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IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE DIVISION, GRAHAMSTOWN

CASE NO: 1381/2018

DATE HEARD: 18/10/2018

DATE DELIVERED: 06/11/2018

In the matter between

 

PLASTOMARK (PTY) LTD                                               APPLICANT

and

ANDRIES JOHANNES SMALL                                        1^ST RESPONDENT

NDLAMBE MUNICIPALITY                                              2^ND RESPONDENT

ABSA BANK LTD                                                             3^RD RESPONDENT

JUDGMENT

 

ROBERSON J:-

 

[1] This is an application for an order declaring the first respondent’s immovable property executable. The property is described as Erf number [...], Port Alfred, Eastern Cape (the property). The second respondent is the municipality in which the property is situated. The third respondent is the mortgagee in favour of which the first respondent mortgaged the property as security for a loan from the third respondent.  No relief is sought against the second and third respondents. In this judgment I shall refer to the applicant as Plastomark, to the first respondent as Small, to the second respondent as the municipality, and to the third respondent as the bank.

Background

[2] On 24 November 2016 judgment was granted in the Gauteng Local Division of the High court, Johannesburg, in favour of Plastomark against Small and one Hendrik Adendorff, jointly and severally, for payment of the sum of R2 633 377.64, interest thereon at the rate of 10,25% per annum from 10 May 2016 to date of final payment, and costs on the attorney and own client scale.  The costs were taxed in the sum of R128 104.13.  Small and Adendorff were sued in terms of a deed of suretyship which they had signed in favour of Plastomark, the principal debtor being a company, Triangle Containers (Pty) Ltd (Triangle). Triangle’s debt was for goods purchased from Plastomark in terms of a credit application. Small and Adendorff had opposed the application and both of them applied for leave to appeal the judgment.  Their applications were dismissed.  Small’s attorneys indicated that he would petition the Supreme Court of Appeal but he did not do so.

[3] Since the judgment was granted Small has made no payment.  Execution against his movable property resulted in a nulla bona return and Small deposed to an affidavit to the effect that he was unable to pay the amount due and that he did not possess any disposable property to satisfy the judgment.  Small and his wife, to whom he is married out of community of property with the exclusion of the accrual system, deposed to affidavits to the effect that certain property contained in an annexed list belonged either to Mrs Small or to the Cresta Family Trust, of which Trust Mrs Small is a beneficiary.  The items on the list were furniture and household effects.

[4] Adendorff paid R75 000.00 towards the judgment debt and, following the sale of one of his immovable properties, paid a further R1 261 768.24.  The original judgment debt has therefore been reduced to R1 296 609.40.

[5] The municipal valuation of the property is R2 151 000.00 and the municipality’s statement of account dated 30 April 2018 for rates and services addressed to Small reflects an amount of R1 831.75 which is due.  

[6] As at 15 May 2018, the amount owing to the bank was R352 042.77, together with interest thereon at the rate of 8,25% per annum, capitalised monthly.  The bond was registered in 2009 covering an amount of R750 000.00.

The Law

[7] The principles to be applied in deciding whether or not to authorise execution against immovable property which is a person’s home have developed considerably in the constitutional era.  The pertinent constitutional provision involved is s 26 of the Constitution (the right to have access to adequate housing).  Rule 46 (1) (a) (ii) of the Uniform Rules provides:

“(1) (a) Subject to the provisions of rule 46A, no writ of execution against the immovable property of any judgment debtor shall be issued unless —

(i) …..

(ii) such immovable property has been declared to be specially executable by the court or where judgment is granted by the registrar under rule 31(5).

[8] The relevant portions of Rule 46A for the purpose of this judgment provide:

“Execution against residential immovable property

(1) This rule applies whenever an execution creditor seeks to execute against the residential immovable property of a judgment debtor.

(2) (a) A court considering an application under this rule must —

(I) establish whether the immovable property which the execution creditor intends to execute against is the primary residence of the judgment debtor; and

(ii) consider alternative means by the judgment debtor of satisfying the judgment debt, other than execution against the judgment debtor’s primary residence.

