THE RIGHT TO ADEQUATE HOUSING VS EXECUTION AGAINST IMMOVABLE PROPERTY: THE CONSTITUTIONAL PERSPECTIVE – SALLY D’ARCY-DONNELLY
Every person has the right of access to adequate housing. It is the duty of the State to take reasonable legislative and other measures to achieve the progressive realisation of this right. This is according to Section 26 of the Constitution.
Section 66(1)(a) of the Magistrate’s Court Act (“the Act”) provides that any judgment or order handed down by a court “shall be enforceable against the movable property and, if there is not found sufficient movable property to satisfy the judgment or order, or the court, on good cause shown, so orders, then against the immovable property of the party against whom such judgment has been given or such order has been made”.
Rule 45(1) of the High Court Rules states:
"The party in whose favour any judgment of the court has been pronounced may, at his own risk, sue out of the office of the registrar one or more writs for execution thereof …Provided that, except where immovable property has been specially declared executable by the court or in the case of a judgment granted in terms of rule 31(5) by the registrar, no such process shall issue against the immovable property of any person until a return shall have been made of any process which may have been issued against his movable property, and the registrar perceives therefrom that the said person has not sufficient movable property to satisfy the writ."
In essence, the Rules of Court allow for the possible deprivation of a person’s rights in terms of Section 26 of the Constitution. It was on this principle that the judgment in Jaftha v Schoeman and Others; Van Rooyen v Stoltz and Others 2005 (2) SA 140 (CC) was handed down.
The case dealt with the constitutionality of the procedure provided for in Section 66(1)(a) of the Act.
The appellants, having had their houses attached and sold in execution by the respondents, applied initially to the High Court and then appealed to the Constitutional Court, to set aside the sales in execution and to interdict the respondents from taking transfer of their houses.
The application was based on the grounds that Section 66(1)(a) and Section 67 of the Act were unconstitutional. Section 67 deals with the items belonging to a judgment debtor which are exempt from attachment and sale in execution, such as clothing, food, tools of trade and the like.
The High Court held that when the sheriff had issued a nulla bona return, the Clerk of the Court, in terms of Rule 36 of the Act, was obliged to issue and sign a warrant of execution against the immovable property of the debtor. Accordingly, the applications were dismissed.
On appeal, the appellants argued that in terms of section 26 of the Constitution, the State had a duty not to interfere unjustifiably with any person’s right to have access to adequate housing. Furthermore, the appellants argued that their section 67 right to access to housing was constitutionally protected. Thus, like the other items protected in this section from attachment, houses below a minimum value should be afforded the same protection.
The Constitutional Court found that there would be circumstances where it would be unjustifiable to order execution on immovable property as the advantage to the judgment creditor would be far outweighed by the prejudice and hardship caused to the judgment debtor. Section 66(1)(a) was sufficiently broad enough to allow sales in execution which were unjustifiable, particularly in light of section 26 of the Constitution.
Section 66(1)(a) further allowed for immovable property to be sold in execution without any form of judicial intervention, even in circumstances where such sale was manifestly unjust. As such, the section was overbroad.
Section 66(1)(a), by failing to provide for judicial intervention on the sale in execution of immovable property, was unconstitutional and invalid. In order to remedy the defects of this section, the words “a court, after consideration of all relevant circumstances, may order execution” should appear before the words “against the immovable property of the party”.
The relevant circumstances the court would consider 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.
It was further held that Section 67 could not be unconstitutional because it did not prohibit the sale of houses below a certain value. This could result in poor people not being able to improve their lot in life, nor would such a prohibition be in the interests of creditors.
Although the Act has still not been amended to reflect the necessity of judicial intervention in instances where there are insufficient movable assets to satisfy the judgment debt, by virtue of the Jaftha judgment, it is now necessary for a creditor to apply to the relevant Magistrate’s Court to seek an order permitting execution against the judgment debtor’s immovable property.
In Nedbank Ltd v Mortinson 2005 (6) SA 462 (W) the constitutionality of Rule 45(1) of the High Court Rules was subsequently challenged in the same vein as Section 66(1)(a) of the Act. In terms of Rule 45(1), the Registrar of the High Court is entitled, without any judicial intervention, to issue a writ over the judgment debtor’s immovable property where there are insufficient movable assets to satisfy the judgment debt.
