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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy
IN THE HIGH COURT OF SOUTH AFRICA
CASE NUMBER: 21841/14
In the matter between:
VINCENT DE PAUL ALBERT FIRST APPLICANT
(l.D. .………)
MARINA RADEVA NAYDENOVA SECOND APPLICANT
(l.D. ………)
and
STANDARD BANK OF SOUTH AFRICA LIMITED RESPONDENT
JUDGMENT
TLHAPI J
[1] This is an application for the rescission of a default judgement in the above matter
which was granted on 22 May 2014. The applicants were ordered to pay the full outstanding
amount of R 1 047 284.51 plus interest thereon and the immovable property situated at 15
Orlando Street, Kensington, Johannesburg, which was their primary residence, was declared
immediately executable.
[2] Summons was issued on 14 March 2014. The return of service recorded that service
was effected on 20 March 2014 at about 11h00 by affixing to the principal door at the
domiciLium citandi et executandi. The arrears amounted to R 69 510 and the monthly
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instalment on the loan was RS 967.47. Default judgment was taken on 22 May 2014 and applicants learnt of it for the first time on 23 May 2014 on a follow up call to the respondent's attorneys. The applicants averred that a copy of the judgement in the form of a draft order was obtained from the respondent's attorneys on 5 June 2014. This application was launched within the stipulated time on 19 June 2014.
[3] The defence raised by the applicants was that their failure to defend the action was not wilful or due to their gross negligence. They alleged that they never received personal service of the summons and were not aware that legal proceedings had been instituted against them. The respondent sent a section 129 notice issued in terms of the National
Credit Act 34 of 2005, by registered post and the first notification by the Post Office to the applicants of a registered item was given on 26 February 2014. The applicants admitted receipt of the section 129 notice and in response thereto they contacted the respondent's attorneys on 19 March 2014 and it was arranged with them that the property be placed on the market. The property was placed by the attorneys on the respondent's Easy-Sell programme. At the time of these negotiations the attorneys had failed to inform applicants that summons had already been issued.
[4] The applicants contended that the summons were vague and embarrassing and therefore excepiable, in that it did not contain the necessary averments required at law when execution against a primary residence was sought. The applicants further contended that the respondent did not comply with its obligations under section 81(2) of the National Credit Act in that they failed to conduct the peremptory pre-assessment in order to establish whether they were in a position to afford repayments on the loan. A substantial amount earned by the first applicant at the time constituted payment for overtime. Having regard to what their income was, the grant of the loan constituted a reckless credit as defined in section 80 of the
National Credit Act. Therefore the declaration that their immovable property was immediately executable denied them the right to adequate housing for themselves and their children.
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They had become over indebted since the first applicant had lost his job in 2011. The second applicant was now the main breadwinner. Prior to them falling into arrears they had regularly made payment on the mortgage bond for a period of five years
[5] The respondent contended that service of the summons was on the domicile address, that the applicant had failed to make out a case as to why they would not have received the summons. Furthermore, that personal service was not a requirement for a default judgement. It was contended that applicants had failed in the founding affidavit to state grounds upon which it was contended that the summons did not comply with the relevant case law in foreclosure matters. The applicants had been duly notified of the status of their account and their rights in terms of section 129 of the National Credit Act. The respondent contended that the defences raised by the second applicant were an afterthought because they did not accord with the declaration they made when the mortgage agreement was concluded. According to the respondent the default judgement bundle which was before the court when default judgement was sought would only be placed before the court when this application was heard. Reference to the contents of the default judgment bundle would be referred to as they were presented to the Court in that bundle. The contents of the application for default judgment were not attached to the answering affidavit..
[6] The respondent annexed a letter from the second applicant in which she had admitted their ability to pay the monthly instalments and had proposed an arrangement to pay the arrears. It was further contended that when the application for the loan was considered by the respondent the first applicant had stated a basic monthly salary of
R44 164.24 per month and that the loan application was assessed on the joint income of the applicants. The second applicant had agreed to be jointly and severally liable with the first applicant for the principal debt. The respondent contended that it found it odd that the second applicant who was in possession of an LLB degree and was a candidate attorney could argue that she did not appreciate the risks associated with the loan agreement.