(b) A court shall not authorise execution against immovable property which is the primary residence of a judgment debtor unless the court, having considered all relevant factors, considers that execution against such property is warranted.

(c) The registrar shall not issue a writ of execution against the residential immovable property of any judgment debtor unless a court has ordered execution against such property.

(5) Every application shall be supported by the following documents, where applicable, evidencing:

(a) the market value of the immovable property;

(b) the local authority valuation of the immovable property;

(c) the amounts owing on mortgage bonds registered over the immovable property;

(d) the amount owing to the local authority as rates and other dues;

(e) the amounts owing to a body corporate as levies; and

(f)any other factor which may be necessary to enable the court to give effect to subrule (8):

Provided that the court may call for any other document which it considers necessary.

(8) A court considering an application under this rule may —

(a) of its own accord or on the application of any affected party, order the inclusion in the conditions of sale, of any condition which it may consider appropriate;

(b)order the furnishing by —

(i) a municipality of rates due to it by the judgment debtor; or

(ii) a body corporate of levies due to it by the judgment debtor;

(c) on good cause shown, condone —

(i) failure to provide any document referred to in subrule (5); or

(ii) delivery of an affidavit outside the period prescribed in subrule (6) (d);

(d) order execution against the primary residence of a judgment debtor if there is no other satisfactory means of satisfying the judgment debt;

(e) set a reserve price;

(f) postpone the application on such terms as it may consider appropriate;

(g) refuse the application if it has no merit;

(h)make an appropriate order as to costs, including a punitive order against a party who delays the finalisation of an application under this rule; or

(i) make any other appropriate order.

(9) (a) In an application under this rule, or upon submissions made by a respondent, the court must consider whether a reserve price is to be set.

(b) In deciding whether to set a reserve price and the amount at which the reserve is to be set, the court shall take into account—

(i) the market value of the immovable property;

(ii) the amounts owing as rates or levies;

(iii) the amounts owing on registered mortgage bonds;

(iv) any equity which may be realised between the reserve price and the market value of the property;

(v) reduction of the judgment debtor’s indebtedness on the judgment debt and as contemplated in subrule (5)(a) to (e), whether or not equity may be found in the immovable property, as referred to in subparagraph (iv);

(vi) whether the immovable property is occupied, the persons occupying the property and the circumstances of such occupation;

(vii) the likelihood of the reserve price not being realised and the likelihood of the immovable property not being sold;

(viii) any prejudice which any party may suffer if the reserve price is not achieved; and

(ix) any other factor which in the opinion of the court is necessary for the protection of the interests of the execution creditor and the judgment debtor.

(c) If the reserve price is not achieved at a sale in execution, the court must, on a reconsideration of the factors in paragraph (b) and its powers under this rule, order how execution is to proceed.

(d) Where the reserve price is not achieved at a sale in execution, the sheriff must submit a report to the court, within 5 days of the date of the auction, which report shall contain—

(i) the date, time and place at which the auction sale was conducted;

(ii) the names, identity numbers and contact details of the persons who participated in the auction;

(ii) the highest bid or offer made; and

(iii) Any other relevant factor which may assist the court in performing its function in paragraph (c).

(e) The court may, after considering the factors in paragraph (d) and any other relevant factor, order that the property be sold to the person who made the highest offer or bid.”

[9] In Jaftha v Schoeman and Others; Van Rooyen v Stoltz and Others [2004] ZACC 25; 2005 (2) SA 140 (CC) at paragraphs [56]–[60] guidelines were provided with regard to what constituted relevant circumstances.

