1.
It is not clear if a repossession in South Africa is administrative action. If it is, the discussion below finds its unconstitutional on that basis.
PAJA and The Right to Just Administrative Action
“The right to just administrative action provides individuals with a protective shield against the actions of executives, administrators and officials who may otherwise be accountable only to the institutions and persons who have appointed them. The restrictions imposed by the right are of vital importance, because executive and administrative discretionary actions probably pose a greater threat to human rights than any other action.”[1]
Section 33 of the Constitution[2] reads:
- Just administrative action.—(1) Everyone has the right to administrative action that is lawful, reasonable and procedurally fair.
The right to just administrative action has been embodied in the Promotion of Administrative Justice Act (PAJA). [3]
1.1. The Enabling Act
A litigant who seeks to assert a right should in the first instance base his case on any legislation already in place to enact the right, not on the relevant section of the Constitution (this is the principle of subsidiarity).[4] In this case therefore, to look at the constitutionality of the bank’s actions in terms of the right to just administrative action, we need to look first at the Promotion of Administrative Justice Act. This does not mean, however, that Section 33 is no longer of any effect[5]. For example, the Section 33 right could be used to challenge of provisions of PAJA and its applications. A limitation enquiry would be used as usual to find whether, if PAJA limited the right, if the limitation was justified.
In the enquiry as to whether or not our law of sale in execution violates the right to administrative action, we must first determine whether or not the act of selling in execution is administrative action. Secondly, we must ask if the process as normally carried out is procedurally fair. Thirdly, we must ask our sale in execution meets the substantial criteria of PAJA. There are many criteria under this head. Is it our law of sale in execution as in works in practice fully authorised by an empowering provision? Are the parties acting in an erroneous belief as to the law? Are irrelevant considerations being taken into account? Are the selling parties acting in bad faith? Is the act of selling properties in execution arbitrary and capricious? Is selling properties at half prices rationally connected to the purpose of the banks getting their money back as quickly as possible? Is the act reasonable? Is there a law governing the price of the sale in execution of properties? Fourthly, if for some reason PAJA does not apply and the principle of legality must therefore be the criteria, does our law of sale in execution pass that test?
1.2. A Sale in Execution is Administrative Action
The Sheriff, in carrying out selling a house in execution, is certainly “exercising a public power or performing a public function”.[6] A power has been defined as “the capacity to act coercively or to enforce rules of law”. This is eminently the activities of the sheriff at this point.
We can argue further that the bank’s act is the administrative action. Section 1 b of the Promotion of Administrative Justice Act says clearly that administrative action is not simply that of an organ of state but also of any natural or juristic person exercising a public power or performing a public function. In that the Sheriff appears to have no discretion as to refuse the bank’s instruction to sell a property at auction, it appears it is the bank and not the sheriff, that is the one exercising the power. It is clear the power being exercised is public in that the power of the state is being used to enforce it. It is not a private power. The bank is not compelled to send the property to the sheriff as it could contract with the judgment debtor that they will sell the property through an estate agent. This would be far more true to its brand promises and advertising. Yet it almost never takes this route. Thus the bank is exercising administrative action when it decides, after gaining judgment and execution, to send the property to the sheriff to sell in execution.
The sheriff, acting on the instructions of the bank, is also acting in “terms of legislation”[7]: the Sheriff’s Act. This Act provides for a statutory Board of Sheriffs; Sheriffs are appointed by the Minister of Justice and can be removed by him. Thus a sheriff is an organ of state.
The Sheriff’s “decision” should be whether to make or refuse, on the grounds laid out in this document, a mandate to sell property in execution based on whether the creditor has proved to his satisfaction that he has tried alternative means to sell that would be likely to sell the property. He would also decide if the property is likely to reach its market value at the auction based on his previous experience. However, the rules of court grant him no such discretion so it appears that the sheriff is required to act unconstitutionally and is not able to do otherwise. However, a Sheriff has a higher duty to the constitution than to an order of a High Court, and therefore should refuse to execute in unconstitutional circumstances. However as this has never yet happened, to all practical purposes the sheriff carries out the will of the bank, even if technically he is an officer of the court and not, officially, an agent of the bank.
The Judiciary is excluded from the definition of administrative action.[8] However, tribunals such as the Commission for Conciliation, Mediation and Arbitration have been found to be included.[9],[10] Therefore it appears that the exclusion is intended to be narrow. If tribunals are included in the definition of administrative action then the Sheriff would certainly also be. He is part of the execution process of the courts, not part of the judicial deciding mechanism.
It was held in Gerber,[11] that a Registrar was part of the executive and (therefore not the judiciary). Thus the issuing of the writ is administrative action. If the Registrar is part of the executive, then the Sheriff certainly is. Further, the Sheriff is ‘executing’ when he sells in ‘execution’. By definition then, he is acting in the capacity of being part of the executive at that point.