The Court, in applying the Jaftha principle, held that Rule 45(1), insofar as it permitted execution against immovable property without judicial sanction, was unconstitutional. Again, the Court held that same could be remedied by the insertion of words “and a court, after consideration of all relevant circumstances, has authorised execution against the immovable property” after the words “movable property” in the third last line of the Rule. This would render judicial sanction a prerequisite for execution against immovable property.
Once more, the legislative amendment necessary to give effect to this judgment has not been made. Furthermore, the judgment in the Nedbank case was handed down by the High Court, Witwatersrand Local Division, which means that it does not have national application.
Standard Bank of South Africa Ltd v Saunderson and Others 2006 (2) SA 264 (SCA) followed the Nedbank case. Standard Bank foreclosed on a bond. In its High Court summons, Standard Bank requested payment of the outstanding bond amounts and for the properties to be declared executable in the event of non-payment. The debtors did not respond to the summons and the Bank then applied for default judgment and requested the Registrar to order the properties executable. The matter was referred to open court for determination.
Applying the Jaftha decision and the rights contained in section 26 of the Constitution, the High Court declined the orders declaring the immovable property executable. On appeal, the Supreme Court of Appeal (“SCA”) maintained that the High Court had had misinterpreted the Jaftha decision and held as follows:
Section 26(1) of the Constitution did not confer a right of access to housing but only a right of access to “adequate” housing. Hence the Jaftha decision did not decide that all residential property was protected by the provisions of Section 26(1).
The situation in this case was substantially different from Jaftha, where the debtor was deprived of title to her home as she was unable to pay a trifling extraneous debt and there was no judicial intervention to prevent this unjustified outcome. In contrast, Standard Bank was a mortgagee with rights over the property arising out of an agreement with the owner. The debtors had willingly bonded their houses to the Bank to obtain finance and the debt was directly linked to the property’s title.
An order to declare residential property executable is not sufficient to constitute an infringement of Section 26(1) of the Constitution, particularly in instances where the debtor does not even raise it as a defence. In this case, the creditor would not be obliged to justify the order being granted.
The Court held that where there is an application for default judgment and an order is sought to declare immovable property executable, Rule 31(5) permits the Registrar to do so. The plaintiff would only have to justify such an order in an instance where the defendant contests its validity on the basis of an alleged infringement of his rights contained in Section 26 of the Constitution.
The court, however, pointed out that this kind of default application is different from a case where there has been an attempt to execute against movables and they are found to be insufficient, as in Jaftha.
The court then concluded:
“Rule 45(1) of the High Court Rules similarly permits a writ to be issued in such circumstances without judicial scrutiny but as the validity of that rule is not before us it is expressly left open.”
Since in most cases where orders for execution on immovable property are sought, the debtors have no defence to the claim and are unlikely to seek legal advice, it is necessary that a debtor be informed of his rights in terms of Section 26 of the Constitution. Accordingly, the SCA made the following practice directive:
“The summons initiating action in which a plaintiff claims relief that embraces an order declaring immovable property executable shall, from the date of this judgment, inform the defendant as follows:
“The defendant’s attention is drawn to section 26(1) of the Constitution of the Republic of South Africa which accords to everyone the right to have access to adequate housing. Should the defendant claim that the order for execution will infringe that right it is incumbent on the defendant to place information supporting that claim before the court.”
The Standard Bank case was subsequently appealed by the Campus Law Clinic, University of KwaZulu-Natal to the Constitutional Court in the matter of Campus Law Clinic, University of KwaZulu-Natal v Standard Bank of South Africa Ltd and Another 2006 (6) SA 103 (CC). The Law Clinic applied for section 27A of the Supreme Court Act 59 of 1959 and Rules 31 and 45(1) of the High Court Rules to be declared unconstitutional.
