Further problems with Repossession Law in SA

Table of Contents

  1. Further problems with the current system.. 1

1.1.     Judgments and creditworthiness. 1

  1. Abolishing securitisation, Mortgage product design and other possible solutions. 2

2.1.     Property and Liability Rules. 10

  1. Contract law.. 11

3.1.     The NCA and contract 12

3.2.     History of contract law.. 13

3.3.     Good faith. 14

 

 

1.    Further problems with the current system

1.1.  Judgments and creditworthiness

One of the problems with sale in execution and the judgements that lead to this situation is that they not only deprive the borrower of his housing but also of his ability to borrow again for a very long time. It may also prevent him from being able to rent and even to be able to get another job, especially if the borrower works in the financial field. This situation is hardly just or even economically useful if the default happened due to circumstances beyond the borrower’s control. In some cases, whole businesses that depend on credit have been destroyed by such judgments, even when they were issued in error, this would including developers who required credit for their developments[1]. Most defaulters are arguably in this category of unintentional defaulters and, as the purpose of a judgment being lodged is presumably to signal to other borrowers that this individual has a higher than average risk for his credit profile of defaulting on the loan, there appears to be no reason why there is a need to signal to the rest of the marketplace not to lend to this person in the future. Such information is already in the marketplace in terms of types of jobs that people are more likely to lose and probabilities of recessions. In particular, a system would pick up serial credit defaulters, who could be considered intentional defaulters. It should thus only be people in the “intentional” category that should be listed on the credit bureaus. Thus, with unintentional default, a judgment would be granted where applicable, so the bank could get their money back, but it would not be registered at the Credit Bureaus.

 

2.    Abolishing securitisation, Mortgage product design and other possible solutions

One of the problems within the banking sector since its development is the possibility of bank runs, primarily caused by the fact that banks borrow short (most deposits at banks are redeemable on demand) and lend long (the bank cannot ask their customers to pay back their mortgage at a few days’ or months’ notice simply because they have a liquidity crisis).[2]  Securitisation is one way to solve that problem. Securitisation, which started in earnest in the 1970s,[3] refers to when a bank or other institution combines a number of bank loans and cedes their rights in these loans to a new company, known as a SPV (special purpose vehicle). The shares (also called securities, hence “securitisation”) are then sold to the bond market, just like any share or bond would be. The income from the mortgages in the SPV is used to pay the investors who buy the debt in the SPV by buying the securities. The bank can now invest the money gained in short term assets such as shares or short-term loans to clients. Thus, if there is a bank run, and the bank now has sold all its long-term mortgage obligations and replaced them with short-term obligations, it will be able to pay out all its depositors. Additionally, the bank now no longer has the loans on its books, so can now lend this money to borrowers again.[4] These new mortgages can be securitised again, and the process repeats. In this manner, the bank is able to get around regulations about the capital it holds compared to its loans as it no longer has the loans on its books. Sometimes credit derivative are used to enhance the quality of the SPV’s assets and make it more attractive to investors.[5] This can be seen as a rough equivalent to insurance which pays out on certain types of default. In South Africa, a large percentage of mortgages are also securitised.[6] For example, one SPV is called Blue Granite and contains mortgages from Standard Bank. Others include Turbo, which contains car loans from First Rand Bank, and Greenhouse Funding includes bonds from Nedbank. The practice of sale in execution in South Africa thus takes place in the context of loans that have often been securitised.

The Subprime Crisis in the United States arose because securitisation was being used to bundle mortgages of poorer people who would not be able to repay their loans.[7] These “non-traditional” loans[8] accounted for more than a third of the total number of loans in 2006, up from 2% just 6 years earlier. The dollar amount went from $35 billion to $600 billion between 1994 and 2006, from 5% to 20% of all home loan originations.[9] Additionally, sometimes the investments banks that were doing the securitisation misled investors about what was in each package,[10] and the investors did not properly check. Further, the US government had implicitly guaranteed the debt, so banks and SPVs assumed the government would bail them out (as it, to some degree, in fact, did).[11] As a result, financial institutions found themselves with vast quantities of debt that was worth much less than they had paid for it and were therefore bankrupt. This problem was made worse by the fact that the investment banks that held large quantities of this debt were around 30 times geared meaning that they traded with 30 times the money (in loans) as they actually owned. Small changes in their financial position resulted in big changes to their balance sheet.[12] Competitive mortgage securitization has been tried three times in U.S. history—during the 1880s, the 1920s, and the 2000s—and every time it has collapsed in a destructive financial and economic crisis[13]  with widespread repossessions. It may then appear that without securitisation, a country could eliminate most of the repossessions that it suffers.

