The Constitutional Court on Monday ruled that only a judge -- and not a high court registrar -- could decide if a bank could sell a person's home in execution. In a unanimous judgment, the court ruled that "where execution against the homes of indigent debtors who run the risk of losing their security of tenure is sought after judgment on a money debt, further judicial oversight by a court of law of the execution process is a must". "It is declared that it is unconstitutional for a registrar of a high court to declare immovable property specially executable when ordering default judgment," states the ruling.
The case relates to Elsie Gundwana, who lives in Thembalethu township outside George in the Western Cape.
Nedcor bank sold her house to collect R5268 arrears on her bond, said her lawyer, Francois van Zyl, in a statement welcoming the judgment.
"The judgment means that banks that wish to execute on mortgage bonds must approach a judge and show why the sale of a person's home would be justifiable in all the circumstances of a particular case."
Gundwana had argued in court that the process by which the bank had sold her property in execution was unconstitutional because a registrar should not be empowered to take a away ownership of a home. She argued that function should be reserved for a judge who must carefully weigh the circumstances of a case. "One of the most important factors will always be the amount a bond holder is in arrears at the time the bank seeks to execute. It may not be justifiable to order a sale where the amount of the debt outstanding is very small and there are other ways to collect a debt. Ms Gundwana argued that it was for a Judge, not a Registrar, to consider that question," said Van Zyl. The Constitutional Court agreed with her and declared Rule 31(5) of the Uniform Rules of Court "constitutionally invalid to the extent that this permits the sale in execution of the home of a person", according to the judgment.
The Constitutional Court said normally banks should first try and settle debts by trying to execute moveable property. Gundwana's case was referred back to the Western Cape High Court for it to make a determination on Gundwana's rescission application for the default judgment granted against her.
The Constitutional Court also set aside an eviction order against her and referred it back to the Magistrate's Court in George for final determination, once the High Court had ruled on her rescission application. Van Zyl said: "We are delighted for Ms Gundwana. We are also delighted with the precedent this sets for other bond holders. Banks must now be on their guard to ensure that they conduct themselves fairly and constitutionally towards their mortgage customers." The Constitutional Court ordered that Nedcor Bank Limited and the justice minister foot Gundwana's legal bill.
Gundwana's property was sold in execution by the Nedcor banking group to Steko Development CC in 2003 after she had missed payments to the bank. Gundwana claims the order was granted without her knowledge. Steko Development was subsequently granted an eviction order against Gundwana. She unsuccessfully appealed against the eviction order in the Western Cape High Court and the Supreme Court of Appeal.
She also lodged an application in the Western Cape High Court for the rescission of the default judgment. Gundwana claims that after issuing her a summons claiming payment on her bond, Nedcor Bank compromised its claim against her, as it had continued to take payment from her for four years before seeking a default judgment and selling her property.