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[2011] ZACC 14
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Gundwana v Steko Development CC and Others (CCT 44/10) [2011] ZACC 14; 2011 (3) SA 608 (CC); 2011 (8) BCLR 792 (CC) (11 April 2011)
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CONSTITUTIONAL COURT OF SOUTH AFRICA
Case CCT 44/10
[2011] ZACC 14
In the matter between:
ELSIE GUNDWANA
….......................................................................................
Applicant
and
STEKO DEVELOPMENT CC
….............................................................
First
Respondent
NEDCOR BANK LIMITED
….............................................................
Second
Respondent
MINISTER FOR JUSTICE AND CONSTITUTIONAL
DEVELOPMENT
…................................................................................
Third
Respondent
and
NATIONAL CONSUMER FORUM
….......................................................
Amicus
Curiae
Heard on : 10 February 2011
Decided on : 11 April 2011
JUDGMENT
FRONEMAN J:
Introduction
The
ultimate constitutional issue in this matter is whether a High
Court registrar (registrar),
1
in the course of ordering default judgment under rule 31(5)(b) of
the Uniform Rules of Court
2
(High Court Rules), may grant an order declaring mortgaged property
that is a person’s home specially executable.
3
The
applicant contends that the power of the registrar is
constitutionally invalid. She seeks direct access to this Court for
a declaratory order to that effect. In addition she claims
consequential relief in the form of rescission of the default
judgment which included the order declaring her property executable
(rescission application), and for the setting aside on appeal
of an
order evicting her from her property (eviction order).
The
second respondent, Nedcor Bank Limited (Bank) contends that the
order declaring the applicant’s property executable
is valid,
but opposes the application for direct access to this Court to
decide its constitutionality. Its grounds for doing
so are that the
rescission application is pending in the Western Cape High Court,
Cape Town (High Court) and that it will not
be in the interests of
justice to bypass those proceedings. In relation to the eviction
order the Bank argues that there are
no reasonable prospects of
success on appeal and that leave to appeal should be refused for
that reason.
To
appreciate these contentions it is necessary to turn to the history
of the matter.
Factual
background
The
applicant purchased Erf 457 and Erf 458 Tyolora, Thembalethu,
George, Western Cape (the property) in 1995 for R52 000. She
paid
part of the price, R25 000, with money lent to her by the Bank
under a mortgage bond (mortgage bond). In terms of the
mortgage
bond the property served as security for the loan. During 2003 the
applicant fell in arrears with her monthly repayments.
On 7
November 2003 the registrar granted default judgment against her in
the High Court at the Bank’s instance for payment
of R33
543,06 together with a further order declaring the property
executable for that sum. On the same day a writ of attachment
was
issued to give effect to the declaration of executability.
The
Bank did not take further action in relation to the execution for
approximately four years. The applicant continued making
payments
on the bond, albeit irregularly. In August 2007 the applicant says
she discovered, on her return from a visit to her
sister in Cape
Town, that the sale in execution of the property was to take place.
She immediately contacted a Bank official
who she says told her
that she was in arrears in the amount of R5 268,66 and that the
total outstanding balance on the bond
amounted to R23 779,13. She
promised the Bank official that she would pay the arrears as soon
as possible and on 13 August
2007 she paid R2 000 to the Bank. She
thought she had averted the sale in execution, but that was not to
be.
On
15 August 2007, the property was sold in execution under the
original writ to the first respondent, Steko Development CC
(Steko).
4
Registration of transfer to Steko followed but the applicant did
not vacate the property. On 23 April 2008, Steko launched
an
application for her eviction from the property in the George
Magistrates’ Court.
When
the eviction application first came before court, the applicant
sought and obtained a postponement in order to obtain legal
advice.
She was less fortunate when the matter came before the court a
second time, on 3 June 2008. She sought another postponement,
on
the basis that she needed to obtain her file from the Legal Aid
Board in order to put a proper defence before the court.
The
magistrate refused this request and granted the eviction order. The
applicant appealed against this order to the High Court,
but the
appeal was dismissed on 27 February 2009. Further leave to appeal
was refused by the Supreme Court of Appeal.
After
the eviction order had been granted, the applicant sought
rescission of the 2003 default judgment in the High Court. She
launched the rescission application on 13 October 2008. The
rescission application is pending in the High Court; the parties
having agreed to postpone it until determination of the proceedings
in this Court.
The
eviction order was granted without the applicant fully answering
the allegations in Steko’s founding affidavit seeking
eviction. In her founding affidavit in support of her application
for a postponement, she alluded to Steko’s acknowledgement
that she may have a case against the Bank which attached the
property and that she might also have grounds for setting the
original default judgment aside, but she provided no further
details.
Proceedings
in this Court
In
the papers before this Court a much fuller picture appears.
5
The applicant admits that the summons which formed the basis of the
default judgment was served on her on 14 October 2003.
She states
that before default judgment was granted she consulted with a Bank
official and made arrangements to borrow money
from friends and
colleagues. Because of this, she assumed that default judgment
would not be taken against her. She knew of
no further action taken
against her by the Bank for a period of approximately four years.
During that time, she states that
she was unaware that default
judgment had been taken against her. The Bank’s summons had
claimed a balance of R33 543,06
and interest at the rate of 14,5%
on the sum as at 1 September 2003. The Bank’s financial
records reflect that three
further amounts of R853,70 were credited
to the account between 1 September 2003 and 7 November 2003, the
date of the default
judgment. The actual amount outstanding on the
day of the judgment was R32 581,62. Subsequent to the default
judgment monthly
payments continued from 1 December 2003 fairly
regularly until April 2004 when, in addition, two larger payments
of R6 000
and R9 000 were made on 26 April and 28 April
respectively. Regular monthly payments continued for the rest of
2004.
In 2005 the payments became irregular and in 2006 none were
made. This was apparently compensated for by a payment of R10 066
on 5 February 2007.
The
applicant approached this Court on two bases. She sought leave to
appeal against the eviction order and also sought direct
access on
the substantive constitutional issue in order to dispose of the
rescission application. I think it is fair to say
that her approach
to the exact relief she sought has not been entirely consistent,
but in view of the fact that the Bank’s
counsel accepted that
the matter should proceed on the basis of the relief sought in the
applicant’s written argument,
this need not detain us
further.