However, securitisation did not lead to the same problems in other countries such as Germany, which also securitises its mortgage debt, as the debt was not “subprime”, but loans that had been properly underwritten. There was therefore no question of the loans being misleadingly sold. There was also no implicit or explicit government guarantee to the market. Thus it does not appear that securitisation per se will necessarily avoid all repossession. Better regulations of the practice may however contribute in some way.[14]

However, the US subprime securitisation crisis, which reverberated around the world and caused a wave of repossession numbering in the millions worldwide, is further evidence that the causes of repossession are often not within the control of the borrower, who can be completely faultless in the matter. On the contrary, as we have seen, the causes of the repossession crisis can often be found in the decisions and mistakes of the banks themselves. Understanding the causes of the financial crisis helps us to be more confident in choosing to adopt helpful aspects of the American system,[15] knowing that these elements are not to be blamed for the financial crisis.

A second explanation for the US repossessions peaks was that mortgage product design was responsible for the crisis and therefore for the increase in sale in execution. In this view, sale in execution might be brought to such a low level by product design that additionally changes to the repossessions system would be unnecessary. This view is not upheld by the facts. On this interpretation, variable rate mortgages as opposed to fixed rates have been seen in particular as the smoking gun.[16] Low quality subprime mortgages were usually securitised at a mostly adjustable[17] rates,[18] in contrast to the majority of US mortgages, which are long-term fixed rate. Fixed rates are uncommon in most European countries, except Denmark, and yet the crisis in Europe had much lower levels of mortgage defaults than the US.[19] The Dodd-Frank Financial Reform Bill attempts to deal with this alleged problems with variable rates, pre-payment penalties, balloon payments and interest-only payments[20] which are all banned by the bill but which do not seem to be associated with higher rates of default.[21] Most countries do not ban these product features but it is likely that long-term fixed rates in particular will become still more prevalent in the US as a result [22] Yet, default rates were and are in general much lower in Europe than in the US.[23]

The US, Spain and the UK saw significant increases in repossessions during the crisis, while most European countries did not (despite greater property price volatility).[24]  Non-performing housing loans amounted to about 5% in the US by 2009 from a base of around 1%,[25] and were approaching 3% in the UK after falling gradually to 1% after a peak above 4% in the mid 90s. The figures for Spain were also around 3% from a base of around 0.5% from 2007.[26] Other countries like Canada and Australia remained under 1%, or mostly under 1%, from the early 1990s up to 2010.[27] Netherlands too remained below 1% for 2004-2009.  In this period, Italy remained around 2%, Ireland between 1 and 2.5%, Portugal between 1.5% and 2.5% and Germany between 1% and 1.5%.[28]  Thus other major country showed rates as  high as the US.

In addition, products across the developed world show remarkable diversity. Half of Japanese loans are convertible, fixed rate loans, which later can choose to convert into fixed rate or variable rates.[29]  Borrowers can also take out multiple loans with multiple lengths of fixed rate (Canada, Germany and Switzerland)  and loans with a variable rate part and fixed rate part (UK, Australia). Some countries have loans that adjust the term with interest rate changed (presumably to keep payments relatively stable (Canada, France, Japan)).[30] Some rates are subject to maximum term constraints.[31] Countries have various policies on cancellation fees,[32] which do not appear to be correlated with outcomes during the crisis. Inter-generational mortgages (100 years) are available in Japan and Switzerland.[33],[34] Interest-only mortgages are available in at least 10 European countries.[35] One must be careful then not to be too prescriptive in prohibiting mortgage design. borrower-friendly design may make the product more expensive[36] in a competitive market.[37] Additional expense can cause defaults. There also may be unanticipated consequence that are not necessarily favourable to borrowers. Spanish mortgage banks stopped providing fixed rates and moved to variable after pre-payment penalties were made illegal in the mid-1990s.[38]  Thus it is clear that legislating on mortgage product design is not likely to have much impact in solving the sale in execution crisis. Sale in execution rates do not seem to be closely related to mortgage product design variations. The law of sale in execution must be overhauled instead.