“[56] It would be unwise to set out all the facts that would be relevant to the exercise of judicial oversight. However, some guidance must be provided. 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 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 payment are significantly less than the interests of the judgment debtor in security of tenure in his or her home, particularly if the sale of the home is likely to render the judgment debtor and his or her family completely homeless.
[57] It is for this reason that the size of the debt will be a relevant factor for the court to consider. It might be quite unjustifiable for a person to lose his or her access to housing where the debt involved is trifling in amount and significance to the judgment creditor. However, this will depend on the circumstances of the case. As has been pointed out above, it may often be difficult to conclude that a debt is insignificant. In this regard, it is important too to bear in mind that there is a widely recognised legal and social value that must be acknowledged in debtors meeting the debts that they incur.
[58] Another factor of great importance will be the circumstances in which the debt arose. If the judgment debtor willingly put his or her house up in some or other manner as security for the debt, a sale in execution should ordinarily be permitted where there has not been an abuse of court procedure. The need to ensure that homes may be used by people to raise capital is an important aspect of the value of a home which courts must be careful to acknowledge.
[59] A final consideration will be the availability of alternatives which might allow for the recovery of debt but do not require the sale in execution of the debtor’s home. At present, section 73 of the Act provides for a judgment debtor to approach a court with an offer to pay off a debt in instalments. As pointed out above, this section does not constitute sufficient protection for indigent debtors because they are generally unaware of its potential to protect them and their inability to invoke it. However, the concept of paying off the debt in instalments is important and the practicability of making such an order must be ever present in the mind of the judicial officer when determining whether there is good cause to order the execution. The balancing should not be seen as an all or nothing process. It should not be that the execution is either granted or the creditor does not recover the money owed. Every effort should be made to find creative alternatives which allow for debt recovery but which use execution only as a last resort.

[60] In summing up, factors that a court might consider, but to which a court is not limited, are: the circumstances in which the debt was incurred; any attempts made by the debtor to pay off the debt; the financial situation of the parties; the amount of the debt; whether the debtor is employed or has a source of income to pay off the debt and any other factor relevant to the particular facts of the case before the court.

[10] In Gundwana v Steko Development and Others 2011 (3) SA 608 (CC) at paragraph [53] and [54] Froneman J said the following (footnotes omitted):

“[53] Some further cautionary remarks are called for. It is rather ironic that the effect of this judgment is to restore to the courts a function that they exercised for close on a century before the introduction of rule 31(5) in 1994.  The change to the original position has been necessitated by constitutional considerations not in existence earlier, but these considerations do not challenge the principle that a judgment creditor is entitled to execute upon the assets of a judgment debtor in satisfaction of a judgment debt sounding in money. What it does is to caution courts that in allowing execution against immovable property due regard should be taken of the impact that this may have on judgment debtors who are poor and at risk of losing their homes. If the judgment debt can be satisfied in a reasonable manner without involving those drastic consequences that alternative course should be judicially considered before granting execution orders.

[54] In Jaftha, Mokgoro J, before listing some relevant factors that needed to be considered in judicial oversight of the execution process, warned that “it would be unwise to set out all the facts that would be relevant to the exercise of judicial oversight.” Mindful of that warning, I would merely add the following. 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 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.”

Evidence

[11] Plastomark’s stance, according to the founding affidavit deposed to by Ms P Soobramoney, Plastomark’s credit manager, is that the only means left available to it is to execute against the property and that if it is unable to do so, it will be greatly and irreparably prejudiced.  Ms Soobramoney stated that Plastomark has no ulterior motive in bringing this application and only seeks to recover what is owing to it.

[12] With regard to the market value of the property, Soobramoney stated that Mr Ryan Kruger, a candidate attorney at Plastomark’s attorneys of record, had been unable to obtain a valuation from an estate agent.  However during April 2018 one Ms Lauren Meyer, of Pam Golding Properties, contacted Kruger and told him that Pam Golding Properties had recently been approached by Small to valuate and market the property.  Pam Golding Properties advised him that the value of the property was between R1 995 000.00 and R2 350 000.00.  Small however wanted to sell the property for R3 000 000.00.  Kruger deposed to a confirmatory affidavit.

[13] In his answering affidavit Small set out his personal and financial position and what he maintained would be the consequences if the property was sold in execution.  He is nearly 64 years old and currently employed at Koogan Plastics as a sales manager, earning a nett monthly salary of R58 470.89.  He says he will retire next year when he turns 65 years.  His wife is 64 years old and retired 10 years ago.

[14] Small purchased the property in 1993 as vacant land and developed it to include a residence.  He and his wife have lived there since 2016. It has always been their intention to retire there and live there for the rest of their lives.