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[7] In reply the applicants contended that the default judgment affidavit was not among copies retrieved from the court file, hence their averment in the founding affidavit that the respondents had failed in the summons to make the necessary allegations regarding their
Constitutional rights. The applicants persisted in their contention that they were not properly assessed when the loan was initially granted. They annexed salary slips which reflected what the first applicant's monthly remuneration was at the time, how it was augmented by overtime.
[8] At this hearing Ms Oosthuizen for the respondent sought to make available to the court the affidavit allegedly presented when the default judgment application was heard. Mr
Velten for the applicant objected to the handing in of the affidavit from the bar. In the answering affidavit the respondent undertook to make available the default judgment bundle and not just the affidavit. I am not persuaded that there was absolutely no affidavit or factors placed before the court when the order was granted by Barn J. However, I upheld the objection because it is my view that the default judgment bundle should have been annexed to the answering affidavit in order to establish what was before the court then and in order to give the applicants an opportunity to deal therewith in reply. There was no explanation in the answering papers why the bundle was not available. The acceptance at this stage of the affidavit would equate to an ambush during this hearing as to what factors were before the court when the default application was heard. The applicants alleged that the affidavit was not on the court file when copies of the court file were obtained in their preparation of this application. In my view, the absence of the default judgement bundle is good reason why the default judgement should be rescinded because I do not wish to second guess which factors were before Barn J when the order was granted on 22 May 2014.
In her heads of argument Ms Oosthuizen has contended that several paragraphs be struck out. I have decided not to deal with this aspect because the issue around section
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81(2) of the National Credit Act are issues that must be ventilated during trial.
[9] Mr Velten submitted that the judgement had to be rescinded on various grounds. He contended that the explanation for the default was reasonable. They were not made aware that respondent had issued summons and intended taking judgment when they responded to the section 129 notice. Alternatively the summons was premature in that they still had opportunity to exercise their rights under section 129 of the National Credit Act. It is my view that the least the attorneys could have done was to have informed the applicants that summons had been issued and forwarded to the Sheriff for service upon them instead of negotiating with them to place their property on the market.
[10] It was further contended that the Johannesburg High Court was situated within 8 kilometres from the applicant's home, that the respondent issued summons out of the
Pretoria High Court in order to avoid the 'onerous conditions relating to foreclosure on domestic properties that have been stipulated for in the practice directives applicable in the
Johannesburg High Court'. I can only comment that the high volume of cases in the Pretoria court is indicative of a preference for this court. I am however not prepared to endorse such inference because the Johannesburg and Pretoria Courts have concurrent jurisdiction and the respondent was within its right to choose the Pretoria court. However in the interests of a proper administration of justice to litigants, the fact that there was one Judge President for both divisions it was necessary to have uniformity in both courts as to the application of the practice directives relating to foreclosure matters. The courts are confronted daily with different narrations on the returns of service on the domicilium citandi et executandi : 'found gates locked affixed to the gated'; affixed to the main entrance or main gate'; 'under a stone';
'in the post box'; 'to the principal door'; 'the occupant does not know the defendant, he/she refused to accept service of process I left it at the main gate';
It is also a concern to me that service at the domicilium always takes place during the day and probably during working hours. Sometimes the Sheriff incurs unnecessary costs to
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the litigants by attempting service two to three times on a single day. It cannot be that the debtor by choosing a domicilium also undertakes to be present at that address at all times or undertakes to ensure access to such address during the day for purpose of service. In my view it is therefore necessary due to the protection afforded by the Constitution to adequate right to housing to extend the domicilium citandi clause in the foreclosure of a primary residence.
[11] It was trite that the form and content of a summons and particulars of claim are prescribed by the rules of court, therefore I normally find the concise manner in which litigants are advised of their Constitutional rights in these processes to be sufficient. In view of recent developments of the law by our courts it is only in the affidavit to the application for default judgement where the respondent is expected to make available such information as shall enable the court to properly exercise its discretion to adjudicate over the foreclosure.
First Rand Bank Ltd v Folscher 2011 (4) SA 314 (GNP) at paragraph 41 gives a list of some of the factors that may be considered by a court in such applications and this information is to be given on affidavit. One of the factors which is of relevance to this matter is couched as follows:
"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, the period of time that elapsed between delivery of such notice and the
institution of action"
The first notification to the applicants of the s 129 letter was issued by the Post Office on 26
February 2014. The letter gives several options one of which invited the applicants to visit the attorneys office, and that failure to respond to the notice within 10 days after receipt would result in summons being issued against them. While there was no information from the applicants when they actually took delivery of the letter, it is not in dispute that by the 19
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March 2014 they had responded and engaged with the respondent's attorneys and thereafter with the respondent. This occurred 15 court days after the first notification.
