Huysamen and Another v Absa Bank Limited Others (30626/2015) [2017] ZAGPPHC 611 (14 August 2017)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN

THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

CASE NO: 30626/2015

REPORTABLE

OF

INTEREST TO OTHER JUDGES

REVISED

14 AUGUST 2017

In the matter between:

HUYSAMEN,

WILHELM GEORGE First

Applicant

HUYSAMEN,

CONSTANTIA TONIA Second

Applicant

and

ABSA

BANK LIMITED First

Respondent

KOLMAN, JAROD Second

Respondent

DU PLESSIS, PHILIP Third

Respondent

REGISTRAR OF DEEDS, PRETORIA Fourth

Respondent

SHERIFF,

SANDTON SOUTH Fifth

Respondent

INVESTEC

BANK LIMITED Sixth

Respondent

Dates of Hearing Date of Judgment

15 May 2017

14 August 2017

JUDGMENT

MANAMELA, A.J

Introduction

[1] This is an application premised on the provisions of section 5(1) of the Insolvency Act 24 of l 936 (the Insolvency Act)[1] for determination of the lawfulness or validity of the sale in execution of property of the estate of a judgment debtor after publication of a notice of surrender in terms of section 4 of the Insolvency Act. The sale followed default in or breach of the

repayment terms of a mortgage bond-backed loan agreement by the first and second applicants (the applicants). The loan agreement was concluded between the applicants and first respondent (ABSA).

[2] As a result of the breach of or default in the repayment terms of the loan agreement. ABSA obtained judgment by default against the applicants. Consequently, the fifth respondent. as the Sheriff with jurisdiction, sold the property of the applicants at a sale in execution (or public auction), after ABSA had obtained another order declaring the property specially executable. The notice for the sale in execution was served on one of the applicants, personally, on the same date the applicants issued the applications for the voluntary surrender of their respective estates.[2] The next day. the notices of surrender of the applicants· estates appeared in the government gazette. The sale in execution was held four days later, whereat, the second and third respondents (the purchasers) bought the property be longing to the applicants.

Registration of title to the property in the names of the purchasers took a while and was only effected by the fourth respondent, as the Registrar of Deeds, some 17 months after the sale in execution.

[3] As scantily indicated above, the applicants primarily contend, in terms of this application, that the sale in execution was in contravention of the provisions of section 5(1) of the Insolvency Act. They pray that the sale transaction be reversed and the property re­ transferred to them. This application is opposed by ABSA and the purchasers.

[4] Apart from the main application, for the reversal of the sale i n execution and its effects, there are other ancillary issues to be determined. The ancillary issues arose due to the subsequent transfer of the property into the names of the purchasers, following the sale in execution. One of the issues to be determined, in this regard, is the applicants' contention that transfer of the property was in breach of a settlement agreement between the applicants or their daughters and ABSA. On the other hand, ABSA has filed a counter application seeking ratification of the sale. There is also an application for the eviction of the applicants from the property by the purchasers, in assertion of the purchasers' rights as registered owners of the property. The latter application is conditional upon the applicants being unsuccessful with regard to the reversal of the sale in execution. The applicants oppose both applications.

[5] This matter came before me in the Third Court on 15 May 2017 and I reserved this judgment, after listening to Mr SJJ van Rensburg,

appearing for the applicants; Mr P Stais SC, appearing with Mr N Horn for ABSA Bank, and Mr M Oppenheimer, appearing for the purchasers.

The fourth, fifth and sixth respondents are not taken part in these proceedings.

[6] The issues requiring determination by this Court are discussed, below, under self-titled paragraphs, immediately after a brief

background to the issues. I agree with the view, expressed as being common cause. by Messrs Stais SC and NJ Horn, for A BSA, that the issue of the reversal of the sale and transfer enjoys priority over the other issues and may probably be dispositive of the other issues.[3] But, whether or not this is indeed common cause between the parties is immaterial for current purposes. It is not necessary to make a finding in this regard, as I will individually deal with all the issues in terms of the respective applications. Next, I will endeavour to briefly reflect the material relevant as a background to the issues, only to the extent that, the facts are common cause between or amongst the parties.

Brief relevant background

[7] The applicants, were until the transfer to the purchasers after the sale in execution, the owners of Erf […] Johannesburg, already referred to as "the property"'. ABSA had passed or registered three mortgage bonds over the property i n the following sums: the first bond for a capital sum of R850 000.00, plus an additional sum of R 170 000.00; the second bond for a capital sum of R224 500.00. plus an additional sum of R44 900.00, and the third and final bond for a capital sum of R500 000.00, plus an additional sum of R 100 000.00.

[8] At some stage. the applicants appear to have run into some difficulties in the repayment of the loans and fell into arrears in respect of the mortgage bond loan agreements, mentioned above. Consequently, ABSA, as already mentioned, obtained default judgment

in an amount of R1 691 958.34 on 16 April 2012. ABSA subsequently, on 28 February 2013, obtained another order from this Court, in terms of Uniform Rule 46(1), declaring the property specially executable. The latter application was unsuccessfully opposed by the applicants.

