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[2019] ZASCA 94
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NPGS Protection and Security Services CC and Another v FirstRand Bank Ltd (314/2018) [2019] ZASCA 94; [2019] 3 All SA 391 (SCA); 2020 (1) SA 494 (SCA) (6 June 2019)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 314/2018
In the matter between:
NPGS
PROTECTION AND SECURITY
SERVICES
CC
FIRST
APPELLANT
LLEWELLYN
RWAXA
SECOND
APPELLANT
and
FIRSTRAND
BANK
LIMITED
RESPONDENT
Neutral
citation:
NPGS
Protection and Security Services CC
&
another v FirstRand Bank Ltd
(314/2018)
[2019] ZASCA 94
(6 June 2019)
Coram:
Navsa
ADP, Mbha and Makgoka JJA and Mokgohloa and Davis AJJA
Heard:
6
May 2019
Delivered:
6 June
2019
Summary
:
Summary judgment – whether bona fide defence established –
execution against primary home of debtor – no facts
placed
before court – whether court entitled to order execution
without such facts – loan secured by mortgage over
surety’s
property – judgment debtor failing to provide court with any
information relative to the asserted right to
housing save for a
statement from the bar which is required to conduct the mandated
inquiry.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Johannesburg (
Wepener
J) sitting as court of first instance:
The appeal is dismissed
with costs on a scale between attorney and client.
JUDGMENT
Makgoka JA
[1]
This
appeal, with leave of this court, is about whether the court a quo,
the Gauteng Division of the High Court (Johannesburg) was
correct in
granting summary judgment against the first and second appellants. If
summary judgment was properly granted, an ancillary
question is
whether the court a quo was correct in declaring the immovable
property of the second appellant specially executable.
[2]
The
first appellant, NPGS Protection and Security Services CC (NPGS) is a
close corporation whose main business is the provision
of security
services. Its sole member is the second appellant,
Mr
Llewellyn Rwaxa.
On
6 May 2009, the respondent and NPGS concluded a written credit
facility agreement in terms of which the respondent advanced an
amount of R250 000 to NPGS as ‘working capital’.
The
second appellant bound himself as surety and co-principal debtor on
behalf of NPGS in favour of the respondent for payment of
all amounts
due by NPGS to the respondent.
The
credit facility was repayable upon demand and subject to annual
review.
[3]
The
loan under the credit facility
was
further secured by a covering mortgage bond registered by the second
appellant over his immovable property, in favour of the
respondent.
At the time
that the credit facility was advanced to NPGS, the second appellant
had already, in January 2007, registered a mortgage
bond in favour of
the respondent in the sum of R2 000 000, over his immovable
property (the property).
[4]
On 4 May 2017 the
respondent issued combined summons in the court a quo against the
appellants for payment of an amount of R649 197.39.
It alleged
that NPGS had defaulted on its repayment obligations in terms of the
credit facility and had been in default for more
than 20 days.
The respondent invoked the suretyship
signed by the second appellant in its favour, as well as the mortgage
bond registered in its
favour over the immovable property of the
second appellant. It accordingly, sought judgment against the
appellants, jointly and
severally, for payment of the claimed amount,
interest, costs and an order declaring the immovable property of the
second appellant
specially executable.
[5]
The appellants
served their notice of intention to defend on 17 May 2017, which was
followed by an application for summary judgment
by the respondent,
supported by a pro-forma affidavit in terms of rule 32(2) of the
Uniform Rules of Court (the uniform rules).
In an affidavit resisting
summary judgment on behalf of the appellants, deposed to by the
second appellant, the appellants initially
relied on three grounds in
an endeavour to establish a bona fide defence necessary to stave off
summary judgment. One of those
grounds, prescription, was not
persisted with.
[6]
The remaining
grounds concerned the failure by the respondent to attach a
certificate of balance to its particulars of claim, and
the alleged
failure by the respondent to demonstrate how the claimed amount was
made up.
Regarding the first
ground, it was stated
that
had the certificate of balance been attached, the appellants ‘might
possibly have started to glean how the amount of
R649 197.39
claimed by the plaintiff is made up’. Absent such certificate,
it was said, it was not possible to determine
how the amount claimed
was made up.
[1]
[7]
Secondly,
it was submitted that the alleged failure by the respondent to
explain how the claimed amount was made up, rendered the
respondent’s
particulars of claim excepiable as failing to disclose material facts
on which the appellants could reasonably
be expected to plead. In
this regard, it was argued that the credit facility agreement was
capped at R250 000. In the light
of that, the appellants claimed
that it was unclear how the amount of R649 197.39 was made up.
[8]
The
application for summary judgment came before Wepener J in the court a
quo on 12 September 2017. The learned judge, in an
ex
tempore
judgment, rejected the two contentions by the appellants as not
constituting a bona fide defence. He accordingly granted summary
judgment for the payment of the sum of R649 197.39, interest and
costs. Furthermore, the learned judge declared the second
appellant’s
immovable property specially executable.
[9]
In
this court, the appellants advanced essentially the same arguments
they did in the court a quo, albeit with a slightly different
emphasis on the absence of the certificate of balance. In this
regard, counsel for the appellants pointed out that the respondent
had, in its particulars of claim, specifically relied on the
certificate of balance, where it was pleaded that the amount of
indebtedness
would be determined and proved by it. In its absence,
submitted counsel, the appellants were unable to determine how the
amount
claimed was calculated, especially given that the credit
facility was limited to R250 000.
