FACTUAL BACKGROUND
[2]
There has been protracted litigation involving a property owned by the Trust, and equally protracted
litigation in respect of nine properties owned by the Bisnaths. Orders were granted in the Durban High Court by Niles-Dunèr
J, Jappie J, Swain J, Hugo J, Msimang J and Radebe AJ.
[3]
I shall begin with the litigation involving the property owned by the Trust. As will become apparent,
there is even a dispute revolving around the correct description of that property. To avoid begging the question, I shall refer to
it as ‘the trust property’. The trust property was registered in the name of the Trust in 1994. A mortgage bond was registered
in favour of the Bank at that time and a further bond two years later. In addition to the bonds the Bisnaths executed suretyships
in favour of the Bank further securing the indebtedness of the Trust to the Bank.
[4]
The Trust fell into arrears with its payments under the bonds. The Bank issued summons under case
number 8912/98 against the Trust as the principal debtor and the Bisnaths as sureties to recover the amount owing by the Trust. On
8 December 1998 the Bank obtained default judgment against the Trust and the Bisnaths, jointly and severally, and an order was given
declaring the property executable.
[5]
After the Bisnaths failed in their attempts to sell the trust property it was sold in execution on 4
October 2000, and bought in by the Bank. It was thereafter in February 2002 sold to Mr and Mrs Durga (who were informed of the proceedings
in the court a quo but decided not to participate in them) and the Trust’s account with the Bank was credited with the net proceeds of the sale,
being R165 980,20.
[6]
Whilst the events set out in the previous few paragraphs of this judgment were taking place, there
was litigation between the Bank and the Bisnaths in respect of the properties owned by the Bisnaths and over which the Bank held
mortgage bonds. There were originally nine properties. The Bisnaths fell into arrears and the bank sued for payment under case 8857/98.
The arrears were brought up to date and the Bank did not proceed with litigation until the Bisnaths again fell into arrears. The
Bank then sued for payment under case 957/2000. The action was defended by the Bisnaths, but settled on 22 November 2000. In terms
of the written agreement of settlement the Bisnaths admitted their liability to the Bank, as claimed, and undertook to pay all outstanding
arrears and thereafter, the monthly instalments due under the bonds. The settlement agreement contained a provision relating to consents
to judgment by each of the Bisnaths which I shall quote at the appropriate place later in this judgment.
[7]
After the settlement three of the Bisnaths’ properties were sold and the proceeds used to
discharge the amounts outstanding in respect of the bonds over those properties. The balance was used to discharge the arrears on
bonds registered over other properties owned by the Bisnaths.
[8]
In September 2000 the Bank attached the remaining six properties owned by the Bisnaths under case 8912/98
(ie the case brought against the Trust and the Bisnaths as sureties, referred to in para 4 above). On 2 December 2002 the Trust and
the Bisnaths obtained from Niles-Dunèr J, as a matter of urgency under case number 8912/98, a rule nisi which inter alia in paragraph 1(a) called upon the Bank to show cause why the attachment of the Bisnaths’ six properties should
not be set aside. The Bank opposed the other relief sought in this application and filed a counter-application for an order declaring
these properties specially executable.
[9]
The return date of the rule nisi was extended and came before Jappie J almost a year later on 10 November 2003. The learned judge confirmed paragraph 1(a) of the
rule and referred certain issues for the hearing of oral evidence. Those issues included the following:
(i)
whether Bisnath instructed the Bank, represented by Mr Payne, to allocate a payment of R65 933,25
to the account of the Trust (for the purposes of what follows, I shall round this amount up to R66 000);
(ii)
whether the Bank agreed to pass a credit of R280 000 in favour of the Trust; and
(iii)
whether the sale in execution of the trust property in October 2000 should be set aside.
[10]
The matter came before Swain J on 14 March 2004. On 6 April 2004 the learned judge found that the Trust
had not proved its entitlement to a credit of R280 000. On 5 September 2006 he determined the issues relating to the payment
of the R66 000 and the setting aside of the sale of the trust property in favour of the Bank. He also found in favour of the
Bank on a further issue, which was raised after the Trust was given leave to re-open its case, namely, that the Trust was not entitled
to be credited with rentals which the Bank had allegedly failed to collect in respect of the trust property, after judgment had been
taken by the Bank and before the property was sold in execution. These latter three findings, made under case 8912/98, form the subject
matter of the first appeal where the appellants are the Bisnaths and the Trust. I shall discuss the issues in more detail when I
come to deal with the merits of this appeal, which is with the leave of Swain J.