[9] On 3 May 2013. A BSA caused a writ of execution to be served on the applicants. Thereafter, on 31 May 2013. sale in execution was advertised. The sale in execution was scheduled to take place on 1 8 June 2013. On 13 June 201 3, the applicants were notified of the date of the sale. The sheriff s return of service of the notice in this regard states that the notice was served on the first applicant personally and on behalf of both applicants.

[10] On the other hand, the applicants began formal steps towards the voluntary surrender of their individual estates. The applicants are married to each other out of community of property. They issued their individual applications on 13 June 2013, which date obviously

coincided with the date of the service of the notice of sale in execution, upon them. The notices of surrender appeared in the

government gazette of 14 June 2013. lt is also common cause that for the applicants to have been able to publish notice of surrender on that date, they would have to have submitted the necessary documents to the government printers by no later than the preceding Friday, on 07 June 2013.

[11] The sale in execution of the property. by the fifth respondent , as the Sheriff, took place on 18 June 2013. as scheduled. by way of public auction. The purchasers were the successful bidders at the auction. The sixth respondent (Investec), loaned the purchasers part of the purchase price for the property. Later on. the purchasers received transfer of title in the property and are said to have also on-sold the property to a third-party.

[12] On 19 June 2013, the applicants' attorneys sent by post or registered post notices of surrender of the applicants respective estates to ABSA, as a creditor. as required in terms of the provisions of the Insolvency Act.[4] In terms of the notices of surrender, the voluntary surrender applications were enrolled for hearing on 1 1 July 2013. But, on the date of the hearing, the application was postponed to 05 September 20 l 3. On 05 August 201 3, the applicants' attorneys sent a letter to the sheriff and ABSA's attorneys, in terms of which, they advised their counterparts of the publication of the notice of surrender and the implications of sect ion 5( I ) of the lnsolvency Act on the sale in execution. On 05 September 2013, the hearing was again postponed to 06 November 201 3.

[13] On 01 November 2013, the applicants filed applications to intervene in the respective applications for the voluntary surrender of the estates of the applicants. By agreement between the parries the applications for voluntary surrender were postponed sine die to allow the parties involved to exchange pa pers. As a result, on 06 November 2013, the voluntary surrender applications were again postponed sine die to allow the parties to finalise the exchange of papers. The applicants are opposing ABSA ·s intervention application. Therefore, both the voluntary surrender and intervention applications are still pending before Court.

[14] During August to October 2014, the applicants and ABSA, through their respective attorneys. exchanged correspondences regarding the possible settlement of the dispute between them. This was initiated by the applicants, through a letter dated 14 August 201 5 directed to a firm of attorneys previously acting for ABSA. The response to that letter was on 14 October 2014, in terms whereof ABSA. accepted the settlement offer made by the applicants. However. there were further engagements in the form of correspondences between the parties, and ultimately ABSA withdrew from the agreement. As indicated above, one of the issues to be determined in this matter. apart from the main issue regarding the reversal of the sale in execution, is whether or not settlement had been reached between the applicants or the applicants' daughter(s), on the one hand, and ABSA, on the other, including whether ABSA was entitled to withdraw from the settlement agreement. if any. All these will be dealt with below, once I conclude on the background issues co the matter.

[15] On 1 8 November 2014. the title in the property was transferred and registered i n the name of the purchasers. As already indicated,

Investec loaned the purchasers money to finance part of the purchase price of the property. Investec appears to have also registered a mortgage bond over the property. On 1 9 November 2014. the purchasers' attorneys advised the applicants attorneys of the transfer and registration of title to the property in the purchasers' names. Thereafter, correspondences were exchanged between the respective attorneys with regard to the validity of the transfer.

[16] The applicants were not only taken aback. but actually dissatisfied with the transfer of their property to the purchasers, the first time they learnt of same. Be that as it may, on 03 February 2015, A BSA's attorneys advised the applicants· attorneys that they will bring an application to 'rectify" (or reverse) the transfer as it was made in error. The undertaking to ''rectify"' was repeated in subsequent correspondences. However, on 26 March 2015, the current attorneys of record for ABSA, advised the applicants'

attorneys that there will be no “rectification”.

[17] On 30 April 201 5, this application was launched. Thereafter, on 30 June 2015. Investec joined the proceedings, as the sixth respondent. However, Investec is not taking an active part in the matter.

[18] There, also, appears to have been previous enrolment or hearing of this application. although it does not appear that anything. material for current purposes. was recorded. Next. I turn to the issues to be determined under self-titled subparagraphs.