On
30 August 2010 the Chief Justice directed that both the
applications for leave to appeal and for direct access be set down
for hearing.
6
On
23 September 2010, a similar application,
7
involving different parties, was brought in this Court against the
Bank in respect of a matter emanating from the Eastern Cape
High
Court, Grahamstown (Eastern Cape High Court), for orders declaring
rule 31(5)(b) and rule 45(1) of the High Court Rules
unconstitutional, alternatively for leave to intervene in the
present matter. That application was withdrawn when the Bank
withdrew its opposition to rescission of the original default
judgment.
This
Court then issued further directions inviting interested parties,
including the Banking Association of South Africa, to
apply to be
admitted as amici curiae to these proceedings. No one did. At a
later stage however, the National Consumer Forum
(NCF) applied and
was admitted as an amicus. We are indebted to the NCF for its
valuable assistance.
Issues
I
intend to deal with the issues under the following categories:
(a) Preliminary procedural issues—
condonation
and
admissibility
of Ms Sarah Sephton’s affidavit;
(b) Direct access and leave to appeal;
(c) Constitutional validity of the High Court Rules and practice;
and
(d) Remedies and relief.
Preliminary
procedural issues
The
first of these relate to a number of condonation applications.
8
It has become a disturbing feature of litigation in this Court that
its rules of practice and procedure are not meticulously
adhered to
by litigants. This must stop. Except for one condonation
application, the transgressions were slight and adequately
explained and need not concern us further. They are granted. The
exception is the condonation application of the third respondent
(Minister) for the late filing of written submissions. The
explanation for the delay is unsatisfactory, but the Minister
abides the decision of the Court and offers no material objection
that will affect the outcome of the matter. During the oral
hearing
counsel for the Minister undertook to convey critical comments from
the Bench on this issue to the Minister. Given
the outcome I reach,
it is unnecessary to decide the condonation application.
The
NCF sought the admission of an affidavit by Ms Sephton, Director of
the Legal Resources Centre (LRC), Grahamstown, as evidence
before
us. The purpose of placing this affidavit before the Court was
stated to be two-fold, namely: (a) to demonstrate that
there is a
recurring problem of people’s homes being declared specially
executable in the High Courts, even where these
cases could be
dealt with in the Magistrates’ Courts; and (b) to contend
that it is unlikely that the issue of the constitutionality
of the
High Court Rules will reach this Court given the tendency of banks
to settle matters when the constitutionality of the
Rules is raised
in the High Courts.
Ms
Sephton’s affidavit deals with: (i) the factual position in
relation to a new rule 14A(a) in the Eastern Cape High
Court that
stipulates what particulars a creditor must set out in an
affidavit, where an order declaring property specially
executable
is sought in a default judgment; (ii) details of the number of
default judgments since February 2010 in that High
Court that could
have been obtained in the Magistrates’ Courts over a certain
period; and (iii) the facts of three cases
concerning sales in
execution in which the LRC has been involved in the Eastern Cape.
Rule
31(1) of this Court’s Rules allows an amicus to lodge
documents—
“
to
canvass factual material that is relevant to the determination of
the issues before the Court and that does not specifically
appear on
the record: Provided that such facts–
(a) are common cause or
otherwise incontrovertible; or
(b) are of an official,
scientific, technical or statistical nature capable of easy
verification.”
In my
view the evidence of Ms Sephton complies with the requirements of
the rule.
9
The situation relating to the operation of the Eastern Cape High
Court rule and the number of default judgments that could have
been
obtained in the Magistrates’ Courts are of a statistical
nature, capable of easy verification. The fact that three
applications relating to sales in execution took place or are
ongoing in the Eastern Cape is likewise incontrovertible.
The
affidavit is thus admitted.
Direct
access and leave to appeal
The
Bank’s opposition to direct access in the rescission
application and to the application for leave to appeal against
the
eviction order, is premised, firstly, on a strict
compartmentalisation of the two applications, and, secondly, on an
emphasis of the applicant’s particular circumstances in
relation to the consequential relief she seeks. Both these
approaches
are inappropriate, for the reasons that follow.
It
is true that there are nominally two separate applications before
us. It is also correct that the applicant has at times
been less
than clear in exactly what relief she sought and in respect of
which application the relief will operate. But there
is little
doubt that in reality the constitutional validity of allowing a
registrar to declare a person’s home specially
executable
when granting default judgment under rule 31(5)(b) is crucial to
both the rescission application and the eviction
order. If the
rule’s ambit is constitutionally bad, the default judgment
may well have to be rescinded to that extent
at least. And
rescission of the order will have an impact on the legal validity
of the execution sale in pursuance of an order
that has been set
aside. The validity or otherwise of the execution sale will, in
turn, have possible consequences for the
transfer of the property
subsequent to the execution sale to Steko and may thus have a
material bearing on the eviction order.
The rescission application
and the eviction order are thus inextricably linked.
The
applicant says that she became aware of the default judgment in the
High Court only when the execution sale was imminent.
Her efforts
at stopping the process thus came at the end and not at the start
of it. The start should have been an application
for rescission of
the default judgment, but she alleges that she was unaware that
default judgment had been granted. The situation
was then
exacerbated by the fact that the underlying constitutional issue
was not raised fully in court before the eviction
order was
granted. This quirk in the history of the matter thus provided the
Bank with the opportunity in this Court to argue
that the
application for leave to appeal against the eviction order should
be assessed in isolation and that, on that approach,
there are no
prospects that the applicant’s appeal could ever succeed on
the appeal record as it stands. In my view this
strict
compartmentalisation of the two applications unjustifiably puts
form above substance and should not be countenanced.
In
similar vein, the Bank argued that direct access in the rescission
application should be refused because that application
is still
pending in the High Court and it is not in the interests of justice
for this Court to hear the matter as a court of
first and last
instance. There are two aspects informing the interests of justice
that militate against acceptance of this
contention. The first
narrower one is that to separate the rescission application from
the eviction order in this manner would
have the inevitable result
that the applicant will lose her home. The eviction order would
become final, without any further
possibility of setting it aside
even if the rescission application is eventually successful. The
second aspect is of wider
import and I turn to it now.
