Quote of the week

Mr Zuma is no ordinary litigant. He is the former President of the Republic, who remains a public figure and continues to wield significant political influence, while acting as an example to his supporters… He has a great deal of power to incite others to similarly defy court orders because his actions and any consequences, or lack thereof, are being closely observed by the public. If his conduct is met with impunity, he will do significant damage to the rule of law. As this Court noted in Mamabolo, “[n]o one familiar with our history can be unaware of the very special need to preserve the integrity of the rule of law”. Mr Zuma is subject to the laws of the Republic. No person enjoys exclusion or exemption from the sovereignty of our laws… It would be antithetical to the value of accountability if those who once held high office are not bound by the law.

Khampepe j
Secretary of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State v Zuma and Others (CCT 52/21) [2021] ZACC 18
13 April 2011

On banks, judges and the right to housing

When Elsie Gundwana (pictured below) went to Nedbank in 1995 to borrow R25 000 to help her buy a house in Thembalethu outside George, she could not have known that the granting of this mortgage bond by the bank would cause her so much pain and sleepless nights. She could also not have known that her fight with Nedbank (“who are those people?”) would end up in the Constitutional Court and that she would eventually win a clear legal victory against one of the mighty banks in South Africa.

For Ms Gundwana her house was literally her life. She stays in the house with family members, but also utilises part of the house to run the only Bed & and Breakfast establishment in Thembalethu. As she wrote in a letter explaining her predicament (reproduced here in full):

I bought this house about eighteen years ago. This is not only a house to me.  This is my home, my source of income, a legacy that I would like to leave for my children.  With this house, I want to break the chain of poverty that has been handed within my family from generation to generation.

ElsieWhen she fell behind with her payments to the bank, the Registrar of the High Court – at the Bank’s insistence – granted default judgment against her for the outstanding amount of the debt. No judge was involved in the decision about whether to grant this order. This judgment meant that the house could be sold in execution, but the bank did not take further action because Ms Gundwana went to the bank and arranged to make two large payments to wipe out her arrears. She says she thought this meant that the bank would no longer seek to sell her house in execution.  

She continued paying the bank – as if the original mortgage bond was still in place – until 2007 when she again fell behind with her payments. She then learnt – on a return from a visit to her sister in Cape Town – that the house would be sold in execution. She promised the bank that she would pay the arrears of more or less R5000 and made an initial payment of R2000 to this effect, thinking that the bank would not go ahead with selling her house. She was wrong. Banks, so it seems, do not always adhere to the ethos represented by their advertisements. Two days after the bank took her R2000, it sold her house to Steko Development CC. An application was then made to evict her from her house.

Ms Gundwana resisted the eviction and also took steps to have the original order to have her house sold in execution rescinded. She was, unfortunately, not well served by various lawyers, but eventually received sound legal advice (even if I have to say so myself) and her case – in which she challenged the constitutionality of the rule that the Registrar of a High Court could declare immovable property specially executable when ordering default judgment under Rule 31(5) of the Uniform Rules of Court and that the house could then be sold – ended up in the Constitutional Court. (Full disclosure: my sister was the advocate who argued this case in the Constitutional Court and I provided legal advice.)

In Gudwana v Steko Development CC and Others the Constitutional Court (Froneman J writing for a unanimous court), declared this rule unconstitutional as it found that the rule infringed on the rights set out in section 26 of the South African Constitution. A similar rule relating to the Magistrate’s court had already been declared invalid in Jaftha v Schoeman several years ago, but banks were circumventing the Jaftha decision by approaching the Registrar of the High Court – even where the amount due would normally mean they would approach the Magistrates Court – to ensure that the Registrar would be able to grant default judgment against defaulters.

The legal problem in this case centred around the Supreme Court of Appeal (SCA) who, in its wisdom, had found in the case of Standard Bank v Saunderson that the principles set out in Jaftha v Schoeman would not ordinarily be applicable to mortgage bonds as such bonds were a very special kind of legal instrument. The SCA found that the Registrar was therefore constitutionally entitled to make execution orders when granting default judgment in cases where the debt arose out of a mortgage bond agreement and that a judge need not be involved in such cases. This reasoning of the SCA in the Saunderson was perplexing. It was almost as if it thought that certain common law rules and principles were so important for the economic well-being of the country that these were not subject to the discipline of the Constitution.

Section 26 of the Constitution clearly states that:

  1. Everyone has the right to have access to adequate housing.
  2. The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this right.
  3. No one may be evicted from their home, or have their home demolished, without an order of court made after considering all the relevant circumstances. No legislation may permit arbitrary evictions.

In Jaftha this was taken to mean that only a court (in this case the Magistrates Court) could declare immovable property executable, which they would do unless there were very good reasons not to. The Jaftha decision found that administrators could not make decisions which might lead to an individual losing access to housing or to being evicted from a house as this was prohibited by the Constitution.

Of course, section 26 of the Constitution should not be read as meaning that one would never have one’s house sold in execution if one did not pay one’s bond instalments in time. Bondholders have a duty to keep on paying their mortgage bonds. If one obtains a loan from a bank in the form of a mortgage bond and one does not repay the bond, then the bank would normally be able to convince the judge that default judgment should be granted and that the house over which the bond was registered could be sold in execution. Banks are entitled to take steps to make sure that bondholders pay their bonds.

But where the bank acts in a callous and unreasonable manner to force payment (for example where the bank wishes to sell the house in execution even where the amount outstanding is very small and other mechanism apart from selling a house in execution is available to force the bondholder to pay his or her debt) a court may well find that the granting of default judgment and the sale in execution should not proceed.

What is important is that there will now always be judicial oversight over this process. Banks won’t be able to go to the Registrar in the hope of obtaining a default judgment against the defaulter – even where that defaulter owes a few hundred Rand to the bank and may well pay back the amount owed  to the bank in the near future. Ms Gundwana’s legal battle is not over yet. Her lawyers will have to go back to the High Court to try and convince the court that the default judgment should not have been granted by the Registrar.  

But for now she can stay on in her house. I for one, am rather happy. Ms Gundwana, her attorney informs me, is ecstatic.

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