Firstrand Bank Limited t/a FNB Home Loans and Others, Ex Parte (25100/05) [2006] ZAGPHC 98; 2007 (3) SA 194 (W) (9 November 2006)

18

IN

THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISION)

CASE NO: 2005/25100

In the ex parte application of:

FIRSTRAND BANK LIMITED trading inter alia

As FNB HOME LOANS (formerly First National

Bank of Southern Africa Limited) First Applicant

THE SHERIFF OF BRAKPAN Second Applicant

THE SHERIFF OF SANDTON Third Applicant

THE ASSOCIATION OF SHERIFFS Fourth Applicant

JUDGMENT

GOLDBLATT J:

The applicants in this matter seek a declaratory order in terms of section 19(1)(a)(3) of the Supreme Court Act no 59 of 1959 as to when service by a sheriff in terms of Rule of Court 46(3) is to be construed as efficacious service and does not expose either the sheriff or the judgment creditor to a future possibility of an action for damages for want of compliance therewith. As will appear hereunder the problems in relation to the aforesaid Rule of Court have been occasioned by conflicting decisions in this court.

Rule of Court 46(3) reads:

“The mode of attachment of immovable property shall be by notice in writing by the sheriff served upon the owner thereof, and upon the registrar of deeds or other officer charged with the registration of such immovable property, and if the property is in the occupation of some person other than the owner, also upon such occupier. Any such notice as aforesaid shall be served by means of a registered letter, duly prepaid and posted addressed to the person intended to be served.”

In Sowden v ABSA Bank Limited and others 1996(3) SA 814 (WLD) Heher J at 820 I – 821H said:

“The applicant also denies receiving this notice. The applicant’s counsel has submitted that neither return meets the peremptory demands of Rule 46(3). The respondent submits that both notices are valid and effective.

While the effect of the second sentence of the subrule is no doubt to provide an expeditious means of serving a notice attaching immovable property so that the notice need not actually be served on the addressee to be effective, the provision does not in my view exclude the need for service altogether. So, for example, if the facts are that a prepaid registered letter addressed to the execution debtor has been posted and has thereafter been returned undelivered, there will have been no service within the terms of the subrule. Likewise, where such a letter travels only as far as the local post office of the debtor because there is no postal delivery to the residential address, the service required by the subrule will be incomplete. That is the situation in this case. To the extent that this conclusion is at variance with that reached by Lucas J in Wessels and Another v Brink NO and Others 1950 (4) SA 352 (W) I respectfully disagree with the learned Judge’s reasoning. The deputy sheriff is certainly not required to be an enquiry agent to pursue the debtor, as the learned Judge points out. Nevertheless, the subrule does not expressly or by necessary implication create an irrebuttable presumption of service upon mere proof of posting a duly paid registered letter addressed to the debtor. In its terms it requires service. If the fact that the debtor was fully aware of previous steps taken against him were sufficient to justify the deemed receipt of a notice which it is common cause has never been delivered, then there is in my opinion little reason to require posting of such a notice as is provided in Rule 46(3) to the debtor at all.

In any event, an important factor which distinguishes the applicant’s position from that of the debtor in Wessels’ case is that the applicant had made the first respondent aware of the deficiencies of the postal service and furnished to it a postal address at which he would receive notices sent by post. The deputy sheriff did not utilise that post office box but instead sent the letters to the street address, in my opinion a futile exercise.

It follows from the facts which are common cause that there was not, and could never have been service as contemplated by the second sentence of Rule 46(3) on 1 February 1994. As to the pinning of the notice to the principal door on 18 March, it was argued that this amounted to service authorised by Rule 4(1)(iv), service at a chosen domicilium. But the notices provided for in Rule 46(3) are not ‘process(es) of the Court directed to the sheriff’ which fall within Rule 4. Nor is the attachment of the property a ‘purpose under the bond’ within the meaning of clause 19. As I read the subrule, if service cannot be effected on the owner by the means provided in the second sentence, that is registered post, the only effective means of service is service ‘upon the owner’, ie personal service. According to that interpretation service on a domicilium would in any event not amount to compliance.