The banks might suggest that change in the law is not necessary as they already have programs whereby they can sell a client’s property through their website and estate agents for more than it would sell for at a sheriff’s auction. These bank schemes have a similar but not identical procedure. The main four South African banks already have various programs whereby, in certain circumstances, the bank enters into an agreement with the defaulting client to help them sell their property. These include “HelpUSell” from ABSA and NAS – “Nedbank Assisted Sale”.  This first demonstrates that the central proposition of this thesis – that banks should sell property through estate agents and not auctions – would not be too difficult to realise, as the banks  have some of the necessary processes already in place. However, it should be noted that these agreements are problematic. One example of such an agreement, ABSA’s HelpUSell programme, [39] which is typical of such agreements by all the main four banks, contains a number of provisions, which, if the current law of sale in execution practice is inconsistent with the constitution and therefore invalid,[40] then certain terms of this agreement would also be invalid.

Firstly, clauses 7.4 and 7.5 together commit the signing debtor to accept any price greater than 75% of the estimated market value of the property (60% for vacant land). It has been argued that selling property for substantially less than the fair market value at sale in execution is unconstitutional.[41] If this premise is proven and accepted so, then a contract should rather provide for a greater percentage of the market value price. An example could be 100% for the first 3 months and 95% for the next 6, which would succeed on most occasions. Only for the few properties that failed to sell in this timeframe would it be necessary to accept lower amounts. Secondly, the contract requires the debtor to give a sole mandate to an estate agent on the banks panel. However, there is no obvious reason why the debtor should not have a right to give additional mandates to other estate agents as well, or a sole mandate to an estate agent of his choice to ensure the best probability of achieving the market value or as close as possible thereto. In practice, estate agents operating these HelpUSell agreements and other similar agreements seem to accept much less than the market value of the property on many occasions, which is consistent with their mandate coming from the bank and not the client. Thirdly, the bank does not commit in this agreement to stop the legal process in the interim while the house is being sold and so may sell the house in execution (according to clauses 7.9, 12, 14 and 18) while the agent is trying to sell the house.[42] Finally, although the contract makes reference to writing off any shortfall that occurs, the bank does not in any way commit itself to doing so. This clause is rather misleading, as an unsophisticated consumer may well believe the bank will write off any shortfall, or at least a percentage of it. Indeed, there seems to be little in the HelpUSell program or the other similar procedures from the other banks that protects the constitutional rights of the debtor or in any significant way look after his/her interests.  In principle, if the contracts were rewritten to be consistent with the constitution, these bank programs could with a minimum of variation be used to operate a new fairer alternative to sheriff’s auctions.[43]

Another perspective is that this issue has already been decided in previous Constitutional Court judgments. However, these have not had much impact on actual practice. This issue has come before our highest courts several times already, notably  in Jaftha,[44]  but with little practical effect. The previous judgments of the Constitutional Court[45] and of the Supreme Court of Appeal[46] have unfortunately had very little positive impact on the problematic situation on the ground.

One curious aspect about the nature of the right to housing as it works in practice after Saunderson,[47] is that there is an onus on the defence to plead the content of the right. In Saunderson,[48] which was heard in 2006, the same year as Mortinson,[49] the matter concerned 9 cases where judgment was granted but the matters were not made executable because the bank had not argued that the constitutional right to housing is not affected thereby. As a result, the court as part of its judgment required that the following paragraph be inserted in the summons initiating action:

“The defendant’s attention is drawn to section 26(1) of the Constitution of the Republic of South Africa which accords to everyone the right to have access to adequate housing. Should the defendant claim that the order for execution will infringe that right it is incumbent on the defendant to place information supporting that claim before the court.”

In practice, what has happened as a result is that the bank inserts a paragraph in their summons alerting the debtor to his right to put this information before the court. However, few debtors (or lawyers) know what is required here, so the decision has little practical effect on practice. Executions are routinely granted as before in virtually all circumstances.

