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CASE NO.7049/07

IN THE HIGH COURT OF SOUTH AFRICA

THE KWAZULU-NATAL HIGH COURT,

PIETERMARITZBURG

In the matter between

THE SHERIFF OF THE HIGH COURT

HLABISA & NONGOMA` Applicant

And

BONGEPHIWE FAITH SHOBEDE Purchaser

In re

FIRSTRAND FINANCE COMPANY LIMITED Plaintiff

And

IRENE MKHWANAZI Defendant

Delivered : 7 May 2009

J U D G M E N T

WALLIS J.

[1] Pursuant to a judgment obtained by Firstrand Finance Company Limited against Ms Irene Mkhwanazi, the Sheriff of the High Court, Hlabisa and Nongoma, sold in execution certain immovable property described as Erf 162 Kwamsane A, Mtubatuba. The purchaser was Ms Shobede and she agreed to pay a price of R101 000.00. Although it appears that Ms Shobede paid the deposit in terms of the Conditions of Sale she thereafter failed to pay or secure the balance of the purchase price; to furnish the conveyancers with the information necessary to enable them to draft transfer documents; to pay the conveyancing costs or to provide a clearance certificate in terms of the provisions of section 118(1) of the Local Government : Municipal Systems Act 32 of 2000. This resulted in the conveyancers, who are also the attorneys acting for Firstrand Finance Company Limited, addressing a letter to her on 27 October 2008 demanding that she remedy these defaults within 14 days of that letter failing which “we shall proceed with cancellation of the sale”.

[2] It does not appear that this demand attracted any response and on 27 January 2009 an application was lodged with the Registrar of this Court for cancellation of the sale in execution in terms of rule 46(11). The application followed the conventional long form notice of motion.¹ Notwithstanding that form it said that the application would be one in terms of rule 46(11) for an order cancelling the sale in execution and further orders that:

“2. The purchaser be held liable for the loss sustained by reason of his default, which loss may be recovered by the applicant from the purchaser by order hereof.

3. That the Purchaser be ordered to pay the costs of this application.”

[3] Although the notice of motion is dated 11 December 2008 that appears to be an error as it has attached to it an affidavit, purporting to be the Sheriff’s report in terms of paragraph 9 of the Conditions of Sale and rule 46(11), which was sworn on 18 December 2008. There is also a supporting affidavit deposed to by a Mrs Pestana, an attorney employed by the conveyancers, which was sworn on 13 January 2009.²

[4] When the file was originally placed before me I queried the fact that there was no proof of service upon Ms Shobede. This was notwithstanding the fact that in paragraph 5 of her affidavit Mrs Pestana deposed that:

“A copy of the Sheriff’s Affidavit together with the Notice of Cancellation was served upon the purchaser and despite demand the purchaser has failed to comply with the Conditions of Sale.”

It was also contrary to the terms of the notice of motion, which in the ordinary way required Ms Shobede, if she wished to oppose the application, to do certain things within periods measured from the date of service upon her of the application. The need for service was reinforced by the fact that in addressing the application to Ms Shobede it was said, immediately after her name and address: “Service by Sheriff”. Lastly the failure was contrary to the provisions of rule 46(11)(a) which provides that a sale may only be cancelled by a judge after due notice to the purchaser.

[5] As a result of my query there was personal service upon Ms Shobede on 5 February 2009 and she has not sought to oppose the application.

[6] In those circumstances it is appropriate for me to grant an order for the cancellation of the sale. Ordinarily that would be done summarily in Chambers, as contemplated by rule 46(11)(a). The reason for preparing this judgment is to deal with the relief claimed in paragraphs 2 and 3 of the notice of motion. At the same time it may be helpful to Sheriffs faced with similar situations in the future for me to deal with the procedure contemplated by rule 46(11).

[7] In its entirety the rule reads as follows:

“11(a) If the purchaser fails to carry out any of his or her obligations under the conditions of sale, the sale may be cancelled by a judge summarily on the report of the sheriff conducting the sale, after due notice to the purchaser, and the property may again be put up for sale.

2. The purchaser shall be responsible for any loss sustained by reason of his or her default, which loss may, on the application of any aggrieved creditor whose name appears on the said sheriff’s distribution account, be recovered from him or her under judgment of the judge pronounced summarily on a written report by the said sheriff, after such purchaser shall have received notice in writing that such report will be laid before the judge for such purpose.

2. If such purchaser is already in possession of the property, the said sheriff may, on 10 days’ notice, apply to a judge for an order ejecting him or her or any person claiming to hold under him or her therefrom.”