My conclusion on the second leg of the argument is that no valid notice of attachment has ever been served on the applicant as required by Rule 46(3). On this ground also the application must succeed. Compare Joosub v JI Case SA (Pty) Ltd (now known as Construction & Special Equipment Co (Pty) Ltd) and Others 1992 (2) SA 665 (N) at 672H-673E.”

Foxcroft J in Standard Bank South Africa Limited v Bundu Te Litho 1999 (volume 3) SA 979 (CPD) disagreed with the views expressed by Heher J and at page 903B – F said:

“On the example given by Heher J of the prepaid letter being addressed and returned undelivered, it seems to me that provided the letter has been posted to the address provided by the debtor, there will have been compliance with the Rule. In Sowden’s case, the Sheriff sent a letter by registered post to the street address which the post office refused to accept. The most cursory inquiry by the Sheriff from the applicant in the matter would have revealed that the Sheriff had chosen the wrong address. If he had sent a registered letter to the respondent at P O Box 1601, Jukskeipark, 2153 (the address chosen by the respondent) and it had been returned unopened, there would, in my view, have been proper service within the terms of the subrule. In that respect I disagree, with respect, with the view of Heher J. The learned Judge’s comment in regard to an undelivered letter was in any event an obiter dictum in that matter. Moreover, no delivery had been attempted. The post office had simply refused to accept the documents for registered posting. Indeed, the fact that Heher J went on at 821D-E to say that

‘in any event, an important factor which distinguishes the applicant’s position from that of a debtor in Wessel’s case is that the applicant had made the first respondent aware of the deficiencies of the postal service and furnished to it a postal address at which he would receive notices sent by post’

Indicates that he had no real quarrel with the result in Wessel’s case.”

Goldstein J in Stand 734 Fairland CC v Boe Bank Limited and Others 2001(4) SA 255 disagreed with Heher J’s reasoning. His view is set out in paragraphs 11 and 12 of his judgment which reads:

“[11]I find it unnecessary to decide whether Heher J’s reasoning n regard to the undelivered letter he speaks of in the example can be said to be obiter . If it is, I can overrule it if I think it wrong. And if such reasoning is not obiter the same position obtains because then I am confronted by two conflicting decisions – those in Wessels and Sowden – each of which would, in the absence of the other, bind me unless clearly wrong. Faced with this conflict I must simply apply the decision I think correct. See R v Sillas 1995 (4) SA 305 (A) at 311A.

[12] My problem then is to choose between the views of Heher J and those of Lucas J. Essentially the former demands actual service on the owner and the later what may be termed formal compliance with Rule 46(3). It seems to me that I ought to follow Lucas J and ought, respectfully, to decline to follow Heher J for the following reasons:

(1) Mr Marais, who appeared for the first respondent contended, correctly I think, that Lucas J’s judgment delivered in 1950 had for about 50 years regulated the interpretation of Rule 46(3) and its similarly worded predecessor and that despite amendments to the Rules over the year the Rulemaker has apparently been satisfied to leave Rule 46(3) in its present form.

(2) Lucas J’s reasons for distinguishing between the requirements of service when proceedings are instituted from those which obtain during execution appear to me to be sound.

(3) Rule 46(4) provides for the sale to take place in the district in which the property is situated and to be conducted by the Sheriff of that district. Giving effect to these provisions may well result in the owner hearing of the sale. This may well also be the result of compliance with the provisions of Rule 46(5), (6), and (9).

(4) The one month referred to in Rule 46(7)(a) expires ‘after service of the notice of attachment’. Rule 46(3) directs that the notice be ‘served upon the owner’ and the second sentence of the subrule provides that ‘such notice .. shall be served by means of a registered letter, duly prepaid and posted addressed to the person intended to be served.’ (My emphasis.) It is clear to me that the sale may occur one month after due posting and not after receipt of the notice. This conclusion is consistent with the provisions I have referred to and also with the words quoted from Rule 46(3) and especially those emphasised by me. It is clear too that posting of the letter constitutes service and, if this is so, receipt is unnecessary.

(5) I find support for my conclusion in Foxcroft J’s decision in Standard Bank and in his view that if in Sowden the letter had been sent to the address furnished by the owner and been returned unopened there would have been proper service.

It follows that the application must fail.”

