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Standard Bank v Saunderson and Others

26 January 2006

Division: Supreme Court of Appeal
Case No: 358/05
Date of hearing: 23 November 2005
Date of delivery: 15 December 2005
Coram: Howie P, Cameron, Nugent, Jafta and Mlambo JJA.

Summary
The value of the mortgage bond as an instrument of security lies in the confidence with which the law will give effect to its terms. That confidence was shaken by a recent decision of the Cape High Court that was the subject of this appeal. After an analysis of the process for the recovery of judgement debt, Cameron and Nugent JJA turned to the reasoning behind the refusal of the court below(Blignaut J) to grant orders for execution in three of the applications for default judgment.
Because the court based its conclusions on the judgment of the Constitutional Court in Jaftha v Schoeman the circumstances of the case and the reasoning behind the judgment were considered.

It found that:
"[15] In our view the way the court below interpreted the decision in Jaftha was misplaced. What was in issue in Jaftha was not s 26(3) of the Constitution but rather s 26(1) - which enshrines a right of access to adequate housing - and the impact of that right on execution against residential property. (Section 26(3), as elaborated by the legislature in the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998, becomes relevant in the event of eviction consequent upon a sale in execution,16 and was not in issue in Jaftha.) Nor did the Constitutional Court decide that s 26(1) is compromised in every case where execution is levied against residential property. It decided only that a writ of execution that would deprive a person of 'adequate housing' would compromise his or her s 26(1) rights and would therefore need to be justified as contemplated by s 36(1). The premise on which the court below proceeded was thus incorrect.

… and continues:
"[16] It must be borne in mind that s 26(1) does not confer a right of access to housing per se but only a right of access to 'adequate' housing; and this concept of necessity is relative (see Government of the Republic of South Africa v Grootboom).17 In Jaftha it seems never to have been disputed and was indeed accepted as self-evident by both the high court and the Constitutional Court that the forfeiture in question entailed a deprivation of 'adequate housing'. The facts before the Constitutional Court show why this was so.18 In the light of the high court's approach, what was contentious was whether a threat to ownership (as opposed to occupation) of a residence that constituted 'adequate housing' was itself invasive of s 26(1), and the Constitutional Court found that it was.

[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.

And …
[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. Mr Marcus for the amici, pointing out that the instruments before us are covering bonds (as mortgage bonds usually are), which observe no such distinctions, suggested in effect that execution should 'ordinarily' follow only where the bond was taken out to fund inessential lifestyle choices; but this gives no weight to the fact that in all cases the bond-holder's claim in its essence is against the property, and that its entitlement springs from a limitation in title the owner chose to accept in obtaining the loan.

[20] Though it is more easily possible to contemplate a court delaying execution where there is a real prospect that the debt might yet be paid, even in such cases the approach to pleading does not change. A plaintiff is called to justify an infringement of a constitutionally protected right only once it has been established that infringement has in fact occurred. As pointed out by Stuart Woolman in M. Chaskalson et al Constitutional Law of South Africa 12-2:
'Constitutional analysis under the Bill of Rights takes place in two stages. First, the applicant is required to demonstrate that her ability to exercise a fundamental right has been infringed … If the court finds that the law [or measure] in question infringes the exercise of the fundamental right, the analysis may move to its second stage. In this second stage … the party looking to uphold the restriction … will be required to demonstrate that the infringement is justifiable.'

Until the defendants in the cases before us could show that orders for execution would infringe s 26(1) the bank was not called on to justify the grant of the orders. 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."

The court found that since none of the defendants alleged, still less showed, that an order for execution would infringe their rights of access to adequate housing, and that no reason existed to believe that it would, in those circumstances the appellant was not called upon to justify the orders it sought and the orders ought to have been granted.

Full judgment

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