FORM A FILING SHEET FOR EASTERN CAPE HIGH COURT, GRAHAMSTOWN JUDGMENT PARTIES: Glenn Leaver McCreath v Marthinus Johannes Wolmarans N.O. and 3 Others Case Number: 1845/08 High Court: Easter Cape Grahamstown DATE HEARD: 4 December 2008 DATE DELIVERED: 25 March 2009 JUDGE(S): REVELAS J LEGAL REPRESENTATIVES Appearances: 1. for the Applicant(s): Adv T Paterson 2. for the Respondent(s): Adv Ford Instructing attorneys: Applicant(s): Netteltons Respondent(s): NN Dullabh, Neville Borman & Botha CASE INFORMATION - 1. Nature of proceedings: Civil 2. Topic: Application concerns the sale in execution of a proper. 3. Key Words:
2 Reportable IN THE HIGH COURT OF SOUTH AFRICA EASTERN CAPE DIVISION - GRAHAMSTOWN In the matter between Case No: 1845/08 Date Heard: 4/12/08 Date Delivered: 25/03/09 GLENN LEAVER McCREATH APPLICANT and MARTHINUS JOHANNES WOLMARANS N.O. NEDBANK LIMITED FIRST RESPONDENT SECOND RESPPONDENT NEWTON GLENN BOWER THIRD RESPONDENT DENISE BOWER FOURTH RESPONDENT J U D G M E N T REVELAS J [1] This application concerns the sale in execution of a property in Port Alfred. The applicant seeks an order which in essence, confirms the validity of the agreement resulting from the sale in execution (the agreement). The second respondent (the Bank), who is the execution creditor, in opposing the application relies on a iustus error as a valid ground for having cancelled the agreement. [2] The error which has become the main issue between the parties, is this: the Bank s attorney, who concluded the sale on its behalf, contended that he had made a bona fide error in respect of the Court Rules applicable to the sale in execution, which in terms
3 of a clause in the agreement, entitled the seller (or the Bank), to lawfully cancel the agreement. [3] The events which gave rise to the sale in execution, emanate from a default judgment obtained by the bank on 4 June 2008 in this Division, for payment against the third and fourth respondents in the amount of R330 127.77 in respect of arrear bond instalments. In terms of the default judgment the property situated at 31 Seabreeze Drive, Port Alfred was declared executable and was subsequently attached by the first respondent, who is the Deputy Sheriff of the Magisterial District of Bathurst on behalf of the Bank. The first respondent does not oppose the application. The third and fourth respondent were cited insofar as they may have an interest in this application which they do not oppose either. [4] The sale in execution was advertised in a local Port Alfred newspaper and held at the Magistrate s Court in Port Alfred on Friday, 8 August 2008, at 11h00. The applicant responded to the advertisement and arrived at the Magistrate s Court, he said, just in time to hear the first respondent read out the conditions of the sale in execution. The only other persons present at the sale were Mr Marais (the attorney who was instructed by the Bank s attorneys in Port Elizabeth), and a Mr Human, who was also interested in buying the property. Mr Marais states that he paid no attention to the conditions of sale when they were read out because he was engaged in a conversation with the applicant. Mr Human also competed in the bidding but the property was eventually knocked down to the applicant. [5] The terms and conditions of the sale in execution were incorporated in the agreement consisting of thirteen clauses. The terms pertinent to this application are the following:
4 The property is to be sold by the Sheriff to the highest bidder without reserve (Clause 1), but not for less R100.00 (Clause 2.1). Clause 2.3 provides that if a dispute arises about a bid, that the property to be put up for auction again. Clause 3, which is headed REPRESENTATIONS AND MISTAKES provides for rectification for mistakes made by the auctioneer in selling the property. Clause 3.2 gave rise to the Bank s refusal to give effect to the sale and the cancellation of the agreement: it provides that if the Bank s attorney, or the Sheriff, commits a bona fide error in respect of the execution of the Court Rules, the sale can be cancelled forthwith and the property may be put up for auction again. [6] The applicant was aware that the judgment debt was in the vicinity of R290 000.00. He said he assumed that in the event of the bidding not reaching that amount, Mr Marais would bid on the bank s behalf, thereby buying back the property as envisaged in the conditions of sale. Having read out the conditions of sale to those present, the first respondent opened the bidding and the applicant made the first bid for R25 000.00. Mr Human increased the bid to R26 000.00, whereafter the applicant s final bid of R50 000.00 was knocked down. According to the applicant, he had asked Mr Marais whether he wished to bid on behalf of the Bank, to which he replied that he had no instruction to bid. This is disputed by Mr Marais. [7] Mr Marais, who did not bid, then contended that there was no sale. The conditions of sale prepared by the Bank s attorneys were nonetheless signed by the applicant and the first respondent. The purchase price inserted in the agreement (or conditions of sale) was R50 000.00. Mr Marais requested that the sale be re-opened for him to bid at R51 000.00. The first respondent indicated that this was not possible since the sale was complete. Mr Marais phoned the
