Chief Lesapo v North West Agricultural Bank and Another

• Jurisdiction: South Africa
• Judge: Chaskalson P, Langa DP, Ackermann J, Goldstone J, Madala J, Mokgoro J, Ngcobo J, Sachs J, Yacoob J, Cameron AJ
• Judgment Date: 16 November 1999
• Citation: 2000 (1) SA 409 (CC)
• Docket Number: CCT 23/99
• Hearing Date: 14 September 1999
• Counsel: No appearance for the applicant H Lever (with him DB Spitz) for the first respondent No appearance for the second respondent AJ Freund as amicus curiae in support of the order of the Bophuthatswana High Court.
• Court: Constitutional Court

Mokgoro J : I

[1] This case raises important questions concerning the principle against self help, which is an aspect of the rule of law. It concerns the constitutionality of s 38(2) of the North West Agricultural Bank Act 14 of 1981 ('the Act') which permits the North West Agricultural Bank ('the Bank') to seize a defaulting debtor's property, without recourse to J

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a court of law, and to sell it by public auction in A defrayal of the debt owed to the Bank. On 20 May 1999 in the Bophuthatswana High Court, Mogoeng J granted Chief Direko Lesapo ('the applicant') an order invalidating s 38(2) of the Act [1] on account of its inconsistency with the Constitution and granting certain consequential relief. The matter came before this Court for confirmation pursuant to s 172(2)(a) B of the Constitution. [2]

[2] In response to directions issued by the President of this Court, the first respondent filed written submissions opposing the confirmation of the order of Mogoeng J. The applicant, however, C submitted no written argument in support of confirmation of the order. This Court therefore appointed Mr Freund as amicus curiae to advance argument in support of the order and to raise any other issues which might assist this Court. The Court is indebted to Mr Freund for his helpful argument.

[3] The applicant, a farmer, had borrowed R60 000 from the first D respondent, the Bank, to enable him to buy certain farming implements. The loan was made in terms of a written agreement pursuant to the provisions of the Act. When he fell into arrears with his payments, the Bank, acting in terms of s 38(2) of the Act, gave notice to the applicant and, upon his continued failure to pay, wrote a letter to the E messenger of the court for the district of Ditsobotla ('the messenger'), authorising him to seize and sell by auction movable property which the applicant had pledged as security for the loan. [3] In an effort to prevent the messenger from proceeding in terms of the notice, the applicant applied, amongst other F things, for urgent relief and for an order declaring s 38(2) of the Act to be in conflict with the Constitution.

[4] Section 38(2) of the Act provides:

'The board may, in the circumstances contemplated by ss (1) where the loan or advance has already been paid over to the debtor, by written notice addressed to the debtor, recall the said loan or advance G in whole, and require the debtor to repay such loan or advance together with interest thereon up to the date of such notice within the time specified therefor in such notice, and in the event of default of payment on such specified date, the board may in writing and under the official seal of the Bank, require the messenger of the court or any other person designated by the board to seize -

(a)

in the case where such loan or advance has been secured by mortgage, the immovable property encumbered thereby; or H

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(b)

in the case where such loan or advance has been A secured by a deed of hypothecation of movable property, or where any other form of security has been given, the property encumbered by such deed or constituting such other form of security,

without recourse to a court of law, and, irrespective of whether or not such messenger of the court or such other person is a licensed auctioneer, to sell such property by public auction on such B date, and at such time and place and on such conditions as the board may determine, of which at least 14 days' notice has been given in the Provincial Gazette and in a newspaper circulating in the district where the said property is situated or, as the case may be, where the said property was kept or used before such seizure, or the board may itself sell the property so seized by public tender on such conditions as it may determine: Provided that the provisions of this section shall not be construed so as to derogate from the C provisions of ss (4).'

