Reportable:  	                              YES / NO
Circulate to Judges: 	                     YES / NO
Circulate to Magistrates:	               YES / NO
Circulate to Regional Magistrates:	  YES / NO	

IN THE HIGH COURT OF SOUTH AFRICA
NORTH WEST DIVISION, MAHIKENG

CASE NO: M487/2019
In the matter between:

ELISE HAASBROEK				                       APPLICANT

and

HENDRIK PETRUS MOOLMAN N.O.			1ST RESPONDENT

JOHANNA MOOLMAN N.O.					2ND RESPONDENT

WILD WIND INVESTMENTS 136 (PTY) LTD		3RD RESPONDENT 

JUDGMENT

LEEUW JP

Introduction

[1]	The applicant approached this Court and is seeking the following order in terms of the notice of motion:

“1.	Judgment is granted against the First to Third Respondents, jointly and severally, the one paying the other to be absolved for:

1.1	payment of the sum of R1 841 049.48;

1.2	interest on the aforesaid sum at the prime overdraft rate charged by the Standard Bank of South Africa Ltd, from time to time plus 2% from 13 April 2019  to date.

2.	The following immovable property is declared executable and the Applicant is hereby authorised to execute against such immovable property for the purposes of recovering on the judgment debt:

	Remaining extent of Portion 2 (Portion of Portion 1) of the Farm Witkop No. 475, Registration Division IQ, North West Province, in extent 368,7467 (three six eight comma seven four six seven) hectares, held under Deed transfer No. T14 58243.

3.	The Respondents are directed to pay the costs of this application on an attorney and client scale.”

[2]	The respondents oppose the application, and they filed opposing papers on 25 September 2019. Subsequently, on 21 October 2019 the respondents filed a counter-application against the applicant seeking the following order:

“1.	Declaring that the loan agreement concluded between the applicant and the Moolman Familie Trust annexed to the founding affidavit marked “FA2”, is void as from the date the agreement was entered into.

	2.	Dismissing the applicant’s application.

3.	Directing the applicant to pay the respondents’ costs of the application, including the costs of the first and second respondents’ counter application.”

Parties

[3]	The applicant is Elise Haasbroek, a pensioner who resides at the KwaZulu-Natal Province.  The first respondent, Hendrik Petrus Moolman (Hendrik Moolman) and the second respondent, Johanna Moolman, are cited in their capacities as the joint trustees of the Moolman Family Trust (The Trust).  Hendrik Moolman is Johanna Moolman’s husband and the brother of Elise Haasbroek.

[4]	The third respondent, Wild Wind Investments 136 (Pty) Ltd (Wild Wind Investments), is a private company registered in terms of the company laws of the Republic of South Africa.  Its registered physical address is situated at Three Rivers East and its chosen domicilium citandi et executandi is stated as Farm Oorbietjiesfontein, Lindequesdrift, Potchefstroom, in the North West Province. Hendrik Moolman is the director of Wild Wind Investments.
The facts

[5]	On 22 July 2014, the applicant and the Trust represented by Hendrik Moolman, entered into a loan agreement which was concluded as part of a settlement agreement. The settlement agreement emanated from a civil action institutes by the applicant at the North Gauteng High Court against the Trust for the recovery of moneys owed to her. Hendrik Moolman had signed the acknowledgment of debt on behalf of the Trust on 18 November 2009.  The debt comprised various amounts of monies advanced to the Trust by the applicant as loans between 19 May 2006 and 27 October 2008. The Trust agreed to repay the total amount of R1 240 000-00 plus interest at Standard Bank interest rates. 

[6]	Whilst the proceedings were still pending at the North Gauteng High Court, the Trust, through its attorney Mr Herbst, who is representing the respondents in the present application, made an offer to settle the action, as follows:

“1.	Our clients agree that a first mortgage be registered against the Witkop property in favour of your client for 2.5 million.
		2.	No interest be payable on the R2.5 million.
3.	The R2.5 million will be payable on demand, subject thereto that it would not become due before 1 November 2015.
4.	The costs in registering the bond will be for your clients account.
5. 	We suggest that each party pay his/her own costs in respect of the litigation”

[7]	As a result, the parties concluded a loan agreement, referred to in paragraph 5 above, which was signed by Hendrik Moolman on 16 April 2014 on behalf of the Trust and Wild Wind Investments, and Elise Haasbroek who signed the agreement on 22 July 2014. The loan agreement, which incorporated the aforementioned terms proposed by Mr Herbst, were accepted by the applicant. It was agreed that the total amount of R1,240,000-00 which was advanced to the Trust during 2006 and 2008, had accrued interest. The total amount, capitalised with interest amounted to R 2.5 million. The parties agreed that the agreement shall indicate that the creditor (Elsie Haarsbrook) re-advanced R2,5 million to the Trust (as a debtor) in a form of a loan, thus affording the Trust a period in excess of 18 months to repay the loan.  Some of the terms of the loan agreement are, amongst others, as follows: 

“4.	PAYMENT

4.1	The BORROWER shall repay the ENTIRE AMOUNT by 1st November 2015.

4.2	All payments made by the BORROWER to the creditor in terms thereof shall be appropriated first to the reduction of costs, then the reduction of INTEREST and then to the reduction of the CAPITAL SUM itself.”