[10]
Counsel
for the appellants also submitted that the respondent had not
‘revealed a statement of material facts’ as to
when the
credit facility was increased beyond that amount. Without this, the
appellants were not able to determine the capital
amount advanced,
including interest charged. A further contention advanced on behalf
of the appellants was that the respondent
had failed to state when
the loan was advanced to NPGS. Thus, the sum total of the arguments
advanced by the appellants is this:
they did not know how the claimed
amount is made up. Firstly, because of the absence of the certificate
of balance and secondly,
because the respondent had not stated the
date on which the credit facility was increased.
[11]
Rule
32(3) of the uniform rules requires an opposing affidavit to disclose
fully the nature and grounds of the defence and the material
facts
relied upon therefor. To stave off summary judgment, a defendant
cannot content him or herself with bald denials, for example,
that it
is not clear how the amount claimed was made up. Something more is
required. If a defendant disputes the amount claimed,
he or she
should say so and set out a factual basis for such denial. This could
be done by giving examples of payments made by
them which have not
been credited to their account.
[12]
In
this case, if monies in terms of the credit facility were not
advanced and extended to NPGS, as alleged by the respondent, it
would
have been easy for the appellants to say so, and unequivocally deny
the allegation. One expects a defendant in the appellants’
position to know whether or not they received money from a bank and
if so, in what amount.
[13]
As
counsel for the respondent correctly submitted in his heads of
argument, the appellants did not deny the respondent’s
allegation that monies were lent and advanced to NPGS in terms of the
credit facility, or that the credit facility was increased
at
the special instance and request of NPGS. Furthermore, the appellants
have not complained that NPGS never received statements
showing the
balance of the monies owed. It is also instructive that the
appellants do not assert that any repayment of these monies
lent and
advanced, has been made. Their silence leads ineluctably to the
conclusion that they were unable to meet the respondent’s
allegations.
In my view,
the defences raised by the appellants fall within those characterised
as ‘sham defences’ by this court in
Joob
Joob Investments (Pty) Ltd v Stocks Mavundla Zek Joint Venture
[2009] ZASCA 23
;
2009 (5) SA 1
(SCA) paras 31 and 33. There is no merit in any of
them.
[14]
Indeed, the court
would be remiss in its duties if such defences, clearly devoid of any
bona fides, stand in the way of plaintiffs
who are entitled to
relief. The ever-increasing perception that bald averments and
sketchy propositions are sufficient to stave
off summary judgment is
misplaced and not supported by the trite general principles developed
over many decades by our courts.
See for example, the well-known
judgment of this court in
Maharaj
v Barclays National Bank Ltd
1976 (1) SA 418
(A) where the proper approach to applications for
summary judgments is stated.
[2]
[15]
It
follows that the court a quo was correct in granting summary judgment
against the appellants. The appeal against that order must
accordingly fail.
[16]
I
turn now to the order of the court a quo declaring the immovable
property of the second appellant specially executable. In the
summons, in compliance with the order in
Standard
Bank of South Africa Limited
v
Saunderson & others
[2005] ZASCA 131
;
2006 (2) SA 264
(SCA), the appellants’
attention was drawn to the provisions of s 26 of the Constitution,
and to rule 46(1) of the Uniform
Rules. They were invited to place
facts before the court, if they wished to contend that the right
enshrined in s 26 would be implicated,
and that the second appellant
would be rendered homeless by the order of execution against his
home. I shall revert fully to these
provisions.
[17]
In
the affidavit resisting summary judgment, the second appellant did
not deal at all with the prayer for the execution against
his
immovable property. However, during argument before the court a quo,
counsel for the appellants submitted from the bar that
the immovable
property was the primary residence of the second appellant. In its
judgment, the court a quo summarily dismissed
counsel’s
submission and granted the order declaring the second appellant’s
immovable property specially executable.
The court reasoned:
‘
The
surety’s [the second defendant’s] defences are based on
the successful raising of defences by the principal debtor,
save that
[he] also argued that the property which falls to be declared
executable, is the surety’s primary home. This argument
is
raised because the plaintiff [the respondent] had followed the
requirements for judgment and execution as if the first defendant
is
entitled to due compliance with the provisions of the
National Credit
Act 34 of 2005
. But the allegations are superfluous as the first
defendant [NPGS], the borrower, is a juristic person and it is trite
that a surety
is not entitled to rely on the provisions of the
National Credit Act in
order to protect a primary residence in these
circumstances.’
[18]
In
this court, it was enquired of counsel for the appellants as to why
the affidavit opposing summary judgment did not deal with
the
execution order. Counsel’s response was that the issue was ‘a
matter of law’, which, in his view, entitled
him to raise it
during argument without setting it out in the affidavit. Counsel was
unable to provide any meaningful response
to why there had not been
an application to adduce further evidence on appeal to introduce this
issue. He was nevertheless given
an opportunity to state what factors
would have been contained in such an affidavit to militate against
declaring the appellant’s
immovable property specially
executable. Counsel was unable to inform us of the would-be contents
of such an affidavit, and whether
the execution would leave the
second appellant homeless.
[19]
Two
things went wrong in the court a quo concerning the issue of primary
residence. The first is that the appellants’ legal
representatives were of the view that the issue of primary residence
‘was a matter of law’ which could be raised from
the bar,
without setting it out in the affidavit opposing summary judgment.
The second is that the learned judge misconstrued
the issue. It was
not whether the provisions of the
National Credit Act availed
NPGS.
The issue was whether the execution against the second appellant’s
immovable property could potentially jeopardise
his right to have
access to adequate housing enshrined in s 26(1) of the Constitution
which provides that everyone has the right
to have access to adequate
housing. Section 26(3), on the other hand, reads:
‘
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.’
