DUBE
J: A judgment debtor or any
person who has an interest in a sale is entitled to bring objections
challenging the conduct of a judicial sale by the Sheriff in terms of
Rule 359(1). Objections may be taken on all process leading to the
sale and are not limited to the actual conduct of the auction sale.
Where a petitioner challenges the decision of the Sheriff to confirm
the sale, he may do so by approaching the court for the setting aside
of the sale on review in terms of Rule 359(8). He may not challenge
the Sheriff's decision on grounds not raised as objections.
The
applicants seek an order for the setting aside of a sale conducted by
the Sheriff. The application is brought in terms of Rule 359(8) of
the High Court Rules 1971.
The
first applicant is the judgment debtor and the second applicant is
wife. The first respondent, the judgment creditor opposes this
application. The second respondent, the Sheriff of the High Court,
(hereinafter referred to as the Sheriff), the Registrar of Deeds and
the fourth respondent, who is the purchaser of the property, have not
opposed the application.
The
first applicant took a mortgage bond against House Number 116 Eastern
Road, Greendale to finance his farming operations. The applicant
failed to service the loan resulting in the first respondent issuing
summons to recover the outstanding balance. On 8 May 2013 the first
respondent obtained an order against the first applicant for payment
of the outstanding balance on the loan.
On
5 October 2013 the Sheriff of the High Court sold the applicants'
house by public auction to the highest bidder at $151,000-00. The
first applicant objected to the sale resulting in the highest bidder
withdrawing his bid. The Sheriff accepted the second highest bid. The
first applicant filed an objection to the sale with the Sheriff in
terms of Order 40 Rule 359. The basis of the applicant's challenge
was that the bid price was unreasonably low, in that the price
realized at the sale could not extinguish the debt owed to the
judgment creditor and given time to sell the property by private
treaty they could get a higher offer for the property.
After
hearing the objections, the Sheriff dismissed the objections
declaring the fourth respondent the highest bidder. The Sheriff ruled
that the price realized at the auction was not unreasonably low as
the price fetched at the auction was far more than the forced sale
value of the property pegged at $100 00-00 and the price obtained at
the sale is close to the open market value of $170,000-00. The
Sherriff confirmed the sale at $150,000-00.
The
applicants submitted that the property which is the subject of the
application is a family home and the family's primary home and
ought not to have been sold. The applicants submitted that the effect
of the respondents' action is to make the applicants' family
destitute. The first applicant is 58 years old and the second
applicant 51 years old. Should the house be sold, the applicants have
nowhere to stay. They are pensioners and there is no likelihood of
buying another house. The respondents have taken all the applicants'
movable property including their motor vehicle and furniture. The
applicants argue that the respondent's actions of selling the
applicants' primary residence are contrary to public policy and
section 28 of the Constitution. They contend further that they should
be given a chance to settle the debt and exhaust all avenues
available to them before respondents sell their home. The applicants
aver that they have a payment plan and wish to be given a chance to
liquidate the debt in terms of the payment plan. The applicants also
challenge values given by the auctioneers. They allege that there was
no proper valuation of the property as the auctioneers visited the
property late in the evening around 17.15pm and simply moved around
the property briefly and hence did not properly value the house.
The
applicants submitted further that there was a failure to comply with
Order 40 Rule 48A(2)(a) in that the period of 6 days given as notice
of the auction is too short.
The
applicants also take issue with the fact that after the highest
bidder had withdrawn his bid, the second respondent went on to accept
the second bid without having re-advertised the property or invited
other parties to bid.
The
applicants challenge the judgment creditor's interest rate of 30%
for the loan on the basis that it is usurious.
The
applicants also take issue with the Sheriff's failure to advise the
Housing Secretary of the attachment in terms of Rule 48A(2)(a).
The
first respondent defends the application.
The
respondent takes a point
in limine.
It argues that the application was filed out of time, in that it was
filed more than a month after the aggrieved party was notified of the
Sheriff's decision to dismiss its objections to confirmation of the
sale contrary to the provisions of Rule 358(8).
On
the merits the respondent's position is that the property was
properly sold after the applicants failed to repay the loan advanced
to them. The respondent submitted as follows.
There
is no way that the applicants can be rendered destitute as the
applicants own a farm where they are ordinarily resident. No
Constitutional issues arise from the sale in execution.
The
respondent argued that it was never the applicant's case before the
Sheriff that the latter had not complied with the provisions of Rule
348A(2)(a) in that he failed to communicate to the Secretary of
Housing the fact of the sale nor that the sale had been improperly
conducted.
The
respondent maintained that the applicants cannot bring up the issue
for the first time in this application.
The
respondent submitted further that the Sheriff was not required to
comply with the requirements of Rule 348.
It
contends that the issue of the interest rate is not relevant to this
application.
The
respondent refutes that the property was sold for an unreasonably low
price.
The
objections to the sale were filed in terms of Rule 359(1). The Rule
provides as follows:
“359(1)
Subject to this rule, any person who has an interest in a sale in
terms of this order may request the Sheriff to set it aside on the
ground that –
(a)
The sale was improperly conducted; or
(b)The
property was sold for an unreasonably low price; or any other
ground.”