Section (5)(1) of the Insolvency Act 24 of 1936 and the sale of the property

[19] Evidently from above, the main application hinges upon the interpretation or application of section 5(1) of the Insolvency Act. The material orders sought by the applicants in terms of the main application are as follows:

1. That the sale in execution of the property known as Erf [...] Johannesburg. ("the property") which took place on 18 June 2013 be declared to have been unlawful and that it be set aside.

2. That the transfer or the property known as Erf [...] Johannesburg, ('·the property") to the Second and Third Respondents be set aside and cancelled and that the property be re-transferred to the Applicants.

…

6. That the Second and Third Respondents be interdicted from selling, alienating. encumbering or transferring the property pending finalisation of this application and the re-transfer of the property to the Applicants.”[5]

[20] As indicated above, the applicants issued the applications for the voluntary surrender of their individual estates on 13 June 2013. The very next day, on Friday, 14 June 2013, the applicants published the notice of surrender of their estates[6] in the government gazette and local newspaper. The sale in execution was held four days later on Tuesday, 18 June 2013. The aforementioned

four days included a Saturday and Sunday.

[21] It is common cause that the applicants or their attorneys had not yet served the voluntary surrender applications or otherwise notified ABSA or its attorneys of the intention to surrender, apart from publication of the notice of surrender in the government gazette and newspaper. However. the applicants sent a notice in terms of section 4(2) of the Insolvency Act[7] to ASSA on 05 August 2013 contending that the provisions of section 5(1) of the Insolvency Act proscribe the sale in execution. Obviously, this was after the sale in execution or public auction by the sheriff had already taken place. By this, I should not be understood to be implying that there was a duty or obligation on the part of the applicants to act otherwise. I will revert to deal directly with this aspect. below.

[22] The essence of the dispute in this matter is the determination of the effect of the publication of the notices of surrender on the sale in execution in terms of section 5(1) of the Insolvency Act. This provision reads in the material part:

'"(1) After the publication of a notice of surrender in the Gazelle in terms of section/our, it shall not be lawful to sell any property of the estate in question, which has been attached under writ of execution or other process, unless the person charged with the execution of the writ or other process could not have known of the publication: Provided that the Master, if in his opinion the value of any such property does not exceed R5000. or the Court, if it exceeds that amount, may order the sale of the property attached and direct how the proceeds of the sale shall be applied.''

[underlining added for emphasis]

[23] The applicants contend that the sale in execution and transfer of the property should be reversed, as they are prohibited by provisions of section 5(1) of the Insolvency Act. As indicated above, it is common cause between or amongst the parties that the sale in execution took place on 18 June 2013, being after the publication of the notices of surrender by the applicants on 14 June 2013. It is further common cause that, despite the Sheriff and ABSA or its attorneys becoming aware of the voluntary surrender applications, the transfer of the property was allowed to proceed and to consummate with registration of title in the names of the purchasers, more than a year later on 18 November 2014.

[24] The transfer of the property into the names of the purchasers was effected, despite the fact that A BSA and its attorneys also

undertook to rectify the situation by obtaining a court order for authority to re-transfer the property to the applicants. Also, the transfer was effected apparently despite the applicants and AOSA concluding a settlement agreement in terms whereof the applicant's

daughter was to purchase the property. More on this under a different heading below. For now, what is to be determined is whether or not the sheriff and by extension ABSA, were prohibited from selling the property in execution, due to operation of the provisions in section 5(1).

[25] The applicants rely on the decision by the Supreme Court of Appeal in the matter of Fourie and Another /\NO v Edkins.[8] The facts in Fourie v Edkins.as gleaned from the judgment of the Supreme Court of Appeal (the SCA), were briefly as follows. ABSA, coincidentally also a party in this matter, as the registered bondholder in an amount of R530 000 in respect of property of the judgment debtor. sold the property in execution after obtaining default judgment and an order declaring the property specially executable. The property was sold by the sheriff to Edkins on 03 August 2010 for an amount of R11 00 000. On 06 August 2010, a notice of surrender of the debtor's estate was published in terms of the provisions of the Insolvency Act. Subsequently, an order for the voluntary surrender of the debtor's estate was made by this Court on 03 September 20 I 0. Fourie and others we appointed, initially as provisional trustees on 02 August 2011 and as final trustees on 03 September 201 1. At all material times, the applicants and the sheriff were completely unaware of the notice of surrender and order for the voluntary surrender of the debtor's estate. When, Edkins proceeded to register the property in his name, he was advised that through internal resolution of the Registrar of Deeds, no registration is allowed where the debtor is sequestrated after a sale in execution. Faced with

this. Edkins approached South Gauteng High Court, Johannesburg (as it was known then) for an order validating the sale agreement concluded with the sheriff and authorising registration of title to the property, in his name. The relief was granted. The court found that the sale agreement was concluded before publication of notice of surrender. thereby suggesting that it was a lawful sale which did not breach the provisions of section 5(1) of the Insolvency Act. As reasons for the aforementioned finding. the court held that "the insolvent new that ABSA had foreclosed on the loan and that there was a pending sale in execution, but deliberately waited until after the sale in execution, to publish his intention to surrender his estate'' and ·'the insolvent had no authority over the property and that the appellants [i.e. Fourie and his fellow joint trustees] had no right to prevent the transfer of the property into the name of Edkins.[9] The aforementioned decision was consequently reversed on appeal by the SCA and thus, the sale agreement could not be proceeded with.