		“8.	BREACH

8.1	Notwithstanding anything contained to the contrary in this agreement, if the BORROWER breaches any terms of this Agreement the CREDITOR shall have the right to take legal action against the BORROWER without notice. No extension of time, relaxation of any of the provisions of this Agreement, condonation of any breach, or any indulgence by the CREDITOR shall be deemed as novation or an estoppel or in any way prejudice the CREDITOR’S rights against the BORROWER.

8.2	Should the BORROWER breach any terms of this Agreement, the CAPITAL AMOUNT plus all other amounts owing hereunder by the BORROWER shall become immediately due and payable. Furthermore the BORROWER agrees that the foresaid amount owing to the CREDITOR shall immediately become due and payable in any of the following circumstances:

8.2.1	in the event of the BORROWER being sequestrated or liquidated, either provisionally or finally or placed under Judicial Management;	

8.2.2	should the BORROWER allow any judgment or order of court against it to remain unsatisfied for a period of 3 (THREE) days.”

		“10. 	COSTS

The Borrower shall be liable for all COSTS the CREDITOR may incur in order to recover the amounts due by the BORROWER to the CREDITOR in terms hereof. The BORROWER also undertakes to pay costs of this Loan Agreement and the stamp duty thereon.”

		“13.	SECURITY

As security for the BORROWER’s indebtedness to the CREDITOR in terms hereof, the BORROWER undertakes that the Moolman Familie Trust No. IT7038/1994 and/or Wild Wind Investments 136 (Pty) Ltd shall stand surety and pass a mortgage bond over the PROPERTY in an amount R2 500 000,00 (two million five hundred thousand rand) in favour of the CREDITOR. The said Mortgage bond shall be prepared by Garlicke & Bousfield Inc on terms and conditions which they consider normal and appropriate for the said purposes. The BORROWER hereby  irrevocably undertakes on written request by the said attorneys to forthwith sign all such documents and/or to do all such things in connection herewith on demand in order to give effect  to the registration of the said bond. The costs of preparation and registration of the mortgage bond shall be borne by the CREDITOR.

13.1	The BORROWER and/or Wild Wind Investments 136 (Pty) Ltd hereby undertake not to further encumber to the PROPERTY in any manner whatsoever and for any reason during the period of the Loan, without the prior written consent of the CREDITOR. The Property referred to in the loan agreement is Portion 2 of the Farm Witkop No. 475, Registration Division IQ, North West Province.”

[8]	Pursuant thereto, on 14 August 2014 Wild Wind Investments, bound itself as “surety, co-principal debtor and guarantor for the timeous payment of all amounts due and owed” by the Trust to the applicant up to a maximum amount of R2, 5 million. As security for the fulfilment of its obligation, Wild Wind Investments also registered a surety mortgage bond over the immovable property, Farm Witkop, in favour of the applicant. Hendrik Moolman signed on behalf of the Trust and Wild Wind Investments as trustee and director respectively. 

 [9]	As at 1 November 2015, neither the Trust nor Wild Wind Investments had paid anything towards the repayment of the loan.  On 7 June 2016 Hendrik Moolman on behalf of the Trust, ceded to the applicant its right, title and interest in respect of immovable property Oorbietjiesfontein on which a mortgage bond was passed in its favour for an amount of R1.4 million. The Trust also ceded an additional sum in respect of “costs, expenses and debts generally, which may be claimable from the Mortgager under the bond, and which other costs, charges, expenses and future debts are secured up to the amount not exceeding the capital and the sum of R350,000-00.”  

[10]	The total balance owing as at 28 February 2019, which is inclusive of capital plus interest added from time to time, amounted to R1,843,173-95.  Farm Oorbietjiesfontein was subsequently sold and the mortgage bond cancelled.  The R1.4 million of the proceeds from the sale was credited against the loan as payment received from the Trust. 

[11]	On 22 October 2018 a letter of demand for the payment of the outstanding loan amount was addressed to Hendrik Moolman as trustee of the Trust. There was no further payment made by the respondents. As a result , on 25 March 2019, the applicant caused a letter of demand to be served on the Trust and Wild Wind Investments, together with a certificate of balance confirming the indebtness of the respondents in an amount of R1 841 049.48 as at 12 April 2019, plus interest at the prime overdraft lending rate  of 2% charged by Standard Bank from time to time, from 13 April 2019 to date of final payment.  Failure to respond to the above letters of demand resulted in the applicant approaching this Court in the present application.