The
objections that may be raised under this rule are not limited to
those listed under the rule. This is evidenced by the inclusion in
Rule 358(1)(b) of the clause 'any other ground.'
The
objections challenging the sale may be raised on any impropriety that
may have occurred from the moment of commencement of execution of the
order given against the judgment debtor to the time of the judicial
sale including its conduct. The objections are not limited to the
actual conduct of the judicial sale.
The
applicants challenge the interest rate of 30% ordered in terms of the
court order of 8 May 2003 granted in default and which is the subject
of these proceedings.
I
do not see the relevancy of that argument in an application for the
setting aside of a judicial sale. An objector may not challenge the
interest rates agreed to between the parties in a loan agreement or
interest rate as ordered by the court, with the Sheriff. The subject
of the interest is outside the ambit of Rule 359(1).The Sheriff has
no power over the court order. The avenue open to a litigant who was
given default judgment and who wishes to challenge any aspect of that
matter, including interest rates, is to apply for rescission of the
default order. The subject of interest charged on the loan and
ordered by the court, has nothing to do with the Sheriff's decision
to sell the property. The Sheriff has no power to review an order of
court nor may the court at this stage enquire into the issue of
interest charged by the judgment creditor. The inquiry under Rule 359
is limited to the conduct of the sale. The challenge related to
interest rates is improperly before the court.
The
Sheriff is expected to hear the objections and render a ruling. A
party aggrieved by the decision of the Sheriff may apply to this
court to set it aside in terms of Rule 359(8). The Rule provides as
follows:
“359(8)
Any person who is aggrieved by the Sheriff's decision in terms of
subrule (7) may, within 1 month after he was notified of it, apply to
the court by way of a court application to have the decision set
aside.”
Rule
359(8) provides for a party aggrieved by the decision of the Sheriff
to challenge the decision within one month after he was notified of
it.
There
are two letters on record from the Sheriff which are identical except
that they give two different dates of confirmation of the sale. The
two dates given are stated as 8 December 2014 and 19 January 2015.
These two letters went unexplained by both parties. This court finds
itself in a position where it is unable to establish the exact date
when the purchaser was confirmed the highest bidder. There is also no
indication of when the applicants became aware of the confirmation of
the sale. The court is not fully equipped to resolve the issue.
The
preliminary point fails.
Rule
348 deals with a scenario where a dwelling is attached.
Rule
348A(2)(a) provides that when the Sheriff receives documents and
particulars relating to the attachment, he shall forthwith, send
written notice to the Secretary responsible for Housing and Building
indicating that the dwelling has been attached and is to be sold in
execution.
The
applicants allege that this was not done.
The
first respondent has a mortgage bond over the property and instituted
foreclosure proceedings when the applicants failed to pay the debt.
In
Meda v
Homelink (Pvt) Ltd and
Anor HB195/11 the
court dealt with Rule 348A in the context of foreclosure proceedings
and held as follows;
“The
only interpretation that makes sense rather than a mockery of justice
is one which says that Rule 348A is not applicable to foreclosure
proceedings.”
See
also Electroforce
Wholesellers (Pvt) Ltd v
FBC HH14/15.
In
Meda (supra),
the court also remarked as follows with respect to sale of
residential properties in execution;
“To
put residential property which is a person's home into that class
of assets beyond the reach of execution would be to sterilize the
immovable property from commerce thereby rendering it useless as a
means to raise credit. Preventing debtors from using their homes as
security to raise credit will create a class of homeless persons
those who are unable to afford the full purchase price of their homes
in a cash sale, but could afford to repay a loan for the purchase
price. It would lock up capital and prevent the home owning
entrepreneur from using his home as security to finance business
initiative. Members of the poor communities will not be able to
obtain finance from banks who will not advance money to purchase
immovable property if the immovable property cannot be used as
security for repayment.”
I
agree with these observations.
Rule
248A is applicable where the Sheriff attaches a “dwelling” in
circumstances where the debt sought to be recovered is not linked to
the dwelling concerned. It applies where the dwelling attached is not
under mortgage.
Rule
348A is not applicable to foreclosure proceedings.
Where
a person approaches a bank for a loan and mortgages his house as
security for a debt, he cannot when he defaults, plead that his house
is his sole dwelling. Any person who puts his home up as security for
loan and does so being well aware of the fact that should he fail to
service the loan, his house will be up for sale, cannot complain when
he fails to service the loan and the bank attaches his home. Such a
person takes a risk which he should live with.
The
applicants cannot cry foul now and seek to avoid their financial and
lawful obligations by invoking Rule 348 to avoid their obligations.
The applicants should live with the consequences of mortgaging their
house. To allow litigants in foreclosure proceedings to hide behind
the fact that the mortgaged house is a family dwelling would amount
to home seekers getting mortgages without security. This would
naturally have a negative effect on the mortgage lenders as they will
not be able to recover their investments. They will no longer be keen
to give mortgages to home seekers.