[26] The facts and legal principles involved in Fourie v Edkins are distinguishable from those in this matter, but there is valuable guidance in the decision. The SCA held i n Fourie v Edkins that the purpose of section 5(1) of the Insolvency Act is to protect creditors against dissipation of the assets in the insolvent estate by anyone, including the insolvent debtor.[10] However, the court held that section 5(1) was irrelevant to the facts in that case ·'as the sale. although the execution thereof was incomplete, took place before the publication”.[11] For, its finding upholding the appeal, the SCA held that Edkins ought not to have relied on the provisions of section 5(1), but section 20(1)(c), also of the Insolvency Act, as upon sequestration of the debtor" s estate, the property of the debtor (which includes property under attachment or proceeds thereof), first, vest in the Master of the High Court and thereafter, in the appointed trustees.

[27] The SCA, still in Fourie v Edkins, further held that ownership of attached immovable property does not pass during the sale in execution, but only upon formal registration of transfer into the name of the purchaser. The SCA relied, in this regard, on the decision of Simpson v Klein NO and Others[12] and made the following remarks in conclusion of its judgment:

"I therefore conclude that upon publication of a notice in terms of s 4(1) of the Act. the provisions of s 20(1)(c) and (2)(a) immediately come into operation. The effect thereof is that control of the insolvent estate vests in the master until a trustee has been appointed. and thereafter the estate will vest in the trustee . Ownership, however, remains with insolvent debtor. (See Liquidators Union. Simpson, Shalala, etc, supra.) Once a concursus creditorum has been established nothing may be done by any cred it or to alter the rights of the other creditors. (See Walker v Syfret NO 191 J A D 141 at 160; Taylor and Steyn NNO v Koekemoer 1982 (1) SA 374 (T).) At once the rights of the general body of creditors have to be taken into consideration. I n other words. no transact ion can then be entered into with regard to estate matters by a single creditor to the prejudice of the general body of creditors. The bona tides of the creditors or execution purchaser are irrelevant: so are the mala tides of the insolvent debtor."[13]

[28] The underlined portion of the judgment of Fourie v Edkins constitute dicta of particular significance. However, I will return to deal with this a little later in the judgement.

[29] ABSA denies that the sale was unlawful and prays, by way of a counter application for ratification of the sale and transfer of the property to the purchasers. ABSA contends in this application that the applicants' individual estates have not been sequestrated and therefore the applicants have not been divested of their estates, as contemplated by section 20 of the Insolvency Act. It is also contended that the steps taken by the applicants towards the surrender of their estates were fraudulent and intended to frustrate the sale of the property and, therefore, constituted abuse of process and were mala fide.

[30] It is submitted on behalf of ABSA that, at the latest, the applicants became aware of the intended sale of the property on 13 June 2013, when the notice of sale was served on the first applicant personally, but yet did not alert the sheriff or A BSA of the publication of notice of surrender. ABSA further submitted that, for the sale of the property to viol ate provisions of section 5(1) of the Insolvency Act, the sheriff ought to have been aware of the publication of the notice of surrender. It is submitted in this regard that the sheriff

could not have known of the publication. I agree that the Sheriff, could not have known of the publication. However, the Sheriff

subsequently became aware of the publication, when he was notified in terms of a letter from the applicants’·attorneys. Didn't this require of the sheriff not to proceed with the transfer? I will deal with this below.

[31] As indicated above, it is further con tended by ABSA that the publication of the notices of surrender, as well as, the other steps taken by the applicants with regard to the surrendering of their estates, were mala fide. It is contended in this regard that, section 5 (l) requires that intention to publish the notice must be bona fide and presupposes that the publisher of the notice is a debtor who honestly is desirous of surrendering his or her estate for the benefit of creditors. I do not think that a determination could be made as to the motive or presence of mala fides by this Court, without delving into the merits or demerits of the voluntary surrender applications. The latter applications are not before this Court, by agreement between the parties, or at least between the applicants and A BSA. Be that as it may, in my view, the motive or intent ion of the debtor applicant in an application for voluntary surrender is irrelevant for purposes of section 5(1) of the Insolvency Act.