Similarly, Mortinson resulted in a practice note[50] but in practice it has had little effect. Jaftha’s seeming sole effect in practice is to prevent execution until about 8-12 months of arrears have been amounted. Even that is not always true, if the case is undefended, one still sees, in practice, execution awarded with two months arrears amounting to R10,000 or less, sometimes.[51] As we will discuss, this issue has come before our highest courts several times already, notably Jaftha,[52]  but with little practical effect. The previous judgments of the Constitutional Court[53] and of the Supreme Court of Appeal[54] have unfortunately had very little positive impact on the problematic situation on the ground.

It would be better if there was more detailed guidance as to what kind of factors might make a difference and what the court should do in each circumstance.

Lastly, it has to be understood that when a person gets into debt, it may come as a result of a problem other than one related to the management of money. The best example of a system that considers this is that of the Netherlands. Dutch process recognises that the debt might be part of a bigger problem: divorce or relationship problems, addiction, mental health problems, difficulties securing employment. As these problems have to be addressed in order to solve the debt problem,[55] the Dutch government provides assistance with these problems as well.  Thus regardless of the alternatives to execution that we provide there will still be a minority of people who are simply unable to cope with the responsibility of a mortgage at that time in their lives. Unless they get help for their problem from another source then sale in execution is more likely to take place.

2.1.  Property and Liability Rules

 

This is to give a property rule to the debtor forbidding the creditor to exercise their right when certain factors are present. Alternatively, the bank can be allowed to sell it but then  can be made liable to pay damages if they sell it for less than market value. Using both solutions and some combinations of the two are also possible.

Thus the use of the tools of economic thought give us great insight into why our law of sale in execution is dysfunctional: information asymmetries mean that consumers don’t have the knowledge to bargain to a better rule; the bank’s oligopoly and consumers non concentrated position means consumers don’t have the bargaining power; and diseconomies of scale mean the bank does not have the incentive to develop a better rule.

 

3.    Contract law

Another consideration relevant to sale in execution is whether the contract with the bank should always be upheld. In other words that should the borrower default, their home should be sold in execution for whatever price the bank wishes, if that is what the contract says. In fact the contract does not say this, but leaves the execution process to the operation of law, so the matter is somewhat academic However, should the current process be declared unconstitutional then there may be circumstances in which only contract and not the operation of law determine how a property in default is dealt with. Thus the matter should be considered.

The South African court have established the principle that, in general, contracts should normally be upheld, this is sometimes known as “Pacta sunt servanda”.[57]

Pacta sunt servanda is a profoundly moral principle, on which the coherence of any society relies. It is also a universally recognised legal principle. But, the general rule that agreements must be honoured cannot apply to immoral agreements which violate public policy. As indicated above, courts have recognised this and our Constitution re-enforces it.”[58]

There are mhus any specific cases in which this principle has not, and should not, be upheld. The question is whether this is one such case. This question is relevant to the issue of sale in execution because banks have claimed, as in Gundwana[59] that as a result of the contract they have with the bond holder, they are entitled to sell houses in execution. This has extended, in the above case to selling houses even when the amounts due were extremely small. The court found against the banks in that circumstance. In other words, the “pacta” principle doesn’t entitle the bank to do whatever it wishes when it sell the house of one of its client’s in execution.

It is, of course, reasonable in most cases, for creditors have a contractual right to sell the house or ensure the contract is upheld if they default on their obligations under the loan secured by the mortgage bond with respect to repayment.[60] The manner in which the circumstance in which, and which ways in which this should be allowed to occur are the focus..

The view that pacta sunt servanda should always apply, would imply the following: if the bank and the consumer formally agree, in a contract if that should he default, the bank can sell his house for nothing should it wish. It seems unlikely that this contract should be enforced by the courts in all circumstances.

In Bank of Lisbon,[61] the court held that the principles of pacta servanda sunt are certainty not however absolute values. In other words, that the pacta principle should not be rigorously applied. There are certain contractual provisions that should not be enforced or should be enforced only with judicial supervision that took all factors into account.