Even
if one accepts that the applicant may not eventually be successful
in obtaining relief for herself, that is no absolute
bar to
granting her direct access. The constitutionality of the rule is an
issue that potentially affects many others: if the
rule is found to
be unconstitutional this Court’s acceptance of the doctrine
of objective unconstitutionality means that
its effects will extend
far beyond the immediate confines of the applicant’s own
particular circumstances.
10
There are instances in this Court where leave to appeal was granted
in cases where the decision did not directly translate
into
individual relief for the litigant before court.
11
The same has occurred in the Supreme Court of Appeal.
12
It
is undoubtedly so that the general rule is that direct access will
be granted only in exceptional circumstances.
13
And this is a case where exceptional circumstances exist.
The
reach of this Court’s decision in
Jaftha v Schoeman and
Others; Van Rooyen v Stoltz and Others
14
has been interpreted in various courts,
15
including the Supreme Court of Appeal,
16
and the outcomes have not been consistent. There is a difference in
the rules for declaring property specially executable in
the
Magistrates’ Courts, where full effect has been given to
Jaftha
,
17
and the High Court Rules, where that has not been the case. It
appears from the NCF’s papers and submissions that this
difference may have been exploited by banks seeking these orders in
the High Court even in instances that fall within the jurisdiction
of the Magistrates’ Courts. The High Courts have divergent
practice rules with regard to additional requirements that
must be
met before specially executable orders are made.
18
If the issue is not dealt with in this case, the evidence presented
by the NCF indicates that there is, to put it at its weakest,
a
possibility that the constitutional issue will not easily reach
this Court again.
The
Bank also submitted that the considerations referred to in
Campus
Law Clinic, University of KwaZulu-Natal v Standard Bank of South
Africa Ltd and Another
19
for refusing direct access in that case are equally apposite here.
In
Campus Law Clinic
direct access to this Court was sought
to challenge the correctness of the decision in
Saunderson
.
20
In
Saunderson
the Supreme Court of Appeal had stated,
non-bindingly, that the registrar was entitled to dispose of orders
of execution by
default.
21
In rejecting the application for direct access from
Saunderson
this Court stated:
“
The
question is whether it is in the interests of justice for us to
grant direct access to the Campus Law Clinic on this issue.
We think
not. On many occasions this Court has indicated that it is
undesirable to determine important constitutional questions
of this
sort as the Court of first and last instance. Moreover, we think
that this is a matter which could properly commence
in the High
Court with the joinder of all interested parties, which could well
include lending institutions other than Standard
Bank, as well as
bodies representing housing and home-owner interests. It is also
important that the Minister be given a proper
opportunity to lodge
appropriate affidavits and argument. As this Court has frequently
pointed out, if a statute is challenged
on the basis that it limits
a right, the government would ordinarily be expected to offer
information and argument relevant to
the possible justification of
any such limitation.”
22
(Footnotes omitted.)
These
are important considerations but on a substantive level I consider
that most of the concerns expressed in the passage
are adequately
met in this matter. It is true that this Court’s disposition
on the constitutional issue will deprive
the High Court of the
opportunity to pronounce upon that issue. But we know by now that
there are divergent approaches in the
High Courts and that
Saunderson
dealt with a case emanating from the High Court.
The rescission application in this matter is pending in the High
Court. It
is unlikely that the High Court would not consider itself
bound by the approach suggested in
Saunderson
. If the matter
was taken further to the Supreme Court of Appeal, it seems
reasonable to assume that it would not easily overturn
a recent
decision of its own. The end of that circuitous route would likely
find the situation the same as it is before us
now, with much time
and costs wasted.
As
mentioned before, the Banking Association of South Africa was
invited to join the proceedings in this Court but chose not
to do
so. As noted, the NCF did join. The Minister is a party to the
proceedings and has indicated that he abides the decision
of the
Court.
The
result is that there has been a comprehensive airing of all the
issues surrounding an important constitutional matter from
a wide
array of perspectives. Finality on the substantive constitutional
issue will be to the benefit of all concerned.
As
will be seen from [56] below, the prospective effect of any order
of constitutional invalidity may have been ameliorated
by the
coming into operation of the amendment of rule 46(1) of the High
Court Rules on 24 December 2010 prior to the hearing
of this
matter. This amendment does not, however, operate retrospectively.
The past can be dealt with by this Court only if
the rule is
declared to be inconsistent with the Constitution.
I
conclude that direct access should be granted in order to determine
the constitutionality of the registrar’s competence
to
declare a person’s home specially executable, in default
judgments granted under rule 31(5)(b). The outcome of that
constitutionality enquiry will have a necessary impact on the
rescission application and the eviction order. The consequential
relief that should follow in respect of each of these applications
will be dealt with later in this judgment when remedies
and relief
are discussed.
Constitutional
validity of the High Court Rules and practice
Section
27A of the Supreme Court Act
23
provides that default judgment may be granted in the High Courts by
the registrar in accordance with the provisions of the
High Court
Rules.
24
Rule 31(5) sets out the manner and circumstances under which the
registrar may grant and enter default judgment. It is as well
to
set out its relevant parts:
“
(a) Whenever a defendant
is in default of delivery of notice of intention to defend or of a
plea, the plaintiff, if he or she
wishes to obtain judgment by
default, shall where each of the claims is for a debt or liquidated
demand, file with the registrar
a written application for judgment
against such defendant: Provided that when a defendant is in default
of delivery of a plea,
the plaintiff shall give such defendant not
less than 5 days’ notice of his or her intention to apply for
default judgment.
(b) The registrar may—
(i) grant judgment as
requested;
(ii) grant judgment for part of
the claim only or on amended terms;
(iii) refuse judgment wholly or
in part;
(iv) postpone the application
for judgment on such terms as he may consider just;
(v) request or receive oral or
written submissions;
(vi) require that the matter be
set down for hearing in open court.
