BY SARAH BOND
Introduction
1. The recent changes made to Rule 46 of the Uniform Rules of court and Rule 43 of the Magistrates Court Rules have caught the attention of the legal community.
2. The courts in various divisions have been applying the existing Rules regarding the procedure leading up to sales in execution against immovable residential property in different ways, trying to balance out the rights of the judgement debtors and those of the judgement creditors.
3. In an attempt to reach uniformity in the application of the Rules of Court and to align these with the rights enshrined in section 25 and section 26 of the constitution, the High Court Rules Board have recently made some important amendments to the existing uniform rule 46 which is mirrored in Rule 43 of the Magistrates Court Rules. These amendments came into effect on 22 December 2017.
4. There have been various amendments made to Rule 46 and 43 as a whole. The table below provides a brief overview of the changes made to the respective rules :
Rule 46 Rule 43
Substitution of Rule 46 Substitution of Rule 43
Insertion of Rule 46A Substitution of Rule 43A
Substitution of form 21 Insertion of Rule 43B
Insertion of form 2A, 20A and 21A Amendment of forms
5. However, for the purposes of this article, the focus shall be on the new addition to Rule 46, namely Rule 46A and its corresponding Magistrate Court’s Rule 43B.
Rule 46A
6. Rule 46A deals with the notice of application to declare immoveable property executable. It aims to regulate the manner in which a property is declared executable and the process to be followed in applying to court to declare the judgement debtor’s residence executable.
7. Many of the amendments came about to make provision for the fact that often matters which come before Court are unopposed and the new mechanisms in place aim to assist the courts in obtaining the information that they need in order to make an informed decision as to whether the property in question ought to be declared executable.
8. The grounds for judicial oversight became apparent when the right to adequate housing was acknowledged in the Jaftha case. This case set out the relevant circumstances to be considered in determining whether or not to declare the primary residence of a judgement debtor executable, the circumstances listed were as follows:
1. Whether the rules of court have been complied with;
2. Whether there are alternative ways of recovering the judgement debt;
3. The circumstances in which the judgement debt was incurred;
4. Attempts made to pay off the debt;
5. The financial position of the parties;
6. The amount of the judgement debt;
7. Whether the judgement debtor is employed or has a source of income to pay off the debt;
8. Other factors relevant to the case.
9. In the Gundwana case, the constitutional court added further circumstances as follows:
“ it is only when there is disproportionality between the means used in the execution process to exact payment of the judgement debt, compared to other available means to attain the same purpose, that alarm bells should start ringing. If there is no other proportionate means to attain the same end, execution may not be avoided.”
10. Different judgements in various provinces have developed differing criteria and circumstances to be considered as part of their judicial oversight function. Another example was a decision from the North Gauteng High Court, Pretoria in the FirstRand Bank case, which reinforced certain factors and introduced some additional considerations such as whether the mortgaged property is the debtor’s primary residence, the arrears outstanding on the bond, the debtor’s payment history and so on. It quickly becomes apparent that prior to the new Rule46A, there were a menagerie of differing views and that the origins of the new Rule stemmed from an attempt to consolidate these views.
Developments
11. Some important developments incorporated in the new rules include those of notice of the application to various parties, mandatory personal service on the judgement debtor (unless otherwise decided by the Court), setting of a reserve price and the inclusion of aspects to be considered by the court before considering execution as viable option in any case.
12. The new rule obliges the courts to establish whether the immovable property in question is the primary residence of the judgement debtor. If the property is the primary residence of the judgement debtor, then the court cannot authorise the execution, unless it has considered all relevant factors and any alternative means which may be available to satisfy the judgement debt.
Important Aspects of Rule 46A
13. Rule 46A applies whenever an execution creditor seeks to execute against the residential immovable property of a judgment debtor. A court considering an application under this rule must establish whether the immovable property which the execution creditor intends to execute against is the primary residence of the judgment debtor; and if so consider alternative means by the judgment debtor of satisfying the judgment debt, other than execution against the judgment debtor’s primary residence.
14. 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.
15. The registrar shall not issue a warrant of execution against the residential immovable property of any judgment debtor unless a court has ordered execution against such property. The registrar is not entitled to declare any residential immoveable property whether it is the primary residence of the debtor or any other residential property of the debtor, specially executable under this rule when ordering default judgement in terms of rule 31(5)(b).
16. In the Gundwana case, the constitutional court declared it unconstitutional for the registrar to declare immovable property specially executable under rule 46(1)(a)(ii) when ordering default judgement in terms of Rule 31(5) to the extent that this permits the sale in execution of the home of a person. The effect of this decision, read with the proviso to Rule 46 (1)(a)(ii), is that only a court is competent to declare a judgment debtor’s primary residence specially executable.
12. Every application in terms of this rule shall be supported by the following documentation :
1. The market value of the immovable property;
2. The local authority valuation of the immovable property;
3. The amounts owing on the mortgage bonds registered over the property
4. The amount owing to the local authority as rates and other dues;
5. The amounts owing to a body corporate as levies; and
6. Any other factor necessary to enable the court to give effect to sub-rule (8)
13. Sub-rule 8 deals with the powers of the court in handing down a ruling. In terms of this rule the court may among other things:
1. Order the inclusion in the conditions of sale, of any condition which it may consider appropriate;
2. Order the furnishing by a municipality of rates due to it by the judgment debtor; or a body corporate of levies due to it by the judgment debtor;
3. Order execution against the primary residence of a judgment debtor if there is no other satisfactory means of satisfying the judgment debt;
4. set a reserve price;
5. Postpone the application on such terms as it may consider appropriate;
6. Refuse the application if it has no merit;
14. Sub-rule 9 obliges the court to consider whether or not a reserve price should be set. In considering whether or not to set a reserve price, this section lists various factors to determine same. Should the reserve price not be achieved at a sale in execution, the sheriff is obliged to submit a report within 5 days of the auction, stating the details such as where and when the auction was held and what the highest bid was. The court considering this report shall make an order on how the execution is to proceed, this may, if necessary, include an order that the property is sold to the person who made the highest bid.
Conclusion
15. Debates have arisen around the conflicting rights of the judgement creditor and those of judgement debtor in this regard. Courts are vested with a responsibility to strike a balance between the Constitutional rights of both the judgement creditor to obtain a satisfactory judgement and the rights of the judgement debtor to adequate housing, human dignity, and security.
16. These amended rules give procedural effect to the constitutional requirement that execution against immovable property constituting a person’s home may potentially entail an infringement of a judgement debtor’s section 25 and 26 Constitutional rights and thus must only occur under judicial oversight.
17. It is submitted that the new rules adhere to and have been brought in line with section 25 of the Constitution and the limitation clause in section 36 of the Constitution striking a constitutional balance between the rights of judgement creditors and judgement debtors.
Bibliography
1. Erasmus Superior Court Practice. Volume 2: Uniform Rules of court and Appendices.
2. Government Gazette 41257
Cases
3. Jaftha v Schoeman; Van Rooyen v Stoltz 2005 (2) SA 140 (CC) at 161-163B.
4. Gundwana v Steko Development 2011 (3) SA 608 (CC) at 626F-G.
5. FirstRand Bank Ltd v Folscher and Another, and Similar Matters 2011 (4) SA 314 (GNP) at 332C-333D.