[12]	In the answering affidavit, which also serves as a founding affidavit for the counter-application, Hendrik Moolman contends that:

(a)	The loan agreement concluded between the applicant and the Trust is void by virtue of the fact that the agreement is subject to the provisions of the National Credit Act, and that applicant has not complied therewith;
(b)	the applicant’s claim for payment of the R1 841 049.48 plus interest, has prescribed;
(c)	the surety bond is void alternatively voidable, in that there exists no underlying cause of action, because the surety bond  was not signed by Wild Wind Investments.
(d)	that the applicant’s application to declare the immovable property executable in terms of Rule 46A should not be granted because the provisions of the Rule have not been complied with; and
(e)	in his personal capacity, that he and his family and extended families are permanently residing at the Farm Witkop, and as such they have a direct and substantial interest in the outcome of the application.  As a result he submits, the applicant’s failure to join the other family members as parties to the proceedings constitutes a material non-joinder, and consequently renders the application fatally defective.

[13]	At the hearing of this application, Mr. Herbst, for the respondents, indicated that the respondents, were  no longer persuing the issues raised in relation to jurisdiction, prescription and voidability of the surety bond.

Submissions

[14]	The applicant submits that the loan agreement cannot be classified as a credit agreement as envisaged in section 8(4)(f) of the National Credit Act, in that:

(a)	the loan agreement stipulates a deadline by when the full loan amount is to be paid;

(b)	there was no interest charged in respect of the deferred payments, except in the event that the defendants defaulted to pay the loan, in which case the loan attracted interest only from 1 November 2015, which was a period of 1 year after the conclusion of the loan agreement.  

(c)	The costs payable relate to the loan agreement and not directly payable to the applicant; and that

(d)	the applicant and Hendrik Moolman were not “dealing at arm’s length” with each other as contemplated by section 4(2)(b) of the National Credit Act; that even though the loan agreement was concluded with the Trust, it is common cause that Hendrik Moolman, who is the controlling trustee of the Trust, is a brother to the applicant and further that, she did not strive to obtain the utmost possible advantage out of the transaction. The Trust was granted a period in excess of 18 months to repay the R2.5 million loan without interest, charge or levy being raised by the applicant on the loan.   

[15]	Counsel for the respondents contends that an analysis of the terms of the loan agreement, clearly indicate that the payment of the loan amount or the capital sum was deferred, which amount was capitalised to include interest charged on the loan. He further submits, that in addition to the interest charged, the loan agreement stipulated that the respondents will be liable for payment of costs related to the loan agreement, and the stamp duty thereon, legal costs on a scale between attorney and own client as well as “collection commission and any tracing agents’ charges”.  He argues that all these factors suggest that the loan agreement is a credit agreement that falls within the purview of the National Credit Act.  For this he places reliance on Standard Bank of SA v Onenante Investments (Pty) Ltd (In Liquidation) and Carter Trading (Pty) Ltd v Blignaut.

[16]	It is further submitted on behalf of the respondents that the fact that the applicant charged interest on the capital amount indicates that she “strived to obtain the utmost possible advantage out of the transaction. Reference is made to the Hicklin v Secretary for Inland where the Court held that:

	“For “dealing at arms ‘length” is a useful and often easily determinable premise from which to start the inquiry. It connotes that each party is independent of the other and, in so dealing will strive to get the utmost possible advantage out of the transaction for himself. Indeed, in Afrikaans text the corresponding phrase is ‘’die uiterste voorwaardes beding”.
Issues 

[17]	The issues to be determined are:

(a)	whether the loan agreement is a credit agreement subject to the National Credit Act;
 
(b)	whether the immovable property should be declared executable in terms of Rule 46 A;

(c)	Costs; and the

(d)	The Order.

The Law

[18]	Section 4 which deals with the application of the National Credit Act, provides in subsection (1) that:

“Subject to sections 5 and 6, this Act applies to every credit agreement between parties dealing at arm’s length and made within, or having effect within, the Republic, except – 
(a)	a credit agreement in terms of which the consumer is – 
(i)	a juristic person whose asset value or annual turnover, together with the combined asset value of annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold value determined by the Minister in terms of section 7(1);
(ii)	the state; or
(iii)	an organ of state; 
(b)	a large agreement, as described in terms of section 9(4), in terms of which the consumer is a juristic person whose asset value or annual turnover is, at the Minister in terms of section 7(1); 
(c)	a credit agreement in terms of which the credit provider is the Reserve Bank of South Africa; or
(d)	a credit agreement in respect of which the credit provider is located outside the Republic, approved by the Minister on application by the consumer in the prescribed manner and form.”

[19]	Section 4 (2)(b) of the National credit Act provides that:

	“(2)	For greater certainty in applying subsection (1)- 
(b)	in any of the following arrangements, the parties are not dealing at arm’s  length:  
(iii)	a credit agreement between natural persons who are in a familial relationship and- 
(aa)	are co-dependent on each other; or 
(bb)	one is dependent upon the other; and 
(iv)	any other arrangement-
(aa)	in which each party is not independent of the other and consequently does not necessarily strive to obtain the utmost possible advantage out of the transaction; or 
(bb)	that is of a type that has been held in law to be between parties who are not dealing at arm’s length.”

