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[2018] ZASCA 29
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Nkola v Argent Steel Group (Pty) Limited t/a Phoenix Steel (406/2017) [2018] ZASCA 29; 2019 (2) SA 216 (SCA) (26 March 2018)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 406/2017
In
the matter between:
BONGILE
SAMUEL
NKOLA
APPELLANT
and
ARGENT
STEEL GROUP (PTY) LIMITED
t/a
PHOENIX STEEL
RESPONDENT
Neutral
citation:
Nkola
v Argent Steel
(406/2017)
[2018] ZASCA 29
(26 March 2018)
Coram:
Lewis,
Saldulker and Swain JJA and Pillay and Makgoka AJJA
Heard:
13
March 2018
Delivered:
26
March 2018
Summary:
A
judgment debtor who claims that he has sufficient movable assets to
satisfy the debt cannot avert execution against his immovable
property unless he makes the movables, including incorporeals,
available for execution.
ORDER
On
appeal from:
Eastern
Cape Division of the High Court, Grahamstown (Beard AJ and Beshe and
Lowe JJ concurring, sitting as court of appeal):
The
appeal is dismissed with costs.
JUDGMENT
Lewis
JA (Saldulker and Swain JJA and Pillay and Makgoka AJJA concurring)
[1]
The issue in this appeal is whether a judgment creditor is entitled
to have two immovable properties belonging to the debtor
declared
specially executable when the movable assets of the debtor are
alleged to exceed the value of the judgment debt.
The parties
have been locked in litigation for several years. The appellant,
Mr B S Nkola, has an admitted liability
to the
respondent, Argent Steel Group (Pty) Ltd t/a Phoenix Steel
(Argent). The court of first instance (the East London
Circuit Local
Division of the High Court – Jacobs AJ) granted the application
and declared the properties, both residential,
executable.
[2]
Jacobs AJ gave leave to appeal to a full court of the Eastern Cape
Division, Grahamstown. The full court (Beard AJ, Beshe and
Lowe JJ
concurring) dismissed the appeal. Mr Nkola has brought a second
appeal with the special leave of this court. The argument
he makes is
that he has substantial movable assets in the form, largely, of
shares in companies that he controls, but also expensive
motor cars,
and that Argent should have obtained execution in respect of these
before seeking execution in respect of the immovable
properties. He
proffers no explanation as to why he has not realized these assets in
order to pay his admitted liability. His argument
assumes that the
creditor, Argent, must find these assets, and that he is under no
obligation to make them available for execution.
I shall consider the
essential facts giving rise to the litigation before discussing the
argument that Mr Nkola makes.
[3]
The judgment debt is in the sum of R914 712, plus interest and costs.
It arose from a deed of suretyship that Mr Nkola signed
in 2008 in
favour of Argent, guaranteeing the obligations of a company
controlled by him, School Furniture and Timber Products
(Pty) Ltd
(School Furniture), to which credit facilities had been extended by
Argent. School Furniture did not honour its obligations
to Argent,
which claimed R2 851 504 from Mr Nkola as surety.
[4]
In July 2011, Argent applied for and was granted a default judgment
against Mr Nkola in the sum of R914 712. Mr Nkola’s
application
for rescission of the judgment was dismissed. Argent first tried to
execute against the movable property of Mr Nkola.
The sheriff
attached household furniture at one of his houses in October
2013. His return stated that Mr Nkola was unable
to pay the judgment
debt, and that goods described by him in an inventory had been
attached. Mr Nkola’s wife filed an affidavit
shortly after the
sheriff’s return was made claiming that the furniture and
household goods belonged to her. The goods were
released from
attachment.
[5]
On 17 January 2014, Argent brought the application under
consideration for a declaration that the two immovable properties be
declared specially executable. However, the parties entered into a
settlement agreement in May 2014, in terms of which the latter
would
pay R100 000 a month to Argent to settle the debt. The agreement was
made an order of court and Mr Nkola consented to execution
in the
event of his default. Mr Nkola failed to pay a single instalment.