3.1.    The NCA and contract

It is hardly revolutionary in our law to suggest that contractual terms should be scrutinised for ones that should not be upheld by the court. The NCA itself identifies several provisions in credit contracts that courts should be law, not be upheld. The following provisions, for example, would be void ab initio:[62] exempting a credit provider from liability for any act, omission or guarantee that would otherwise be implied,[63] allowing the consumer to sign to say they have received something that they haven’t received, including required documents under the Act[64] for the consumer to agree to forfeit money in certain circumstances,[65] makes the credit provider the agent of the consumer,[66] consent to a pre-determined value of enforcement costs, consent to the jurisdiction of a High Court rather than a magistrates court or a court elsewhere than the defendant’s area,[67] for the consumer to leave their ATM card or ID book with the Credit provider,[68] varying the rate of interest, except in authorised ways.[69]

It is thus clear that the pacta principle is often not only not enforced by the courts, but that the legislature has considerable sections of the credit act devoted to ensuring that the pacta principle does not have full sway.

3.2.    History of contract law

In many Western countries, beginning in the 1970s, a move for contractual justice moved away from the view that “the rules relating to justifiable mistake, duress, undue influence and fraudulent, negligent and innocent misrepresentations,” etc. were enough to protect consumers.[70]

In 1996, the South African law commission looked at the issue of unconscionable contracts and recommended the principle of good faith be used to resolve the issue of what contractual provisions should be used and which not.[71] It should be noted that even those against the ‘good faith’ argument did not believe in full ‘freedom of contract’ but that certain clauses should not be enforceable.[72] These include consent to jurisdiction, exemption and voetstoots clauses, waiver of defences clauses. The research team for the Commission recommended 14 further categories of clauses that should not be enforced.[73] It seems then, that all sides of this debate accepted that the pacta clause should not be absolute.

The question to be determined in is whether selling houses for much less than they are worth should be banned as a practice or whether it should be allowed. Some in the above SA law commission may have banned it on the basis of good faith, others might have listed it as a specific type of unconscionable clause.

It thus should be said that purely arguments for aimed at upholding contracts cannot be credibly used to justify the selling of a person’s property for 50% or more of its market value.

3.3.  Good faith

In the US, although creditors have some leeway in how it sells your property, it must do so in good faith as well as in a commercially reasonable manner. In the words of one US legal adviser “if the creditor sells the car at a price that is significantly lower than what the car is worth, it may raise a red flag.”[74]

Good faith[75] (or bonos mores) is an old concept. However, the concept was used in Gundwana:[76] “It is true that a mortgagor willingly provides her immovable property as security for the loan she obtains from the mortgagee, and that she thereby accepts that the property may be executed upon in order to obtain satisfaction of the debt. The question is, does that particular willingness imply that she accepts that: …(c) the mortgagee is entitled to enforce performance, in the form of execution, even when that enforcement is done in bad faith? I think not.”

In civil law jurisdictions, the principle of good faith is prevalent throughout the whole system, so, would by necessary implication, be included in the contracts between mortgagees and mortgagors. To some degree the duty of good faith also forms part of contract law in the United States of America.[77]

The South African courts have taken on this question in Brisley vs. Drotsky[78] and in Bank of Lisbon.[79] In Brisley, the court was dealing with a lease. In the lease there was a “Shifren” clause where the parties agree to restrict themselves in how they can made amendments. In this case that a clause where the parties had concluded that any changes must be in writing and signed by the parties. It was argued that this contract was not in good faith. The court found that good faith was not a separate criteria by which a court could decide not to enforce an otherwise valid contract.[80] Instead, the majority decision of the court found that good faith was a basic principle of contract law.[81] However, good faith, in their view should not be used to invalidate contractual terms. This is in contrast with Davis J[82] who held that it could.

The court found that the concept of public policy should rather be used.[83] On this basis cases where the contract is so unfair as to be contrary to the interests of the community can be invalidated.[84] These are situation, it is held, where the damage to public is substantially incontestable.  It is possible, in the context of the issues we discuss in this thesis, that a mortgage agreement that allows for sale in execution at a price substantially below market value or before other alternatives have been tried may be considered “not in good faith”.

Renting at a lower level

There is also a second balancing process, which operates at a lower level. Here, the right to housing will not be eliminated altogether but be reduced. The person can still rent but perhaps at a significantly lower standard of accommodation despite having the ability to pay. Here again, while not as drastic as the complete removal from the housing market or of that person’ loss of his/her home equity, it still forms an infringement on his/her rights.