The problems occasioned to both the sheriffs and judgment creditors by these conflicting decisions are set out in paragraphs 24 to 36 of the founding affidavit of this matter which reads:

“24. The First Applicant enters in the course of pursuing its core business, transactions which are directly related to the financing of immovable property usually in the form and guise of home acquisitions. In the course thereof the First Applicant loans and advances funds to various members of the public as borrowers, the latter utilising such funds so loaned and advanced by the First Applicant for the purpose of acquiring and paying for immovable property acquired by them. As a natural consequence of such home loan advances, the First Applicant makes such advances conditional upon the borrower, registering unto and in favour of the First Applicant a mortgage bond over the immovable property so purchased, as security in respect of the loan amount advanced.

25. The terms and conditions appertaining to the mortgage bond registered by a borrower unto and in favour of the First Applicant as mortgagee are detailed in the various mortgage bonds which are executed between the First Applicant and borrowing members of the public. A copy of the usual mortgage bond is not annexed hereto, in a bid to avoid the undue amassment of paper, but shall be made available to the above Honourable Court should the need therefore arise in the hearing of this application.

26. In the ordinary course, where such a borrower falls into arrears with the repayment of his monthly obligations and defaults, giving rise to the First Applicant foreclosing upon such borrower, the First Applicant utilises the machinery of our law, for purposes of instituting an action the ultimate intention thereof being to obtain a judgment against such borrower (in respect of the amount owing and to declare the mortgaged property executable, thereby relying upon the security held by the First Applicant). Such realisation, in the ordinary course, occurs by way of a Sheriff sale in execution of such property.

27. Consequent upon securing a judgment and order against the borrower, the First Applicant sets proceedings in motion, to sell the property concerned in realisation of its security.

28. To this end, following an order of the above Honourable Court, in favour of the First Applicant and against a defaulting borrower, the First Applicant proceeds, via its attorneys, to utilise the mechanisms laid down by the Uniform Rules of Court, so as to attach the relevant property concerned and to proceed to a sale in execution, in satisfaction of the judgment debt. The First Applicant thus and through its attorneys in each instance, instructs the relevant sheriff of the appropriate district of the above Honourable Court, to attach the immovable property concerned. In so doing the various sheriffs of the numerous districts of the above Honourable Court utilise the machinery and procedures laid down by the provisions of Rule 46(3) of the Uniform Rules of Court.

29. Once the First Applicant has been notified by its attorneys of record, that the relevant sheriff has attached the property and has served a notice of attachment in accordance with the dictates of Rule 46(3), the First Applicant incurs the expenses associated with securing a sale date for the property, consequent upon which it advertises the sale date and takes all further steps as are necessary to facilitate an auctioning of the property on the advertised sale date.

30. In consequence of the judgment of His Lordship Mr Justice Heher in the Sowden case, the practice has arisen by inter alia the Second Applicant, prior to selling the property at the sale in execution, to require from the First Applicant an indemnity in respect of the sale which is to take place. In respect of such indemnity the said Second Applicant requires an indemnity to the effect that all process has been duly complied with and that the notice of attachment has been properly served. The Second Applicant requires such an indemnity where he has utilised the mechanisms of Rule 46(3) and does so in consequence of the judgment of His Lordship Mr Justice Heher in the Sowden case. The Second Applicant’s request for an indemnity will occur in any instance where Rule 46(3) has been utilised and in circumstances where, either a postal delivery service is in place in the area where the borrower has been served with such notice of attachment, or in circumstances where it is unknown to the Second Applicant at the time of the sale whether or not such notice has been received by the intended recipient, alternatively, in circumstances where the Second Applicant knows at the time of giving effect to service of the notice of attachment (in accordance with the provisions of Rule 46(3) that there is no postal delivery service offered in the area in which the debtor and/or occupier and/or other persons referred to in Rule 46(3) resides.

31. The First Applicant is in such circumstances most constrained to give such an indemnity, in that the net effect of same would be that it could render the First Applicant liable to damages were it to be in due course found that there was improper service or at least that service as required by Rule 46(3) had not occurred. The First Applicant finds itself in an invidious position in that although having proceeded and taken all such legal steps as are required to secure judgment against the borrower, the property sold by a sheriff of the above Honourable Court (following the requirements laid down by the Rules) may be set aside in consequence of the interpretation given to Rule 46(3) in the Sowden case.

