Firstrand Bank Ltd v Registrar of Deeds, Pretoria and Others (44146/2021) [2021] ZAGPPHC 631 (24 September 2021)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

Case number: 44146/2021

Date of hearing: 21 September 2021

Date delivered: 24 September 2021

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

REVISED

In the matter between:

FIRSTRAND BANK LTD Applicant

and

THE REGISTRAR OF DEEDS, PRETORIA First

Respondent

L'ESTREUX PROPERTIES (PTY) LTD Second

Respondent

CHRISTO MYBURGH Third

Respondent

SABI SABI (PTY) LTD Fourth

Respondent

JUDGMENT

SWANEPOEL AJ:

INTRODUCTION

[1] This application came before me as one of urgency. Applicant seeks the following relief:

[1.1] That first respondent ("the Registrar") be authorized and ordered to transfer Portion 286 (a portion of Portion 74) of the Farm Rietfontein No. 375, Registration Division J.R, the Province of Gauteng ("the property"), held by Deed no. 71409/13 measuring 1, 1020 hectares in extent, in terms of section 56 (2) of the Deeds Registries Act, Act 47 of 1937 ("the Act").

[1.2] That second respondent be ordered to consent to the cancellation of its mortgage bond (B43173/13) or to release the property from its mortgage bond within 5 days of the order.

[1.3] Costs on the attorney/client scale.

[2] Second respondent ("L'Estreux") is the erstwhile owner of the property, having sold the property to third respondent ("Myburgh") on 1 May 2013. Myburgh's purchase of the property was funded by a loan provided by applicant ("Firstrand") for R 8 000 000.00. A first mortgage bond was registered over the property in favour of Firstrand on 12 September 2013.

[3] Apparently unbeknown to Myburgh and Firstrand, a second mortgage bond was registered simultaneously with the first mortgage bond, on the same day, for a sum of R 500 000.00, and in favour of L'Estreux.

[4] Myburgh has subsequently run into financial difficulties and on 14 February 2021 he executed a special power of attorney appointing Firstrand to dispose of the property. Firstrand in turn appointed auctioneers to dispose of the property, and on 5 June 2021 the property was sold to fourth respondent, Sabi Sabi, for R 6 200 000.00. Myburgh is indebted to Firstrand for the sum of R 8 359 010.60. It is expected that the sale will yield R 5 936 222.29, which leaves a substantial deficit owing to Firstrand.

APPLICANT'S CASE

[5] L'Estreux has refused to consent to the cancellation of the second mortgage bond. Firstrand brings this application in terms of section 56 (1) (c) of the Act which provides:

"(1) No transfer of mortgaged land shall be attested or executed by the registrar, and no cession of a mortgaged lease of immovable property, or of any mortgaged real right in land, shall be registered until the bond has been cancelled or the land, lease, or right has been released from the operation of the bond with the consent in writing of the holder thereof or unless, in the case of any such bond which has been lost or destroyed, the registrar has on application by the registered holder thereof, cancelled the registry duplicate of such bond: Provided that no such cancellation or release shall be necessary if the transfer or cession is made-

(a) …

(b) …

(c) in any circumstances in this Act or in any other law specially provided or as ordered by the court." (emphasis added)

[6] Firstrand seeks an order in terms of section 56 (1) (c) of the Act, authorizing the registrar to cancel the mortgage bonds, and to transfer the property to Sabi Sabi.

[7] The second bond, in favour of L'Estraux, contains a non-prejudice clause which reads:

"That the following shall be conditions of this bond to which the rights of the mortgagee shall always be subject:

a) This bond shall in no way interfere with, prejudice or affect the rights and preference of Firstrand Bank Limited ("the Bank'') under any prior ranking mortgage bond passed by the mortgagor in favour of the Bank over the mortgaged property, which rights and preferences shall be and remain in all respects as if this bond has not been passed;

b) …

c) The mortgagee shall hand this bond to the Bank who may retain possession thereof until this bond or the bonds in favour of the Bank are paid off and cancelled."

[8] Firstrand bases its application on three grounds:

[8.1] Firstly, it says that the non-prejudice clause allows it to seek the cancellation of the second mortgage bond in these circumstances.

[8.2] Secondly, it contends that the non-prejudice clause contains a stipulatio alteri in its favour, which it has accepted.

[8.3] In the alternative Firstrand says that a tacit agreement has been concluded between it and L'Estreux which allows it to seek the cancellation of the latter's mortgage bond in these circumstances.

[9] As an aside, I must mention an aspect which is not directly relevant to the point to be decided, but which strikes me as strange. Myburgh denies that he is liable to "L'Estreux at all, and he denies the validity of the second mortgage bond. Upon the attorney for L'Esreux being asked to explain the nature of the underlying debt, he replied that it was related to property of L'Estreux which remained on the property, and which Myburgh had refused to return to L'Estreux.

[10] The mortgage bond, however, tells a different tale, as it records that the underlying debt is "monies lent and advanced". Whatever the debt may be is not relevant to these proceedings, but it does seem that Myburgh has reason to question his alleged indebtedness to L'Estreux. A further aspect that is strange is that the deponent to the answering affidavit is L'Estreux' attorney, Naude, who has no personal knowledge of the underlying debt, nor, presumably, of the circumstances leading up to the registration of the second bond. One wonders why a director of L'Estreaux did not depose to the affidavit, especially given the fact that Firstrand squarely disputed Myburgh's indebtedness to L'Estreux.