But the Constitutional Court declined to deal with the issue on the basis that the Law Clinic’s application for direct access to the Court had been dismissed. The Court held that such an application could be brought in the relevant High Court for determination by joining all relevant parties and having the issues dealt with in their entirety and not merely piecemeal. This decision has thus resulted in no clarity on the constitutionality of Rule 45(1).
In ABSA Bank Ltd v Ntsane and Another 2007 (3) SA 554 (T), ABSA sought to obtain default judgment against the defendants on the full amount owing in terms of a mortgage bond and to declare the immovable property of the defendants executable. The Bank’s claim was for the full amount owing on the bond (R62 042.43) and not just the arrears monthly payment (R18.46), the agreement having contained an acceleration clause.
The application was not granted by the court, because of the following:
Per the Nedbank case, the Registrar was obliged to refer all cases where a hypothecated property is sought to be declared executable to be heard in the open motion court.
ABSA’s rights to commercial activity and to enforce lawful agreements had to be balanced against the defendant’s constitutional adequate housing right, per the relevant Jaftha factors.
Because the outstanding amounts on the mortgage were small relative to the value of the immovable property, it was possible to have them repaid by attaching movable property as opposed to the defendants’ immovable property, the attachment of which would deprive them of their section 26 Constitutional rights.
Even if the defendants’ constitutional rights had not been infringed, ABSA’s application constituted an abuse of the right to claim an outstanding amount that could easily be obtained by execution against movable assets. Here it is necessary for the plaintiff to show that he had no other reasonable alternative to enforce his rights other than to proceed with an execution against the immovable property.
The court recommended that the banking and financial services sector should create a compulsory arbitration process to which the courts could refer matters to determine whether execution against immovable property in circumstances where small amounts were in arrears, ought to be granted.
The ABSA decision seems to contradict the Standard Bank case, which held that if application for default judgment is made on a mortgage secured by immovable property, only where the defendant does not raise section 26 of the Constitution as a defence, can the Registrar declare the immovable property executable without referring the matter to open court.
So where to now?
In line with Jaftha, section 66(1)(a) of the Act needs to be amended to read:
“Whenever a court gives judgment for the payment of money or makes an order for the payment of money in instalments, such judgment, in case of failure to pay such money forthwith, or such order in case of failure to pay any instalment at the time and in the manner ordered by the court, shall be enforceable by execution against the movable property and, if there is not found sufficient movable property to satisfy the judgment or order, or the court, on good cause shown, so orders, then a court, after consideration of all relevant circumstances, may order execution against the immovable property of the party against whom such judgment has been given or such order has been made.”(my emphasis)
As per Standard Bank, where summons is issued on a mortgage bond and the immovable property is bonded as security, the practice directive needs to be inserted into the summons, alerting the defendants to their section 26 Constitutional rights.
However, this does not necessarily mean that the Registrar can automatically grant an order that the immovable property is executable. The ABSA decision suggests that the Gauteng High Courts have made it compulsory that such an order be referred to open motion court for determination, even where the claim is for monies owing on a mortgage bond and the property was secured as payment for the mortgage. Whether the ABSA decision will stand any further judicial scrutiny remains to be seen.
The Nedbank decision requires confirmation from either the SCA or the Constitutional Court to give effect to Rule 45(1) of the High Court Rules being amended as follows:
"The party in whose favour any judgment of the court has been pronounced may, at his own risk, sue out of the office of the registrar one or more writs for execution thereof …Provided that, except where immovable property has been specially declared executable by the court or in the case of a judgment granted in terms of rule 31(5) by the registrar, no such process shall issue against the immovable property of any person until a return shall have been made of any process which may have been issued against his movable property and a court, after consideration of all relevant circumstances, has authorised execution against the immovable property, and the registrar perceives therefrom that the said person has not sufficient movable property to satisfy the writ." (my emphasis)
Accordingly, where an order is sought declaring immovable property executable (even on default), the application should set out the relevant factors contained in the Jaftha decision and state that the plaintiff has no other reasonable means to secure payment of the outstanding debt, other than through the attachment of immovable property.
It remains then to be seen whether the Registrar will grant the order or whether the matter will be referred to open motion court.
Sally D’Arcy-Donnelly is a Senior Associate at Bowman Gilfillan