[20]
In
my view, once it is found that the basis on which the court a quo
declined to exercise execution oversight was erroneous, the
matter
should be remitted to that court for it to consider the matter
afresh, on the correct basis. This is where I part ways with
my
colleague, Davis AJA, whose judgment (the majority judgment) I have
had the privilege of reading. My colleague agrees that the
court a
quo misdirected itself when it ruled that the second appellant was
not entitled to judicial oversight regarding execution
against his
home. Despite this, he concludes that the execution order should
stand because ‘. . . it is equally clear that
the court was
unimpressed with the mere submission from the bar about the loss of a
primary residence without any further information
being presented. It
was clearly seen by the court below as a ruse to escape the
consequences of default’.
[21]
I
am in respectful disagreement with how the reasoning of the court a
quo is explained. I have quoted in full the excerpt from its
judgment. It is clear that the court declined to exercise its
oversight role on the basis that, in the circumstances of the case,
the second appellant was not entitled to such oversight because the
principal debtor was a juristic person. It is on that basis
alone,
that judicial oversight was not exercised. The court a quo did not
rely on the manner in which the issue was raised, as
its reason for
not exercising oversight role. We must therefore accept what the
court a quo said in its own words.
[22]
Therefore,
but for the misdirection, we do not know what the court a quo’s
attitude would have been to counsel’s submission.
It could have
adopted either of the following courses. It could have concluded
that, in view of the unsatisfactory manner in which
the issue was
raised, the second appellant’s home was liable to be executed
against, without judicial oversight (which would
have been wrong in
my view). It could also have adjourned the prayer for execution and
set out directives as to the manner in which
those circumstances
should be placed before it, as well as time frames therefor, coupled
with a suitable costs order against the
appellants. The latter would
have been the proper approach, in my view.
[23]
As
to what such enquiry would reveal, one would never know beforehand.
There are pertinent issues that would come into
consideration in such
an enquiry. Among them would be whether indeed the property is the
primary home of the second defendant,
as it appears to be. If it is,
the court, exercising its judicial oversight, would consider whether
the principal debtor, NPGS,
or the second appellant, own any or
sufficient moveable assets which can be realised to meet the judgment
debt. This is particularly
important in light of the obiter remark of
a single Judge of the Gauteng Division of the High Court, Pretoria,
in
Nedbank
Ltd v Molebaloa
[2016]
ZAGPPHC 863 para 10, footnote 2, that the word ‘or’
appearing at the end of rule 46(1)(
a
)(i)
[3]
is now in practice read and interpreted as ‘and’.
[24]
If
that interpretation is correct, the effect is that execution against
immovable property of a judgment debtor is not competent
unless there
has first been execution against movable property, and a nulla bona
return had been made in respect thereof. I express
no view as to the
correctness of that interpretation, as the issue is not before this
court.
[4]
However, if that is the practice in the Gauteng courts, the question
is whether the court a quo was not obliged to follow that
practice
when considering the execution order in this case.
[25]
The
majority judgment concludes that the second appellant is not entitled
to judicial oversight enshrined in s 26(3) of the Constitution
for
two reasons. First, because the loan in question was obtained by the
second appellant to finance his business, and not to purchase
his
home. Second, because the appellants were legally represented in the
court a quo, and that the provisions of s 26(3) and 46(1)(
a
)
were brought to the second appellant’s attention in the
summons. The second appellant has had ample opportunities to place
the relevant circumstances before the court: in the affidavit
opposing summary judgment; during the argument in the court a quo;
in
this court in which they could have sought leave to apply to adduce
further evidence; and during the hearing of the appeal in
this court.
I conclude, on the facts of the case, that none of the above
considerations disentitles the second appellant of the
right to
judicial oversight.
[26]
The
jurisprudential foundation for judicial oversight was laid in
Jaftha
v Schoeman & others; Van Rooyen v Stoltz & others
[2004] ZACC 25
;
2005 (2) SA 140
(CC) where
the
Constitutional Court declared that
t
he
failure to provide judicial oversight over sales in execution against
immovable property of judgment debtors in s 66(1)(
a
)
of the
Magistrates’ Courts Act 32 of 1944
was unconstitutional
and invalid.
It
remedied the defects by reading in words into the subsection
providing for judicial oversight of the process of execution against
immovable property. With the reading in, only the court, after
consideration of all relevant circumstances, was empowered to order
execution
against
the immovable property of the party against whom judgment had been
given.
[27]
Following
Jaftha
,
rule 46
, which provides for execution against immovable property, was
amended with effect from 24 December 2010, by the addition of a
proviso
to sub-rule 1, to provide for judicial oversight over
execution of immovable property which is the primary residence of a
judgment
debtor. The amended
rule 46(1)(
a
)
read, at the time,
[5]
as
follows:
‘
No
writ of execution against the immovable property of any judgment
debtor shall issue until – (i) a return shall have been
made of
any process which may have been issued against movable property of
the judgment debtor from which it appears that the said
person has
not sufficient movable property to satisfy the writ; or (ii) such
immovable property shall have been declared specially
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.
’
(My emphasis.)
[28]
The
object of judicial oversight was emphasised in
Mkhize
v Umvoti Municipality & others
[2011] ZASCA 184
;
2012 (1) SA 1
(SCA) para 26, as being to determine
whether rights in terms of s 26(1) of the Constitution are
implicated. This court went
on to explain:
‘
In
the main a number of cases grappling with
Jaftha
sought to arrive at that determination without accepting that
judicial oversight was required in every case. How, it must be asked,
can a determination be made as to whether s 26(1) rights are
implicated, without the requisite judicial oversight? We are
unable to understand the difficulty of applying the principle that it
is necessary
in
every case
to subject the intended execution to judicial scrutiny to see whether
s 26(1) rights are implicated. To not undertake such an enquiry
would
in fact render the procedure unconstitutional. . .