[33] With regard to the sale and transfer of the property after publication of the notice of surrender, ABSA makes the following

submissions, further from what already appear above. Since, the applicants· estates have not yet been sequestrated, the

concursus creditorum in substitution of the pignus judiciale of the attachment, has not yet taken place. ABSA finds authority for this submission in the decisions of Simpson v Klein NO;[15] Syfrets Bank Ltd and Others v The Sheriff of the Supreme Court, Durban Central and Anor; Schoerie NO v Syfrets Bank Ltd and Others,[16] referred to in the decision of Fourie v Edkins, discussed above. It is further contended in this regard that only the concursus requires the protection of the insolvent, as this is for the benefit of the genera l body of creditors. I agree with this contention and. with optimum deference, finds it at odds with the dicta. quoted above,[17] from the decision of Fourie v Edkins. discussed above that. ·'upon publication of a notice [of surrender] in terms of s 4(1) of the [Insolvency] Act, the provisions of s 20(1)(c) and (2) (a) [of the Insolvency Act] immediately come into operation''.[18] In my respectful view, the provisions of section 20 of the Insolvency Act, only come into effect upon the granting of a sequestration order. This is the very reason for existence of the protection in terms of

section 5(1) of the Insolvency Act.

[35] The prohibition in section 5 (1) of the Insolvency Act, in my view, operates from the date of publication of notice of surrender to the hearing of the application for voluntary surrender. If during its tenure of prohibition, property belonging to the estate of the person or persons who publish the notice of surrender, is sold, such sale will be unlawful. The prohibition in this provision does not apply where the person “charged with the execution of the writ or other process”, invariably the sheriff of court, "could not have known of the publication".

[36] It is my view that, the timing of the acquisition of the knowledge of the publication of the notice of surrender is immaterial under the circumstances. The purpose of this statutory prohibition is to prevent the sheriff and by extension the debtor or even

creditors,[19] from dissipating the assets of the estate of the publisher of the notice of surrender. Therefore, the moment the sheriff becomes aware of the notice he or she has to halt with the process of selling the property, no matter at what stage it may be, including halting the transfer of the property. This halting, so to speak, will have to be in existence and continue until the hearing of the application for voluntary surrender. At the hearing, determination will be made as to the future of the surrender of the estate through an order, either accepting the voluntary surrender or dismissing the application or postponing the application to a date in the future. Whilst I am at this, I may en passant express my disagreement with the sine die postponement of the applications for voluntary surrender. as was apparently done in the applicants voluntary surrender. I am not certain of the effectiveness of such an order and respectfully doubt that it is for the benefit of the general body of creditors. Voluntary surrender is a collective debt recovery mechanism and an indefinite postponement, in my view, would hamstrung the rights and interests of other creditors for undetermined period, during which they may not act against the debtor. It is for this reason, in my view, that the legislature has deemed it fit to constrain the time periods for making the publication of notice of surrender in terms of section 4(1) of the Insolvency Act.[20] The prohibition in the notice of surrender continues when the voluntary surrender application is postponed, again in my view, to

the date of postponement, which is undetermined in case of indefinite postponement.[21] When the application is granted and the surrender of the estate of the debtor is accepted. section 20(1) of the Insolvency Act comes into operation as correctly found in Fourie v Edkins. discussed above. In this matter, the sale in execution and the consequential transfer of the property were proceeded with despite the sheriff and ABSA as the execution creditor, been aware of the publication of the notice of surrender. In my judgment, the sale was contrary to the provisions of section 5(1). In this regard, I do not agree with the submission made on behalf of ABSA that the words or phrase “sale in execution”·in

the provision do not include transfer. Even if I am wrong in this regard. I do not find this decisive on the issues.

[37] However, section 5(1) does not specify consequences or penalties for breach of its provisions. It is clear that the sheriff or anyone capable of effecting a sale in execution is proscribed by the aforementioned statutory provision not to do so when aware of publication of the notice of surrender. But, the section doesn’t state the consequences of acting contrary to its provisions. In this matter, despite the sheriff subsequently becoming aware of the publication of the notice of sun-ender, transfer of the property was effected into the names of the purchasers. The purchasers, on the other hand, performed in terms of the sale agreement, including by paying the purchase price. There is nothing i n the facts of this matter to suggest that they at any stage in the process did not act honestly or bona fide when acquiring the property. They also did not know of the notice of surrender. These aspects are very significant for current purposes,

particularly as to what is to become of the purchasers acquisition of the property.

[38] The breach of the prohibition in terms of section 5(1), does not operate to render void or invalidate an otherwise valid transfer of property. In Milne N.O v Singh, N.O. and Others[22] the Court discussed statutes in which similar words to section 5( 1) appear and came to the conclusion that these words do not necessarily render the transact ion void whenever they appear in a statute. Milne N.0 v Singh was cited with approval by this Division in Gibson NO v Jscor Housing Utility CO. Ltd and 0thers.[23] The following words from the latter decision are, in my view, very instructive for a determination to be made herein:

