CC);
1999 (2) BCLR 125
(CC) at para 17.
2
[5]
1997 (11) BCLR 1624
(LAC) at
1644F - 1645A.
2
[6]
Above n
25.
2
[7]
The rational basis and
the justification for a similar provision, s 55(2) of the Land Bank Act 13 of
1944, has been considered in
various judgments. In
Ixopo Irrigation Board v
Land and Agricultural Bank of South Africa
1991 (3) SA 233
(N) at 237J-238A,
Hugo J said:
“The overwhelming impression one gains from a reading of ss 55 and 56 of
the Land Bank Act in particular is that the Legislature
is intent upon giving
the Bank’s funds the greatest possible protection. This is no doubt being
because the Land Bank is funded
by public moneys.
In authorising the bank to attach and sell land without court intervention the
object must surely have been to raise the greatest
possible amount on the
Bank’s security with the least possible cost or
delay.”
In
Land and Agricultural Bank of SA v Sentraal Westelike Kooperatiewe
Maatskappy Bpk en Andere
1979 (2) SA 346
(N), Didcott J, dealing with the
same clause of the Land Bank Act, said at
349H:
“The applicant is not a commercial concern which does business for its own
profit and may fairly be expected to take the rough
with the smooth. It is a
statutory body, entrusted with public funds and charged with the duty of using
them in the national interest
by fostering agriculture in South
Africa.”
See also
Strydom v Die Land- en Landboubank van Suid-Afrika
1972 (1) SA
801
(A) at
814F-H.
2
[8]
See s
36(1)(c).
2
[9]
See para 20
above.
3
[0]
See s 27 of the Act,
which deals with security for loans and advances, and provides in subsection
(3):
“The Board may upon such terms and conditions as it deems fit and on
completion of a deed of hypothecation grant a loan or
make an advance upon a
hypothec of
movable property of which the applicant is the owner and in
respect of which he or she has the right of use and disposal
.”
[emphasis
supplied]
3
[1]
See
s 27(1) of the Act, which provides:
“Subject to the provisions of this Act, no loan or advance may be granted
or made by the Bank except on the security of a mortgage
of land or a real right
in land in the Province or of a deed of hypothecation of movable property in
terms of this
section.”
3
[2]
In
addition, the loan amount may be insured in favour of the Bank: see s 22(2)(e)
of the Act.
[3]
3
Similar mechanisms already
exist. See, for example, the automatic rent interdict and attachment provisions
in
ss 31
and
32
of the
Magistrates’ Courts Act 32 of 1944
.
3
[4]
1999 (2) SA 757
(W).
3
[5]
[1995] ZACC 3
;
1995 (3) SA 391
(CC);
1995
(6) BCLR 665
(CC) at para 104.
3
[6]
National Coalition for
Gay and Lesbian Equality and Another v Minister of Justice and Others
1999
(1) SA 6
(CC);
1998 (12) BCLR 1517
(CC) at para 35 (footnote omitted).
3
[7]
See
Beinash
above n
24 at para 21.
3
[8]
See para 27 above.
3
[9]
See para 24 above.
4
[0]
See para 22
above.
4
[1]
Section 14(c)
provides:
“Everyone has the right to privacy, which includes the right not to have
-
. . . .
(c) their possessions seized;
. . . .”
4
[2]
Section
172(1)(b)(ii)
provides:
“When deciding a constitutional matter within its power, a court
-
. . . .
(b) may make any order that is just and equitable, including -
. . . .
(ii) an order suspending the declaration of invalidity for any period and on
any conditions, to allow the competent authority to correct
the
defect.”
4
[3]
Section 38(3)
provides:
“If the proceeds of any sale of property in terms of subsection (2), after
the deduction of the costs of the seizure and sale
thereof, exceed the amount to
be repaid to the Bank with the amount of interest thereon as contemplated by
that subsection, the balance
shall be paid over to the debtor or any person who
is in law entitled to receive such payment, and where such proceeds, after such
deductions, are less than the sum of the amount so repayable and interest
thereon as hereinbefore contemplated, such proceeds shall
first be applied
towards reducing the amount of interest payable to the Bank before being applied
in redemption of capital, and the
Bank shall have a claim against the debtor or
his or her estate (as the case may be) in respect of the
deficit”;
and
s 38(4)(b)
reads:
“The Board may after giving written notice to the Master or the trustee or
the assignee or the liquidator, as the circumstances
may require, cause the said
hypothecated property to be sold in the manner provided by subsections (2) and
(3).”
[4]
4
[1995] ZACC 7
;
1995 (4) SA 631
(CC);
1995
(10) BCLR 1382
(CC) at para 16.
4
[5]
Footnote omitted. The
footnote in the quoted text makes reference to
Johannesburg City Council v
Chesterfield House (Pty) Ltd
1952 (3) SA 809
(A) at 822. See also
Ferreira v Levin
above n 7 at para 130.
4
[6]
See above n 42.
4
[7]
At para
30.
4
[8]
S v Ntsele
[1997] ZACC 14
;
1997
(2) SACR 740
(CC);
1997 (11) BCLR 1543
(CC) at para 13, where the following
observation was made with regard to the evidence which must be placed before the
court:
“[A]ll the relevant evidence should be received and evaluated by the court
of first instance. Courts would also be well-advised,
when it appears that the
constitutionality of a statute is in jeopardy, to consider whether notice of the
proposed invalidation should
not be given to organs of State - and possibly
others - concerned with the administration of the targeted provision or likely
to
be affected by its demise.” [footnote
omitted]
See also
S v Mello and Another
[1998] ZACC 7
;
1998 (3) SA 712
(CC);
1998 (7) BCLR 908
(CC) at para 11;
S v Julies
[1996] ZACC 14
;
1996 (4) SA 313
(CC);
1996 (7) BCLR 899
(CC)
at para 4;
S v Mbatha
;
S v Prinsloo
[1996] ZACC 1
;
1996 (2) SA 464
(CC);
1996 (3)
BCLR 293
(CC) at para 30;
S v Bhulwana; S v Gwadiso
[1995] ZACC 11
;
1996 (1) SA 388
(CC);
1995 (12) BCLR 1579
(CC) at para
30.
4
[9]
Act 200 of
1993.
5
[0]
In argument before this
Court, Mr Lever read out a letter dated 23 August 1999, written by Mr MJ Khasu,
Member of the Executive Council
for Agriculture, Conservation and Environment
for the North West Province and addressed to the attorneys on record for the
first
respondent. Apart from stating his opposition to the confirmation of the
order of Mogoeng J and stating that an order of unconstitutionality
would cause
serious hardship for the public, neither compelling factual evidence nor
persuasive reasons which would justify the suspensive
effect of an order of
invalidity, were provided.