.
’ (My emphasis.)
[29]
As
stated already, the majority concludes that the second appellant is
not entitled to the judicial oversight of s 26 because the
loan was
not acquired for the purpose of purchasing his home, but for
financing the business of NPGS. A similar argument was raised,
and
rejected, in
Gundwana
v
Steko Development CC & others
[2011]
ZACC 14
;
2011 (3) SA 608
(CC). There, it was contended
that
a mortgaged property was not affected by judicial oversight because
mortgagors were willing to accept the risk of losing their
property
when entering into the mortgage loan agreement.
[6]
[30]
The
Constitutional Court, at para 44, rejected the proposition. It held
that the particular willingness to provide the property
as security
for the loan did not imply that the mortgagor accepts that the
mortgage debt may be enforced without court sanction;
or that the
mortgagor has waived his or her right to have access to adequate
housing or eviction only under court sanction of ss
26(1) and (3).
Froneman J observed at para 47 that mortgage bonds do not ordinarily
contain clauses describing the purpose for
which the mortgage is
held. See also
Mkhize
para 16 where this court (in a separate concurring judgment), with
reference to
Gundwana
,
held
that a mortgagee is in the same position as other creditors.
[31]
Similarly,
I can conceive of no legal basis for treating differently, judgment
debtors who secure business loans by providing their
property as
security, and disentitle them to the protection of s 26(3) when their
homes are sought to be executed against.
It could well be that
in those circumstances, the remarks of Mokgoro J in
Jaftha
para 58, would weigh with the court exercising its judicial oversight
whether execution should be ordered:
‘
Another
factor of great importance will be the circumstances in which the
debt arose. If the judgment debtor willingly put his or
her house up
in some or other manner as security for the debt, a sale in execution
should ordinarily be permitted where there has
not been an abuse of
court procedure.’
[32]
Needless
to say, this passage does not mean that where loans were obtained for
purposes other than purchasing a home, judicial oversight
is not
required. Instead, it reinforces the proposition that in all
circumstances where there is an application for an order of
execution
against a primary residence of a judgment debtor, judicial oversight
is required, irrespective of the purpose for which
the debt was
incurred.
[33]
The
only way to determine whether execution ‘
should
ordinarily be permitted’
and
to determine whether there was an abuse, is to
have
‘some preceding enquiry’, which is necessary to determine
whether the facts of a particular matter are of the
Jaftha
-kind,
as per
Gundwana
para 43. Therefore, a court must
provide
judicial oversight in all cases, including when the property has been
provided as security for a business loan, as is the
case here.
See
Mkhize
para
18, where the opinions of
Max
du Plessis and Glenn Penfold,
[7]
in their discussion of
Jaftha
and
Sauderson
,
were
cited with approval. The learned authors make the point, with
reference to
Jaftha
,
that
the
‘only way to determine whether s 26(1) will be breached is on a
case-by-case basis; hence the need to ensure judicial
oversight of
the process in
all
cases’.(My emphasis.)
[34]
The
determinative test is whether
the
judgment debtor is likely to be deprived of the to access to
adequate housing should the immovable property in question be
executed against. The court’s oversight role is triggered
a
s
long as the loan is secured by an immovable property which is the
primary home of a judgment debtor, and there is an application
to
declare that property specially executable. Accordingly, I conclude
that it is immaterial to the court’s oversight role
whether the
loan was obtained to finance the purchase of a home or to finance a
business venture. Apart from being at odds with
the general thrust of
s 26(3), it is doubtful whether the differentiation sought to be made
would be compatible with the equality
provisions of s 9 of the
Constitution.
[35]
This
bring me to the next consideration. It is whether the court is
entitled to shirk its oversight role where there is no opposition
to
an order of execution, despite a judgment debtor being legally
represented. In a slightly different but relevant context, when
it
considered the constitutionality of rule 31(5) of the uniform rules
in
Gundwana
(whether the registrar of a high court is competent to order
immovable property specially executable), the Constitutional Court
held at para 43 that the constitutional validity of the rule cannot
depend on the subjective position of a particular applicant.
[36]
Once
more, in
Mkhize
at para 18, the learned authors
Du
Plessis and Penfold, are quoted as follows:
‘
At
no point in its reasoning did the Constitutional Court [in
Jaftha
]
suggest that this constitutional duty only arose when there was
formal opposition from the defendant. Nor did it allow application
for such orders that were not opposed to continue to take place
before the registrar. Instead, it required judicial oversight in
all
cases to ensure that the orders being granted did not violate s 26(1)
of the Constitution. In any event, the idea of formal
opposition as
the trigger for constitutional justification appears to miss the
point. There are many reasons why a defendant may
not formally or
informally oppose such an order, not least of which may be a lack of
funds and a lack of knowledge about the legal
process –
something the Constitutional Court adverted to in
Jaftha
.
In our view there are also undoubtedly circumstances in which a court
would, despite the lack of opposition, be fulfilling its
constitutional duty by refusing to grant such an order.’
[37]
There
is indeed force in these remarks. In addition to the lack of funds
and lack of knowledge of legal processes, I would add another
reason
why a judgment debtor may not formally oppose the order of execution,
namely wrong advice or remissness of legal representatives.
We have a
classic example of that in the present case. I am of the view that in
those circumstances the court’s oversight
role is neither
displaced nor diminished. A court cannot remain supine in the face of
potential infringement of a constitutional
right. It must
proactively seek to establish the relevant circumstances before it
declares a primary home specially executable.
This is what the
Constitution demands in s 26(3).
