Standard Bank of South Africa Ltd v Hendricks and Another and Related Cases

• Jurisdiction: South Africa
• Judge: Erasmus J, Dolamo J and Savage J
• Judgment Date: 18 December 2018
• Citation: 2019 (2) SA 620 (WCC)
• Docket Number: 11294/18
• Hearing Date: 18 December 2018
• Counsel: J Babamia (with M Mbikwa) for Standard Bank. K Hofmeyr (with M Musandlwa and A Armstrong) for Absa Bank. M Calitz for first amicus curiae (the Legal Aid Board). E Mahlangu for second amicus curiae (the National Credit Regulator). E Webber for third amicus curiae (the LLHRF).
• Court: Western Cape Division, Cape Town

The court: F

Introduction

[1] Section 26(1) of the Constitution Act 108 of 1996 guarantees the right of access to adequate housing, with the Constitutional Court G having recognised in Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others (Jaftha) [1] that '(r)elative to homelessness, to have a home one calls one's own, even under the most basic circumstances, can be a most empowering and dignifying human experience'. Section 26(3) is clear that no one is to be evicted from one's home 'without an order of court made after considering all the relevant circumstances'. H

[2] While the Constitution requires judicial oversight over orders of execution made against immovable property which is the primary residence of the judgment debtor, [2] the manner and extent to which this oversight has occurred has received different treatment in our courts. I

The Court

This A led to the promulgation of Uniform Rule 46A, which came into effect on 22 December 2017, and which is concerned with matters related to the execution against immovable property which is the primary residence of the judgment debtor. It is the application of this rule which is, in the main, before us in this matter.

[3] B On 13 September 2018 a number of foreclosure matters served in motion court before Savage J by way of application in which an order of execution was sought against immovable property which was the primary residence of the judgment debtor. This was the day after the judgment of the full court in the Gauteng Local Division in Absa Bank Ltd v Mokebe and Related Cases (Mokebe) [3] had been delivered.

[4] C Having regard to Mokebe, Savage J decided to invoke the provisions of s 14(1)(b) of the Superior Courts Act 10 of 2013. The matters before her, which are now the subject of this hearing, were postponed. The Judge President of this division, in terms of s 14(1)(a), thereafter referred the matters for hearing before this court as a full bench. D The legal practitioners involved in the applications, together with the amicis curiae, were invited to address the court, in terms of ss 14 (1)(a) and (b), on the following issues:

1.

Whether rule 46A introduces substantive legal requirements for obtaining an order for the execution of judgments in mortgage E contracts, and, if so, whether such substantive requirements can competently be introduced by the Rules Board or only by the legislature, and whether rule 46A was made ultra vires the powers of the Rules Board and is accordingly invalid.

2.

Whether, as is the practice in other divisions of the High Court, F personal service by the sheriff is required prior to granting a money judgment for the accelerated full outstanding balance of moneys lent, which moneys are secured by a mortgage bond over immovable property.

3.

The circumstances under which it may be appropriate to grant a money judgment for the accelerated full outstanding balance and G then postpone the application to declare the property secured by the bond specially executable, given the impact on costs and the potential for attachment and execution of movables in the meantime.

4.

Whether the court has a discretion to decline to grant a default H money judgment for the accelerated full outstanding balance and whether there are considerations to which regard should be had to ensure uniformity of treatment in this regard.

5.

Whether the postponement of the application for the money judgment under certain circumstances is objectionable or desirable.

6.

Whether the court has a discretion, when postponing an application I for executability, to afford the mortgagor an opportunity to 'remedy a default in such credit agreement by paying to the credit provider

The Court

all amounts that are overdue' under the National Credit Act 34 of 2005 (NCA). A

7.

Whether the operation of rule 46A(9), insofar as the setting of a reserve price is concerned, purports to amend the substantive law or not.

8.

The circumstances under which a court is to set a reserve price and B how this is to be determined in terms of the new Uniform Rule 46A, effective since 22 December 2017.