“In my view the answer to this submission is to be found in the wording of sec. 70 itself. It specifically states that a sale perfected by delivery or registration, as the case may be, cannot be impeached if the purchaser purchased in good faith. These words cannot refer to any minor irregularity or defect. Sec. 70 was inserted, in my view, to cover the invalid or defective sale perfected by delivery or registration, because a valid sale, or one without defect s. needs no protection, whether or not deli very has taken place. Then too, the use of the words 'it shall not be lawful' in sec. 5 of the lnsolvency Act and the fact that sec. 20 of the same Act stays execution, does not mean that if some error has occurred and a sale in execution has taken place and registration and delivery pursuant thereto has been effected, the delivery or registration can be impugned in the absence of bad faith on the part of the buyer. It is interesting to note that the words 'it shall not be lawful' in sec. 57 of the Administration of Estates Act, 24 of 1913, which prohibit the survivor of two spouses married in community of property from selling certain estate property, were discussed in Milne. N.O v Singh. N.O. and Others, 1960 (3) SA 441 (0) at pp. 450, 451. The learned Judge discusses statutes in which similar words appear. The conclusion to which he comes is that these words do not necessarily render the transaction void whenever they appear in a statute. In the case with which he was dealing transfer of the property had been effected. and he held that on the facts of that case the transfer could not be impugned

In Sookdeyi's case [Sookdeyi and Others, Sahadeo and Others. 1952 (4) SA 568 (AD)], sup. cit. at p. 571 .VAN DEN HEEVER, J .A., points out that:

'It was a principle in the Netherlands that a perfected sale in execution should after transfer or delivery of the subject matter not be lightly impugned . . .'

He goes on to say that this reluctance to rescind perfected sales has been received in our case law, but adds, however, that in certain exceptional cases a sale in execution may nevertheless be impugned. On p. 572 he states:

'Had the section not contained the words 'in good faith and without notice of any defect', a sale in execution by the messenger would after delivery or transfer have been absolutely unassailable.'

If one has regard to the importance attached to the system of land registration in our law and the faith which the public places therein, the inconveniences and improprieties that would be caused by holding that a transfer of l and following upon a sale in

execution effected not in accordance with the provisions of the Insolvency Act would be much greater than the consequences of allowing the transaction to stand. Mo1tgage bonds and subsequent transfer might fall to be set aside, even where a property has changed hands several time, were one to hold otherwise. It follows from what I have said above that I am of the view that the transaction in question cannot be impeached in the absence of an allegation of bad faith or knowledge of the defect.''[24]

[underlining added for emphasis]

[39] The facts in Gibson v Iscor Housing were very similar to those in this matter and briefly as follows. On 26 April 1961, a creditor obtained judgment against a certain Mr Botha in an amount of R84.86. On 25 July 1961, the debtor's estate was placed under provisional sequestration, which order was made final on 02 November 1961. On 0 I and 02 August 1961, a copy of the provisional order of sequestration was given to both the Registrar of Deeds and the sheriff or messenger of court, respectively. Nevertheless, on 17 August 1961, the immovable property of the now insolvent Botha was attached. On 29 September 1961, notice of the provisional order of sequestration was published in the government gazette.

[40] Therefore, despite finding that the sheriff acted contrary to the provision of section 5(1), I do not find that the sale and transfer of the property to the purchasers are affected to the point where same ought to be considered void and reversed. I reiterate that I do not find anything in their conduct warranting the reversal of the transaction. Therefore, in the absence of an allegation or bad faith or knowledge of the defect on the pa1t of the purchasers, the transfer of the property to the purchasers will be unaffected by finding made with regard to section 5(1) above.

[41] I also consider the conduct of the applicants to be relevant in this regard. The applicants were aware that sale in execution was imminent and they did not take a simple step of notifying the Sheriff of the publication of the notice of surrender. Although, they did not have a statutory duty to do so, the current situation may have been avoided or at least would have turned upon a different set of circumstances. A reasonable person would have acted differently and not simply relied on the possibility of the Sheriff picking up the government gazette or all local newspapers, that material Friday and noted that one of his or her sale in execution is affected.

[42] I consider it necessary to add the following. In my view, the provisions of section 5(1) are not principles relating to the ownership and acquisition or disposal or sale of immovable property or property, in terms of our law. Section 5(1) is part of the mechanisms of the law of insolvency, aimed at bringing in control or measures in terms of which the rights or interests of creditors in respect of assets in the estate of the judgment debtor, can be safeguarded. The objective of section 5(1) is similar to that for section 20(1)(c). Section 5(1) does not take away operate to take away ownership rights in respect of the property, which is subject of sale in execution, but merely places an embargo regarding the exercise of the rights relating to that property, being that the sale of such property, ostensibly by a creditor, through the sheriff, is not lawful. This is a very telling. as ordinarily such rights of disposal will be exercised by the owner of the property in question, but here a third party in the person of the judgment creditor and through the hand of the sheriff, is placed under an embargo from free exercise of the rights obtained through the judgment. The rights are

restrained, to the extent that, the person responsible for the sale in execution is not aware or could not have known of the publication

of the notice of surrender. This, again in my view, is to allow the collective debt recovery mechanism of insolvency to get in motion, should the required relief of the voluntary surrender of an estate, be granted by the court. Therefore, transgression of the provisions of section 5(1) does not automatically render void the subsequent sale and transfer, which is an aspect of the law of property. One of the issues to consider when determining whether the subsequent sale or transfer is void, is whether the purchasers acted in bad faith under the circumstances. This is to protect the credibility of our property registration system and, above all, in the interests of justice.