Alternatively, in Sidomo,[12] seeking support from, inter alia, SARFU[13], argues that it is the actual duty that we should analyse. In other words, even if the sheriff was deemed to be part of the judiciary, the task being performed (selling houses in execution) is certainly not a judicial task, but rather an administrative one. In Sudomo, the court says: “judicial officers may, from time to time, carry out administrative tasks.”[14] O’Reardon in the same judgement reinforces that if the function[15] is administrative then it is administrative action, even if the action takes place in another arm of government. In terms of the bank’s actions, it is not necessary to decide which part of government, it is part of as it is a private entity. It is its exercise of a public power that make its actions administrative action.
Another way to distinguish administrative vs. judicial actions, according to O’Rearden in the same case, are that the former are based (at most) on policy whereas the latter in terms of (a body of detailed) rules.[16] In this case, the decision about what price to sell and what method to use to sell is certainly not currently government by detailed rules. That makes it administrative action. It could be argued it is not even governed by policy and is thus in fact arbitrary and capricious. This criteria applies equally to the bank’s act and to the sheriff’s act.
The further criteria are that the action “adversely affects the rights of an individual” and “has a direct legal effect” both of which apply to the practice of Sheriff’s selling houses in execution on a bank’s instructions.
Thus the actions of bank and sheriff are administrative action when they sell a house in execution.
1.3. Steps to Be Analysed
There are three steps in the Rule 46 process that need examination in terms of their constitutionality in terms of just administrative action. The first is sub rule ten that requires that the property is sold at auction, the second is sub rule twelve that mandates that there should be no reserve price as opposed to mandating that there must be a reserve price and it must be no more than 5% different from the market price. The third is that it fails to provide that other less drastic options, such as selling the house through an estate agent, must be tried before a sale in execution in permitted. It also fails to provide for exclusions in appropriate circumstances such as when there is considerable equity in the property or where the debtor can now afford to pay the bond again when the arrears are capitalised. Refinancing the bond and doing nothing until the equity is substantially used up are less drastic options that are therefore less restrictive of the right in terms of Section 36.
1.3.1. The Promotion of Administrative Justice Act
Where a constitutional right has been given effect by an Act, constitutional challenges must analyse that right in terms of the legislation that has given effect to the constitutional right. This is the principle of subsidiarity. It is therefore necessary in terms of the right to administrative justice to look at the above Act.
There are various parts of the Act that this action by the sheriff has violated in continuing with this practice.
As an organ of state, in accepting a mandate from a bank to sell a property at auction and in selling the property for a particular price at that auction, the sheriff is involved in an administrative act. Similarly, as argued above, the bank itself is exercising a public power in sending the property to the sheriff to auction instead of, for example, negotiating with the client that it should be sold through estate agents.
1.4. Section 2 Procedural Fairness
There are three sections of the procedural fairness section that are very seldom if ever followed in execution proceedings.
The Sheriff, and the bank in sending a property to the sheriff, are required in terms of Section 2 b ii to give reasonable opportunity for representation. In this case, this would be about the price that the property is worth and the most appropriate way to sell it. The Sheriff and the bank, wrongly, do not do this, in execution proceedings.
The Sheriff is also thus required in terms of Section 2 b iii to give a clear account of the administrative action. In other words, to give an account of whether he has had undertaking from the bank that they have tried other means to get the market price or close and that they have reason to believe that the property will reach the market price or close. Some indication of what their track record is in this respect would also be necessary. In other words, the market price vs. the actual price obtained for the last 100 transactions or some similar measure. The Sheriff, and the bank, wrongly, fail to do this, in execution proceedings
The Sheriff is also thus required in terms of Section 2 b v to provide adequate notice of the right to request written reasons. The Sheriff, and the bank, wrongly, fail to do this, in execution proceedings. In fact the bank and sheriff operate with no accountability, never being required to give a reason for their actions.
Thus by the basic and time-honoured criteria of procedural fairness, our law of sale in execution fails the test and is thus not just administrative action, and is therefore unlawful.
1.5. Substantial Breach of PAJA
As well as the procedural breaches of PAJA by the Sheriff, the Sheriff in selling property for less than it is worth also breaches PAJA substantially.
A Sheriff, and the bank, whilst empowered to sell a property in execution, has not been authorised by the empowering provision (Section 6 2 a i) [17] to sell it for less than it is worth. No statute lays out that he is authorised to do so.
The bank and the sheriff when they sells a property for less than it is worth, is acting in the erroneous belief that their actions are constitutional and therefore legal, when in fact they are not. Thus they are influenced materially by an error of law[18]
According to Section 6 2 e iii, irrelevant considerations must not be taken into account.[19] It is sometimes the case that the speed of the bank getting their funds back is relevant. Yet this is often irrelevant as there is sufficient equity in the property so that the bank will be in the same position whether or not they wait a year or two. This is because they will simply get more interest after the sale, when the property it finally sold. Thus the bank and the sheriff take irrelevant considerations into account when these circumstances occur.