 

Here at least the balancing process requires the bank to treat sale in execution as a genuine last resort, with refinancing and other alternatives routinely considered and applied beforehand, sometimes several times.

 

[1] Authors direct experience in the cases of Louw v CBT and Tarantula Investment Finance v cbt

[2] In many ways it makes sense for life insurance companies and pension funds which have long term liabilities as well to buy these long term assets. Such companies often buy the securitised mortgage loans.

[3] Gaschler Understanding the Securitization Process and the Impact onConsumer Bankruptcy Cases at 15th Annual Rocky Mountain Bankruptcy Conference p668.

[4] Gaschler Understanding the Securitization Process and the Impact onConsumer Bankruptcy Cases at 15th Annual Rocky Mountain Bankruptcy Conference p669.

[5] Gaschler Understanding the Securitization Process and the Impact onConsumer Bankruptcy Cases at 15th Annual Rocky Mountain Bankruptcy Conference.

[6] As is disclosed in the public accounts of the big four banks each year.

[7] Securitisation of the loans of low  income people given loans as a result of the Community Reinvestment Act began in 1997.

[8] Not all of these loans were made to people who could not repay of course. But far more loans were made to people who could not repay that at other times or in other countries at the same time.

[9] Eds Johanna Niemi, Ramsay, Whitford Consumer Credit, Debt and Bankruptcy: Comparative and International Perspectives 20.

[10] Sorkin Too big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System–and Themselves ( Penguin)(2010).

[11] Sorkin Too big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System–and Themselves ( Penguin)(2010).

[12] For an exhaustive treatment of the 2008 crisis : Sorkin Too big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System–and Themselves ( Penguin)(2010).

[13] Simkovic “Competition and Crisis in Mortgage Securitization (October 8, 2011)” Indiana Law Journal, Vol. 88, p.213, (2013)

[14] Further analysis of what exact regulation is appropriate is beyond the scope of this document.

[15] See the Section on Foreign law.

[16] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010).

[17] That is, variable rate, which fluctuated with the lending rate.

[18] Simkovic “Competition and Crisis in Mortgage Securitization” (October 8, 2011). Indiana Law Journal, Vol. 88, p.213, (2013) .

[19] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 8.

[20] Where the borrower does not pay back any capital to the bank, usually because a savings vehicle such as an endowment policy with a life assurer is intended to mature and pay off the mortgage at the end. The problem with such policies is that where investment rates are over estimated and do not pay off the mortgage at the end.

[21] Which seems more related to subprime lending and mortgage bubbles.

[22] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010)

[23] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 8 though in Greece and Ireland they were higher than the US.

[24] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 29.

[25] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 29

[26] Spain had another crisis from 1990 to about 1996 where non-performing loans peaked at over 5%.

[27] When the data in this survey ended.

[28] Spain had another crisis from 1990 to about 1996 where non-performing loans peaked at over 5%.

[29] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 20

[30] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 20

[31] This has questionable policy justifications.

[32] These should perhaps be limited to the administrative cost of processing the application minus the profit already gained. Any more is a deterrent on market competition.

[33] Known as the “infinite”.

[34] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 24

[35] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 24

[36] For example if early repayment penalties in the first three years are illegal in order to favour the borrower then the interest rate may have to be higher to ensure the bank on average makes a profit on the transaction.

[37] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 15

[38] Lea “International Comparison of Mortgage Product Offerings” (Research Institute for Housing America September 2010) 19

[39] 46933 Absa HelpUSell Mandate_NewVI_V2.indd.

[40] As we will explore in Section 5 CBT check .

[41] Or at least that the market price should be tried first and only after that fails, that lower prices should gradually and incrementally be tried.

[42] This is not theoretical, the bank does in fact often do this.

[43] Where the property is sold for its market value and not (potentially) at 75% of that value, and where the debtor is able to select as many estate agents as he wishes, is potentially a better way than the current sheriff’s sale of the property at auction.

[44] Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others (CCT74/03) [2004] ZACC 25; 2005 (2) SA 140 (CC); 2005 (1) BCLR 78 (CC) (8 October 2004) par 59 (my emphasis)

[45] Jaftha; Gundwana; Grootboom; Modderklip.

[46] Mortinson; Saunderson. Cbt ref

[47] Standard Bank of South Africa Ltd v Saunderson and Others 2006 (9) BCLR 1022 (SCA).