Summons was issued on 14 March 2014. The question that I ask is whether the attorneys had information before issue of summons that the first notification had been issued; was it reasonable to issue summons almost immediately, that is, two days after the deadline; is there any reason why the applicants were not informed on 19 March 2014 that summons had actually been issued, that if they failed to defend the action judgment would be taken against them Why would any attorney negotiate on behalf of the respondent with a debtor, give false hope to the debtor and proceed to take judgment. In annexure 'STD 2' to the answering affidavit the second applicant wrote directly to the respondent on 27 May 2014.
"I have tried to come to a payment arrangement with the attorneys unsuccessfully up
to now which is the reason I contacted Nazir of Easy Sale for assistance. Apparently
the attorneys handling the account have managed to obtain default judgment against
us on 22 May 2014 irrespective of me contacting them immediately after receiving
the section 129 letter in March this year. After speaking to the attorneys offices in
March I was advised that they will contact Standard Bank regarding a payment
arrangement and they will come back to me in due course. At the same time it was
arranged for the property to go on easy sale and I was assured that if we take this
step no judgment or sale in execution will take place while the property is on easy
sale...... I was never advised that the attorneys were planning to take legal action
against us pending the arrangement. We never received a copy of the summons
which was never served personall y on us by the sheriff and nobody tried to contact
us regarding this...... At the moment I will be able to pay the May instalment but my
concern is the arrears of R87 000.00 as the attorneys advised that we need to pay
50% of the arrears in order for them to stop the legal process" (my underlining)
[12] A further question to ask is whether the negotiations preceding the taking of default
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judgment were disclosed in the affidavit to the application and whether any reasons were
given why it was not feasible to accede to the proposed solution. The affidavit was not
annexed to the answering affidavit. I have already mentioned that I would not second guess
what came before Barn J. I am however confident that if these facts about the negotiations of
the 19 March 2014 were mentioned to the court, it is possible that the court could have
postponed the order to declare the immovable property immediately executable. It is not
clear when an attorney should decide when to issue summons after the section 129 letter. In
this matter the issue of summons two days after the 10 day deadline was unreasonable. An
injustice was committed by not informing the applicant that summons had been issued, that
same had been forwarded to the sheriff for service and that if nothing was done to defend
the action judgment would be taken. While it was not a requirement to personally serve an
application for default judgment on a debtor, in this instance it would have been fair and
prudent to do so. Fair dealing and good faith required of the respondent's attorneys to have
informed the applicants of the legal action on 19 March 2014, Legal Ethics by Lewis (1982)
page 123 . Having regard to what occurred in this matter, is reason why I am of the view that personal service should be the norm. While banks are entitled to their judgements, they and the practitioners and our courts should not ignore the plethora of safeguards developed in legislation, developed by the decisions of the courts of the land and by the issue of practice directives by a Judge President to protect consumers.
[13] Iwish to digress to what was considered in the Full Court unreported judgment in
ABSA v Lekuku, case number 32700/13, and delivered on 14 October 2014, considered in particular, the effect of the introduction of the practice directive which required personal service in foreclosure matters and, under which circumstances a court in exercising its discretion, could deem arrears to be substantial thereby justifying an order that an immovable property was immediately executable. Judges Makgoba and Victor, who delivered the majority judgement stated the following:
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Paragraph 28
"In promoting the spirit, purport and object of the Bill of Rights its application in the
common law of contract is necessary. A procedural requirement extending the application of the domici/ium clause must of necessity be introduced where appropriate."
Paragraph 25
" The introduction of a procedural step in the service of process in our constitutional
milieu serves as a safeguard that primary residences are not lost through
inadequate service. It does not undermine the domicilium clause as that address
remains the central point where the creditor and the Deputy Sheriff must find the
debtor. The question to be answered is whether the introduction of a procedural
requirement running parallel with the domicilium clause is permissible ..... The
starting point is not whether the court has a discretion to refuse to enforce the
domicilium clause but whether the introduction of such a procedural step concerning
the domicilium clause offends the commercial transaction in an unduly trammelled
manner''
Paragraph 29
"The balance between contractual freedom and the framework of the debtor creditor
relationship and foreclosure process is not imperilled by the development of the
common law in respect of the common Jaw principles of a domicilium citandi clause.