5 instructing attorney in Port Elizabeth because of the way things went. The applicant, in the meanwhile, paid an amount of R7 500.00 in cash to the first respondent, being ten percent of the purchase price as well as other costs and commission, payable in terms of the sale conditions. [8] The applicant attached to his papers, an unsigned statement by the first respondent. The document being unattested of course is not an affidavit, and was therefore struck out at the commencement of the hearing of this matter. Counsel for the Bank submitted that to the extent that there are disputes of fact in these papers such disputes must be resolved in accordance with the factual allegations stated by the Bank. Counsel for the applicant, in my view correctly so, did not argue the applicant s case on the disputed facts. I will determine the matter on the facts which are common cause between the parties. [9] Three days after the sale in execution, the first respondent wrote a letter to the applicant cancelling the sale in execution stating the reasons for the cancellation as the following: Mr Grant Marais, in his capacity as representative of Pagdens Attorneys, made a bona fide error in the execution of the sale inasmuch as he was under the mistaken belief that a reserve price was applicable to the sale in execution, when in actual fact the property would be sold to the highest bidder in terms of the Conditions of Sale. [10] The applicant s attorneys of record rejected the cancellation, tendered any outstanding performance in terms of the agreement and advised the first respondent of the applicant s intention to resort to litigation in the event of the cancellation being persisted with. The Bank s attorneys confirmed the cancellation, reaffirming
6 the basis thereof, namely the alleged bona fide error by Mr Marais. In support of their entitlement to cancellation, reliance was placed on clause 3.2 to which I have already referred. [11] According to Mr Marais, it was only when he phoned the Bank s attorneys in Port Elizabeth, to which reference is made above, that was it pointed out to him that in terms of Rule 46(12), the sale in execution of immovable property, was to be without reserve resulting in the property having to be sold to the highest bidder. To this he added: The stipulation of a reserve price in my instructions was accordingly intended to reflect the limit up to which I was to bid on behalf of the second respondent and not to suggest that the sale could be rendered subject to a reserve price in contravention of Rule 46(12). He further stated that he honestly believed that the Rule entitled him to stipulate a reserve price and that the first respondent would not sell the property for less than the reserve price. [12] In elaborating on the error, Mr Marais alleged that when he received the instruction, he was wholly unaware of the provisions of Rule 46(12), he was further not in possession of the relevant conditions of sale and finally, also did not pay attention when the conditions were read out by the first respondent. Accordingly, he said, he assumed that the sale in execution would be a sale subject to a reserve price, as stipulated by the Bank s attorneys, in his letter of instruction and that upon his conveying this to the first respondent, the sale would not be concluded at a lesser price. As an example of the prevailing practice in this regard, he referred to another sale he had attended on the instructions of the Bank s attorneys, where a nett reserve price was in fact stipulated. From
7 this it is apparent he believed that if he erroneously assumed that as the attorney representing the judgment creditor (in this case the Bank) was simply to notify the first respondent if the reserve price was not achieved, which would have resulted in the end of the sale in execution and its consequences. [13] The Bank also relied on the affidavit of Mr Francois Vienings of the Bank s attorneys of record, wherein he stated that his firm issues instructions on an ongoing basis with regard to sales in execution on behalf of judgment creditors, who are often Banks. In this particular matter, where the sale in execution took place in a different town (not in Port Elizabeth where his firm practices) he instructed a Port Alfred firm of attorneys to attend to the sale in execution which is the reason why Mr Marais received instructions to represent the Bank at the sale in execution. The relevant part of the letter