[20]	Section 8 (1) of the National Credit Act classifies a credit agreement, as follows:

“(1)	Subject to subsection (2), an agreement constitutes a credit agreement for the purposes of this Act if it is- 

(a)	a credit facility, as described in subsection (3); 

(b)	a credit transaction, as described in subsection (4);

(c)	a credit guarantee, as described in subsection (5); or 

(d) any combination of the above.”

[21]	Counsel for the respondents argued that the loan agreement constitutes a credit agreement as contemplated in section 8 (4)(f) of the National Credit Act.  This section provides that:

“An agreement, irrespective of its form but not including an agreement contemplated in subsection (2), constitutes a credit transaction if it is any agreement, other than a credit facility or credit guarantee, in terms of which payment of an amount owed by one person to another is deferred, and any charge, fee or interest is payable to the credit provider in respect of- (i) the agreement; or (ii) the amount that has been deferred.”

[22]	In Rebeiro and Another v Slip Knot 777 Pty Ltd , the parties had concluded a written agreement which emanated from two previous separate loan agreements, and in which the respondents had bound themselves as sureties for the said previous loan amounts. When the respondents failed to pay in terms of the written agreement, and when the applicant sought to enforce the agreement, the respondents opposed the application on the grounds that the agreement was void for want of registration as prescribed by Section 89 (2) (a) of the National Credit Act, and further that the agreement properly construed, constituted a credit agreement as contemplated in Section 8 (4) (f).

[23]	In rejecting the respondent’s contention, the Court held that:
	
	“[13]	.... the parties ‘specifically recorded’ that the agreement ‘does not constitute a novation of the initial loan agreements and that the ‘obligations and undertakings as accepted by the sureties in terms of the agreement have as their origin the initial undertakings and obligations attributable to the sureties in the initial loan agreements’. The fact that the parties also recorded that ‘this agreement shall be the sole record of the subject matter contained herein’ – a point the respondents relied upon to avoid the consequences of the initial agreements – does not detract from the fact that the parties explicitly intended not to extinguish, but rather to confirm, the obligations arising from the initial agreements. The obligations under the loan agreements and those under the new agreement were thus interdependent. This can only mean that the agreement was, in substance, an agreement to guarantee R.B. Merit’s obligations under the initial loan agreements – and was therefore a credit guarantee to which the NCA did not apply. 
(footnotes excluded)
[24]	In Shaw and Another v Mackintosh and Another the respondents signed an acknowledgment of debt two years after the respondent had lent Mabili Search (Pty) (Mabili) an amount of R2million. Mabili acknowledged its indebtness to Mackintosh and that the R2 Million would attract interest of R50,000-00 per month until the date of final payment. There were other terms relating to interest which were incorporated in the agreement. Shaw and Taylor bound themselves jointly and severally in favour of Makintosh as co-principal debtors for repayment of the amounts owing. When Mabili was liquidated, an the debtor sought to enforce the surety agreement, Makintosh contended that the agreement was a credit agreement which falls under the ambit of Section 8 (5) of the National Credit Act.

[25]	In deciding that the agreement between Shaw and Taylor and Mackintosh on the other side, fell outside the scope of the National Credit Act, the Court per Mathopo JA, held at paragraph 12 that:

“It is clear that the appellants were not granted any loan nor was any credit advanced to them and neither were they parties to the historical agreement between Mabili and Mackintosh concluded in 2009. Their involvement only arose when they undertook or promised to pay on demand the admitted indebtedness of Mabili to Mackintosh. The agreement expressly stated that the sum of R2 million was advanced to Mabili and not the appellants. That brings the obligations of the appellants squarely within the language of s 8(5). However, s 4(2)(c) of the NCA provides that this Act applies to a credit guarantee only to the extent that this Act applies to a credit facility or credit transaction. Mackintosh was not a credit provider in terms of s 40 of the Act. He was not in the business of providing credit. The agreement was a once-off transaction and not falling within the ambit of the provisions of the NCA Act. It was rightly not suggested that the arrangement could be both a credit guarantee and a credit transaction in terms of s 8(4)(f) of the NCA (see JMV Textiles v De Chalain Spareinvest (KZD). The agreement between appellant and Mackintosh thus falls outside of the scope of the NCA. For these reasons the appeal must fail.”(emphasis added). Compare De Bruyn NO and Others v Karsten.

[26]	In Ratlou v Man Financial Services SA (Pty) Ltd (1309/17) [2019] ZASCA 49; 2019 (5) SA 117 (SCA), Dambuza JA cautioned against a literal interpretation of credit agreements and took the view at paragraph 21 that:

“A purposive interpretation of the NCA and not a literal interpretation of s 8 (4)(f) is required because it is quite clear that the NCA was not aimed at settlement agreements. Its application to them will have a devastating effect on the efficacy and willingness of parties to conclude settlement agreements and thereby curtail litigation”.

