Recently, the Durban High Court in Naidoo v Changing Tides 17 (Pty) Ltd set aside a sale in execution and declared the subsequent transfer of immovable property to a third party invalid after determining that there was no legal basis for attaching the property.
In 2008, Naidoo (‘the Applicant’) secured a home loan. Changing Tides (‘the Respondent’)* passed a mortgage bond over her property, being her primary residence, as security for the loan. Within a year, the Applicant fell into arrears. After summons was issued in early 2009, the Applicant made payment of R18 093.29, discharging the arrears. She continued to make payments but defaulted again. In October 2009, the Applicant acknowledged indebtedness to the Respondent in the amount of R279 866.14, signed a consent to judgment, and consented to the execution of the property. When she signed the judgment, however, the indebtedness referred to in the first summons was extinguished. As such, the Respondent did not proceed to apply for default judgment.
When the Applicant fell into arrears again in 2013, the Respondent applied for default judgment.
Notably, during the period between the signature of the confession to judgment and the lodging of the application, the Applicant made various payments towards the property. Nevertheless, default judgment was granted in December 2013. At this point, Uniform Rule 46A, which regulates the execution against residential property, was not yet in force.
Notably, the Applicant remained in the house and continued to pay off the loan. Years later, however, she defaulted on her monthly repayments. In December 2020, the parties concluded a settlement agreement, which the Applicant did not adhere to. Consequently, the Respondent ‘dusted off’ the 2013 default judgment and issued a warrant of execution. The property was sold at a public auction in October 2021 for R102 000 – a fraction of its estimated market value.
The new owner subsequently launched eviction proceedings to remove the Applicant from the property. Seeking to set aside the sale and transfer of the property, she contended that the legal basis for the original summons was extinguished by the 2009 payment and that the Respondent was therefore not entitled to apply for default judgment.
In assessing the evidence, the court found in favour of the Applicant. First, the Respondent admitted to receiving the 2009 payment of R18 093.29, which would have settled the Applicant’s arrears. Second, documentary evidence clearly demonstrated that the Applicant continued to make payments after default judgment had been granted and that the Respondent accepted her ongoing payments. Third, it conceded to granting the Applicant ‘various indulgences’ when her monthly bond repayments increased pursuant to a recapitalisation of the outstanding debt.
Given the concessions, which were demonstrably intended to reinstate the loan agreement, the court held that the legal basis for the original summons had thus been extinguished. Consequently, the Respondent was not entitled to apply for default judgment. As such, the court held that the subsequent execution against the Applicant’s property was of no legal force or effect. The sale and transfer of the property to a third party was accordingly invalid.
The court ordered the reinstatement of the parties’ credit agreement and set aside the sale in execution. Further, the court ordered the Deeds Office to cancel the registration of the transfer of the property into the name of the third party, and to revive the Applicant’s title deed.
Importantly, the court noted that, despite its crusade, the Respondent conducted itself in a manner consistent with the reinstatement of the parties’ loan agreement. Criticising the Respondent’s ‘egregious’ conduct, the court remarked that the case highlights the importance of judicial oversight of the execution of immovable property. Recognising that the property is the Applicant’s primary residence, the court emphasised the indispensable role played by Uniform Rule 46A in safeguarding an individual’s fundamental right to access to housing under section 26 of the Constitution.
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Read the full judgment here.
*The judgment refers to Changing Tides as ‘the First Respondent’. For brevity, this article uses ‘the Respondent’.