instructing him reads as follows: We refer to our fax dated the 2 nd of July 2008 and your subsequent advices to the effect that either Mr Grant Johannes Marais, alternatively Mr Jacques Hilpert, would be available to attend the above sale in execution which is scheduled to take place on the 8 th of August 2008 at 11h00 at the Magistrates Court Port Alfred. We advise that Nedbank s NETT reserve price is R296 407.28. Kindly telephone the writer once the sale has been held, to enable us to report immediately to the bank on the outcome. [14] Mr Vienings said that it is usual practice for the attorney representing a judgment creditor, to bid up to the reserve price, as the judgment creditor is obviously intent on receiving the best price
8 to diminish the debt owed to the Bank. Whilst Banks are not in the business of buying the kind of property under consideration he said, they would be prepared to do so in circumstances where the value of the security would not be achieved at the sale in execution, or otherwise. The stipulation of the reserve price in the instruction, he stated was intended to instruct the attorney who attends the execution on behalf of the Bank, to bid in a way which would ensure that at least the reserve price is achieved. All attorneys in his experience, being familiar with the provisions of Rule 46(12), he finally stated, are aware that the stipulation of a reserve price would not conflict with the provisions of the Rule. [15] It is at the outset necessary to examine the nature of the error made by Mr Marais as well as the reasons given for it having occurred. The error undoubtedly resulted from Mr Marais inexperience. He was ignorant of the provisions of the applicable rule (Rule 46(12)). He also misunderstood the letter of instruction stipulating a reserve price. He failed to appraise himself of the conditions of sale and moreover allowed himself to become distracted when they were read out in his presence by the Sheriff. [16] The applicant s submission, that the letter of instruction to Mr Marais was misleading or deficient was contested by the Bank. In his affidavit, Mr Vienings advanced the argument that his instruction to the attorneys in Port Alfred was patently to the effect that the attorney representing the Bank at the sale (Mr Marais in this case) was to bid to the reserve price and that the instruction did not stipulate a reserve price which would not have been competent, both in terms of the relevant Rule and the conditions of sale, which he added, were drafted by his firm.
9 [17] The Bank argued that the error being bona fide, plainly arose from Mr Marais lack of experience and lack of knowledge of the provisions of the Rules of Court. The applicant and first respondent, so the argument went, must have been aware that Mr Marais was labouring under a misapprehension with regard to both the conditions of sale and the Court Rules. The applicant, the Bank contends, snatched at a bargain in circumstances where it must have been clear to both him and the first respondent, that the Bank had no intention to conclude a sale of the property at an amount not stipulated in the letter of instruction. The conditions of sale reflected no more than the applicable Court Rule (Rule 46(12)), and therefore, the argument was an error with regard to the conditions of sale was patently an error with regard to the Rules and consequently in the execution of the Court Rules as envisaged in clause 3.2. For these reasons it is contended the cancellation was valid. [18] The Bank relied on the judgment of the then Appellate Division in SONAP Petroleum (SA) (Pty) Ltd v Pappadogianis 1992 (3) SA 234 (A). In that matter the respondent leased a property in Randfontein to the appellant for a period of twenty years. The lease agreement provided that the lease period was to commence on a date to be specified in terms of a certificate to be issued by the appellant, which the latter failed to do. Later, instead of issuing a certificate for the inception date, the appellants attorney settled an addendum which the respondent (after discussing the matter with his attorney) signed. The inception date of the lease was fixed in the addendum at 1 December 1974 but as a result of an unexplained mistake by the appellant s attorneys, the term of the lease was reduced to fifteen years. The appellant relied on a mistake made during the expression of its intention and that the mistaken belief in its declared intention conformed to its actual