[11]
Whilst the litigation was proceeding before Swain J, the Bank, according to it, gave the Bisnaths notice
on 24 April 2006 that it intended to apply for judgment by consent in terms of the settlement agreement under case number 957/2000
to which I have referred in para 6 above. (Argument was advanced on behalf of the Bisnaths as to whether notice was properly given
to them and I shall return to this aspect.) Hugo J considered the Bank’s application in chambers and on 30 May 2006 he granted
judgment by consent against the Bisnaths. In terms of that judgment, the Bisnaths were jointly ordered to pay amounts alleged to
be outstanding in respect of each of their six remaining properties and those properties were declared specially executable. Pursuant
to the order the six Bisnath properties were attached by the sheriff. I pause to emphasise (for reasons which will become apparent)
that there is no attack on the validity of this attachment (as opposed to the order which granted the Bank the right to do so).
[12]
In terms of a notice of motion dated 15 March 2007 the Bisnaths brought urgent motion proceedings before Msimang
J, who issued a rule nisi against the Bank. I shall quote the rule later in this judgment.
[13]
On the extended return day, 1 August 2007, Radebe AJ confirmed the rule (with the exception of the paragraph
that related to costs) and subsequently refused the Bank leave to appeal. The second appeal, with the leave of this court, is against
the order of Radebe AJ.
ISSUES
[14]
The issues are therefore the following:
In the first appeal, where the Trust and the Bisnaths are the appellants:
(i)
whether the Trust was entitled to a credit of R66 000;
(ii)
whether the trust property was declared specially executable; and
(iii)
whether the Trust is entitled to a credit in respect of rentals not collected by the Bank;
and in the second appeal, where the Bank is the appellant:
(i)
whether notice of intention to apply for judgment by consent was properly given to the Bisnaths;
and
(ii)
whether the confirmation of the rule nisi by Radebe AJ should be set aside.
THE FIRST APPEAL
Credit of R66 000
[15]
The appellants’ case as testified to by Bisnath was that on 15 October 1998 the latter had agreed
with Payne of the Bank that the proceeds of the sale of a property, the R66 000 in question, would be credited to the bond account
of the Trust. Payne on the other hand said that the instruction given by Bisnath at the meeting was to credit the proceeds of the
sale to the arrears in the bond accounts of the Bisnath properties. Payne went on to say that had Bisnath attempted to give him an
instruction to credit the Trust’s bond account, he would not have accepted it as that would have resulted in the Trust’s
account being R40 000 in credit, and the other bond accounts remaining in debit. This, he said, would not have made sense and
would also have been contrary to the Bank’s policy to update as many accounts as possible because there were a lot of foreclosures
at the time. Payne even went so far as to say that Bisnath was lying about the instruction given at the meeting. Yet Payne was never
cross-examined on his version.
[16]
The evidence of Bisnath was patently unacceptable, for a number of reasons. I shall mention only two.
He said that he had not discussed the arrears on the Bisnath properties with Payne because no legal action had been instituted in
respect of the arrears on those properties. A return by the sheriff reflecting personal service on him of the summons relating to
the Bisnath properties, was put to him. That return recorded that the summons had been served on the same date, 14 October 1998 ?
a day before the meeting with Payne ? as the summons relating to the trust property. Bisnath said, variously, that he did not recollect
receiving the summons relating to the Bisnath properties; he remembered only service of the summons relating to the trust property;
he only received one summons; and he received no summons in respect of the Bisnath properties. Eventually, after several adjournments
and a change of counsel, he was led to say (after the appellants’ case had been reopened) that he had received two summonses
? one relating to the trust property and one relating to the Bisnath properties.
[17]
Pearce said in his affidavit that ‘during the meeting [between himself and Bisnath on 15 October
1998] Mr Bisnath and I dealt with these two cases separately’. Pearce then went on to relate what Bisnath had said in respect
of the bonds over the Bisnath properties, and what he had said in respect of the trust property. In answer to these allegations,
Bisnath said in an affidavit: ‘It is correct that the two cases were dealt with separately.’ Bisnath could not reconcile
his oral evidence that the Bisnath properties had not been discussed at all, with what he had said in his affidavit.
