The Judgment in Mokebe

(delivered today, 12th September 2018)

This is definitely a win for the people of South Africa against very dodgy banking practice.

(The judgement, heads and other documents can be found here).

What is most significant about this judgment is firstly that it says at point 4 of the order that “save in exceptional circumstances that reserve prices should be set”. This is important as some banks were apparently arguing  (unbelievably unethically) that reserve prices should only rarely be set.

Secondly, it makes clear that if you pay off your arrears then the contract revives (this is not at the discretion of the bank) and you can continue with the bond. This is not at the bank’s discretion.

It was mostly about whether the money judgement and execution (selling of house) should be heard together. The decision was they should be.  This is better in the sense that legal costs would be lower but worse if it results in less delay as delays can allow the debtor to pay the arrears or sell the house himself. But if orders are given that allow a time to sell before the house is sold by the sheriff then this remedies this.

What still needs to be decided is how to calculate these reserve prices.

In our view they should start at 90% of the market value of the property after the levies and rates and taxes have been taken off. After each 3 months it can drop a further 5% for those properties that still haven’t sold.

If the property is not in good condition then the market value would be lower. The market value in this definition is what the property would sell for if sold by a few estate agents over 3 to 6 months in a normal sale situation.

In this judgment there was an indication that each case the reserve price should be decided on the merits.

Then the next question is how we can improve the sheriff’s auction system to deliver these prices.

Are the banks overcharging you for legal costs

I was just talking to clients now who has had R200,000 added to their bond account for legal costs who has never even been to court in any kind of opposing action against the bank. Something tells me they might be getting ripped off.

There are limits to what attorneys can charge for what they do:

 

In the High Court you can find them at: http://billsofcosts.co.za/case-law/send/7-court-tariffs-in-south-africa/379-high-court-tariff-1-november-2017.html
In the Magistrates courts the tariff is lower: http://www.justice.gov.za/legislation/notices/2015/20150123-gg38399_rg10349_gon33-RulesBoard.pdf

So what to do is list and the phone calls, letters, etc that you have got, and count the pages of the legal documents you have received and put them in a spreadsheet.

Then put in the tarifff amount per page or phone call or whatever.  Do a separate column for candidate attorneys and attorneys.
Its likely that in many matters that a candidate attorney drafted the document, so you should propose that this is the case until proven otherwise.

Note, one could argue that an excessive level of phone calls or letters might not be chargable.

(if any one knows if new tariffs have been made since 1 November 2017, please let me know, But it doesn’t appear so.)

A win against ABSA on a point that may affect many people whose houses the banks wish to sell.

I won against ABSA this week in the Gauteng North court at Pretoria .and on an interesting point. It was a leave to appeal which means I am asking the judge to consider that another court may come to a different opinion than the one that he has  himself  found on a judgment he made before. Needless to say, judges often don’t like to do this. In this case, it concerned a client where the bank got an order to sell his house (execution) BEFORE the new rule 46A became law. I was arguing that despite the fact that the rule was not in force at the time, the fact that the law had changed showed, in this case, that the previous law had been unconstitutional. Thus the change in this case moved the law to what it should  have been.  The judge took my argument and ran with it.  That is not to say he says that IS the law, but he was convinced enough to find that another court may find  that that IS the law. So he granted my client leave to appeal.  If the appeal court does find this then even when orders of execution were granted before Dec 2017, the bank must still bring an application to set a reserve price and bring the municipal valuation etc.  This would stop houses being sold for ridiculously low amounts, the norm before December 2017.  #gooddayincourt.

Bar Status

Further to the Judgement of Judge Keightley in Mouton where ABSA bank asked the judge successfully for an investigation to be undertaken by the bar counsel into my conduct, I hereby announce that I am not in good standing with my bar council  (the National Bar Council).
I will inform users of the website of any change in status once they have completed their investigation.

Adv Douglas J Shaw

The Judgment in Nkwane

Why Nkwana was decided wrongly.

Nkwana came before the court in April 2018. In that case it was argued that the pre Dec 2017 rule 46(12) was not unconstitutional because there was no evidence before the court that a reserve price would lead to a higher price.