[26]	She went further to observe in paragraph 22 that:

“As is evident from the portion of the settlement agreement set out above it provided for payment of the amount owed in deferred instalments and interest was payable in terms thereof. As I have said, on a literal interpretation the settlement agreement meets the definition of a credit transaction. This is so even though the underlying lease agreements did not constitute credit agreements as: they were large agreements; the rental was payable in advance and not deferred; ownership of the trucks would not pass to PNT at the end of the lease term; and Mr Ratlou’s suretyship was not governed by the NCA. Further, on a literal interpretation of s 8 (4)(f) of the NCA, a settlement agreement concluded in relation to a delictual claim would immediately fall within the ambit of the NCA. As submitted on behalf of MAN this could never have been the intention of the legislature. The consequence would be absurd for agreements of settlement in respect of non-contractual claims.”

[27]	Section 2 and 3 of the National Credit Act which provides that:

Section 2(i): “This Act must be interpreted in a manner that gives effect to the purposes set out in Section 3.”

Section 3 provides that: “The purposes of this Act are to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers.”  See also Nedbank Ltd and Others v The National Credit Regulator and Another. 

Analysis

[28]	In the present case, the applicant, Elise Haasbroek and Hendrik Moolman can easily be classified as “credit provider” and “consumer” respectively, if their loan agreement were to be interpreted in the literal sense. 

[29]	It is common cause that the applicant, Elise Haasbroek and Hendrik Moolman are siblings. That even though the applicant had given a loan to the Trust, Hendrik Moolman was the beneficiary in his interest, as this was a Family Trust. When the proceedings were still pending at the High Court of Gauteng, he as a trustee of the Trust and director of Wild Wind Investments respectively, sought an indulgence from the applicant who agreed on several occasions, to afford him the opportunity to repay the loan. The applicant allowed the respondents to repay the loan, without any interest for moneys advanced to the Trust between May 2006 and October 2008. In addition, when they concluded the settlement agreement, the respondents were given an opportunity to pay back the money without interest until 01 November 2015, in order to afford the respondents an opportunity to repay the money within a period of 18 months.

[30]	Despite several indulgences granted to the respondents to pay back the loan, the respondents failed to honour the agreement.  The applicant instructed her attorneys to initiate the process of attaching the immovable property used as security for the loan. I alluded above that the immovable property Oorbietjiesfontein, was sold to pay part of the loan amount of R2.5 million.

[31]	Hendrik Moolman avers in his answering affidavit that he never promised or undertook to pay back the balance of the loan.  This averment flies in the face of the following written correspondences between the parties’ legal representatives:

31.1	On 4 March 2014, Mr Herbst of PSN Attorneys on behalf of the respondents, made an offer of settlement wherein he drafted the terms of the settlement agreement.  The offer of settlement was ultimately reduced to writing in the impugned loan agreement, which is part of the settlement agreement.
	
31.2	In a letter dated 14 April 2014, Mr Herbst perused the draft surety Mortgage Bond, and even effected some corrections thereto. He also amongst others, made inputs in relation to the costs of the registration. The respondents failed to pay back the loan as agreed.  On 30 October 2015, Mr Swart, of PSN Attorneys  who   are the present  attorneys of record for the respondents, asked for an indulgence on behalf of Hendrik Moolman and stated the following:

“We refer to the above matter and Hennie Moolman instructed us that he agreed with your client for an extension to pay the amounts due to her, which is secured by a mortgage bond registered against the property of Wild Wind Investments 136 (Pty) Ltd.

	As additional security, the Moolman Family Trust will cede its right, title and interest in Mortgage Bond B 61854/13, a copy of which is attached hereto.

	The monthly payments in clause 1.4 and the balance of the loan is ceded to your client and actual payments received will reduce the amount due to her.”
(emphasis added)

31.3	On 18 November 2018, the Trust through Hendrik Moolman, wrote a letter to the applicant’s attorneys, asking for further indulgence. In the letter, Hendrik Moolman’s attorney states in the last paragraph that:

 “Please consult with your client to withhold immediate action until such time of Deeds manufacturing and submission. This will be followed by an Auction whereby funds will be raised to remit our commitments.” (sic) 

[32]	It is clear from the above letters exchanged between the parties hereto, that the respondents undertook on several occasions to perform in terms of the settlement agreement. The engagement between the applicant and the respondents, which spans from 2014 exposes the disingenuous conduct of Hendrik Moolman, who is at pains to challenge the validity of the loan agreement, solely because he wants to avoid payment of the loan amount outstanding. 

[33]	It is important to note and remark that whenever the applicant takes action to recover her money, the respondents would raise technical points relating to the validity of the loan agreement. This line of defence was raised at the Gauteng High Court despite the fact that Hendrik Moolman had signed the acknowledgment of debt.  Hendrik Moolman promised to pay back the money and eventually concluded a settlement agreement. When the applicant sought to enforce the agreement by lodging the present application, the respondents once again, attack the validity of the loan agreement. The trend adopted by Hendrik Moolman, aimed at escaping liability, is an abuse of the Court process and should be frowned upon. See Joob Joob Investments (Pty) Ltd v Stocks Mavundla Venture.