[8] The background to this rule is briefly the following. Under earlier rules of court that required that a sale in execution of immovable property be confirmed by the court, it was held that the cancellation of a sale likewise needed to be confirmed by the court.³ It appears from those cases that the costs of the application to confirm the cancellation were made costs of the resale of the property. When the rules were amended, at least insofar as this division is concerned, to remove the requirement that a sale in execution be confirmed by the court it was held that it was no longer necessary for the sheriff to obtain the leave of the court to cancel a sale and resell the property.⁴ It was also held that the defaulting purchaser was liable to pay for the loss that she had caused being the difference between the nett proceeds which would have resulted from the first sale and the nett proceeds actually resulting from the second sale after taking account of the additional costs incurred in conducting that sale. The court also ordered the respondent to pay the costs of the application.

[9] One can readily understand why a sheriff would wish to have the security of a court order authorising the cancellation of a sale in execution and authorising him or her to resell the property. However, if conventional procedures have to be followed such applications involve cost and take time, which is prejudicial to all concerned in a situation where it is unlikely that there will be any dispute. It is for that reason that rule 46(11) was promulgated in order to provide a simplified procedure by way of which the sheriff can obtain the necessary assurance that it is safe to resell the property, without incurring additional costs that will burden someone who is already in default of their financial obligations. The rule contemplates a summary procedure based solely on a report by the sheriff. There is no reference to an “application” and it is both unnecessary and inappropriate to follow the procedure laid down in rule 6 when seeking the cancellation of a sale under this rule. All that is required is that the sheriff report to the court that there has been a sale in execution and that the purchaser has failed to carry out their obligations under the conditions of a sale in respects stated in the report, thereby justifying its cancellation. The purpose of this is that the court should oversee the process of execution. This is of fundamental constitutional importance.⁵

[10] It seems to me that the report by the sheriff under Rule 46(11)(a) will be relatively simple. It must set out details of the sale and have annexed to it the conditions of sale with which it is said that the purchaser has not complied. It must state the nature of the default and attach any relevant correspondence including any letter placing the purchaser on terms to comply with their obligations under the conditions of sale. In view of the fact that rule 46(11)(a) states that the request that a judge cancel the sale is to be made “after due notice to the purchaser” it is desirable that the sheriff do the following. When the decision is taken to seek the cancellation of the sale a notice should be sent by registered post or otherwise delivered to the purchaser informing them of that fact. Secondly, a copy of the report in terms of the rule should be served on the purchaser before the report is lodged with the court. The report can then be lodged with the court under cover of a letter requesting the cancellation of the sale and attaching the proof of service. If there is any indication that there is a dispute it seems that the judge should refuse an order under rule 46(11) and leave the parties to pursue conventional remedies by way of the ordinary procedures of the court.

[11] The fact that this procedure has not been followed in the present case does not disentitle the Sheriff to an order cancelling the sale. It is, however, relevant to the prayer for costs. In my view that prayer cannot be granted. Not only was a formal application unnecessary and this should have been apparent from a reading of the rule itself, but I can find nothing in rule 46(11) that empowers a judge, when cancelling a sale, to make such an order. The reason for the rule’s silence in this respect is that it does not contemplate a formal application, but merely a relatively terse report from the sheriff together with a request that the judge cancel the sale summarily. It was not contemplated by the rule-maker that legal costs would be incurred in making such a report and requesting the judge to act upon it. The rule contemplates that the preparation of such a report is the task of the sheriff and would be prepared as part of the day to day administration of the sheriff’s office, without any need to incur legal costs.

[12] It follows that in my view the prayer for costs must be refused. Similarly the prayer in paragraph 2 of the notice of motion that the purchaser be held liable for the loss sustained by reason of her default is not a proper prayer to be granted at this stage. This is a matter that is governed by the provisions of rule 46(11)(b). Questions of the recovery of loss can only be dealt with when the court is in possession of a report from the sheriff under that Rule in which an aggrieved creditor seeks judgment against the defaulting purchaser. Such an application raises interesting procedural issues and potentially difficult constitutional questions under section 34 of the Constitution. The less said about such matters at this stage the better. The time to deal with them is when they pertinently arise in an application in terms of rule 46(11)(b).

[13] I accordingly order that the sale in execution that took place on the 7 May 2008 in respect of the property described as Erf 162 Kwamsane A, Mtubatuba is hereby cancelled. The other prayers for relief in paragraphs 2 and 3 of the notice of application are refused.

ATTORNEYS FOR THE APPLICANT FINDLAY & NIEMEYER INC.

C/O E R BROWNE INC.

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