32. Given the aforesaid concerns, the First Applicant declines to grant such an indemnity to the Second Applicant, which inevitably and invariably results in the scheduled sale being cancelled. The cost implications and attendant further delays occasioned to the First Applicant in consequence of such cancellation, are with respect easy to appreciate.

33. Although there are judgments pronouncing upon whether or not His Lordship Mr Justice Heher in the matter of Sowden was correct his findings, the position is such (absent a pronouncement to the contrary) that the First Applicant is required to either indemnify the Second Applicant alternatively to proceed to apply to the above Honourable Court and/or any other local or provincial division of the High Court of South Africa, with a view to obtaining service directives in respect of the notice of attachment. This procedure obliges the First Applicant to incur the costs associated with the bringing of an ad hoc application and causes undue delay in the execution of the judgment. The bringing of a substantive application (for service directives) in each such instance, adds to the costs of the litigation, for the First Applicant and the borrower, given that the mortgage bond provides that al such costs occasioned to the First Applicant in pursuing its legal entitlement will be borne by the borrower on an attorney and client scale. All the while that the judgment remains unsatisfied, the interest payable in respect of the judgment debt secured, continues to escalate and causes consequent prejudice to the borrower.

34. In consequence of the second leg of the judgment of His Lordship Mr Justice Heher in the matter of Sowden, it is not a course open to the First Applicant to take all steps as it my believe prudent so as to avoid the above situation. The First Applicant may not seek to effect service of the notice of attachment (over and above having complied with the provisions of Rule 46(3)) in accordance with the provisions of Rule 4 of the Uniform Rules of Court. His Lordship Mr Justice Heher in the matter of Sowden held such service to be improper in the circumstances, finding that a notice of attachment does not qualify as process of Court directed to the Sheriff, in consequence of which the provisions of Rule 4 of the Uniform Rules of Court are not of application. The First Applicant cannot circumnavigate the difficulties that have been described above, by simultaneously with service of the notice of attachment (in accordance with the provisions of Rule 46(3)) serve such process utilising the mechanisms provided by Rule 4 so as to ensure that every effort has been made to serve the notice of attachment on the intended recipient. If the judgment of His Lordship Mr Justice Heher in the Sowden case is to followed to its logical conclusion, the effect hereof would be that any judgment creditor who has furnished to a sheriff instructions to attach immovable property would be constrained to wait for a return of service or non-service of the warrant of attachment before being able to motivate an ad hoc application.

35. The predicament of the Applicants is as follows:

35.1 Despite obtaining judgment and utilising the mechanisms afforded it by the provisions of our law, a Sheriff who has sold a property in the circumstances described above, may face a challenge in regard to the validity of such sale in due course, were a bona fide attachment to be returned with a non-service after such service was thought to have initially taken place. This would impact directly upon the First Applicant.

35.2 The Second and Third Applicant inform me that it is not uncommon for them to receive from the post office well after a sale in execution has taken place, notice that the registered letter in respect of which the notice of attachment was sent to the intended addressee, has been returned unclaimed, this in circumstances where a postal delivery service operates within the area where the intended addressee resides.

35.3 In addition it is often the case that given the requirements of Rule 46(3) and in circumstances where a Sheriff knows that there is no postal delivery service in the area of the intended addressee, that he nonetheless complies with the provisions of Rule 46(3) uncertain of whether the notice of attachment may in due course be returned undelivered, given that no postal delivery service operates within the area of the intended addressee.

35.4 In such circumstances the ability of the First Applicant to act in such a manner as to take all steps prudently and reasonably possible to avoid the aforegoing is constrained by the reasons given in the Sowden case. One can appreciate that were the First Applicant to endeavour to take pre-emptive action so as to avoid the aforegoing it would be constrained in doing so (over and above the aforegoing financial and practical implications) by virtue of the following:

35.4.1 Assuming that the First Applicant intended to bring an application for substituted service simultaneously with the issuing of a notice in terms of Rule 46(3) so as to allow for service by means of an alternative method, the First Applicant would be unable in its founding affidavit to motivate such an application in that it would not have sufficient evidence and would not be able to definitively inform the Court whether or not service of such nature is required.

35.4.2 The First Applicant would be unable to motivate substituted service, it being unable to inform the Court definitively whether or not the notice of attachment served in terms of Rule 46(3) has or has not been delivered to the intended addressee.

