Firstrand Bank Ltd v Folscher and Another (55204/2010) [2011] ZAGPPHC 79 (24 May 2011)
Introduction
With effect from 24 December 2010, Rule 46 of the Uniform Rules of Court was amended. Consequently, in cases where either the court or the registrar had declared the property specially executable, where the property is the primary residence of the judgment debtor, no writ shall be issued unless the court, having considered all the relevant circumstances, orders execution against such judgment.
Further, on 11 April 2011 the Constitutional Court in Gundwana v Steko Development CO & Others, held that it was unconstitutional for a Registrar of a High Court to declare immovable property specially 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 a home of a person as this is incompatible with s 26 of the Constitution.
The consequence of this declaration of unconstitutionality upon the amended Rule necessitated a review of the method in which the court should approach an application for authorisation of a writ of execution against a person's home.
Application of the Gundwana considerations
The amended Rule 46(1)(a)(ii) requires from a court to "consider all the relevant circumstances” before authorising the issuing of a warrant of execution. However, such ‘’relevant circumstances" are not defined in the Rules. The Court held that the protection of section 26(1) of the Constitution is extended to the judgment debtor who may lose what is usually his only home. A ‘primary residence’ is the same concept as “the home of a person” as formulated in Gundwana.
The judicial oversight that must be exercised by the court is limited to those cases where the execution order relates to the debtor’s principal (in most cases, only) dwelling. Therefore, the execution against a second house or holiday home not typically occupied by the debtor does not apply to the rule.
In addition, the term ‘judgment debtor’ refers to an individual. Therefore, it is the primary residence owned by a person that fall within the ambit of the rule. This means that immovable property owned by a company, a close corporation or a trust whose member, shareholder or beneficiary is the beneficial occupier is not protected by the amended rule and does not necessitate the same judicial oversight through an order of Court authorising a writ of execution, although the immovable property is the member’s, shareholder’s or beneficiary’s only residence.
The following factors inter alia may need to be taken into consideration by a court when deciding whether or not to issue a writ:
• whether the mortgaged property is the debtor's primary residence;
• the circumstances under which the debt was incurred;
• the arrears outstanding under the bond when it was called up;
• the arrears on the date default judgment is sought;
• the total amount owing in respect of which execution is sought;
• the debtor's payment history;
• the relative financial strength of the creditor and the debtor;
• whether any possibilities exist in which the debtor's liabilities to the creditor may be liquidated within a reasonable period of time without having to execute against the debtor's residence;
• the proportionality of prejudice the creditor might suffer if execution were to be refused compared to the prejudice the debtor would suffer if execution went ahead and he lost his home;
• whether any notice in terms of s 129 of the National Credit Act 34 of 2005 was sent to the debtor prior to the institution of action;
• the debtor's reaction to such notice, if any;
Practice Directive
A practice directive is issued that, if the issue of summons is preceded by a notice in terms of s 129 of the National Credit Act 34 of 2005, such notice is to include a notification to the debtor that should action be instituted and judgment be obtained against him or her, execution against the debtor's primary residence will ordinarily follow and will usually lead to the debtor's eviction from such home.
For further information in this regard, see Firstrand Bank Ltd v Folscher and Another (55204/2010) [2011] ZAGPPHC 79 (24 May 2011)
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