(c) The registrar shall record
any judgment granted or direction given by him.
(d) Any party dissatisfied with
a judgment granted or direction given by the registrar may, within
20 days after he has acquired
knowledge of such judgment or
direction, set the matter down for reconsideration by the court.
(e) . . . .”
As
can be seen from this, rule 31(5) makes no explicit reference to
orders declaring mortgaged property specially executable.
For that
reference one needs to turn to rule 45(1), the rule dealing with
execution following upon a judgment. It reads:
“
The
party in whose favour any judgment of the court has been pronounced
may, at his own risk, sue out of the office of the registrar
one or
more writs for execution thereof as near as may be in accordance
with Form
18 of the First Schedule: Provided that,
except
where immovable property has been specially declared executable
by
the court or,
in
the case of a judgment granted in terms of rule 31(5), by the
registrar
,
no such process shall issue against the immovable property of any
person until a return shall have been made of any process
which may
have been issued against his movable property, and the registrar
perceives therefrom that the said person has not sufficient
movable
property to satisfy the writ.” (Emphasis added.)
The
origin and development of rule 45(1) and the practice of declaring
immovable property specially executable at the time of
judgment are
helpfully set out in
Gerber v Stolze and Others
25
and
Nedbank Ltd v Mortinson
.
26
For present purposes it is not necessary to re-examine that history
in any detail. Suffice it to note that execution upon judgment
on a
money debt generally took place against movable property first and
upon immovable property only if there was insufficient
realisable
movable property to satisfy the judgment. Initially the practice
was that the court had to be approached for an
order declaring
immovable property executable when movables were insufficient to
satisfy the debt, but this practice was soon
discontinued.
27
The practice of ordering immovable property specially executable at
the time of judgment arose on the basis of practical expediency,
namely to circumvent the necessity of first executing against
movables where immovable property had been specially hypothecated
as security for the debt.
28
The underlying basis for the lack of judicial control over the
whole process of execution was that it was an “executive
matter which is dealt with by the Registrar.”
29
The
decisions of this Court in
Chief Lesapo v North West
Agricultural Bank and Another
,
30
and in
Jaftha
31
have challenged the notion that the execution process needs no
judicial content.
In
Lesapo
the constitutionality of a legislative provision,
32
providing for the seizure of property without recourse to a court
of law upon default of payment of a debt, was successfully
challenged. In the course of her judgment Mokgoro J stated:
“
The
judicial process, guaranteed by s 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.”
33
“
On
this analysis, s 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 s 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.”
34
In
Jaftha
section 66(1)(a) of the Magistrates’ Courts
Act
35
was found to violate section 26(1) of the Constitution to the
extent that it allowed execution against the homes of indigent
debtors, where they lose their security of tenure.
36
In the course of discussing a remedy for the violation, Mokgoro J
commented on the suggestion made by the applicants that judicial
oversight over the execution process was appropriate in the
following terms:
“
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. The crucial difference between
the provision of
judicial oversight as a remedy and the possibility of reliance on ss
62 and 73 of the Act is that the former
takes place invariably
without prompting by the debtor. Even if the process of execution
results from a default judgment the
court will need to oversee
execution against immovables. This has the effect of preventing the
potentially unjustifiable sale
in execution of the homes of people
who, because of their lack of knowledge of the legal process, are
ill-equipped to avail themselves
of the remedies currently provided
in the Act.”
37
The
combined effect of these two cases is that execution may only
follow upon judgment in a court of law. And where execution
against
the homes of indigent debtors who run the risk of losing their
security of tenure is sought after judgment on a money
debt,
further judicial oversight by a court of law of the execution
process is a must.
38
The
Bank did not challenge the necessity of judicial oversight of the
execution process in
Jaftha
-like circumstances,
39
but sought to argue that the present case did not fall within the
ambit of
Jaftha
. Two grounds were advanced in support of
this argument, both said to be buttressed by the Supreme Court of
Appeal decision
in
Saunderson
. The first was that neither
the person of the applicant, nor her property, fell within
Jaftha
protection (the fact-bound argument). The second was linked to the
first, but it may also stand on its own feet, namely that
mortgaged
property is property that does not come within
Jaftha
’s
reach, because mortgagors willingly accept the risk of losing their
secured property in execution when entering into
a mortgage loan
agreement (the voluntary placing-at-risk argument). I will deal
with each in turn. I prefer to do so without
any detailed enquiry
into whether the understanding of the import or effect of
Jaftha
by the Supreme Court of Appeal in
Saunderson
is correct.
Both grounds advanced by the Bank can be shown to be based on
incorrect premises, without reliance on precedent-based
reasoning.
There
are two different reasons why the fact-bound argument, that neither
the applicant nor her property falls within the
Jaftha
category, should not succeed. The first is that the constitutional
validity of the rule cannot depend on the subjective position
of a
particular applicant. It is either objectively valid or it is not.
40
The second is that the fact-bound nature of each case supports the
opposite conclusion to the one the Bank advances. Some preceding
enquiry is necessary to determine whether the facts of a particular
matter are of the
Jaftha
–kind. An enquiry of that sort
requires an evaluation that goes beyond merely checking the summons
to determine whether
it discloses a proper cause of action. On the
face of the summons in this case there is nothing to indicate,
either way, whether
the applicant was indigent or whether the
mortgaged property was her home.
41
The
voluntary placing-at-risk argument also runs into difficulty. It is
true that a mortgagor willingly provides her immovable
property as
security for the loan she obtains from the mortgagee and that she
thereby accepts that the property may be executed
upon in order to
obtain satisfaction of the debt. But does that particular
willingness imply that she accepts that—
the
mortgage debt may be enforced without court sanction;
she
has waived her right to have access to adequate housing or eviction
only under court sanction under section 26(1) and (3);
and
the
mortgagee is entitled to enforce performance, in the form of
execution, even when that enforcement is done in bad faith?
I think not.
If
authority is needed that self-help is inimical to the rule of law,
Lesapo
42
is that authority. It is also authority that execution upon
property in respect of a mortgage debt without court sanction is
not allowed.
43
Mortgage
bonds do not ordinarily contain clauses describing the purpose for
which the mortgaged property is held by the mortgagor.