[34]	I find it strange that the respondents’ attorneys of record, who were involved, with the drafting of the settlement agreement from its inception, raise the point that the settlement agreement is invalid and that the loan agreement is void for failure on the part of the applicant to register as a credit provider as prescribed by the National Credit Act. These issues are raised mainly because the respondents are not in a position to pay back the outstanding loan amount. 
	
[35]	Furthermore, the applicant advanced loan amounts to the Trust between 2006 and 2008. The total loan of R1,240,000-00 was made out as follows: R250,000-00 on 19 May 2006, R150,000-00 on 19 September 2006; R90,000-00 on 19 September 2006; R500,000-00 on 19 September 2008 and R250 ,000-00 on 27 October 2008.  The Trust , represented by Hendrik Moolman, signed an acknowledgment of debt and undertook to repay the loan amounts on demand “(op anvraag te betaal)” and further that the Trust will pay the debt from the proceeds of certain immovable property owned by the Trust, which he was in the process of selling to a potential buyer. In the alternative, Hendrik Moolman offered applicant the choice of buying the immovable property, Farm Witkop, at a 25% discounted price from the Trust.

[36]	The 2009 acknowledgement of debt is the genesis of the loan agreement which is part of the settlement agreement. These two agreements are interdependent. Compare Ribeiro and Another v Slipknot Investments (Pty) supra. For reasons already stated above, I am of the view that the respondents are clasping straws and are abusing the court process in order to avoid paying back the money they owe to the applicant. I find that the loan agreement which is part of the settlement agreement, does not fall within the ambit of the National Credit Act.  The settlement agreement is valid and binding on the respondents. Consequently, I find that the Trust and Wild Wind Investments are jointly and severally indebted to the applicant in terms of the settlement agreement.

Should the immovable property be declared executable?

[37]	Applicant contends that Rule 46A does not apply in the present matter in view of the fact that the judgment debtors are the Trust and Wild Wind Investments, which is a legal entity. Hendrik Moolman avers that Rule 46A is applicable to his situation in that, although Farm Witkop is not the primary residence of the respondents as judgment debtors, it is nevertheless “the primary residence of other interested parties who should have been joined, inter alia, due to the provisions of section 26 of the Constitution.”  He further submits that he and his wife are elderly and reside on the farm together with their son, Wynand Moolman and his family, who reside in the second residence on the property, which is also their primary residence.  He therefore submits that they should have been joined as co-respondents.  He further submits that he and his wife were cited in their representative capacities as trustees and that they ought to have been joined in their personal capacities in these proceedings. 
	
[38]	Rule 46(1) provides that:

“(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)	a return has been made of any process issued against the movable property of the judgment debtor from which it appears that the said person has insufficient movable property to satisfy the writ; or
(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).
(b)	A writ of execution against immovable property shall contain – 
	(i)	 a full description of the nature, magisterial district and physical address of the immovable property to enable it to be traced and identified by the sheriff; and
(ii)	sufficient information to enable the sheriff to give effect to sub rule (3) hereof.”

[39]	Rule 46A, which further amended Rule 46, was introduced on 22 December 2017.  Rule 46A prescribes, amongst others that:

“(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.

(3)	Every notice of application to declare residential immovable property executable shall be— 
 (b) 	on notice to the judgment debtor and to any other party who may be affected by the sale in execution, including the entities referred to in rule 46(5)(a): Provided that the court may order service on any other party it considers necessary; 
(c) 	supported by affidavit which shall set out the reasons for the application and the grounds on which it is based; and
(d) 	served by the sheriff on the judgment debtor personally: Provided that the court may order service in any other manner.

(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
		
[40]	Section 26 of the Constitution provides that:

		(1)	Everyone has the right to have access to adequate housing. 
(2)	The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this right.
(3)	No one may be evicted from their home, or have their home demolished, without an order of court made after considering all the relevant circumstances. No legislation may permit arbitrary evictions.” 
[41]	The enactment of Rule 46(1)(a) and Rule 46A was influenced by the decision in Jaftha v Schoeman & Others; Van Rooyen v Stoltz & Others.  In Standard Bank of South Africa Ltd v Saunderson and Others, the Court held the view that execution of mortgaged property may be granted without necessarily compromising section 26(1) and remarked as follows:

“[17]	But Jaftha did not decide that the ownership of all residential property is protected by s 26(1); nor could it have done so bearing in mind that what constitutes ‘adequate housing’ is necessarily a fact-bound enquiry. One need only postulate executing against a luxury home or a holiday home to see that this must be so, for there it cannot be claimed that the process of execution will implicate the right of access to adequate housing at all.  

[18]	The situation this case presents is thus radically different from that before the Constitutional Court in Jaftha.  There, the sale in execution deprived the debtor of title to the home a state subsidy enabled her to acquire because she was unable to pay a relatively trifling extraneous debt, and no judicial oversight was interposed to preclude an unjustifiably disproportionate outcome.  The judgment creditor in Jaftha was not a mortgagee with rights over the property that derived from agreement with the owner.  By contrast, the property owners here have willingly bonded their property to the bank to obtain capital.  Their debt is not extraneous, but is fused into the title to the property.  The effect of s 26(1) on such cases was not considered in Jaftha. Observations were made in the judgment concerning mortgage bonds, but that was in the context of the kind of interests that might need to be considered once it was shown that s 26(1) was in fact compromised.  