(Emphasis supplied.) Section 38(1) deals with the preconditions for the Bank to withdraw its approval of an advanced loan or refuse payment thereof. Ten circumstances are identified, encompassing: the debtor's failure 'to pay any amount payable in respect of a loan . . . on or D before due date'; the commission of an act of insolvency or the debtor's sequestration; being sentenced to a term of imprisonment without the option of a fine; if the debtor 'in the opinion of the board [4] arrived at after the carrying out of any inspection in terms of s 36 does not apply the loan . . . for the purposes for which . . . [it] was granted'; failure by the debtor E to comply with a s 37 notice; [5] breach of the loan conditions; the debtor's being declared mentally ill or incompetent; in the case of a company, liquidation; failure by the debtor to apply the loan 'on a substantial scale' within a reasonable time or a time specified by the Board; and conviction of various offences under the statute. [6]

[5] Mogoeng J held that s 38(2) was inconsistent with the provisions F of s 34 of the Constitution, which provides:

'Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.'

According to Mogoeng J, this section embodies a fundamental rule of G natural justice, according to which everyone has the right to have a dispute settled by a court of law or an unbiased, independent and impartial tribunal, where appropriate; and nobody should be allowed to take the law into his or her own hands or to usurp the functions of a court of law. H

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[6] In the High Court the Bank contended that the applicant had not A disputed that the debt was due and that there was accordingly no averment that there was a dispute between the parties. Mogoeng J held that it was not necessary that a dispute be raised against the Bank's claim. The applicant had been summarily dispossessed of property and was aggrieved thereby. That was sufficient to entitle him to challenge B the constitutionality of the legislation.

[7] When the matter came before this Court, Mr Lever, counsel for the Bank, correctly conceded that the approach to be adopted for determining questions of constitutionality is objective. [7] Whether there was in fact a dispute C between the parties in this case is thus irrelevant to the present inquiry. The subjective position in which the parties find themselves cannot affect the constitutional status of the law under attack.

[8] The Bank contended that the right had not been infringed on two bases. First, Mr Lever submitted that there is no conflict between s 38(2) of the Act and s 34 of the Constitution. Section D 38(2), he argued, pertains to the attachment and subsequent sale of property, while s 34 concerns the adjudication of disputes. Central to this argument was the contention that s 34 applies only where a dispute exists that can be resolved by the application of law. The extraordinary execution procedure authorised by the impugned provision, E he argued, comes into operation only within a narrow compass - where there is no dispute. Thus, if there was a dispute, s 38(2) could not be invoked.

[9] Mr Lever conceded that, if s 38(2) allows for seizure and sale where there is a dispute, this would be contrary to s 34. He, however, contended that it is possible and desirable that s 38(2) be F interpreted as being applicable only where there is no dispute. Section 38(2) does not appear to be reasonably capable of such a restrained interpretation. Thus, properly construed, the application of s 38(2) is not limited to circumstances where there is no dispute, nor is the requirement of the absence of a dispute anywhere implied. If the Legislature had indeed intended such a prerequisite, there seems to be G no reason why it should not have provided so expressly.

[10] Mr Lever further contended that because the notice to the messenger authorising the attachment is preceded by a notice of demand to the debtor, if there is a dispute, there is an opportunity for the debtor to raise it in response to the notice. That, however, is H no answer to the challenge to the constitutionality of the section. Section 38(2) allows the Bank to bypass the courts. Without any judgment or order from any court and without any of the statutory or other safeguards applicable to the attachment and sale in execution of a judgment debt, s 38(2) authorises the Bank itself to bypass the I courts and these other safeguards and to seize and sell the debtor's property of which the debtor was in lawful and undisturbed possession. This is so even where, under s 38(2), the messenger of the court is required by the Bank to seize and sell the

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property because under the A subsection the messenger can only be acting as the Bank's agent and not, as is normally the case, as an officer of the court. [8] His instructions and authority emanate solely from the Bank and not from any court or court order.

[11] A trial or hearing before a court or tribunal is not an end in itself. It is a means of determining whether a legal obligation exists B and whether the coercive power of the State can be invoked to enforce an obligation, or prevent an unlawful act being committed. It serves other purposes as well, including that of institutionalising the resolution of disputes, and preventing remedies being sought through self help. No one is entitled to take the law into her or his own hands. Self help, in this sense, is inimical to a society in which the C rule of law prevails, as envisioned by s 1(c) of our Constitution, which provides:

'The Republic of South Africa is one, sovereign, democratic State founded on the following values:

. . .

(c)

Supremacy of the Constitution and the rule of law.' D

Taking the law into...