The
applicant’s mortgage bond contains no such provision. To
agree to a mortgage bond does not without more entail agreeing
to
forfeit one’s protection under section 26(1) and (3) of the
Constitution.
In
Jaftha
it is remarked that:
44
“
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 manner as security for the debt, a sale in execution should
ordinarily be permitted
where
there has not been an abuse of court procedure
.”
(Emphasis added.)
An
agreement to put one’s property at risk as security in a
mortgage bond does not equate to a licence for the mortgagee
to
enforce execution in bad faith.
I
conclude that the willingness of mortgagors to put their homes
forward as security for the loans they acquire is not by itself
sufficient to put those cases beyond the reach of
Jaftha
. An
evaluation of the facts of each case is necessary in order to
determine whether a declaration that hypothecated property
constituting a person’s home is specially executable, may be
made. It is the kind of evaluation that must be done by
a court of
law, not the registrar. To the extent that the High Court Rules and
practice allow the registrar to do so, they
are unconstitutional.
The
Bank suggested that any constitutional invalidity is cured by the
provisions in the High Court Rules that allow a registrar
to set
the matter down for hearing in open court
45
and for dissatisfied parties to set a matter down for
reconsideration once they acquired knowledge of the default
judgment.
46
Perhaps these provisions might be sufficient for cases where the
registrar does not need to make any evaluation. But execution
orders relating to a person’s home all require evaluation.
And the registrar’s power to refer the matter to open
court,
and a party’s recourse on getting to know of a default
judgment – once the horse has bolted – is a
poor
substitute for the initial judicial evaluation. In
Jaftha
a
similar argument was rejected on the grounds that many debtors
would be unaware of these provisions and, in any event, would
often
be too poor to make proper use of them.
47
This
finding makes it unnecessary to deal with the further ground
advanced by the applicant in support of constitutional invalidity,
namely that the right to property is also implicated when property
is declared specially executable. I express no view on its
merits.
This case is confined to the potential invasion of a homeowner’s
right under section 26(1) and (3) of the Constitution.
The
effect of this judgment is to overturn the findings of the Supreme
Court of Appeal in
Saunderson
and the Full Court in
Mortinson
, to the extent that they found that the registrar
was constitutionally competent to make execution orders when
granting default
judgment in terms of rule 31(5)(b). This judgment
does not, however, suggest that the practical suggestions made in
both those
cases,
48
to ensure that defendants are alerted to the possibility of the
impact that judgment may have on their fundamental rights,
should
be discarded. To the contrary, those practical directions may also
assist courts when evaluating whether to grant execution
orders.
Some
further cautionary remarks are called for. It is rather ironic that
the effect of this judgment is to restore to the courts
a function
that they exercised for close on a century before the introduction
of rule 31(5) in 1994.
49
The change to the original position has been necessitated by
constitutional considerations not in existence earlier, but these
considerations do not challenge the principle that a judgment
creditor is entitled to execute upon the assets of a judgment
debtor in satisfaction of a judgment debt sounding in money. 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. If the judgment debt can be satisfied in a
reasonable manner without involving those drastic consequences
that
alternative course should be judicially considered before granting
execution orders.
In
Jaftha
, Mokgoro J, before listing some relevant factors that
needed to be considered in judicial oversight of the execution
process,
warned that “it would be unwise to set out all the
facts that would be relevant to the exercise of judicial
oversight.”
50
Mindful of that warning, I would merely add the following. 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.
Remedies and relief
In
view of the conclusion that to the extent that the High Court Rules
and practice allow a registrar to grant orders declaring
immovable
property that is a person’s home executable, they are
constitutionally invalid; a declaratory order to that
effect must
be made. What needs to be considered in its light is—
(a) the just and equitable order in relation to the prospective and
retrospective effect of the declaration;
51
and
(b) the individual relief that should be granted in respect of the
pending rescission application and the appeal against the
eviction
order.
To
an extent, the prospective effect of the order has been overtaken
by events. Rule 46(1) of the High Court Rules was amended
with
effect from 24 December 2010. The relevant part now reads:
“
(a)
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 the movable
property of the judgment debtor
from which it appears that the said
person has not sufficient movable property to satisfy the writ; or
(ii) such
immovable property shall have been declared to be 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.”
But
what about retrospectivity? In
Jaftha
, this Court placed no
limit on the retrospectivity of its order. The declaration of
invalidity of the legislative provisions
in that matter did not
entail, however, that all transfers made subsequent to invalid
execution sales were automatically invalid.
Individual persons
affected by the ruling still needed to approach the courts to have
the sales and transfers set aside if
granted by default. This was
made clear in
Menqa and Another v Markom and Others
.
52
A similar approach should be followed here.
There
may be a fear that the decision in this matter will lead to
large-scale legal uncertainty about its effects on past matters
where homes were declared specially executable by the registrar and
sales in execution and transfers followed. The experience
following
Jaftha
may be an indication that this fear is overstated. It
must be remembered that these orders were issued only where default
judgments
were granted by the registrar. In order to turn the clock
back in these cases aggrieved debtors will first have to apply for
the original default judgment to be set aside. In other words, the
mere constitutional invalidity of the rule under which the
property
was declared executable is not sufficient to undo everything that
followed.
53
In order to do so the debtors will have to explain the reason for
not bringing a rescission application earlier and they will
have to
set out a defence to the claim for judgment against them.
54
It may be that in many cases those aggrieved may find these
requirements difficult to fulfil.
From
what has been stated above in relation to the legitimacy of
resorting to execution in order to obtain satisfaction of judgment
debts sounding in money, and that only deserving cases would
justify other means to satisfy the judgment debt, it follows that
a
just and equitable remedy following upon the declaration of
unconstitutionality should seek to ensure that only deserving
past
cases benefit from the declaration. I consider that this balance
may best be achieved by requiring that aggrieved debtors
who seek
to set aside past default judgments and execution orders granted
against them by the registrar must also show, in
addition to the
normal requirements for rescission, that a court, with full
knowledge of all the relevant facts existing at
the time of
granting default judgment, would nevertheless have refused leave to
execute against specially hypothecated property
that is the
debtor’s home
.