[19]	The present case does not require us to decide whether s 26(1) may be compromised when the rights conferred by a mortgage bond are sought to be enforced in cases where the property concerned does in fact constitute ‘adequate housing’.  But even accepting for present purposes that execution against mortgaged property could conflict with s 26(1) such cases are likely to be rare.  It is particularly hard to conceive of instances where a mortgagee’s right to reclaim the debt from the property will be denied altogether; and it is therefore not surprising that the Constitutional Court noted in Jaftha that in the absence of abuse of court procedure – and none is alleged here – a sale in execution should ordinarily be permitted against even a home bonded for the debt sought to be reclaimed.  Nor can the approach differ depending on the reasons the property owner might have had for bonding the property, or the objects on which the loan was expended.  

[20]	The sole fact that the property is residential in character is not enough to found the conclusion that an infringement of s 26(1) will necessarily occur.” 

[42]	In the full bench decision of Firstrand Bank v Folscher, the court at paragraph 12, held the view that: 

“Every fundamental right is subject to limitations.  The right of access to adequate housing is no exception.  Execution levied against immovable property that is the judgment debtor’s home constitutes a significant limitation upon the fundamental right to access to a roof over a person’s head.  Subsection 26(3) protects the home owner and the home occupier against arbitrary eviction or demolition, and ensures judicial oversight before an order of eviction or demolition may issue.  It applies horizontally, and binds all natural and legal persons: Brisley v Drotsky 2002 (4) SA 1 (SCA) ([2002] 3 All SA 363 BCLR 1229) at para 40, 20E–F.”

[43]	In Gundwana v Steko Development and Others, the court cautioned at para [53] that: 

“[53]	. . . in allowing execution against immovable property, due regard should be taken on 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.” (emphasis added)

[44]	In the present case, the immovable property sought to be executed, is owned by a legal entity Wild Wind Investments. The Trust and Wild Wind Investments are principal and co-principal debtors. Rule 46 applies in respect of immovable property of a judgment debtor. In this context, the judgment debtor includes both natural and legal persons. Rule 46A regulates the procedure to be followed by the execution creditor when execution is sought against the residential immovable property of a judgment debtor. It is important to note that when the court made an order in Gundwana supra it specifically ordered that it was “unconstitutional for a Registrar of a High Court to declare immovable property executable when ordering default judgment under Rule 31(5) of the Uniform Rules of Court to the extent that this permits the sale in execution of the home of a person.” (emphasis added)

[45]	The full court in Firstrand Bank v Folscher supra, held the view in paragraph 29 that:

“A person’s primary residence is the dwelling where they usually live, typically a house or an apartment. A person can only have one primary residence at any given time, though they may share the residence with other people. A primary residence is considered as a legal residence with other people. A primary residence is considered as a legal residence for the purpose of income tax and/or acquiring a mortgage.”

[46]	The court also held that the judgment debtor, according to Saunderson, refers to an individual or a person and thus the “primary residence owned by a person falls within the purview of the rule”.  Consequently, the court made the following directives, amongst others, that the word judgment debtor excludes legal persons and trusts. This is in line with Rule 46 (1) which refers to execution of “immovable property” of any judgment debtor (which is inclusive of juristic and natural persons) as against reference to execution of immovable property of a judgment debtor in Rule 46A (1). Neither a trust nor a legal entity can be said to occupy or reside on immovable property. The only reasonable inference to be drawn from the provisions of Rule 46A, is that it refers to natural persons who reside on the property. See Commissioner for Inland Revenue v Friedman   and Others.

[47]	In the present case, the applicant indicated in the particulars of claim that an order to execute the mortgaged immovable property would be sought. It is also alleged, amongst others, that the applicant has no knowledge of the business activities conducted by the Trust or Wild Wind Investments. The respondents were invited to place facts before this Court relating to whether there exist any alternative means that the Trust or Wild Wind Investments may have to repay the loan. The applicant was only able to establish that the municipal valuation in respect of the Farm Witkop is valued at R20,000,000-00 (twenty million rand). She was however, unable to establish whether the rates and taxes were owing on the property. The respondents were requested to provide more information in that regard.

[48]	In response, Hendrik Moolman raises the point that he and his wife, should have been joined as respondents in their personal capacities, as well as his son Wynand Moolman, because they have a direct and substantial interest in the outcome of this application. For this, he relies on Section 26 of the Constitution. He nevertheless avers that he never promised or undertook to repay the loan, and reiterates that the loan agreement is not enforceable. This is one of the delaying tactics adopted by Hendrik Moolman.

[49]	Hendrik Moolman was granted an opportunity to place evidence on record that would enable the Court to establish whether there are other alternative means or resources at the disposal of the respondents, from which the loan can be settled. Instead, he persist in his denial of the validity of the loan agreement even though he had admitted indebtedness through the acknowledgment of debt and the consequent loan agreement, which is part of a settlement agreement.