10 intention. The respondent s declared intention, on the other hand, did not differ from his actual intention. Harms AJA (as he then was) described the dissensus that arose as being in a sense the result of the appellant s so-called unilateral mistake. The Bank, in the present matter considers itself as being in the same position as the appellant in Sonap. In Sonap the learned judge concluded (at 239 I- J and 240 A-B) that the decisive question in such case was whether the party whose actual intention did not conform to the common intention expressed, led the other party, as reasonable person, to believe that his declared intention represents his actual intention. The answer he held, lay in the following three-fold enquiry: Firstly, was there a misrepresentation as to one party s intention, secondly, who made that misrepresentation, and, thirdly, was the other party mislead thereby? See also Du Toit v Atkinson s Motors Bpk 1985 (2) SA 893 (A) at 906 C-G; Spindrifter (Pty) Ltd v Lester Donovan (Pty) Ltd 1986 (1) SA 303 (A) at 316 I-317 B. The last question postulates two possibilities: Was he actually misled and would a reasonable man have been misled? Spes Bona Bank Ltd v Portals Water Treatment South Africa (Pty) Ltd 1983 (1) SA 978 (A) at 984 D-H, 985 G-H. [19] Applying the aforesaid test, Harms AJA (at 242 B-E) found that the respondent was not misled by the appellant to believe that it was his intention to reduce the lease period but, on the contrary, he was alive to the real possibility of a mistake and that he had, in the circumstances, a duty to speak and to enquire. He did not, but decided to snatch the bargain. That he could not do. There was, therefore, no consensus, actual or imputed, on this issue. The appeal succeeded and the addendum was declared null and void.
11 [20] Counsel for the Bank submitted that the reasoning in the Sonap judgment is applicable to this matter and, by parity of reasoning, the applicant should have had no misapprehension with regard to the Bank s actual intentions and certainly must have been alive to the real possibility of a mistake on the part of the Bank s attorney in the execution of the Court Rules (Rule 46(12). [21] Rule 46(12) deals with sales in execution of immovable property. It provides that subject to the provision of sub-rule (5), a sale in execution of immovable property shall be without reserve, and upon the conditions stipulated under Sub-rule (8), to the higher bidder and provides for the submission of the conditions of sale by the execution creditor and the granting of an opportunity to anyone to apply to a magistrate for the modification of the conditions of sale. [22] The conditions of sale are ultimately the execution creditor s responsibility as Rule 46(8) clearly demonstrates. The Bank s attorneys who instructed Mr Marais prepared the conditions of sale in question. Moreover, clause 1 of the conditions of sale virtually repeats the provisions of Rule 46(2) word for word in the sense that both provide that the relevant immovable property shall be sold to the highest bidder and without reserve. [23] In my view, the letter of instruction cannot be interpreted to have the meaning attributed to it by Mr Vienings. The letter plainly does not instruct Mr Marais to bid up to the reserve. Apart from the fact that the letter was not addressed to either the applicant or the first respondent, the letter did not impose on the applicant or the first respondent, as reasonable persons, a duty to inform or advise Mr Marais to bid on the property. Nor can it be said that they should have been alive to the real possibility of Mr Marais making a
12 mistake, given the nature of the sales conditions. The reasons for the mistake or error, as mentioned before in this judgment, are because of Mr Marais ignorance of both the provisions of Rule 46(12) and the conditions of sale on the one hand, and also as a result of his misunderstanding that his letter of instruction from the Bank s attorneys on the other hand, was in conflict with the sales conditions. This distinguishes this case from SONAP. The Bank s actual intention is purportedly recorded in a letter addressed solely to its own representative, whereas its expressed intention is contained in the conditions of sale drafted by its own attorneys, which were read out at the sale in execution and accepted by the highest bidder, the applicant. [24] The next question is whether, accepting that Mr Marais erred, his error entitled the Bank to cancel the agreement in terms of clause 3.2 of the conditions of sale. Mr Marais ignorance of the conditions of sale and Court Rules does not constitute an error in the execution of the Court Rules. The true nature of his error was the belief that there indeed was a reserve price. It is hardly open to an attorney representing an execution creditor, to rely on his ignorance of the relevant law and conditions of sale as a ground for cancellation of the resultant agreement on the basis of a iustus error. Attorneys accepting instructions for the perfection of bonds, as was the case here, ought to be appraised of the applicable Rules of Court (See: Maia v Total Namibia (Pty) Ltd 1992 (2) SA 357 (Nm)). I agree with the submission of the applicant s counsel that the purpose of clause 3.2 is to ensure that the execution creditor does not become party to a sale which does not comply with the provisions of the Rules. In this case, the complaint is not one of non-compliance with the Rules. On the contrary, Rule 46 was adhered to in all relevant respects. The purpose of clause 3.2 could hardly have been to assist an attorney for an execution creditor,