Once
these hurdles have been cleared, and it is determined that special
execution should not have been allowed, the question
of the effect
of invalid execution sales and subsequent transfers will have to be
considered as a next step. It is not possible
to lay down
inflexible rules to deal with all the permutations that may arise
in these cases. Existing legal principles and
rules will be
sufficient to deal with most cases in a just and equitable manner.
The
applicant alleges that she continued to make payments on the bond
over a period of approximately four years and that the
Bank
accepted those payments without letting her know that they were
inadequate or unacceptable or that they had obtained default
judgment against her. She argued that the Bank could not, under
those circumstances, simply proceed in 2007 with an execution
order
and writ obtained in 2003. It was argued that this amounted to a
compromise that novated the judgment debt, or, if not,
something
less that at least precluded execution without giving her some form
of a hearing before proceeding. Alleged abuse
of the execution
process after granting the order is of a different kind from that
following upon a constitutionally invalid
process. This is not an
issue for us to decide, but it may become an issue in the
rescission application and eviction proceedings.
55
The
pending rescission application before the High Court must be
referred back to the High Court, with the parties being granted
leave to supplement their papers in the light of this Court’s
judgment. The High Court should then determine the rescission
application, in accordance with the guidelines set out in the order
made by this Court.
I
now consider the application for leave to appeal against the
eviction order. The application must be granted because there
are
prospects of success.
The
appeal itself must also succeed on the exceptional basis that the
eviction order was granted by the Magistrates’ Court,
and
confirmed by the High Court, on the assumption that there were no
prospects of success in the rescission application.
56
Our finding on the constitutional validity of the High Court rule
does not predetermine the rescission application. But it
does make
it clear that rescission is possible. The eviction order was thus
granted on the mistaken premise that an execution
order against the
home of the applicant by the registrar was competent. The
registrar’s order is, however, inconsistent
with the
Constitution. The eviction application can be determined only once
the rescission application has been finalised.
The appeal therefore
succeeds to the extent that the eviction order is set aside and the
matter is referred back to the Magistrates’
Court to be
considered after the determination of the rescission application.
Order
The
following order is made:
The
application for direct access is granted.
It
is declared that it is unconstitutional for a Registrar of a High
Court to declare immovable property specially executable
when
ordering default judgment under rule 31(5) of the Uniform Rules of
Court to the extent that this permits the sale in execution
of the
home of a person.
The
matter is remitted to the Western Cape High Court, Cape Town for
the determination of the rescission application in the
light of
this judgment.
The
application for leave to appeal against the eviction order granted
by the Magistrates’ Court, George, Case No 3291/2008,
and
confirmed by the Western Cape High Court, Cape Town, Case No
A379/2008, is granted.
The
appeal against the order granted by the Magistrates’ Court,
George, Case No 3291/2008 and confirmed by the Western
Cape High
Court, Cape Town, Case No A379/2008, evicting the applicant from
Erf 457 and Erf 458 Tyolora, Thembalethu, George,
Western Cape, is
upheld.
The
order for eviction is set aside and the costs of the application
are reserved.
The
application for eviction, including the costs issue, is referred
back to the Magistrates’ Court, George for determination
after the finalisation of the rescission application.
The
second respondent and the third respondent are ordered to pay the
costs of the applicant, including the costs of two counsel,
jointly
and severally.
Moseneke
DCJ, Cameron J, Jafta J, Khampepe J, Mogoeng J, Mthiyane AJ,
Nkabinde J, Van der Westhuizen J and Yacoob J concur
in the judgment
of Froneman J.
For the
Applicant: Advocate AM de Vos SC and Advocate S Wilson instructed by
Francois van Zyl Attorneys.
For the
Second Respondent: Advocate AM Breitenbach SC and Advocate K Pillay
instructed by Herold Gie Attorneys.
For
the Third Respondent: Advocate Nelly Cassim SC instructed by the
State Attorney, Johannesburg.
For
the Amicus Curiae: Advocate G Budlender SC, Advocate S Budlender
and Advocate A Bodasing instructed by the Legal Resources
Centre,
Grahamstown.
1
The
registrar is not a judicial officer appointed in terms of the court
structures under the Constitution. A registrar is appointed
in terms
of section 34 of the Supreme Court Act 59 of 1959 as being
administratively responsible for the execution of the powers
and
authorities of a particular High Court.
2
The
rules regulating the conduct of the High Courts in South Africa,
currently issued in terms of the Rules Board for Courts of
Law Act
107 of 1985.
3
This
invokes section 26 of the Constitution, which provides in relevant
part:
“
(1) Everyone has the right to
have access to adequate housing.
(2) . . . .
(3) No one may be evicted from their home, or have
their home demolished, without an order of court made after
considering all
the relevant circumstances. No legislation may
permit arbitrary evictions.”
4
Steko
indicated that it abides by the decision of this Court.
5
These
facts are also set out in detail in the applicant’s papers in
the rescission application. They are not materially
disputed in the
affidavit filed on behalf of the Bank, who attached a printout of
her financial history as well as the formal
returns of service in
respect of the default judgment and sale in execution.
6
They
read in part:
“
6. The written argument must
deal only with the following issues:
Whether it is in the interests of justice to grant
leave to appeal and direct access;
Whether Rule 31(5)(a) of the Uniform Rules of Court,
allowing the registrar of the High Court to grant an order
declaring immovable
property specially executable, is
constitutionally valid;
Whether the enforcement of the sale in execution of
the immovable property was constitutionally permissible in the
particular
circumstances of the case;
If the execution was not permitted, what effect does
the subsequent transfer of the property to the first respondent have
on the
rights of the parties?”
7
Siphiwo
Peter Kanana and Another v Nedbank Limited and Others
Case No
CCT 91/10.
8
They
are: (a) an application for condonation for the late filing of the
applicant’s notice of motion and application to
this Court;
(b) an application for condonation for the late filing of the
applicant’s heads of argument; (c) an application
for
condonation for the late filing of the record; and (d) an
application for condonation by the third respondent for the late
filing of heads of argument.