[48] Standard Bank of South Africa Ltd v Saunderson and Others 2006 (9) BCLR 1022 (SCA.)

[49] Nedbank v Mortinson par 24.

[50]For example, Practice Notes Number 1 of 2013 of the South Gauteng Practice Manual becoming Chapter 10.17.

[51] Authors personal experience as an advocate.

[52] Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others (CCT74/03) [2004] ZACC 25; 2005 (2) SA 140 (CC); 2005 (1) BCLR 78 (CC) (8 October 2004) par 59 (my emphasis)

[53] Jaftha; Gundwana; Grootboom; Modderklip.

[54] Mortinson; Saunderson. Cbt ref

[55] Eds: Johanna Niemi, Ramsay, Whitford Consumer Credit, Debt and Bankruptcy: Comparative and International Perspectives 420.

[56] Guido Calabresi and A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089 (1972). This is probably the second most important paper in the law-and-economics school after that of Coase, according to Lee Anne Fennell “ Property and Half Torts” in 116 Yale L.J. (2007) 2

 

[57] Black’s Law Dictionary (2004).

[58] Barkhuizen v Napier (CCT72/05) [2007] ZACC 5; 2007 (5) SA 323 (CC); 2007 (7) BCLR 691 (CC) (4 April 2007).

 

[59] CBT reference .

[60] Should creditors in fact NOT have such a contractual right and be found to require on in order to sell the house in execution, banks would very quickly ensure that such a clause would be in their contracts. It is not, therefore, worthwhile to discuss whether the practice of selling properties for less than value is, in fact, based on contract at the current time, rather than on the court rules. We will consider whether contract would in fact give the bank such a right should contract law be relied upon,

[61] Bank of Lisbon and South Africa Ltd v De Ornelas 1988 (3) SA 580 paragraph 8.

[62] Section 90 (3).

[63] Section 90(2) g, k v.

[64] Section 90(2) h.

[65] Section 90(2) i.

[66] Section 90(2) j.

[67] Section 90(2) k vi.

[68] Section 90(2) l.

[69] Section 90(2) o.

[70] SALC p7.

[71] SALC p5.

[72] SALC p10 at paragraph 11.1.

[73] SALC p10 -12 .

[74] Though this is not enough in itself. See also http://law.justia.com/codes/ohio/2006/orc/jd_1309627-5845.html this the Ohio implementation of the UCC. Note most states versions are 90% similar to the UCC.

[75] Compare US position: Under Article 1 of the US Uniform Commercial Code, “good faith,” defined as “honesty in

fact in the conduct or transaction concerned,” is a purely subjective standard (UCC Article 1) The obligation cannot be waived. (U.C.C. § 1-102(3)).

[76] First at 794..

[77] “In the United States of America both the Uniform Commercial Code, clause 1–304; and the Restatement (2d) of Contracts, clause 205, impose an obligation of good faith in contractual performance and enforcement.”

[78] Brisley v Drotsky (432/2000) [2002] ZASCA 35.

[79] Bank of Lisbon and South Africa Ltd v De Ornelas 1988 (3) SA 580.

[80] Kroeze “Contract, constitution and confusion: The case of Brisley v Drotsky” Codicillus Volume 47 No 1 2006 Unisa Press p18; Brisley v Drotsky (432/2000) [2002] ZASCA 35 at paragraph 22.

[81] Kroeze “Contract, constitution and confusion: The case of Brisley v Drotsky” Codicillus Volume 47 No 1 2006 Unisa Press p 19.

[82] Mort NO v Henry Shields-Chiat 2001 (1) SA 464 (C) see Kroeze “Contract, constitution and confusion: The case of Brisley v Drotsky” Codicillus Volume 47 No 1 2006 Unisa Press p 19.

[83] Brisley v Drotsky (432/2000) [2002] ZASCA 35 at paragraph 29 .

[84] Brisley v Drotsky (432/2000) [2002] ZASCA 35 at paragraph 31 citing Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A) 9 A – C).

[84] Barkhuizen v Napier (CCT72/05) [2007] ZACC 5; 2007 (5) SA 323 (CC); 2007 (7) BCLR 691 (CC) (4 April 2007)