13 who has not read either the sales conditions or the Court Rules, to challenge an otherwise lawfully concluded agreement. [25] It is further significant that conditions of sales in execution, are in terms of the Rules, only cancelled by a judge in circumstances where the purchaser fails to carry out his obligations under the conditions of sale. In Nicolau v Navarone Investments (Pty) Ltd 1971 (3) 883 (W) the court considered the nature of an auction sale in execution of immovable property belonging to a company in liquidation and the subsequent signing of the conditions of sale by the purchaser as a trustee. In that matter the conditions of sale bearing the signature of the purchaser, also contained the usual condition that the sale would be without reserve and that the property would be sold to the highest bidder. In terms of the same document, the auctioneer was entitled to refuse a bid if he believed that the purchaser did not have to financial means to pay the deposit or balance of the purchase price. The court emphasized (at 884 G-H), that the sheriff had no discretion but to sell to the highest bidder, provided the latter had the financial means (as stipulated in the conditions of sale) and held that such a sale is concluded at the fall of the hammer. In this regard the court referred to the decision in Schuurman v Davey 1908 TS 665 at p668, and added: Moreover, the conditions of sale would come into operation as from that instant and without any formality or consensus. At 885 G-H of the judgment, the position is stated thus: The highest bidder (purchaser) is obliged, in terms of the binding oral contract and against the risk of having the transaction set aside by a Judge, to sign the document put before him by the deputy-sheriff. He has no unfettered
14 volition such as one would expect to observe when a contracting party forms the required animus contrahendi. [26] In Herbstein and Van Winsen s The Civil Practice of the Supreme Court of South Africa (Van Winsen et al, 4 th Edition 1997 p 794, fn 308), the following is stated with regard to Rule 46(12): This subrule leaves the sheriff no discretion to accept the highest bid or not as he thinks fit. (Cf Former Cape Rule 39(11), which required the sheriff to declare the highest bidder the purchaser if satisfied that the price offered was fair and reasonable, having regard to the circumstances of time and place and to the state of the property market. (emphasis added) [27] Because of the lack of a discretion on the part of the sheriff in such circumstances, the scope of a iustus error in the context of a sale in execution consequently becomes extremely narrow. If the former Cape Rule 39(11) was still applicable, the first respondent may well have been entitled to exercise his discretion to refuse to sell the property to the applicant at a price which was not market related as in this case. Under the present Rule 46(12), the first respondent has no such discretion and neither he, nor the applicant, incurred an obligation to point out to Mr Marais that he was acting in error, as envisaged in SONAP. The first respondent was obliged to sell the property to the applicant as the highest bidder. Mr Marais failed, as he ought to have appreciated, the very crucial difference between the conditions of sale (echoing, as I have pointed out, the applicable Court Rule) and his letter of instruction. That is an entirely different error from one envisaged in clause 3.2 made in the execution of the Court Rule. The Bank is therefore bound by the signed conditions of sale and the purported cancellation therefore ought to be set aside.
15 [28] The applicant is consequently entitled to the relief sought. In the result I make the following order: 3. The first and/or second respondent s cancellation of the agreement referred to in para 2 below, is set aside. 4. It is declared that the Conditions of Sale in Execution of Immovable Property signed by the applicant and the first respondent on 8 August 2008 constitutes a valid agreement of sale in favour of the applicant relating to erf 6431, Port Alfred, Nladambe Municipality, Division of Bathurst, Province of the Eastern Cape, also known as 31 Seabreeze Drive, Port Alfred. 5. The first respondent is directed to, on payment by the applicant of the purchase price and any other amounts still owing in terms of the agreement, to sign all necessary documentation to effect transfer into the name of the applicant. 6. The second respondent is to pay the applicants costs of the application. E REVELAS JUDGE OF THE HIGH COURT