Case Studies - Elsie Gundwana Vs Steko Development CC
Elsie Gundwana v Steko Development CC and Others
Case No: CCT 44/10
Date of Hearing: 10 February 2011
Case Summary: The Constitutional Court on Monday ruled that only a judge and not a high court registrar could decide if a bank could sell a persons 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.
On Monday, 11 April 2011, the Constitutional Court delivered judgment in the application lodged by Ms Elsie Gundwana. Default judgment declaring her mortgaged property specially executable was granted in 2003, when she failed to enter an appearance to defend her case in the Magistrates Court. Pursuant to that judgment, her property was sold in execution to the first respondent, Steko Development CC in 2007. Subsequently, Steko sought and obtained an eviction order against the applicant.
Ms Gundwana unsuccessfully appealed against the eviction order in both the Western Cape High Court as well as the Supreme Court of Appeal. She also lodged an application in the Western Cape High Court for the rescission of the default judgment. This application was postponed to enable her to pursue her application in the Constitutional Court. She approached the Constitutional Court for leave to appeal the eviction order as well as direct access to argue that the execution order was not constitutionally valid.
The key question which arose out of the application for direct access is whether section 27A of the Supreme Court Act and rule 31(5) of the Uniform Rules of Court are unconstitutional in so far as they allow the Registrar of the High Court to grant an order declaring immovable property executable.
The Court found that the willingness of mortgagors to put their homes forward as security for the loans they acquire is not by itself sufficient to permit the Registrar to grant an order declaring immovable property executable. The Court also found that an evaluation of the facts of each case is necessary in order to determine whether a declaration that hypothecated property constituting a persons home is specially executable, may be made. This determination has to be made by a judicial officer and not a Registrar.
The Court accordingly granted direct access and declared rule 31(5) of the Uniform Rules of Court unconstitutional to the extent that it permits the sale in execution of the home of a person. The Court thus granted leave to appeal in the eviction application in order to remit the rescission application back to the High Court for determination in light of the declaration of unconstitutionality in this judgment.
Concourt rules in favour of home owner in arrears
The Constitutional Court on Monday ruled that only a judge and not a high court registrar could decide if a bank could sell a persons 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 persons 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.
Gundwanas case was referred back to the Western Cape High Court for it to make a determination on Gundwanas 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 Magistrates 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 Gundwanas legal bill.
Gundwanas 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. Sapa