Case  CCT 181/22
[2024] ZACC 02

Hearing Date: 22 August 2023 (Tuesday)

Judgement Date:12 April 2024

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On 12 April 2024 at 10h00 the Constitutional Court handed down a judgment in an application for leave to appeal against the judgment and order of the Supreme Court of Appeal dated 13 June 2022.

The applicants are the trustees of the Goede Hoop Trust. The respondent is Nedbank Limited. The immovable property in question is registered in the name of the trust which conducts business as a wine farm, wine cellar, wine merchant and restaurateur in Stellenbosch, Western Cape. The applicants reside in the main house within the property. The trust’s permanent employees and their families occupy 12 smaller cottages on the property.

The respondent granted substantial financial assistance to the trust in the form of an overdraft and a loan, secured by nine mortgage bonds over the property. The applicants failed to settle the debt. The respondent issued summons against the applicants for repayment of the debt and an order declaring the trust’s mortgaged property executable.

The respondent launched an application for summary judgment. The parties entered into a settlement agreement wherein the applicants admitted their indebtedness to the respondent and agreed to pay a specified amount together with interest. The terms of the settlement agreement were that, should the applicant fail to honour the terms of the settlement agreement, the respondent would be entitled to proceed with an application for payment, alternatively the private sale of the property, failing which judgment by consent. The parties further agreed to an order declaring the property executable and set the minimum reserve price.

The applicants failed to honour the terms of the settlement agreement, failed to sell the property privately and refused to honour their consent for the immovable property to be declared executable. As a result, the respondent launched an application before the High Court, for payment of the undisputed debt, and an order declaring the property executable. The respondent also challenged the applicability of rule 46A.

The High Court granted judgment in favour of Nedbank and held that rule 46A and Practice Directive 33A finds no application in this matter and that no section 26 rights were infringed upon granting the order. The High Court concluded that the judgment debtor is not a natural person, the constitutional considerations and protections are not available to such a judgment debtor and the right to access adequate housing in section 26 of the Constitution is not implicated. The High Court found that the provisions of rule 46A are not applicable as the property sought to be executed against, is registered in the name of the trust and it is irrelevant that the trustee and her children reside on the property and consider it their home. The High Court further reasoned that since the trust, being the judgment debtor, is not a natural person, the constitutional safeguards are not available to it where execution is sought against its immovable property.

The Applicants sought leave to appeal to the Supreme Court of Appeal (SCA) and the application was granted. In determining the applicability of rule 46A, the SCA found that a plain reading of rule 46A makes clear that the rule applies whenever a creditor seeks to “execute against the residential immovable property of a judgment debtor”. The SCA rejected the respondent’s argument that rule 46A only applies to situations where the judgment debtor is a natural person. The SCA extended the rule’s protection to include beneficiaries who primarily reside on the property. In rejecting the applicants’ interpretation of rule 46A, the SCA held that the applicant’s tenants are already afforded protection under the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998 (PIE) and the Extension of Security of Tenure Act 62 of 1997 (ESTA).

In this Court, the parties submitted that this Court’s jurisdiction is engaged on the basis that (a) the property in question is residential in nature; (b) rule 46A of the Uniform Rules of Court applies to situations when the property subject to execution is held in trust and (c) all individuals who primarily occupy the property, regardless of whether they are judgment debtors or beneficiaries of the trust, are entitled to notice under rule 46A as “persons who may be affected by the sale in execution.”

The applicants argued that the SCA erred in its finding that the farmworkers and their families are not entitled to notice under rule 46A. The applicants submitted that rule 46A is applicable to situations when the property is held in trust and the judgment debtor is a juristic person. They contend that despite the judgment debtor being a juristic person, the property is still occupied by natural persons who are worthy of protection under rule 46A. However, the applicants concurred with the SCA’s reasoning that despite commercial activity taking place on the property, the beneficiaries, the farmworkers and their families all live on the property, and it therefore constitutes residential immovable property.

The respondent argued that the applicants failed to disclose details pertaining to the farmworkers and specifically how their section 26 rights would be impacted by a sale in execution. The respondent submitted that even if the matter would fall within this Court’s jurisdiction, the primary use of the property is commercial in nature and therefore falls outside the scope of rule 46A. The respondents argued that rule 46A only applies to property where the judgment debtor is a natural person who resides on the property, in other words, not property held in trust. The respondent further argued that farmworkers are not “persons who may be affected by the sale in execution” because the sale itself does not impact the farmworkers section 26 rights, and any future threat of eviction is properly dealt with under PIE and ESTA; and even if rule 46A applies, the rule is intended to provide procedural prescripts, which the respondent contends were materially complied with.

In a unanimous judgment penned by Tshiqi J, this Court held that the matter engages this Court’s constitutional jurisdiction and raises an arguable point of law of general public importance on the basis that it concerns the interpretation and applicability of rule 46A of the Uniform Rules of Court. This Court found that it is in the interests of justice to grant leave to appeal to hear the question of whether the farmworkers are affected persons in terms of rule 46A(3)(b) of the Uniform Rules of Court. This Court held that the property in question has mixed characteristics and use. The farm is a business enterprise but the residential premises are used as residential immovable property. The Court held further that the premises occupied by the trustees, the beneficiaries and the farmworkers are residential immovable property within the meaning of rule 46A(1). This Court found that while a juristic entity such as a trust cannot reside in a property, it is not uncommon for such property to be used as residential immovable property and for it to be occupied by natural persons. This Court held that in such instances one has to have regard to the phrase “any other party that may be affected by the sale in execution” that is used in rule 46A(3)(b).

This Court reasoned that farmworkers do not fall under the category of “any other party who may be affected by the sale in execution”. It found that in this matter there is no evidence to show that the farmworkers’ security of tenure may be affected by the proposed sale in execution and that the farmworkers’ section 26 rights are unaffected because their rights will remain the same even when there has been a change of ownership. This Court found that farmworkers are also entitled to adequate legislative safeguards against eviction, such as ESTA and PIE in the event of their eviction as well as the Roman-Dutch law rule of huur gaat voor koop.

In the premise, the Constitutional Court granted leave to appeal, dismissed the appeal with costs and ordered that the cross-appeal be struck from the roll. The Constitutional Court ordered the respondent to pay costs occasioned by the cross-appeal.

The Full judgment  here