There
is nothing that is contrary to public policy about two parties
entering into a loan agreement and a mortgagor calling up loaned
monies and foreclosing on the mortgage bond. This arrangement remains
purely a commercial transaction and is legal.
Having
found that a 348A application cannot be brought where there have been
foreclosure proceedings, I find that the failure by the Sheriff to
comply with the requirement to write to the Home Secretary concerning
the attachment is immaterial and of no consequence. The Sheriff was
not required to comply with the requirements of Rule 348A.
Section
28 of the Constitution provides as follows;
“The
State and all institutions and agencies of Government at every level
must take reasonable legislative and other measures, within the
limits of resources available to them, to enable every person to have
access to adequate shelter.”
The
section speaks to the responsibility placed on the State,
institutions and agencies of government to take reasonable and other
measures to enable every person to have access to adequate shelter.
What
is clear from the constitutional provision is that it is not only the
State that has the responsibility to take measures to ensure
provision of houses. Other agencies of government and institutions
like banks that can offer mortgage facilities bear the responsibility
to ensure adequate shelter for every person. They have to be enabled
by legislative and other measures to provide housing. The intention
of the legislature was clearly to facilitate the provision of
shelter.
Section
28 does not create a right for the applicants.
This
case does not involve the availability of a facility to enable the
applicants to own and have access to shelter. The loan was for
farming activities. The relevance of section 28 to this case eludes
me. There is no constitutional issue arising from these facts.
Rule
359(1) provides for a procedure enabling any interested party to
raise objections to a sale. The Rule outlines the grounds upon which
the application may be brought. These are that the sale was
improperly conducted or that the property was sold for an
unreasonably low price, or any other ground. Where the Sheriff
dismisses the objections and confirms the sale, a party aggrieved by
such a decision may in terms of Rule 358(8) apply for the setting
aside of the decision by making an application to this court. The
procedure envisaged by Rule 359 is that of a review of the decision
of the Sheriff by this court. The court is required to look at the
objections raised and test the decision of the Sheriff. Rule 358(8)
limits the grounds upon which this application may be brought to
those grounds raised in terms of Rule 359(1) as objections.
The
High Court sitting as a review court, cannot enquire into questions
that were not raised initially as objections and deliberated on by
the Sheriff.
A
party who has failed to raise an objection at the time he challenges
the decision to accept a bid price with the Sheriff, cannot raise the
objection for the first time in an application to set aside the
Sheriff's decision to confirm a sale.
The
issues regarding the interest charged for the loan amount and that in
the default order, and the short notice of the auction were not
raised in the objections. It is not competent for the applicants to
raise these objections at this stage.
The
bid price was obtained at an auction.
In
in Morfopoulous v
Zimbank Limited and Ors
1996 (1) ZLR 626, the court dealt with a challenge to a price
obtained at an auction. The court held that the bid price realized at
an auction is a reliable indication of the value of the property.
Where a property has been properly advertised and a public sale
conducted, the bid price obtained at an auction, is the best
indication of the property's market value. The bid price accepted
by the Sheriff is way far higher than the forced market value of
$100,000-00 and is slightly less than the open market value of the
property of $170,000 -00. This goes to show that the price obtained
is reasonable.
The
applicants aver that they have a valuation which shows the market
price of the property to be $240,000-00. No evidence of any other
evaluation to the contrary has been produced. The applicants failed
to produce proof to support the assertion that the price realised at
the auction was unreasonably low.
The
Sheriff exercised his discretion properly.
The
applicants instructed estate agents to sell the property but failed
to find a buyer. The Sheriff was justified in rejecting the
applicant's plea to sell the property by private treaty.
Where
a judgment debtor has already instructed an estate agent to sell
property which is subject of a judicial sale, and the estate agents
fail to find a buyer with a better price, no basis remains for the
Sheriff to try and put up the property sale by private treaty. A sale
by private teary should only be resorted to where there is a
possibility that a higher price may be realized. The Sheriff
exercised his discretion properly in refusing to sell the property by
private treaty.
In
the absence of sufficient proof that the price fetched is
unreasonably low, the court will not interfere with the decision of
the Sheriff.
A
judicial sale cannot be upset simply on the say so of the judgment
creditor. The fact that the applicant desires for a better price is
not on its own a good enough reason to upset a sale.
The
Sheriff was entitled in his discretion to consider the second highest
bid after the highest bidder withdrew his bid. The second highest
bidder offered an amount of one thousand dollars less than that of
the first bidder. The difference is negligible and hence this is not
a good enough reason to upset the sale. I view that the Sheriff
exercised his discretion judiciously.
I
am not convinced that the property belonging to the applicants was
sold at an unreasonably low price or that there was an impropriety in
the manner in which the Sheriff conducted the sale. No case has been
shown to upset the judicial sale.
In
the result it is ordered as follows:
The
application is dismissed with costs.
T.
K. Hove & Partners, applicants' legal practitioners
Scanlen
& Holderness, respondent's legal practitioners