CONDONATION FOR LATE FILING OF THE ANSWERING AFFIDAVIT

[11] At the outset L'Esteux sought condonation for the late filing of its answering affidavit. The affidavit was filed on the eve of the hearing. L'Estreux had been served with the application on 1 September 2021, which means that it took three weeks to file its answering affidavit. In the meantime it engaged in dilatory tactics. It delivered a rule 7 notice challenging Firstrand's attorney's authority to act in the matter. It did so without one shred of an indication that the attorney may not be authorized to act. Naude alleged that due to the prevalence of fraud he thought it would be best to delivered the notice. That explanation makes no sense whatsoever, and there was no reason for the attorney to suspect fraud on the part of Firstrand's attorneys. Naude received the rule 7 reply on 16 September 2021, notwithstanding which he only uploaded the affidavit on 21 September 2021. The explanation that he had to take "urgent" instructions on whether to oppose is devoid of merit.

[12] L'Esreux also delivered a rule 35 (3) notice, which smacks of delaying tactics, and when it received the requested documents, Naude did not, on his own version, even peruse the documents before filing the answering affidavit even though he had a number of days to do so. I am convinced that he was simply trying to delay the matter.

[13] It consequently seems to me that L'Estreux deliberately delayed the delivery of an answering affidavit. It's explanation, that it was waiting for the rule 7 reply, and for the requested documents does not properly explain the delay. It could have delivered an answering affidavit within the time frames set by Firstrand, while still reserving its rights to supplement on receipt of the documents.

[14] Condonation is not had simply for the asking:

"An applicant for condonation must give a full explanation for the delay. In addition, the explanation must cover the entire period of the delay. And, what is more, the explanation given must be reasonable[1]

[15] Consequently, I decline to grant condonation for the late filing of the answering affidavit. The application will be decided on the facts set out in the founding affidavit.

EVALUATION

[16] L'Estreux has argued that the matter is not urgent, and that the accrual of interest does not justify an urgent application being brought. The notion that commercial urgency is somehow less serious than any other urgency was dealt with in Twentieth Century Fox Film Corporation v Anthony Black Films (Pty) Ltd[2]. Myburgh's debt is substantial, as is the interest that is accruing. Furthermore, Firstrand has specifically stated that Sabi Sabi may cancel the sale is there is an undue delay. There is no evidence to gainsay that averment.

[17] In my view the non-prejudice clause is dispositive of the application. L'Estreux has argued that it had the right to be advised of the sale in advance, and to interrogate the sale to determine whether it was a bona fide transaction at a fair market related purchase price.

[18] Firstly, I see no basis for such a right. Firstrand's bond ranks first, and it is entitled to enforce its rights as if the second mortgage bond does not exist. Secondly, there is no basis to believe that the sale was anything other than bona fide. Firstrand appointed an independent auctioneer to sell the property. I have no doubt that Firstrand was anxious to achieve the best possible price for the property, and that it would not have agreed to the sale if the price was not market related. In my view Firstrand's case is unassailable. Consequently, I do not have to make a finding on the other two grounds on which Firstrand bring the application.

[19] I have been asked by Firstrand's counsel to award punitive costs. Such cost orders are not easily granted, but if circumstances warrant, then a Court should not hesitate to impose a punitive costs order. Such orders are granted when a party has been vexatious, reckless, malicious, dishonest or frivolous[3].

[20] I have expressed my views with the manner in which this case has been conducted by L'Estreux. However, I do not easily impose punitive costs orders, and I am not convinced that the conduct of L'Estreux' has satisfied the test for such costs.

[21] In my view the manner in which the relief is sought in the notice of motion may not achieve the desired purpose. I will therefore craft a different order.

[22] Consequently I make the following order:

[22.1] The first respondent is authorized and ordered, in terms of section 56 (2) of the Deeds Registries Act, Act 47 of 1937, to cancel the mortgage bond in favour of second respondent with number B 43173/13, over Portion 286 (A portion of Portion 74 of the Farm Rietfontein 375, Registration Division JR, The Province of Gauteng, measuring 1,1020 hectares (hereinafter referred to as "the property").

[22.2] The first respondent is authorized and ordered to effect transfer of ownership of the property to fourth respondent without second respondent's consent to the cancellation of the mortgage bond referred to in paragraph 22.1 above being required.

[22.3] Second respondent shall pay the costs of the application

Swanepoel AJ

Acting Judge of the High Court,

Gauteng Division, Pretoria

Delivered: This judgement was prepared and authored by the Judge whose name is reflected and is handed down electronically by circulation to the Parties/their legal representatives by email and by uploading it to the electronic file of this matter on Caselines. The date for hand-down is deemed to be 24 September 2021.

COUNSEL FOR APPLICANTS: Adv. M. De Oliveira

ATTORNEY FOR APPLICANTS: Jason Michael Smith Inc.

COUNSEL FOR RESPONDENTS: Adv. C. Avidon

ATTORNEY FOR RESPONDENTS: WN Attorneys Inc.

HEARD ON: 21

September 2021

JUDGMENT ON: 24

September 2021

[1] Van Wyk v Unitas Hospital and another (Open Democratic Advice Centre as amicus curiae)2008 (4) BCLR 442: See also: Tasima (Pty) Ltd v Department of Transport and others [2016] 1 ALL SA 465 (SCA)

[2] 1982 (3) SA 582 (W) at 586 G

[3] See: Van Loggerenberg, Erasmus' Superior Court Practice 2nd Ed D 5 22 and the authorities quoted).