This extension of the common law in relation to the proper application of the
domicilium clause in a foreclosure matter is highly desirable and a necessary infusion
in the common law. The introduction of the Practice Directive in relation to
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foreclosure matters involving a primary residence the common law is to be developed. There is a constitutional imperative that the creditor and the debtor relationship within the contest of foreclosure be subjected to greater scrutiny when seNice of processis atissue. Courst are faced with hundreds of foreclosure applications per month where people Jose their homes. Itis no longer appropriate that this happens without a further requirement of heightened focus on whether the debtor received the summons".
Paragraph 30 and 31
"...In choosing a domicilium the debtoris faced with a fait accompli. It does not mean that when a debtor selects a domici/ium he or she knowingly waives the right to personal seNice where possible. Accordingly additional seNice requirements around the domici/ium clause in foreclosure matters do not undermine the pacts sunt seNanda principle. The additional requirement does not violate a public policy principle.
''The effect of additional seNice does not mean that either partyis going back on their word"
Paragraph 32
"Although the Constitutional Court has not dealt with the constitutionality of a domicilium clause in bonded property, sufficient jurisprudence has evolved to justify a High Court engaging strategically with the Banks on issues of foreclosure, whether it be the question of service or a proportionality assessment of the amount owing to justify foreclosure"
Paragraph 36
"It would be inappropriate to define when arrears are low for the purpose of Practice
Directive 10.17.1.6 as this would unduly restrict a discretion which a judge must
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exercise in the particular circumstances of each case:
Paragraph 37
"In seeking foreclosure in respect of low arrears the banks must examine each case and advise the court what they have done to avoid foreclosure of a primary residence in particular with reference to engagement with the debtor at a "with prejudice" level to avoid foreclosure...... it should not be a cut and paste exercise. This court need give no further guidance as to what should be in the affidavit justifying foreclosure.
Ample guidance has been given in Folscher ....and the principles emerging from all the case referred to, ...... Banks having considered all the facts should only bring a foreclosure application if the execution would not be disproportionate."
Paragraph 39
"In addition on the question of the triggering point on low arrears and the number of months in arrears, this court adds to the long line of cases that suggest points for consideration before granting foreclosure. This court adds the principle of proportionality. In dealing with proportionality the affidavit in support of foreclosure must still deal with aspects referred to in Folscher, Saunderson, Mortison Dawood
Jessa and in addition deal with the principle of proportionality. On the question of proportionality the affidavit accompanying the foreclosure application must deal with the contacts with the debtor and attempts to avoid foreclosure. This court also directs that in matters of low arrears a postponement f the matter for a period of 6 months be made in order for the mortgagors to report back on steps taken be them to avoid foreclosure" (Standard Bank v Saunderson 2006 (2) SA 264 (SCA);
Nedbank LTD v Martinson 2005 (6)SA 462 0fl/) para 33.1; Standard Bank v Dawood
2012 (6) SA 151 0fl/CC) para 37;Nedbank Ltd v Jessa and Another 2012 (6) SA 166
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CC para 12)
In the minority judgement it was suggested that service be extended also to the place
of employment of the debtor.
[14] Having regard to the practice in Johannesburg, I am concerned about the conflict in the mind of a judge who sits in Pretoria and goes to Johannesburg to be confronted by the same counsel and litigant, being the bank, and is expected to apply different directives and vice versa. It is important that there is uniformity in the practice directives of these two courts which share one Judge President. In my view, it is appropriate to recommend to the Judge
President and the Deputy Judge President of this court to amend the Pretoria practice directives to be in line with the practise directive in Johannesburg.
[15] In casu, I am satisfied that a case for rescission has been made out and in the result
I give the following order:
1. The judgement granted on 22 May 2014 is rescinded;
2. The respondent is ordered to pay the costs.
\I , i' i; r , I V'.C'i I ), , ' THAPI vJ..
(JUDGE OF THE HIGH COURT)
MATTER HEARD ON 07 SEPTEMBER 2015
JUDGMENT RESERVED ON 07 SEPTEMBER 2015
ATTORNEYS FOR THE APPLICANTS S ROUX INCORPORATED
ATTONEYS FOR THE RESPONDENTS EASTES INCORPORATED