[50]	In NPGS Protection & Security Services CC and Another v Firstrand Bank Ltd the majority decision through Davis AJA, held that the appellant, who was granted an opportunity to place evidence under oath through the answering affidavit and failed to present essential facts in a Summary Judgment and a Rule 46A application, could not expect the Court to second guess his defence. The following remarks by Davis AJA are apposite: 

“[65]	 Having taken the point from the bar concerning the loss of a primary residence, it could not have escaped the second appellant or his legal representatives, as pointed out in the summons with the references to his constitutional rights and the need to place information before the court, that certain basic information had to be provided. The failure to do so, in the light of all the circumstances set out above, leads to the compelling conclusion that the point was raised as a stratagem to avoid the consequences of failing to fulfil his obligations in respect of a commercial loan. One is left with the distinct impression that the second appellant was unable to attest to that which could have avoided the execution order. This is forfeited by the unlikelihood that the second appellant would have put his primary residence at risk purely to secure a commercial loan…. 

[66]	The duty of a court to investigate a debtor’s position may well be different, even on the facts of this case, if it involved an unrepresented litigant, the loan was not exclusively of a commercial nature, or where, at least, some evidence suggests that the execution was in respect of a debtor’s primary residence. As we made clear in Standard Bank Of South Africa Ltd vs Saunderson and Others 2006 (2) SA 264 (SCA) 2006 (9) BCLR 1022; [2006] 2 A11 SA 382) para 23, a judgement creditor only has to justify the grant of a writ where the debtor has contested its validity because of an alleged infringement of s 26(1) of the Constitution. In their judgment Cameron and Nugget JJA held that the determination of whether the grant of a writ of execution is constitutionally justified only arises where the defendant defends or at least lodges an informal objection to the writ of execution. 

[67] 	On the facts of this case, the complete failure by the second appellant, to avail himself of rights which were expressly drawn to his attention in the summons issued by the respondent, dictates to the contrary. It bears repeating that there was specific prayer in the summons requesting an order of execution. In imposing an obligation upon a court in this case, when one vague and unspecified mention of a personal residence without more suffices as a defence or even a justification for remitting a case back to the court a quo, in my view, causes significant uncertainty, and arguably serious damage, to the efficient provision of credit in the economy.”

[51]	The respondent cannot, in the circumstances of this case, hide behind the provision of Section 26 of the Constitution and Rule 46A without further. The applicant could not have joined the trustees and Wynand Moolman in these proceeding where the order sought was a money judgment against the respondents. Hendrik Moolman, as an interested party, was all the time aware of the consequences that may arise if an order in terms of Rule 46 were to be granted. Presently, there is no evidence placed before this Court that may dissuade the court from declaring the immovable property executable.

Costs

[52]	The respondents have avoided paying back the total amount of money owing for many years now. Each time action is taken by the applicant, Hendrik Moolman commits himself to pay back the loan, which promises he never fulfilled. He instead abuses the court process by raising unfounded technicalities whenever there is a demand for payment. I am of the view that a punitive costs order is appropriate in the circumstances.

Order

[53]	I accordingly make the following order:

1.	Judgement is granted against the Moolman Family Trust registration number IT7038/1994 (represented by Hendrick Petrus Moolman NO and Johanna Moolman NO) and Wild Wind Investments 136 (Pty) Ltd, the respondents, jointly and severally, the one paying the other to be absolved as follows:

1.1	Payment of a sum of R1841,049-48 (one million eight hundred and forty-one thousand and forty nine rands forty eight cents);

1.2	Interest on the aforesaid sum at the prime overdraft rate charged by Standard Bank of South Africa Ltd from time to time, plus 2 % interest from 13 April 2019 to date of final payment.

2.	The following property is declared executable and the Applicant, Elise Haasbroek, is hereby authorized to execute against the immovable property, for the purposes of recovering on the judgment debt:

Remaining extent of Portion 2 (Portion of Portion 1) of the Farm Wilkop No 475, registration Division IQ, North West Province, in exetent 368,7467 (three six eight comma seven four six seven) hectares, held under Deed of Transfer No. T14 58243.

3.	The execution of the order in 2 above is suspended for a period of 90 days from the date of this order, in order to afford the respondents an opportunity to pay the judgment debt as ordered in 1 above.

4.	The counter-application is dismissed with costs.

5.	The respondents are ordered to pay applicants costs on an attorney and client scale.

________________________
M M LEEUW	
JUDGE PRESIDENT OF THE HIGH COURT
NORTH WEST DIVISION

Date of Hearing				:  	 02 July 2020
    
Judgment Handed Down on		:	15 October 2020

Counsel for the   Applicant              :	Advocate Hoarn

Instructed by				:	Garlicke & Bousfield Inc c/o Maree &
 Maree Attorneys

Counsel for the Respondent	   	:	Mr. Herbst
	
Instructed by				:	PSN Incorporated c/o Borman Duma 
							Zitha Attorneys