[38]
Anything
less would lead to unintended results. For example, two judgment
debtors who both face the risk of losing their primary
homes when
action is instituted, would be treated differently, depending on how
they react to the summons. The one who elects not
to defend the
action, and default judgment is taken against him or her, will be
assured of judicial oversight in terms of the prevailing
rules and
jurisprudence when their property is sought to be executed against.
On the other hand, the one who elects to defend the
action, albeit
through a not so diligent legal representative, enjoys no such
benefit, and his or her property would summarily
be executed against,
without judicial oversight. It is untenable.
[39]
It
follows in the context of the present case that the enjoyment and
protection of fundamental rights, such as the one enshrined
in s 26,
cannot depend on subjective factors such as the quality of one’s
legal representation. The court is enjoined by
the Constitution to
exercise judicial oversight in all matters where orders for execution
against primary homes of judgment debtors
are sought.
It
is only after considering ‘relevant circumstances’ that a
court would arrive at a constitutionally appropriate decision.
[8]
It is
by no means suggested that legally represented judgment debtors do
not have a duty to place the relevant information before
the court as
to why the execution against their primary homes should not be
ordered. By all means they do. This calls for diligence
and proper
advice on the part of their legal representatives. In the present
case, there was no such. The legal representatives
provided the
second appellant with incorrect legal advice as to how the issue of
primary residence should be raised. However, the
consequence of their
wrong advice – losing the primary home without the
constitutionally required judicial oversight –
should not be
visited upon the second appellant.
[40]
The
insistence on judicial oversight does not mean that execution against
a judgment debtor’s primary home can never be authorised.
It
simply means that if it occurs, it must be within the constitutional
dictates of s 26(3). On the face of it, it might appear
that the
circumstances of the second appellant, a businessman, are not of the
Jaftha
-type.
Therefore, it could well be that he is abusing the mechanism of
judicial oversight. My colleague in para 65 makes a definitive
conclusion that the issue of primary residence was raised as
stratagem to avoid the consequences of the second appellant failing
to fulfil his obligations.
[41]
Without
a proper enquiry into all the relevant circumstances, it is difficult
to accept that conclusion. I attribute the unsatisfactory
state of
affairs to the wrong advice given to the second appellant by his
legal representatives that the issue of primary residence
could be
raised in argument without dealing with it fully in the opposing
affidavit. As explained in
Mkhize
para 22 ‘[
c]ourts
cannot
ante
omnia
decide whether s 26(1) rights have been implicated without conducting
a proper investigation in discharging its oversight role’.
[42]
It
is true that
Gundwana
and
Mkhize
both concerned applications for default judgment, and not summary
judgment. It is also true that the majority of cases where judicial
oversight is exercised, followed judgments granted by default.
Difficulties seldom occur in applications for summary judgment.
That
is because in the majority of those cases, the defendants receive
proper advice from their legal representatives. That is
not the case
here. The second appellant was clearly given wrong advice that he did
not have to set out the relevant factors in
an affidavit concerning
his primary home. That attitude persisted in this court. It became
clear that, until the possibility of
applying to adduce further
evidence on appeal was raised from the bench during argument, no
thought had been given to it by the
appellants’ legal
representatives.
[43]
There
is therefore nothing preventing a court, in suitable cases such as
the present, to play an active role to ensure that in a
given case,
its execution order is constitutionally compliant. This is
particularly true here, given that in the summons it was
foreshadowed
that the property against which execution was sought, was the primary
home of the second appellant. Upon perusal of
the summons, this
should have been flagged by the learned judge as potentially
triggering judicial oversight. Upon noticing that
the affidavit
opposing summary judgment was silent on it, the learned judge should,
at the very least, enquired whether the second
appellant had waived
the protection afforded in s 26(3) and rule 46(1).
[44]
A
court must always be reluctant to deprive a judgment debtor of the
right and protection of s 26(3) except in the clearest case
that the
judgment debtor had waived that right. Such waiver must not be easily
inferred. In the present case, it can hardly be
said that the second
appellant had waived his right his right. For all these reasons, I
would dismiss the appeal against the granting
of the summary
judgment, but remit the prayer for execution against the second
appellant’s immovable property to the court
a quo, for it to
conduct an enquiry envisaged in s 26(3) of the Constitution, in the
light of this judgment. In this regard, each
of the parties should be
afforded an opportunity to place whatever information before the
court regarding the executability of
the second appellant’s
immovable property.
__________________
T
M Makgoka
Judge
of Appeal
Davis
AJA (Navsa ADP, Mbha JA and Mokgohloa AJA concurring)
[45]
I
have had the privilege of reading the judgment of my colleague
Makgoka JA. I respectively disagree with the approach that he has
adopted in respect of one critical issue whether the order of the
court a quo regarding the execution of immovable property stands
to
be set aside and his proposed order that the prayer for execution be
remitted to the court a quo for it to conduct an inquiry
envisaged in
s 26(3) of the Constitution 1996.
[46]
The
facts giving rise to this appeal have been meticulously set out by
Makgoka JA. The difference between us turns on the following
part of
the order:
‘
The
immovable property described as Erf 66 Elton Hill, extension 1,
Township, the province of Gauteng, measuring 1767 square metres
in
extent and held under deed of transfer number T93029/1999 is declared
especially executable.’
[47]
The
respondent claimed R649 197.39 against the principal debtor,
being the first appellant of which the second appellant is
the sole
member. The claim was based on a loan advanced to the first appellant
by the respondent for the purpose of financing its
business. The
second appellant stood surety for the first appellant’s
obligations in respect of this loan. As security for
the first
appellant’s loan, a first mortgage bond over second appellant’s
immovable property was registered.