[18]
Swain J recorded in his judgment that senior counsel representing the appellants had found himself unable
to present argument in favour of their case on this issue. The learned judge nevertheless analysed the evidence and weighed up the
probabilities in some detail, and concluded that it was ‘quite clear that Mr Bisnath has lied to the court’. I do not
propose being detained by the arguments advanced in the heads of argument against this finding. They were not advanced with any enthusiasm
during oral argument. All of them are devoid of substance and none merits detailed consideration.
Trust property declared executable
[19]
As I have already said, the Bank obtained default judgment against the Trust (as the principal debtor
under the bond) and the Bisnaths as sureties for the debts of the Trust, on 8 December 1998 under case number 8912/98. Paragraph
3 of the relief granted was:
‘An order declaring the property described as:
Lot 2643 Reservoir Hills (Extension No. 1)
situate in the City of Durban
administrative District of Natal
Province of Kwazulu-Natal
in extent 697 Square Metres
specially executable.’ (I have deliberately retained the paragraphing of the order for emphasis.)
The property is in fact situated in extension 7. The appellants accordingly contended (I quote from an affidavit deposed to by Bisnath):
‘[T]he property, extension no. 7, was never declared specially executable and the writ in terms of which the sale took place . . .
was not issued in accordance with the default judgment . . . as that declares the property described as Lot 2643 Reservoir Hills,
extension no. 1, specially executable. It is respectfully submitted that the sale in execution of the property, extension no. 7,
to the [Bank] was accordingly irregular and is liable to be set aside at the instance of [the trust and the Bisnaths].’
[20]
In answer to these allegations, the Bank delivered an affidavit by Mr Marais, who had been employed in the
office of the Surveyor-General, Kwazulu-Natal, and had thirteen years’ experience in (in his own words) ‘the various
technical aspects of the approval of diagrams prepared by land surveyors for certification for use in the Deeds Office’. According
to Marais, there is only one erf 2643 in the township of Reservoir Hills; the phrase ‘extension 7’ merely indicates that
the developer developed the township in phases and that erf 2643 was registered when the seventh phase was reached; and in terms
of regulation 28 made under the Deeds Registries Act, the particulars to be quoted in any deed in which land in a township is described do not require reference to the extension number.
This evidence was confirmed by Mr Williams-Wynn, the Surveyor-General: Pietermaritzburg. It was not challenged by Bisnath or anyone
else either on affidavit or in oral evidence.
[21]
As Swain J correctly held, the need for a property to be described accurately in an order declaring it
executable is obviously to ensure that the correct property is attached and sold. There was only one erf 2643 in the township and
it was precisely
identified in the order. That erf was attached a nd sold. Reference to the extension was unnecessary for the proper description of the erf, it created no ambiguity and it was entirely
irrelevant. Counsel representing the appellants found himself unable to argue the contrary but he did not abandon the point, obviously
acting on instructions. I shall return to this briefly when I deal with the costs of appeal.
Collection of rentals
[22]
The appellants’ case is this. The Bank, according to them, was in possession of the trust property
after it was attached. The building on the property had been converted into a student residence and was fully let for the academic
year commencing February 1999. Had the bank collected the rentals, the amount of the debt for which the default judgment was granted
on 8 December 1998 under case number 8912/98 would have been extinguished and accordingly, the property was wrongly declared executable.
[23]
I shall deal first with the law, and then the facts. There are two Transvaal cases which deal with the obligations
of a pledgee in respect of the fruits of property pledged. In Freeman Cohen’s Consolidated Ltd v General Mining and Finance Corporation Ltd Innes CJ (Wessels and Bristowe JJ concurring) said:
‘The pledgee is bound not only to take care of the pledged property, but to render an account of any fruits or profits derived from
it. The rule is thus expressed in the Code (4, 24, 1): Ex pignori percepti fructus imputantur in debitum, et si sufficiunt ad totum debitum, tollitur actio et reditur pignus. The profits received from the pledged thing are to go in account against the debt. If they are sufficient to wipe out the whole
of the debt the action is at an end, and the pledge must be returned. In commenting on that rule Grotius (Introduction, 3, 8, 5) says: “With respect to the fruits or profits of the property pledged, the pledgee must give them up or carry them
to account in reduction of the debt;” and Pothier, in his treatise on Namptissements (sec. 35, p. 680), is to the same effect.’