[15] Small said he is the sole breadwinner and supports his wife.  He listed their monthly expenses, amounting to R55 757.00.  Amongst these expenses are:  Ndlambe Municipality R5 200.00; Absa home loan repayment R5 100.00; Momentum endowment R520.00; Liberty Life retirement annuity R13 972.00; Old Mutual retirement annuity R550.00; MFC R6 103.00 (presumably motor vehicle finance); medical aid R5 785.00; Multichoice R920.00; and Vodacom R3 400.00.  The Liberty Life policy is valued at R1 550 000.00, the Old Mutual policy at R255 000.00, and the Momentum policy at R154 000.00.  The two retirement annuities will mature and pay out in 2020 and should Small not take a one third lump sum, he will have a monthly income of approximately R7 500.00.  Small tendered to pay R4 000.00 a month towards the debt owing to Plastomark.  He maintained that if the property was sold in execution, his right to adequate housing would be compromised and he and his wife would be left without a home.

[16] Small said that the debt was incurred by Triangle after he had resigned as a director.  He notified Plastomark that he had resigned and would no longer be liable for purchases made by Triangle.  Small went on to state that Adendorff is a wealthy businessman who owns three immovable properties.  Small obviously did not know that Adendorff had sold one of these properties.  This sale and payment were only mentioned in the replying affidavit.  Small annexed a CSI Persons Report which reflected three immovable properties registered in Adendorff’s name.  The first was purchased in 2005 for R650 000.00, the second was purchased for R250 000.00 in 2006 and the third was purchased for R140 000.00 in 2015.  It appears that the first property was the one which was sold by Adendorff and the proceeds paid to Plastomark.  Small alleged that Plastomark had failed to disclose what steps it had taken to execute against Adendorff and disputed that declaring his (Small’s) property executable was the only means left to satisfy the judgment debt.  

[17] Small did not deny that he had approached Pam Golding Properties to valuate and market the property.  He said:

“If I were to receive a particularly good offer for the immovable property I would consider selling it, however have no intention of doing so.  I have previously placed the immovable property on the open market, approximately two years ago, for the sum of R2 000 000 but I had no offers whatsoever to purchase the property.”

[18] He disputed that the property would achieve the price mentioned by Meyer.  He annexed to his affidavit valuations from estate agents.  One agent expressed the view that the property was likely to sell for between R1 495 000.00 and R1 550 000.00.  Another said that the market value of the property was in the region of R1 650 000.00 and R1 750 000.00, which was what a willing buyer would pay a willing seller.

Evaluation

[19] Rule 46A (2) (a) (ii) requires a court to consider alternative means by the judgment debtor of satisfying the judgment debt, other than execution against the primary residence.  Small has tendered R4 000.00 per month.  As pointed out on behalf of Plastomark, this amount will not even cover the interest which is running on the debt.  Small has not suggested any other means.  He has not offered to take a loan against his investments.  He says he will retire next year.  If all he will earn from the retirement annuities is R7 500.00 a month, and the property is not sold, he will never pay the debt.  What strikes me about his attitude is a complete lack of will to pay the debt.  The judgment was granted in 2016 and he has not paid anything towards the debt, despite earning a high salary.  He maintains a lifestyle which consumes most of that salary, without making provision for payment of the debt.  He seems to have been determined to continue with his life as if the debt did not exist or as if there is no obligation on him to pay. 

[20] Rule 46A (8) (d) provides that a court may order execution against the primary residence of a judgment debtor if there is no other satisfactory means of satisfying the judgment debt.  In this regard I do not think that I can consider execution against Adendorff to the exclusion of Small merely because Adendorff is wealthy and owns two immovable properties.  It was submitted on behalf of Small that Adendorff’s position was a relevant circumstance.  Plastomark is entitled to recover the debt from either or both Small or Adendorff.  Adendorff has paid a substantial amount.  According to the replying affidavit it was agreed that he would sell one of his properties in order to make a payment towards the debt.  A court cannot tell a creditor to choose one co-debtor over the other.  In this application Plastomark has elected to proceed against Small and it is entitled to do so.