The Sheriff and the bank are acting in bad faith,[20] or acting as agent for a creditor acting in bad faith. This is because the creditor could get a much higher price for its client by selling another way or using a different procedure. It is thus bad faith to go ahead with a procedure that will net its client much less. Bank’s sometimes claim they have no duty to act in good faith when selling properties in execution, but here administrative law gives them such a duty.
The Sheriff’s action is also arbitrary and/or capricious[21] . We have already made this argument under the Right to Property, however it applies here equally in violating also, the right to just administrative action.
The action of selling a property for less than it is worth is not rationally connected to the purpose[22] for which it was taken or the purpose of the Sheriff’s Act or of Uniform Rule 46. The purpose in each of these cases is to help the bank get their funds back. This purpose can be accomplished by selling the house for what it is worth also.
This particular class of unreasonable decisions have been taken by banks and sheriffs for many years. People have therefore become hardened to how unreasonable it is. This is particularly true of sheriffs and the departments of banks that take such decisions every day. Nevertheless, when considered anew or when people are consulted for an opinion who have no knowledge or experience of the practice, it is clear that it is not a decision a reasonable person could make. In other words, no reasonable person would chose to sell someone’s house for substantially less than it was worth, when they could achieve the same objective by selling it for its market price.
Administrative action must be lawful. Above all that means law-full – in other words there must be laws which govern the administrative action. Here while there is some law in Rule 46, there are lacunae in that law. There is no law, or policy, that governs the price and means of selling houses in execution. This is unlawful and furthermore not according to the rule of law.
1.5.1. Duty of Sheriff
In the light of the above analysis, it is manifest that sheriff’s should refuse to accept mandates from banks, liquidators and other clients selling property in execution, if he should not be satisfied either that the bank has already attempted to sell the property for its market price, gradually brining the price down over time to the price the sheriff believes the property will reach at auction or above; or without such a process, the sheriff nevertheless believes the property will reach its market value at auction.
Failing this, it is clear that selling a property in execution for less than it is worth, is in breach of the right to fair administrative action by violating the Promotion of Administrative Justice Act.[23]
1.6. Broader Principles Regulating the Sheriff’s Public Power
Administrative law is not the only constraint on those exercising Public Power in the new Constitutional era. All public power must also be consistent with the Constitution[24] and the control of public power is “always a constitutional issue”.[25]
PAJA is the main means of analysing the Section 33 compliance of administrative action, only then if PAJA does not apply to a matter, would the common law still apply,[26] interpreted through the prism of the Bill of Rights.
An addition principles that restricts public power is that of legality. This is the principle that the government cannot exercise any power not conferred on them by law.[27] When PAJA does not apply, the government will still be constrained by legality. In SARFU[28], it was found this included that the president must act in good faith, personally and without misconstruing the nature of his powers.[29] In additions, the decisions must ‘be rationally related to the purpose for which the power was given, otherwise they are in effect arbitrary and inconsistent with this requirement’, in casu, acts must not be brought into operation before the regulatory infrastructure is in place.[30] This is a minimum threshold criteria of rationality that applies to all action of government whether it is governed by PAJA or not. This is to be considered a part of the criteria of legality rather than a second criteria.[31]
As we have discussed earlier in this section, the action by the bank and thus the sheriff, is not legal as there is no law that authorises it to sell the property for less than it is worth. This aspect of the law is not defined in the Rules of Court or anywhere else.
Additionally, there is no rational connection between a law enabling the bank to get its money back and an action which destroys the savings of the debtor by selling the property for much less than it is worth.
Procedural Fairness and Reasonableness, which are in effect “rules for rule making”, have been found not to be part of legality[32] but legality extends to the operation of legislative power.[33] In fact, the principle of legality gives a jurisdiction to the court that is extremely wide as Bishop discusses at length in Chapter 11 of Constitutional Law of South Africa, and especially:
“In any possible appeal in a case at law, at least one party must be contending that at least one state body has acted in a way that either is contrary to law or is unauthorized by law. The body accused may be an executive body, charged with acting in contravention of statute, of the Final Constitution, or of the common law, or of acting without due authorization from any of those sources. It may be a subordinate legislative body charged with acting in violation of superior legislation, of the Final Constitution, or of the common law, or of acting without due authorization from any of those sources. It may be a provincial legislature or the national parliament, charged with acting in contravention of, or without authorization from, the Final Constitution.