9
See
S v Shaik and Others
[2007] ZACC 19
;
2008 (2) SA 208
(CC);
2007 (12) BCLR 1360
(CC) at
para 19;
Prophet v National Director
of Public Prosecutions
[2006] ZACC
17
;
2007 (6) SA 169
(CC);
2007 (2) BCLR 140
(CC) at para 38;
Rail
Commuters Action Group and Others v Transnet Ltd t/a Metrorail and
Others
[2004] ZACC 20
;
2005 (2) SA
359
(CC);
2005 (4) BCLR 301
(CC) at paras 37-8;
Bannatyne
v Bannatyne (Commission for Gender Equality, as Amicus Curiae)
[2002] ZACC 31
;
2003 (2) SA 363
(CC);
2003 (2) BCLR 111
(CC) at
paras 3, 26 and 32;
Prince v
President, Cape Law Society, and Others
[2002] ZACC 1
;
2002 (2) SA 794
(CC);
2002 (3) BCLR 231
(CC) at para
10; and
S v Lawrence; S v Negal; S v
Solberg
[1997] ZACC 11
;
1997 (4) SA
1176
(CC);
1997 (10) BCLR 1348
(CC) at para 23.
10
Ferreira
v Levin NO and Others; Vryenhoek and Others v Powell NO and Others
[1995] ZACC 13
;
1996 (1) SA 984
(CC);
1996 (1) BCLR 1
(CC) at paras 26-9. See
Mvumvu and Others v
Minister of Transport and Another
[2011]
ZACC 1
; Case No CCT 67/10, 17 January 2011, as yet unreported at
para 44;
Van
der Merwe v Road Accident Fund and Another (Women’s Legal
Centre Trust as Amicus Curiae)
[2006]
ZACC 4
;
2006 (4) SA 230
(CC);
2006 (6) BCLR 682
(CC) at para 61;
and
National Coalition for Gay
and Lesbian Equality and Another v Minister of Justice and Others
[1998] ZACC 15
;
1999 (1) SA 6
(CC);
1998
(12) BCLR 1517
(CC) at para 84.
11
MEC
for Education, KwaZulu-Natal, and Others v Pillay
[2007]
ZACC 21
;
2008 (1) SA 474
(CC);
2008 (2) BCLR 99
(CC) at para 32; and
AAA Investments (Pty) Ltd v Micro Finance
Regulatory Council and Another
[2006] ZACC
9
;
2007 (1) SA 343
(CC);
2006 (11) BCLR 1255
(CC) at para 27. For an
opposite holding, see
Radio
Pretoria v Chairperson, Independent Communications Authority of
South Africa and Another
[2004]
ZACC 24
;
2005 (4) SA 319
(CC);
2005 (3) BCLR 231
(CC) at para 22.
12
Midi
Television (Pty) Ltd t/a E-TV v Director of Public Prosecutions
(Western Cape)
[2007] ZASCA 56
;
2007 (5) SA 540
(SCA);
2007 (9) BCLR 958
(SCA) at paras 4 and 21.
13
Christian
Education South Africa v Minister of Education
[1998] ZACC 16
;
1999 (2) SA 83
(CC);
1998 (12) BCLR 1449
(CC)
.
See also
Transvaal
Agricultural Union v Minister of Land Affairs and Another
[1996] ZACC 22
;
1997
(2) SA 621
(CC);
1996 (12) BCLR 1573
(CC) at para 16;
Luitingh
v Minister of Defence
[1996]
ZACC 5
;
1996 (2) SA 909
(CC);
1996 (4) BCLR 581
at para 15;
S
v Mbatha; S v Prinsloo
[1996] ZACC 1
;
1996
(2) SA 464
(CC);
1996 (3) BCLR 293
(CC) at para 29;
Ferreira
above n
10 at para 10;
Executive
Council, Western Cape Legislature, and Others v President of the
Republic of South Africa and Others
[1995] ZACC 8
;
1995
(4) SA 877
(CC);
1995 (10) BCLR 1289
(CC) at paras 15-7;
and
S
v Zuma and Others
[1995]
ZACC 1
;
1995 (2) SA 642
(CC);
[1995] ZACC 1
;
1995 (4) BCLR 401
(CC) at para 11.
14
[2004]
ZACC 25
;
2005 (2) SA 140
(CC);
2005 (1) BCLR 78
(CC).
15
Mkhize
v Umvoti Municipality and Others
2010 (4) SA 509
(KZP);
ABSA
Bank Ltd v Ntsane and Another
[2006] ZAGPHC 115
;
2007 (3) SA 554
(T) (
Ntsane
);
Standard Bank of South Africa v Adams
2007 (1) SA 598
(C);
Nedbank Ltd v Mashiya and Another
2006 (4) SA 422
(T);
Nedbank Ltd v Mortinson
[2005] ZAGPHC 85
;
2005 (6) SA 462
(W) (
Mortinson
);
Standard Bank of SA Ltd v Snyders and Eight Similar Cases
2005 (5) SA 610
(C).
16
Standard
Bank of South Africa Ltd v Saunderson and Others
2006 (2) SA 264
(SCA) (
Saunderson
).
17
Section
66(1)(a)
of the
Magistrates’ Courts Act 32 of 1944
reads:
“
Whenever a court gives
judgment for the payment of money or makes an order for the payment
of money in instalments, such judgment,
in case of failure to pay
such money forthwith, or such order in case of failure to pay any
instalment at the time and in the
manner ordered by the court, shall
be enforceable by execution against the movable property and, if
there is not found sufficient
movable property to satisfy the
judgment or order, or the court, on good cause shown, so orders,
then [
a
court, after consideration of all relevant circumstances, may order
execution]
against the immovable property of the party against whom such
judgment has been given or such order has been made.”
18
The
North West High Court, Mafikeng has issued Practice Direction No 30
of the North West High Court Practice Directions. The
Eastern Cape
High Court issued Court Notice 1 of 2010 on 30 July 2010 inserting
rule 14A
into the Joint Rules of Practice for the High Courts of the
Eastern Cape. In
Mortinson
above n 15 the court also laid
down rules of practice at 473D-H. The Western Cape High Court has
adopted the practice direction
stated in
Saunderson
above n
16 at 277C-E. See
Standard Bank of South Africa Ltd v Hunkydory
Investments 188 (Pty) Ltd and Others (No 2)
2010 (1) SA 634
(WCC) at para 29.