[48]
The
appellants opposed the application for summary judgment on the basis
of what they averred to be bona fide defences. The court
a quo found
that none of these averments raised in their affidavit opposing
summary judgment set out sufficient facts to show that
the appellants
had a bona fide defence. Makgoka JA has found that, save for the
declaration of special execution of the property,
the court a quo’s
findings should not be disturbed. As indicated it is with the latter
finding that I find myself in disagreement.
[49]
In
its summons, the respondent drew to the second appellant’s
attention the provisions of ss 26(1) and 26(3) of the of the
Constitution that he may not be evicted from his home, or his home
may not be declared executable and sold in execution, without
a court
order, which can only be granted after a court has considered all the
relevant circumstances. The summons drew further
attention to the
provisions of rule 46(1)(
a
)(ii)
of the uniform rules of Court, which applied prior to an amendment to
the uniform rules on 22 December 2017, which amendment
set out in
greater detail the protection afforded to a debtor as sourced in ss
26(1) and (3) of the Constitution.
[50]
Since
22 December 2017 rule 46(A) applies to all applications for special
execution as well as proceedings that were pending on
that date. To
the extent relevant, rule 46(A) provides as follows:
‘
(1) This rule applies whenever
an execution creditor seeks to execute against the residential
immovable property of a judgment debtor.
(2)(a) A court considering an
application under this rule must –
(i) establish whether the immovable
property which the execution creditor intends to execute against is
the primary residence of
the judgment debtor; and
(ii) consider alternative means by the
judgment debtor of satisfying the judgment debt, other than execution
against the judgment
debtor’s primary residence.
(b) A court shall not authorise
execution against immovable property which is the primary residence
of a judgment debtor unless
the court, having considered all relevant
factors, considers that execution against such property is warranted.
(c) The registrar shall not issue a
writ of execution against the residential immovable property of any
judgment debtor unless a
court has ordered execution against such
property.’
[51]
The
protection afforded to a judgment debtor by this rule, whenever an
execution creditor seeks to execute against the former’s
residential home, stems from the interpretation of s 26(3) of the
Constitution in the judgment of Mokgoro J in the Constitutional
Court
in
Jaftha
v Schoeman & others; Van Rooyen v Stoltz & others
[2004]
ZACC 25
;
2005 (2) SA 140
(CC) paras 55-56.
‘
It
is my view that this is indeed an appropriate remedy in this case.
Judicial oversight permits a magistrate to consider all the
relevant
circumstances of a case to determine whether there is good cause to
order execution . . . It would be unwise to
set out all the
facts that would be relevant to the exercise of judicial oversight.
However, some guidance must be provided. If
the procedure prescribed
by the rules is not complied with, a sale in execution cannot be
authorised. If there are other reasonable
ways in which the debt can
be paid an order permitting a sale in execution will ordinarily be
undesirable. If the requirements
of the rules have been complied with
and if there is no other reasonable way by which the debt may be
satisfied, an order authorising
the sale in execution may ordinarily
be appropriate unless the ordering of that sale in the circumstances
of the case would be
grossly disproportionate. This would be so if
the interests of the judgment creditor in obtaining payment are
significantly less
than the interests of the judgment debtor in
security of tenure in his or her home, particularly if the sale of
the home is likely
to render the judgment debtor and his or her
family completely homeless.’
[52]
In
Jaftha
the
court found that s 66(1)(
a
)
of the Magistrates’ Court Act 32 of 1944 violated s 26(1) of
the Constitution to the extent that it allowed execution against
the
home of indigent debtors whenever, as result thereof, they stood to
lose the security of tenure.
[53]
Rule
46(1) and its replacement rule 46(A) afford a judgment debtor an
opportunity to oppose the grant of an order of special execution
against residential home. In
Standard
Bank of South Africa Ltd v Bekker and Four Similar Cases
2011 (6) SA 111
(WCC) a full bench at para 30 in respect of rule
46(1) said:
‘
Allegations
that execution against the hypothecated property would infringe the
defendant/ judgment debtor’s constitutional
rights or that the
application for a writ of execution to issue is an abuse should, in
principle, be pleaded by the defendant/
judgment debtor, and any
rebutting allegations by the plaintiff/ judgment creditor
.’
[54]
The
requirements now contained in rule 46(A) make it clear that a
judgment debtor must be informed before an application to execute
is
heard, that he or she has a right to set out grounds of opposition to
such an application. Faced with an application to execute
in respect
of a residential home, a court is required to examine the specific
circumstances of the debtor, as they apply at the
time the order is
to be made, whether there are alternative means by which the debt may
be repaid taking into account whether the
remedy to be granted meets
a test of proportionality between the legitimate contractual rights
of the creditor and the rights of
the debtor in terms of s 26(1) of
the Constitution. See
Standard
Bank v Hendricks & others
[2018]
ZAWCHC 175
para 39.
[55]
From
this review of the relevant jurisprudence, it is clear that in a case
of an application for default judgment, a court, in its
discretion,
needs to ensure that it is possessed with adequate information to
enable it to grant a remedy which complies with these
requirements.
In the case of an application for summary judgment, provided the
creditor has complied with the requirements of rule
46(A), there is
an onus on the debtor, at the very least, to provide the court with
information concerning whether the property
is his or her personal
residence, whether it is a primary residence, whether there are other
means available to discharge the debt
and whether there is a
disproportionality between the execution and other possible means to
exact payment of the judgment debt.