Or — and here comes the rub — the body complained of might be a lower court charged with having made a legally erroneous or legally unauthorized decision to the complainant’s detriment. After all, even a good faith misapplication to the facts of a concededly correct legal rule or standard, as claimed in Phoebus Apollo Aviation, seemingly must count as a legally non-authorized exercise of power by the judge who perpetrates it, to the detriment of a presumably innocent victim — as clear a case as one might hope to see of a direct insult to the principle of legality if allowed to stand uncorrected by a superior court that knows better”[34]
Thus the principle of legality, including rationality, is extremely wide. This does not mean the Court finds itself to have no limits. However, its limits are wide enough to embrace our law of execution and find that it does not pass the legality criteria.
1.7. Conclusion of the Right of Just Administrative Action
In conclusion, we must find that the sale of properties is administrative action both on the part of the bank and of the sheriff. It is a process makes no attempt to be procedurally fair. It is also breaches the right to administrative action in a number of substantial ways. The practice of selling for less is not authorised by an empowering provision. The selling parties are acting in an erroneous belief as to the law. Irrelevant considerations are routinely being taken into account. The selling parties are acting in bad faith. The practice of selling properties at half prices is not rationally connected to the purpose of the banks getting their money back. Is the act is manifestly unreasonable? And it violates the principle of legality. Thus it can be concluded that our current law of sale in execution is not constituent with the constitutional right to just administrative action and is therefore invalid being inconsistent with the enabling act whose intention is to embody that constitutional right.
Thus, our law of sale in execution violates the right to property, to housing and to just administrative action.
[1] Bill of Rights Compendium 1A79.1 CBT check/finish reference
[4] South African Defence Union v Minister of Defence and Others 2007 (8) BCLR 863 par 52; See also Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others (CCT 27/03) [2004] ZACC 15; 2004 (4) SA 490 (CC); 2004 (7) BCLR 687 (CC) para 22; and Minister of Health and Another v New Clicks South Africa (Pty) Ltd and Others (CCT 59/2004) [2005] ZACC 14; 2006 (8) BCLR 872 (CC); 2006 (2) SA 311 (CC)paras 95–97; 433–438
[5] Constitutional Law of South Africa 63 -11
[7] Required by the Promotion of Administrative Justice Act 4 of 2000, 1 a ii
[8] Promotion of Administrative Justice Act 4 of 2000, 1 ee
[9] Sidumo v Rustenburg Platinum Mines Ltd
2008 (2) BCLR 158 (CC)
[10] Carephone (Pty) Ltd v Marcus NO and Others
1998 (10) BCLR 1326 (LAC)
[11] Gerber vs Stolze and others [1951] 2 all SA 316 (T)
[12] Sidumo v Rustenburg Platinum Mines Ltd
2008 (2) BCLR 158 (CC) at paragraph 81 quoting President of the RSA and Others v SARFU and Others
1999 (10) BCLR 1059 (CC)
[13] President of the RSA and Others v SARFU and Others
1999 (10) BCLR 1059 (CC)
[14] Sidumo v Rustenburg Platinum Mines Ltd
2008 (2) BCLR 158 (CC) at paragraph 131 again quoting President of the RSA and Others v SARFU and Others
1999 (10) BCLR 1059 (CC)
[15] Sidumo v Rustenburg Platinum Mines Ltd
2008 (2) BCLR 158 (CC) at paragraph 203
[16] Sidumo v Rustenburg Platinum Mines Ltd
2008 (2) BCLR 219 quoting Professor Wade
[17] Promotion of Administrative Justice Act 3 of 2000 Section 6 2 a i
[18] Promotion of Administrative Justice Act 3 of 2000 Section 6 2 d
[19] Promotion of Administrative Justice Act 3 of 2000 Section 6 2 e iii
[20] Promotion of Administrative Justice Act 3 of 2000 Section 6 2 e v
[21] Promotion of Administrative Justice Act 3 of 2000 Section 6 2 e vi
[22] Promotion of Administrative Justice Act 3 of 2000 Section 6 2 f aa,bb
[23] 3 of 2000
[24] Klaaren and Penman in Constitutional Law of South Africa 63-1
[25] Bato at para 22 citing +Pharmaceutical Manufacturers Association of SA: In Re Ex Parte President Republic of South Africa 2000 (3) BCLR 241 (CC)
[26] Constitutional Law of South Africa 63 -7
[27] Constitutional Law of South Africa 63 -15
[28] President of the RSA and Others v SARFU and Others
1999 (10) BCLR 1059 (CC)
[29] President of the Republic of South Africa & Others v South African Rugby Football Union & Others2000 (1) SA 1 (CC), 1999 (10) BCLR 1059 (CC)
[30] Pharmaceutical Manufacturers Association of SA: In Re Ex Parte President Republic of South Africa 2000 (3) BCLR 241 (CC)
[32] Constitutional Law of South Africa 63 -17
[33] Constitutional Law of South Africa 11 – 11
[34] Constitutional Law of South Africa 11- 11-12