[21] Dealing now specifically with relevant factors, I do not think there is anything remarkable about the circumstances in which the debt was incurred.  According to the judgment of the Gauteng Local Division, Small’s main ground of defence in the application was that he had been released from the suretyship.  A further defence was that Plastomark had acted to his prejudice by extending credit to Triangle after he had resigned.  Neither of these defences succeeded.

[22] I have already commented on the fact that Small has paid nothing towards the judgment debt and his attitude towards his obligation to pay.  He is not indigent.  He currently earns a large salary.  Although he said he will retire next year, he did not say that he is obliged to retire or that he is physically or mentally incapable of working beyond 65 years.  He seems to have made a choice, regardless of the fact that he owes Plastomark a lot of money.  He did not say that were he to retire he would not be able to find further employment.  A person in his position should be trying as hard as he can to pay the debt.  It was submitted on his behalf that it was unreasonable to expect him to continue working and that the age of 65 is a normal age of retirement.  It is so that in certain spheres of employment retirement ages of 60 years and 65 years are compulsory.  Further, one cannot describe a 65 year old person as young or middle aged.  However many people do work beyond the age of 65 and do so productively and without diminished capacity.  I am therefore not satisfied that Small will be forced to stop working next year and that he cannot continue to earn an income.  In that case there would no problem in finding alternative accommodation.  I am reluctant to take into account any possibility of Mrs Small finding employment in order to assist Small.  It was submitted on behalf of Plastomark that she could find employment.  Small provided little information other than that she retired 10 years ago but she is not the judgment debtor and she can make her own choices with regard to working or not working.

[23] The debt is a large one and I am of the view that execution against the property is in the circumstances not disproportionate.  Plastomark will suffer a substantial loss if it is not paid. 

[24] It was submitted on behalf of Plastomark that Small would not have put the property on the market if he did not have the means to find alternative accommodation.  I agree with this submission.  Small blew hot and cold about his intention to sell the property.  He said if he received a good offer he would consider selling and in the next breath said he had no intention of selling.  If he put the property on the market two years ago, 2016, the same year he moved into the property, this conduct contradicts his assertion that he intended to retire at the property.  If he considered selling, he would have had in mind alternative accommodation.  This factor reflects adversely on his contention that he and his wife will be homeless if the property is sold in execution.

Conclusion

[25] I have considered the relevant factors placed before me.  Bearing in mind the authorities to which I referred above, I am of the view that these factors cumulatively demonstrate that there is scant reason to exercise my discretion in favour of Small.  On the contrary, in my view, these factors demonstrate that execution against the property is justified.  The disadvantage to Plastomark if execution is refused in my view outweighs any harm to Small which might occur if the property is sold in execution.

Reserve price (Rule 46A (9)

[26] The parties were in agreement that in the event of the application succeeding, a reserve price of R1 600 000.00 should be set.  Taking into account the various factors mentioned in the sub-rule, I think that the reserve price suggested is pragmatic and sensible.  It was submitted on behalf of Small that interest is still to be added to the capital amount of the debt.  As I understand this submission, if the sale of the property achieves this price there will still be a substantial amount owing by Small.  It was however inevitable that the longer the debt remained unpaid, the greater the interest would be.

[27] The following order will issue:

[27.1] The immovable property being Erf Number [...], Port Alfred, Eastern Cape, held by the first respondent under Title Deed Number [...], situate at […] L Street, Port Alfred, Eastern Cape (“the immovable property”) is declared executable in respect of the judgment obtained by the applicant against the first respondent under case no 2016/14511, Gauteng Local Division, and the taxed bill costs in respect of such action and the costs of this application.

[27.2] A reserve price is set in respect of the immovable property in the amount of R1 600 000.00 (one million six hundred thousand rands).

[27.3] The Registrar is authorised to issue a writ of execution in respect of the immovable property.

[27.4] The first respondent is to pay the costs of this application.

 

J M ROBERSON

JUDGE OF THE HIGH COURT

Appearances:

For the Applicant:  Adv L Hollander, instructed by Whitesides Attorneys, Grahamstown

For 1^st Respondent: Adv K Watt, instructed by NN Dullabh & Co, Grahamstown

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