19
[2006]
ZACC 5
;
2006 (6) SA 103
(CC);
2006 (6) BCLR 669
(CC).
20
Id.
21
Above
n 16 at para 22. The question was not before the Supreme Court of
Appeal since, as it recorded, the registrar had in each
case
referred the matters before it to open court. Therefore its opinion
that the registrar was entitled to dispose of execution
requests in
dealing with default judgments was expressly obiter.
22
Campus
Law Clinic
above n 19 at para 26.
23
59
of 1959. The Act must be read together with sections 165, 166(c),
169 and Schedule 6(16) of the Constitution, as well as with
the
Renaming of High Courts Act 30 of 2008
.
24
Section
27A
states:
“
A judgment by default may be
granted and entered by the registrar in the manner and in the
circumstances prescribed in the Rules
made in terms of the Rules
Board for Courts of Law Act, 1985 (Act No. 107 of 1985), and a
judgment so entered shall be deemed
to be a judgment of the court.”
25
1951
(2) SA 166
(T).
26
Above
n 15.
27
Gerber
above n 25 at 171F-172C.
28
Id
at 172F-H.
29
Id
at 171E.
30
[1999]
ZACC 16
;
2000 (1) SA 409
(CC);
1999 (12) BCLR 1420
(CC)
. See
also
First National Bank of South Africa Ltd v Land and
Agricultural Bank of South Africa and Others; Sheard v Land and
Agricultural
Bank of South Africa and Another
[2000]
ZACC 9
;
2000 (3) SA 626
(CC);
2000 (8) BCLR 876
(CC).
31
Above
n 14.
32
Section
38(2) of the North-West Agricultural Bank Act 14 of 1981.
33
Lesapo
above n 30 at para 15.
34
Id
at para 16.
35
32
of 1944.
36
Above
n 14 at para 52.
37
Id
at para 55.
38
Jaftha
above n 14 at para 55.
39
It
did not pursue a suggestion, first raised at the oral hearing, that
Jaftha
needed reconsideration.
40
Lesapo
above n 30 at para 7; see also cases in above n 10.
41
Compare
Saunderson
above n 16 at para 25.
42
Above
n 30 at para 11.
43
Id
at paras 14-6. The Supreme Court of Appeal has held, in a series of
cases, that this does not apply to general notarial bonds
hypothecating movables. See
SA Bank of Athens Ltd v Van Zyl
2005 (5) SA 93
(SCA) at paras 13-5
;
Juglal
NO and Another v
Shoprite
Checkers (Pty) Ltd t/a OK Franchise Division
2004 (5) SA 248
(SCA) at paras 25-6; and
Bock and Others v
Duburoro Investments (Pty) Ltd
2004 (2) SA 242
(SCA) at para 13
.
This Court has not been called upon to pronounce on this issue.
44
Above
n 14 at para 58. See also
Ntsane
above n 15 at para 85.
45
Rule
31(5)(b)(vi).
46
Rule
31(5)(d).
47
Above
n 14 at para 47.
48
Saunderson
above n 16 at para 27 (para 2 of the order);
Mortinson
above
n 15 at paras 33-4. See above n 18 for the practice directions
adopted by the different High Courts.
49
The
rule was introduced by Government Gazette 15322 GN R2365, 10
December 1993, and amended by Government Gazette 17853 GN R417,
14
March 1997.
It has subsequently undergone another
amendment in terms of
Government Gazette 18956
GN
R785, 5 June 1998. See
Gerber
above n 25 at 170H-172H for a history of the
procedure dating back to 1902.
50
Above
n 14 at para 56.
51
Section
172 of the Constitution reads:
“
(1) When deciding a
constitutional matter within its power, a court—
must
declare that any law or conduct that is inconsistent with the
Constitution is invalid to the extent of its inconsistency;
and
(b) may make any order that is just and equitable,
including—
(i) an order limiting the retrospective effect of the
declaration of invalidity; and
(ii) an order suspending the declaration of invalidity
for any period and on any conditions, to allow the competent
authority
to correct the defect.”
52
2008
(2) SA 120
(SCA). See also
Campbell v Botha and Others
[2008] ZASCA 126
;
2009
(1) SA 238
(SCA).
53
Oudekraal
Estates (Pty) Ltd v City of Cape Town and Others
2004 (6) SA 222
(SCA) at paras 27-38 and
Bengwenyama Minerals (Pty) Ltd and
Others v Genorah Resources (Pty) Ltd and Others
[2010] ZACC 26
;
Case No CCT 39/10, 13 November 2010, as yet unreported at paras
81-5.
54
Grant
v Plumbers (Pty), Ltd
1949
(2) SA 470
(O)
;
Chetty v Law
Society, Transvaal
1985
(2) SA 756
(A) at 764I-765D; and
De
Wet and Others v Western Bank Ltd
1979
(2) SA 1031
(A) at 1042
.
55
Compare
Garlick Ltd v Phillips
1949 (1) SA 121
(AD)
.
The idea of good faith underlies the acceptance of many rules
of our contract law – see Zimmermann “Good Faith and
Equity”, in Zimmermann and Visser (eds)
Southern Cross:
Civil Law and Common Law in South Africa
(Juta, Kenwyn 1996)
217-60. In the United States of America both the Uniform Commercial
Code, clause 1-304; and the Restatement
(2d) of Contracts, clause
205, impose an obligation of good faith in contractual performance
and enforcement
. In Europe good faith generally forms part of
contract law, also in the enforcement of the contract. See
Zimmermann and Whittaker
(eds)
Good Faith in European Contract
Law
(Cambridge University Press, Cambridge 2000).
56
In
the Magistrates’ Court, it was found that the rescission
application should have been instituted much earlier. On appeal
to
the High Court, it was held that the matter was not one that “falls
fairly and squarely within the factual situation
. . . in
Jaftha
”