Standard Bank’s evidence was effectively that a force sale necessarily yields a lower price than a voluntary sale. That may be true but forced sales around the world yield prices much closer to market value than ours do. Forced sales around the world yield rarely are allowed to yield prices of 90% off, not were they allowed to do so in our own Roman-Dutch legal history. In our past, the sale price needed to be confirmed to prove that it is reasonable.

The second argument from Standard Bank is that buyers fear the liability of rates and taxes and so offer lower amounts. That is certainly true, and has been changed in the new rules. Nevertheless, that is an argument for holding the rule unconstitutional also for that reason not for saving its constitutionality.

Thirdly, the prospect of having to evict tenants from the property is suggested as another reason why prices are lower. However, if debtors were given a fair market price for their property, which would usually in a working system be over the bond, they would move out quickly. It is because the debtors feel an injustice has been done and are justifiably angry that they refuse to leave.

The court found no evidence was produced as to what the reserve price should be based on and for that reason alone the case must be dismissed. Reserve prices must of course be based on the market price of the property.

The case seemed to rely on other cases inappropriately. Mouton was a case that was never argued by the debtors due to a shortage of funds ( I know because I would have been the one arguing it)  and the judgment is thus based only on the bank’s point of view.

It is true that more is needed to establish proper prices than simply the setting of a reserve price. Reserve price in itself is not enough, we need a combination of techniques to restore constitutionality. Certainly, we should return to our historical practice of confirming the sale after the sale and not allowing sales below a certain percentage of the value, say 10 or 20% below, except in exceptional circumstances. The best process would be that they are automatically rejected below this amount and then the bank must approach a court to justify why they should be allowed regardless, such as because the property is in a poor state of repair.

Standard Bank are right, however, that sales without reserve will attract more interest. Of course, they will. Who would not wish to pick up a property for 90% off! But it is wrong to allow this. Yet, attracting more interest from buyers, in other words, creating more liquidity in the auction market is key to higher prices. And here we find further problems with our rules. We require a deposit of 10% of the price of the property. That one rule reduces the number of buyers by 99.9%. Very few  South African except professional buyers with access to capital have R200,000 available to put down for a deposit. If this amount was reduced to 1% or better 0.1% then thousands of times as many people could participate. Certainly, some people would default on their purchases, but most people would prefer not to lose thousands of rands and would only bid for properties they wanted to keep. Thus, taken together with the failure to have a compulsory reserve price (the new rules only give the court the ability but not the obligation to set one), and the other aspects we describe below, the rules are unconstitutional.
A second important matter is the way the auction is conducted and here we may profitably compare the sheriff’s auction system prescribed by the rules with our private auctions which deliver much higher prices.

 

The learned judge misses the point when it come to property but maybe the point wasn’t argued properly in the papers. The property of which the debtor is arbitrarily deprived is not his house. This could also be an arbitrary deprivation if there were other options, that it was not a last resort. However, it may have been a genuine last resort in the case on Nkwana. However, the clearer example of arbitrary deprivation of property is the equity in his property, not his house as such. It is not necessary for sales in execution that the person should lose the equity in their property. Houses can be sold for more.
However, the judge is probably right when he says that it is the legislature that should put in new laws rather than the necessary changes being rolled out by court orders, but if so, he should have instructed the Minister to do so.

Information on how to defend yourself against the SA banks

This is a sister site to bankinglawadvisor.co.za.  If you want an appointment with Bizzy Khoza or Adv Douglas Shaw (as briefed by Bizzy Khoza to see you) then email appoitments@bankinglawadvisor.co.za.

or go to  www.bookeo.com/bankinglawadvisor to make your own appointment (quicker). See How to book your own appointment.

We have gathered the information from this website into a number of categories each with an index. These are:

Initial : everyone should read these articles as it gives you the basics and tells you how we work:  Index: Initial Information – what you need to know about dealing with BLA

General interest: specialised questions that dont apply to everyone will appear here.  Index: General interest

Stopping the sale: Is information about what happens before the sale. Index: Stopping the Banks Selling Your House

Constitutional case: This information is about what happens after the sale and how you can join our constitutional case to get compensation. Index: Constitutional Case – Compensation for those whose houses have been sold

Advanced: This is if you are interested in banking and money in general and want to read about how it all works. Index: Advanced