[43] Against the backdrop of what is stated above, I will refuse the relief regarding the setting aside of the sale of the property,

including the consequential relief for the re-transfer of the property into the names of the applicants. I deal next with the rest

of the aspects in the main application.

Settlement agreement

[44] As indicated above, the applicants, also pray that ASSA be ordered to perform in terms of the settlement agreement concluded on 14 October 2014 with the applicants. In terms of their attorneys’ letter dated 14 August 2014, the applicants made an offer to settle the dispute with A BSA on the basis that the applicants· daughter would purchase the property for an amount of R 1 500 000 in full and final settlement of ABSA’s claim against the applicants. The offer was accepted by ABSA, through a letter by its previous attorneys dated 14 October 2014. The acceptance by A BSA was not subject to conditions and therefore the settlement agreement was on the terms solely proposed by the applicants. However, ASSA acting - again through its attorneys - later on advised that the settlement offer was erroneously interpreted and accepted. A BSA purported to withdraw from the agreement or to revoke the agreement. The applicants contend that ASSA is bound by the terms of the settlement agreement, on the basis that, a party who brings another party under the impression that he or she accepts an offer is bound by such conduct and cannot rely on a subjective mental reservation not communicated to the other party.[25]

[45] On the other hand, ABSA denies that a settlement agreement was concluded with the applicants. On 05 July 2013, the applicants' total indebtedness to ABSA was in the amount of R3 292 106.31. It is submitted by ASSA that the employee from ABSA s insolvency

department, who accepted the offer made by the applicants, d id so erroneously and due to reliance on misrepresentations contained in the applicants' settlement proposal or offer that ASSA held only two mortgage bonds, as opposed to three mortgage bonds, and that ASSA’s security was limited to an amount of R869 400. It is contended that, under the circumstances, ASSA was entitled to resile from the agreement. It is fu1ther contended that the purchasers, to whom the property had already been sold and the applicants' daughters. were not party to the settlement agreement. I understand the latter part of the submissions to mean that a settlement agreement was therefore im possi ble without the purchasers and the appl icants' daughters. bei ng pa1ties thereto.

[46] Be that as it may, in my view. whether a valid settlement agreement between A BSA and the applicants or the applicants· daughters came into being. is irrelevant. Any such agreement will amount to sale of the property by “other process”, as opposed to sale in execution, and would have been embargoed by the same provisions of section 5(1) of the Insolvency Act, discussed above. In this instance the applicants were always aware of the publication of their notice of surrender. Therefore. this part of the main application will also be refused.

Eviction application

[47] The purchasers, other than opposing the main application, filed a conditional counter application, in terms of which, they seek an order evicting the applicants from the property. This counter application is conditional upon the dismissal of the main application by this Court.

[48] I posed a question during the hearing of this application to Mr M Oppenheimer, appearing for the purchasers, whether an eviction

application may be conditional. My concern was with regard to observance of the strict requirements of the Prevention of Illegal

Eviction from and Unlawful Occupation of Land Act 19 of 1 998 and Part 15.7 of the Practice Manual of this Division.[26] which require, among others, the pre-authorisation of the proceedings and the requirements for effective notice, as set out in section 4[27] of the aforesaid legislation. Further, there was a challenge of the validity of title to the property held by the purchasers, which had to be fully ventilated. Considering this, the application was also premature. Therefore, the application cannot succeed, due to non-compliance with statutory and practice requirements, and will be dismissed with costs.

Conclusion and Costs

[49] The notice of motion also included relief to the effect that the conduct of ABSA's attorneys be referred to the Law Society of the Northern Provinces for investigation. However, this was not pursued in both oral and written argument. But, to the extent that the issue requires determination, I have been unable to find, from the facts in the matter, anything suggesting that the conduct of the attorneys requires the attention of the Law Society. Therefore. I will refrain from making any order or referral in this regard. In my view, with or without an order of this Court, those who are so minded or advised, may still pursue the matter directly with the Law Society and my aforesaid remarks ought not to constrain anyone in this regard.

[50] I have found against the applicants with regard to the main application: against the first respondent or ABSA with regard to the counterapplication for ratification and finally, against the second and third respondents or the purchasers with regard to the eviction application. Costs will follow the aforementioned outcomes.

Order

[51] For the abovementioned reasons, an order is made in the following terms:

(a) the application by the first and second applicants is dismissed with costs;

(b) the counterapplication by the first respondent is dismissed with costs;

(c) the eviction application by the second and third respondents is dismissed with costs.