[56]
In
his judgment Makgoka JA relied heavily on the proposition that there
is no legal basis for treating differently judgment debtors
who
secure business loans by providing their property as security, which
distinction would disentitle them to the protection of
s 26(3)
of the Constitution as well as rule 46, when their homes are sought
to be executed against. For this proposition he
has relied on the
judgments in
Gundwana
v Steko Development
[2011]
ZACC 14
;
2011
(3) SA 609
(CC) and
Mkhize
v Umvoti Municipality
[2011] ZASCA 184
;
2012 (1) SA 1
(SCA). In both cases the courts were
dealing with default judgments. In
Gundwana,
the court found that the Registrar of the high court was not
competent to make an execution orders when granting default judgments
in terms of rule 31(5)(b) of the Uniform Rules. In
Mkhize
,
judgment by default was entered against the plaintiff by the clerk of
the magistrate’s court and a warrant of execution
was issued
against his immovable property leading to nulla bona return of
service. A clerk thereafter issued a warrant to execute
against the
immovable property which was sold at a sale in execution.
Notwithstanding that both of these cases dealt with
default judgment,
it is significant that Navsa and Snyders JJA held in
Mkhize
at
para 26:
‘
We
are unable to understand the difficulty of applying the principle
that it is necessary in every case to subject the intended
execution
to judicial scrutiny to see whether s 26(1) rights are implicated. To
not undertake such an inquiry would in fact render
the procedure
unconstitutional.’
However
the court issued the caution that ‘the validity of executions
will depend on the circumstances of each case.’
(para 27).
[57]
This
dictum implies that care should be taken by a court to examine the
circumstances of each case. It must follow that the circumstances
pertaining to a default judgment are generally different to those
which apply with regard to a summary judgment, a point which
is
luminously illustrated in this case.
[58]
In
the present case in its summons the respondent drew the attention of
the appellants to the significance of ss 26(1) and (3) of
the
Constitution together with the implications of rule 46(1)(
a
)(ii).
Notwithstanding that the appellants were duly represented and deposed
to an affidavit, opposing summary judgment, not a word
was said about
the property which would be employed as security for the loan of the
first appellant. The second appellant is a
businessman and, judging
by the extent of the first appellant’s indebtedness at the time
that the summons were issued, which
was probably also not the full
extent to which the facility was extended, his security business that
was conducted must have been
quite extensive.
[59]
It
is apparent from the judgment of the court below that the only, and
limited, manner in which the question of the property being
the
primary residence of the second appellant was raised, was by way of a
submission from the bar by counsel representing him.
Nothing more.
Before the court below, no attempt was made to provide even the most
basic information in relation thereto. A further
affidavit could have
been submitted. An opportunity could have been sought for the second
appellant to testify. The court could
have been told whether he was
now a businessman without means and whether he had accommodation of
any sort. This was not done.
[60]
Moreover,
at the stage before the hearing of the appeal, no attempt was made on
behalf of the second appellant to have further evidence
admitted on
appeal by way of an application to that end. Furthermore, before us,
during oral argument, a further opportunity presented
itself, when
counsel was asked about the failure to resort to what is set out
above. That opportunity, too, was spurned.
[61]
The
present case is neither one of default judgment nor does it involve a
mortgage bond needed to acquire a personal residence.
The relevant
loan was a commercial loan, to be employed in the business of the
first appellant. These facts alone may not be sufficient
to justify a
full inquiry into whether an execution of a residential property
should take place. It is notable however that this
case stands to be
classified differently to the impecunious litigant who sought leave
in
Jaftha
or
an unrepresented debtor. See also the observation of Froneman J in
Gundwana
at
para 53 concerning the scope of the oversight role of a court in this
cases: ‘What it does is to caution courts that, in
allowing
execution against immovable property, due regard should be taken of
the impact that this may have on judgment debtors
who are poor and at
risk of losing their homes’.
[62]
When
courts issue an order of execution against immovable property, due
regard should be had to the impact that this may have on
judgment
debtors who are poor and at risk of losing their homes. In
Gundwana
at para 54 Froneman J said the following about execution of immovable
property:
‘
It
must be accepted that execution in itself is not an odious thing. It
is part and parcel of normal economic life. It is only when
there is
disproportionality between the means used in the execution process to
exact payment of the judgment debt, compared to
other available means
to attain the same purpose, that alarm bells should start ringing. If
there are no other proportionate means
to attain the same end,
execution may not be avoided.’
[63]
In
the present case this court is asked to find that but one mention by
counsel from the bar in the court below is sufficient to
avoid an
order of execution. The summary judgment procedure enables essential
information to be placed before a court to enable
it to fulfil its
function in adjudicating on defences raised. In the present case,
extensive facile defences, which were dressed
up as being technically
proficient, were the only ones presented resisting summary judgment.
One would have thought that a business
person in the position of the
second appellant, when faced with the loss of his home, would, at the
very least, have expressed
his anxiety about the consequences
thereof. It is the one thing that is conspicuously absent from the
affidavit. While it is true
that the court below misdirected itself
in relation to whether or not an individual rather than a company was
affected, it is equally
clear that the court was unimpressed with the
mere submission from the bar about the loss of a primary residence
without any further
information being presented. It was clearly seen
by the court below as a ruse to escape the consequences of default.
[64]
Judicial
oversight continued before us. We were required to consider whether
the circumstances were such as to preclude an execution
order. The
second appellant was provided with yet another opportunity to present
relevant information. This aspect was specifically
raised with
counsel at the hearing. If the second appellant was genuinely at risk
of losing his primary residence, it would have
taken no more than a
few lines in an affidavit to put before us the required information.
This is not an instance of a vulnerable
individual being subjected to
the evils that might be perpetrated by an unscrupulous lender. It is
not correct to characterise
the second appellant as being placed in a
vulnerable position by his legal representatives being remiss.