[6]
As I have said, Mr Nkola has throughout, including in this appeal,
argued that before the immovable properties could be sold
in
execution, his movable assets should have been attached and sold in
execution. It is of course correct that in executing a judgment,
a
debtor’s movable property must be attached and sold to satisfy
the debt before the creditor can proceed to execute against
immovable
property. Only if they are insufficient to fulfill the debt may a
creditor proceed against immovable property. The common
law rule is
given effect in rules 45 and 46 of the Uniform Rules of Court.
[7]
Rule 45(3) requires the officer of the court executing the order to
demand payment of the debt by the debtor, and failing payment,
‘demand that so much movable and disposable property be pointed
out as he may deem sufficient to satisfy’ the writ
of
execution, and failing such pointing out, search for such property.
The rules specify how incorporeal movable property is to
be attached.
[8]
There is no evidence on record that any movable assets, corporeal or
incorporeal, were pointed out by Mr Nkola to the sheriff.
Yet in his
answering affidavit in the application, he claims to have ‘more
than sufficient movable assets of significant
value (far in excess of
the judgment debt) against which the applicant can execute should it
choose to do so, without having to
execute against my immovable
properties.’ Mr Nkola continued:
‘
I
am the shareholder in five active companies . . . .The applicant
would be at liberty to execute against any/all of my shares or
loan
accounts in these companies . . . but which attachment has not
been done for reasons which are not apparent to me presently.
I have
other movables too, which should be excussed, over and above my said
shares and loan accounts (in four of aforementioned
companies these
are valued at the sum of R2,763,00.00) These other movables of mine
are, inter alia, motor vehicles (valued at
R1,597,617.00), furniture
and fittings . . . and a Liberty Life retirement annuity policy . .
.’.
[9]
Mr Nkola went on to say that, although he owned assets of significant
value, he could not afford to pay the instalments that
he had
undertaken to pay under the settlement agreement for various reasons.
But, he said, when certain problems had been resolved
(which he
anticipated would occur in December 2014), he would be able to settle
the debt to Argent.
[10]
The question that springs to mind immediately is why Mr Nkola,
possessed of such wealth, did not dispose of his incorporeal
property
and pay the admitted debt to Argent. His stance is that Argent must
seek out the movables and sell them before attempting
to execute
against his immovable properties. He would place the duty on the
judgment creditor instead of resolving his financial
problems
himself.
[11]
I consider that the common law and the rules place no obligation on a
creditor to execute against movable assets where a judgment
debtor
has failed to point these out and make them available. The sheriff’s
return read together with Mr Nkola’s ‘defence’
raised in his answering affidavit, show him to be a ‘tricky’
debtor of the kind referred to by Voet 42.1.42 (in Gane’s
translation), cited by Wunsh J in
Silva v Transcape Transport
Consultants & another
1999 (4) SA 556
(W). Voet wrote:
‘
Generally
the judgment debtor himself is asked to point out to the person
making the execution the property which he wishes to be
taken and
sold off with a view to the securing of a judgment debt. If he
refuses to do so or does so in a tricky manner or points
out what is
not enough, the court servant himself seizes at his discretion those
things from which the money can most readily be
made up. He does so
up to the limit of the debt.’
[12]
Wunsh J held in
Silva
that rule 45 did not remove the court’s
discretion. He considered that, because the debtor in that matter had
not pointed
out movable property that was available to satisfy the
judgment debt, he had behaved in a tricky manner, and had
deliberately frustrated
the creditor’s efforts to obtain
payment. Wunsh J said (at 563D-E):
‘
This
is pre-eminently a case where the interests of justice do not dictate
that the execution of the judgment should be stayed and
a case where
execution should proceed against the [debtor’s] immovable
properties.’
Silva
was
endorsed in
Tirepoint
(Pty) Ltd v Patrew Transport CC & others
[2012] ZAGPJHC 34; 2012 JDR 0417 (GSJ).