9.

And any other issue the judges wish to hear the parties on.

Parties C

[5] The parties to this matter are:

[5.1]

Standard Bank of South Africa Ltd, a company with limited liability registered in terms of the company laws of South Africa, registered as a financial service provider and credit provider in terms of the NCA (Standard Bank); and D

[5.2]

Absa Bank Ltd, a public company with limited liability duly registered in accordance with company laws of South Africa, registered as a financial service provider and credit provider in terms of the NCA (Absa).

[6] The individual defendants, as respondents in the matter, did not E participate in the proceedings.

[7] The amici curiae before this court are Lungelo Lethu Human Rights Foundation, a duly registered private company (LLHRF), admitted as the first amicus curiae; the National Credit Regulator (NCR), established in terms of s 12 of the NCA, admitted as the second amicus curiae; and F Legal Aid South Africa (Legal Aid), admitted as the third amicus curiae in the matter.

[8] Although Changing Tides 17 (Pty) Ltd, also known as SA Home Loans, was initially joined as a party to this matter after concerns were G raised in the judgments of Changing Tides 17 (Pty) Ltd v Turner (case No 5773/10) and Changing Tides 17 (Pty) Ltd v Jones and Others (case No 9707/18) regarding the calculation of the interest rate on outstanding amounts owed, attorneys for Changing Tides indicated subsequently that the application had been withdrawn. H

Background

[9] The Constitutional Court in Gundwana v Steko Development CC and Others[4] emphasised that the constitutional requirement of judicial oversight did not challenge the principle that a judgment creditor is entitled I to execute upon the assets of a judgment debtor in satisfaction of a judgment debt sounding in money when the judgment debtor had

The Court

willingly A put his or her home up in some manner as security for the debt. [5] The court stated:

'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 B 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.' [6]

[10] In Jaftha[7] the value of a home as a means by which to raise capital was recognised. In Standard Bank v Saunderson[8] the court recognised the C mortgage bond as 'an indispensable tool for spreading home ownership', with its value as an instrument of security existing through the 'confidence that the law will give effect to its terms'. [9] In Mouton v Absa Bank Ltd; Haylock v Absa Bank Ltd[10] it was recognised that this allows lenders to extend further credit which serves a broader social purpose in allowing D the inclusion of new entrants in the market.

[11] In Nedbank Ltd v Fraser and Another and Four Other Cases[11] the court stated:

'To put residential immovable property which is a person's home into that class of assets beyond the reach of execution would be to sterilise E the immovable property from commerce, thereby rendering it useless as a means to raise credit. Preventing debtors from using their homes as security to raise credit will create a class of homeless persons — those who are unable to afford the full purchase price of their homes in a cash sale, but could afford to repay a loan for the purchase price. Furthermore, it would lock up capital and prevent the home-owning entrepreneur F from using his or her home as security to finance business initiative.'

[12] The Constitutional Court in Jaftha noted:

'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 G 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 H payment are significantly less than the interests of the judgment debtor

The Court

in security of tenure in his or her home, particularly if the sale of the A home is likely to render the judgment debtor and his or her family completely homeless.' [12]

[13] In Bartezky and Another v Standard Bank of South Africa Ltd and Others[13] this court stated that, as a fundamental aspect of the rule of law, execution mechanisms must be effective if they are to have legitimacy, B and public confidence in them should not be lightly disturbed. They are also required to comply with mandatory consumer-protection processes before a sale in execution can occur. In Kubyana v Standard Bank of South Africa Ltd[14] the Constitutional Court was careful to explain that while the NCA is directed at consumer protection —

'this should not be taken to mean that the Act is relentlessly one-sided C and concerned with nothing more than devolving rights and benefits on consumers without any regard for the interests of credit providers. No. For just as the Act seeks to protect consumers, so too does it seek to promote a competitive, sustainable, efficient and effective credit industry.' [15]

[14] The full bench in Mokebe considered rule 46A and provisions of the D South...