In Judes v SA Breweries Ltd Ward J said:
‘Under the Roman-Dutch law the pledgee has to take care of the property pledged and he must account for the fruits (Grotius 3.8.4; Voet, XIII. 7.4). . . . According to the [C]ode IV. 24.3 the creditor is bound to account for the fruits gathered and those which should
have been gathered. Donellus “De Pignoribus et Hypothecis,” IX. 1. (Vol. VI., page 998) says: “Quin etiam judicio pignoratitio percipere eos cogitur ex fide bona, ne res apud eum otiosa et sine fructu maneat, et debitori vacet.” . . . . I take the law to be that the onus is on the plaintiff [the successor in title to the rights of the debtor] to show that there has been loss incurred.’
[24]
I respectfully adopt those passages as correctly setting out the law in regard to pledges. It does not follow,
however, that the same obligation in respect of fruits is imposed by law on a mortgagee. Ex hypothesi, a pledgee is in possession
of the article pledged; but that is most unusual in the case of a mortgage of immovable property. There is no reason why the law
should impose the obligations of a pledgee in regard to fruits on a mortgagee not in possession of the mortgaged property. Professors
Lee, C G van der Merwe, Lubbe, and T J and S Scott all limit the obligation of a mortgagee to account for fruits, to that case. The view expressed by C G van der Merwe elsewhere that except in the case where a pactum antichreseos is included, the mortgagor has to account for fruits of the mortgaged land, is, with respect, wrong and is not borne out by the authority quoted in support
of it, which is Judes v SA Breweries Ltd. I can only assume that the learned author intended to refer to the mortgagee and that the reference to the mortgagor is a misprint.
But then the proposition would require qualification. In Judes, the creditor, the South African Breweries Ltd, the defendant in the action, was in possession of the property of the debtor, Joffe,
who had transferred the property to the Breweries ‘with authority to collect the rents to devote the same to the payment of
the capital amount of the loan and interest, with the right to [the Breweries] to sue for rent or in respect of breaches of the lease
and to re-enter in respect of the same’. The Breweries were not a mortgagee. Lubbe describes the relationship between the Breweries and Joffe as a fiducia cum creditore contracta pursuant to which the Breweries had taken transfer of the movable property in securitatem debiti. Ward J adjudicated the claims of Judes, the successor in title to Joffe’s rights who argued that the Breweries should not have reduced
the rent and should have collected more rent than it did, on the basis that the Breweries had the same obligation as a pledgee to
account for fruits. The important fact, for present purposes, is that the Breweries were in possession of the debtor’s property.
[25]
So far as the onus is concerned, on basic principles, the onus of proving that the mortgagee was in possession
of the mortgaged property and therefore obliged to collect the fruits, should be on the party who asserts this ie the mortgagor.
[26]
The Bank relied upon the following clause in the bond as relieving it of any liability should it fail
to collect rentals in respect of the trust property. The clause provides:
‘The Mortgagor(s) hereby grant(s) a full and sufficient cession, transfer and assignment to the Bank of his/her/its/their right, title
and interest in and to all rents and other revenues which may accrue from the mortgaged property as additional security for such
sums as may be claimable at any time under this Bond, with the express right in favour of the Bank irrevocably and in rem suam to take proceedings against tenants in default for the recovery of the rent, and/or ejectment, to cancel or renew and enter into
leases in such manner as the Bank shall think fit, provided, however, that such cession, transfer and assignment shall not be acted
upon without the consent of the Mortgagor(s) while the conditions of this Bond have been and are being fully complied with. It is
hereby agreed that the Bank shall be entitled to charge a commission of 5% (five per centum) on the gross amount of all rents collected
to recover such commission under this Bond.’
I interpret the clause to confer a right on the Bank:
(i)
To take proceedings against tenants in default (for the recovery of the rent and/or ejectment);
and
(ii)
to cancel or renew and e