[13]
Mr Nkola argued nonetheless that the sheriff had not issued a
nulla
bona
return and that it was common cause that he had movable assets that
he could use to satisfy the debt. Rule 46 deals with execution
against immovable property. Rule 46(1)
(a)
(i)
provides that no writ of execution against immovable property shall
issue until a return has been made that the debtor does
not have
sufficient movable property to satisfy the writ, or (ii) the
immovable property is declared specially executable by a
court. The
requirements of sub-rules (i) and (ii) had not been met since there
was no
nulla
bona
return, it was argued. The submission was that sub-rules (i) and (ii)
have as a matter of practice been read to require that there
must be
a
nulla
bona
return before immovable property can be declared specially
executable.
[14]
Counsel for Mr Nkola cites as authority for this proposition two
judgments:
Firstrand
Bank Ltd v Folscher & another and similar matters
2011 (4) SA 314
(GNP) and
Nedbank
v Molebeloa
[2016] ZAGPPHC 863. He argued that these judgments have changed the
common law, reflected in
Silva
.
However, both those cases deal with a completely different factual
matrix. They follow on the judgments in the Constitutional
Court
which deal with the right to housing, which might be jeopardized
where execution is permitted in respect of a debtor’s
primary
residence:
Jaftha
v Schoeman & others, Van Rooyen v Stoltz & others
[2004] ZACC 25
;
2005
(2) SA 140
(CC) and
Gundwana
v Steko Development CC & others
2011 (3) SA 608
(CC). The decisions of the Constitutional Court are
confined to execution in respect of a debtor’s primary home and
bring
the law in line with the constitutional right to housing. See
in particular
Mkhize
v Umvoti Municipality & others
[2011] ZASCA 184
;
2012 (1) SA 1
(SCA) para 26 where this court said
that the object of judicial oversight is to determine whether rights
in terms of s 26 of the
Constitution (the right to adequate housing)
are implicated.
[15]
What the sub-rule requires, as a result of these decisions, is that
in all cases where a debtor’s home is in issue, a
court must
look at the circumstances of the debtor and exercise a discretion.
Rule 46(1)
(a)
(ii)
was amended so as to include a proviso 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’.
The proviso reflects the principle that a poor person who runs the
risk of losing a home should not be placed
in jeopardy without a
proper consideration of his or her circumstances.
[16]
In exercising her discretion in the court of first instance, Jacobs
AJ took into account all Mr Nkola’s circumstances
as set out in
his answering affidavit. These included the fact that he said that he
was a person of considerable means and that
the debt had been
outstanding since July 2014, despite the fact that he said that his
liquidity problems would be resolved by the
end of that year. Mr
Nkola, on his own account, is not the kind of person who qualifies
for the protection required by
Gundwana
.
[17]
The full court appropriately did not interfere with the exercise of
the discretion by the court of first instance. It was exercised
after
proper consideration was given to Mr Nkola’s personal
circumstances. The fact that one of the houses was his and his
family’s primary residence, and the other that of his elderly
father, is of no consequence: he had the means to avert the
execution
of the judgment debt and chose not to pay his admitted liability.
There is no justification in this matter to read the
requirements of
rule 46(1)
(a)
conjunctively. ‘Or’ need not be read as ‘and’
save where a debtor is indigent, has insufficient assets
to satisfy
the debt and is at risk of losing his or primary residence.
[18]
And in any event, the sheriff’s return dated 11 October 2013,
which preceded the agreement of settlement, made it clear
that he had
demanded payment of the debt by Mr Nkola who did not make any movable
asset available for execution such that there
would be satisfaction
of the debt. The return met the requirements of rule 46(1)
(a)
i.
[19]
There is no justification for interfering with the exercise of her
discretion by Jacobs AJ, as the full court rightly found.
[20]
Accordingly, the appeal is dismissed with costs.
_________________________
C
H Lewis
Judge
of Appeal
APPEARANCES
For
Appellant:
H E de la Rey (Heads of Argument prepared by C A Renaud)
Instructed
by:
Neville, Borman &
Botha, Grahamstown
Bock Van Es Attorneys,
Bloemfontein
For
Respondent:
T J M Paterson
SC
Instructed by:
Nettletons Attorneys,
Grahamstown
Symington & De Kok
Attorneys, Bloemfontein