[65]
Having
taken the point from the bar concerning the loss of a primary
residence, it could not have escaped the second appellant or
his
legal representatives, as pointed out in the summons with the
references to his constitutional rights and the need to place
information before the court, that certain basic information had to
be provided. The failure to do so, in the light of all the
circumstances set out above, leads to the compelling conclusion that
the point was raised as a stratagem to avoid the consequences
of
failing to fulfil his obligations in respect of a commercial loan.
One is left with the distinct impression that the second
appellant
was unable to attest to that which could have avoided the execution
order. This is fortified by the unlikelihood that
the second
appellant would have put his primary residence at risk purely to
secure a commercial loan. It should be borne in mind
that there was
already an existing bond in place, which was then used for the
further purpose of securing the loan.
[66]
The
duty of a court to investigate a debtor’s position may well be
different, even on the facts of this case if it involved
an
unrepresented litigant, the loan was not exclusively of a commercial
nature or where, at least, some evidence suggests that
the execution
was in respect of a debtor’s primary residence. As was made
clear in
Standard
Bank of South Africa Limited
v
Saunderson & others
[2005] ZASCA 131
;
2006 (2) SA 264
(SCA) para 23, a judgment creditor
only has to justify the grant of a writ where the debtor has
contested its validity because
of an alleged infringement of s 26(1)
of the Constitution. In their judgment Cameron and Nugent JJA held
that the determination
of whether the grant of a writ of execution is
constitutionally justified only arises where the defendant defends or
at least lodges
an informal objection to a writ of execution.
[67]
On
the facts of this case, the complete failure by the second appellant
to avail himself of rights which were expressly drawn to
his
attention in the summons issued by the respondent dictates to the
contrary. It bears repeating that there was a specific prayer
in the
summons requesting an order of execution. In imposing an obligation
upon a court in this case when one vague and unspecified
mention of a
personal residence without more suffices as a defence or even a
justification for remitting a case back to the court
a quo, would in
my view, cause significant uncertainty, and arguably serious damage
to the efficient provision of credit in the
economy.
[68]
In
this case the second appellant was afforded a number of opportunities
to lodge an objection to the application to execute. From
the time of
the deposition of the affidavit resisting summary judgment to the
time of the appearance of the hearing before the
court a quo and then
before the hearing of the appeal, added to which a further
opportunity at the hearing of the appeal, the second
appellant
spurned four opportunities to provide the necessary information.
[69]
For
the reasons set out above together with those set out by Makgoka JA
in respect of the other defences, I would dismiss the appeal
with
costs.
[70]
In
the result:
The
appeal is dismissed with costs on a scale between attorney and
client.
_________________
D
Davis
Acting
Judge of Appeal
APPEARANCES:
For
the Appellants:
VP Ngutshana
Instructed
by:
Maoba
Attorneys, Pretoria
Mogaswa
Inc., Johannesburg
Van
der Berg Van Vuuren Attorneys,
Bloemfontein
For
the Respondent:
C Moreno
Instructed
by:
Marais
Muller Hendricks Inc., Tyger Valley
Mervyn
Joel Smith Attorneys, Johannesburg
Bezuidenhout
Inc., Bloemfontein
[1]
In
papers before us, the certificate of balance appears as annexure
‘A’. We were informed from the bar that the certificate
had been sent to the appellants as part of the documents in terms of
s 129
of the
National Credit Act 34 of 2005
.
[2]
See
also
Herb
Dyers (Pty) Ltd v Mahomed & another
1965 (1) SA 31
(T) at 31H-32A-B;
Caltex
Oil
(SA) Ltd v Webb & another
1965 (2) SA 914
(N) at 916D-H;
Arend
& another v Astra Furnishers (Pty) Ltd
1974
(1) SA 298 (C) at 303F-H;
Shepstone
v Shepstone
1974
(2) SA 462
(N) at 467A-H and
Breitenbach
v Fiat SA (Edms) Bpk
1976
(2) SA 226 (T).
[3]
Rule
46(1)
is quoted in full in paragraph 27 of this judgment.
[4]
In
Nkola
v Argent Steel Group (Pty) t/a Phoenix Steel
[2018] ZASCA 29
;
2019 (2) SA 216
(SCA), this court’s attention
was drawn to the remarks in
Molebaloa
.
However, this court did not deem it necessary to express any firm
view about it. It distinguished the matter before it on the
basis
that
Molebaloa
concerned execution of a primary home, which was not implicated in
the case before it.
[5]
Rule
46
was further amended on 22 December 2017, by amongst others, the
introduction
of a new
rule 46A
, to regulate the procedure which a judgment
creditor has to follow when applying to court to declare a judgment
debtor’s
primary residence executable. It provides for the
following aspects: judicial oversight; procedure; contents of the
application;
supporting annexures; respondent’s options;
powers of the court; and the setting of a reserve price. These
provisions are
not applicable to this case as it was finalised
before the new amendments came into effect on 22 December 2017.
[6]
The
contention was based on a passage in para 18 of
Standard
Bank of South Africa Ltd v Saunderson & others
[2005]
ZASCA 131; 2006 (2) SA 264 (SCA).
[7]
M
du Plessis and G Penfold
‘
Bill
of Rights Jurisprudence’ (2005)
Annual
Survey of South African Law
27
at 77 to 81; 2006
Annual
Survey of South African Law
45 at 83-93.
[8]
For
analogous circumstances where the Constitutional Court set aside
evictions granted without the court considering all relevant
circumstances as required in terms of the Prevention of Illegal
Eviction from and Unlawful Occupation of Land Act 19 of 1998
(PIE),
see
Machele
& others v Mailula & others
[2009] ZACC 7
;
2010 (2) SA 257
(CC);
Pitje
v Shibambo & others
[2016]
ZACC 5
;
2016 (4) BCLR 460
(CC).