35.5 In the result the First Applicant becomes locked in to see through the procedure of Rule 46(3). The difficulty however, is that it may well occur that after an initial return of service to the warrant of execution is received, the sheriff may in due course advise an execution creditor that the letter under cover of which the writ has been sent has been returned unclaimed. There is no saying as to how long this may take to eventuate, if at all. In the interim, the likes of the First Applicant are faced with a dilemma as to whether or not they should sell the attached property or wait for an unfavourable return, in circumstances where this may never arise.

36. The effect of the Sowden judgment operates on a daily basis and affects the ability of the First Applicant to realise its security consequent upon having obtained default judgment, and where it does so realize the property it faces the possibility that such sale may in due course be set aside. In addition the Sowden judgment has impacted upon the ability of the Second to Fourth Applicants to formulate a clear policy and implement the appropriate manner of service where the attachment of immovable property is concerned.”

In my view the second sentence of Rule of Court 46(3) is imperative and upon compliance therewith the notice by the sheriff has been served. The only caveat I would add is that the letter must be addressed to an address chosen by the addressee or an address which the sheriff either personally or through acceptable evidence knows to be the address of such party.

Rule of Court 46(7) (a) provides that:

“`The sheriff shall appoint a day and place for the sale of such property, such day being, except by special leave of a magistrate, not less than one month after service of the notice of attachment.”

Thus in order to give effect to this Rule the sheriff must know when service of the notice of attachment took place. If this depended on knowing when and if the addressee of the notice received such notice it would create considerable uncertainty and difficulty in fixing a date for the sale. This could not have been the intention of the drafters of the Rule and they must have intended service in terms of Rule of Court 46(3) to mean that service occurred on the posting of the registered letter referred to in such Rule.

I further agree with the reasoning both of Foxcroft J and Golstein J in the cases cited above and I am accordingly satisfied that the views expressed by Heher J in the Sowden case do not reflect a proper interpretation of Rule of Court 46(3).

In my view the note to Rule of Court 46(3) in “Superior Court Practice” is a proper interpretation of the Rule. Such note reads:

“ ’Shall be served by …registered letter’. The notice must be served by means of a registered letter, addressed to the person intended to be served. Where the sheriff, in attaching immovable property, sends a notice of attachment to the owner and the occupier of the property attached and to be sold in execution by prepaid registered post, in formal compliance with the subrule, there will have been proper service of the notice of attachment and substantial compliance with the subrule, even though the owner or occupier might not have received the notice of attachment. Posting of the letter constitutes service and receipt thereof is unnecessary . If the notice is addressed to a domicilium citandi et executandi chosen by the debtor this will be a sufficient compliance with the subrule. A party who has notice of the proceedings and fails to notify the creditor of a change of address, cannot impugn an attachment if the registered letter is sent to him at the address which appears in the papers in which judgment has been given. Where no domicilium has been chosen and the debtor’s whereabouts are unknown, application will have to be made to court for directions in regard to service. A notice under the subrule is not ‘process of the court directed to the sheriff’ and cannot therefore be served in accordance with the provisions of rule 4(1)(iv).”

With regard to the finding by Heher J that the notice referred to in Rule of Court 46(3) is not a process as referred to in Rule of Court 4 I am satisfied that he was correct. Rule of Court 4(1)(a) specifically refers to: “any process of the court directed to the sheriff” and “ any “document initiating application proceedings”. A notice to be given by the sheriff clearly is not covered by these descriptions and thus Rule of Court 4 cannot apply to such notice.

I will accordingly make the following order:

It is declared that:

1. Service in terms of Rule of Court 46(3) takes place upon post by pre-paid registered post of a letter containing the requisite notice to the address of the person intended to be served. Such address shall be either the address chosen or furnished by the addressee as such person’s address or the actual postal address of such party.

2. A notice in terms of Rule of Court 46(3) cannot be served, in the absence of an appropriate order of court, in terms of Rule of Court 4.

_____

LI GOLDBLATT

JUDGE

OF THE HIGH COURT

I agree

____

P

BORUCHOWITZ

I agree

________

M

TSOKA

JUDGE OF THE HIGH

COURT

Counsel for applicant: Adv N Konstantinidis

Instructed by: Van Hulsteyns Attorneys