________

K. La M. Manamela

Acting Judge of the High Court

Appearances:

For the Applicants: SJJ van Rensburg

Instructed by: DLBM Inc,

Wapadrand, Pretoria

For the First Respondent: P Stais SC

N Horn

Instructed by: Smit Sewgoolam I nc,

Saxonwold, Johannesburg

c/o Pretorius Le Roux Inc

Hatfield, Pretoria

For the Second and Third Respondents: M Oppenheimer

Instructed by: Schindlers Attorneys,

Melrose Arch, Johannesburg

c/o Friedland Hart Solomon & Nicolson,

Monument Park, Pretoria

Fourth. Fifth and Sixth Respondents: No appearance

[1] See par 121 below. for a reading of section 5 of the Insolvency Act 24 of 1936.

[2] the applicants remarried to each other out of community of property.

[3] Sec par 6.3 on p 3 of the heads of argument filed on behalf of ABSA.

[4] See section 4(2) of the Insolvency Act.

[6] The voluntary surrender applications were to be heard on 11 July 2013.

[7] Section 4(2) of the Insolvency Act reads as follows in the material part: "(a) With in a period of seven days as from the date of publication of the said notice in the Gazette. the petitioner must deliver or post a copy of the said notice to every one of the creditors of the debtor in question whose address he or she knows or can ascertain”

[8] 2013 (6) A 576 (SCA).

[9] See Fourie v Edkins at par [10].

[10] See Fourie v Edkins at par [12].

[11] Ibid.

[12] 1987 (1) SA 405 (W) at 408F-H.

[13] See Fourie v Edkins at par [20]

[14] See par [22] above for a reading of section 5(1).

[15] 1987 (I) SA 405 (W).

[16] 1997 (1) SA 764 (D).

[17] See the quotation under par 27 from the decision of Fourie v Edkins.

[18] See Fourie v Edkins at par [20]

[19] See Fourie v Edkins.

[20] Section 4(1) of the Insolvency Act reads as follows in the material part: “Before presenting a petition mentioned in section three the person who intends to present a petition ... shall cause lo be published in the Gazette and in a newspaper circulating in the district in which the debtor resides . . . a notice of surrender in a form corresponding substantially with Form A in the first Schedule to this Act. The said notice shall be published not more than thirty days and not less than fou11ccn days before the date stated in the n0tice of surrender as the date upon which application will be made to the court for acceptance or the surrender of the estate or the

debtor."

[21] My statements regarding indefinite postponement or the voluntary surrender applications ought not to be constructed rulings or

findings on the issue. They are only non-binding remarks on the issue.

[22] 1960 (3) SA 441 (D) at pp. 450, -151

[23] 1963 (3) SA 783 (TPD).

[24] See Gibson v Iscor Housing at 786B- 787A

[25] See Bird v Somerville 1960 (4) SA 395 (N) L 409A.

[26] Part 15.7 of the Practice Manual or this Division reads in the material part: “15.7 EVICTION IN TERMS OF THE PREVENTION OF ILLEGAL EVICTION FROM AND UNLAWFU L OCCUPATION OF LAND ACT 19 OF 1998 1. The application for eviction must be a separate application.

The procedure to be adopted (except in urgent applications) is as follows: 1.1 The notice of motion must follow Form 2(a). 1.2 ... 1.3 The notice of motion must give a date when the application will be heard in the absence of a notice of intention to oppose.

2. After the eviction application has been served and no notice of intention to oppose has been delivered. or if a notice or intention to oppose has been delivered al a stage when a date for the hearing of the application has been determined, the applicant may bring an ex parte interlocutory application authorising a section 4(2) notice and for directions on service.

3. When determining a date for the hearing of an eviction application, sufficient time must be allowed for bringing the ex parte application, for serving the section 4(2) notice and for the l 4-day notice period to expire.

4. If the eviction application is postponed in open court on a day of which notice in terms of section 4(2) was duly given. and if the postponement is to a specific dale. it will not be necessary to serve another section 4(2) notice in respect or the latter date...

[27] Section 4 reads as follows in the material part:"(1) Notwithstanding anything to the contrary contained in any law or the

common law, the provisions or this section apply to proceedings by an owner or person in charge or land for the eviction or an unlawful occupier. (2) A t least 14 days before the hearing of the proceedings contemplated in subsection (I), the court must serve written and effective notice of the proceedings on the unlawful occupier and the municipality having jurisdiction. ... (5) The notice of proceedings contemplated in subsection (2) must-(a) state that proceedings are being instituted in terms of subsection ( l ) for an order for the eviction of the unlawli.11 occupier: (b) indicate on what date and at what time the cou1t will hear the proceedings: (c) set out the grounds for the proposed eviction: and (d) state that the un lawful occupier is entitled to appear before the court and defend the case and, where necessary, has the right to apply for legal aid .... (8) I f the court is satisfied that all the requirements of this section have been complied with and that no valid defence has been raised by the unlawful occupier, it must grant an order for the eviction of the unlawful occupier…”