Huysamen & another v Absa Bank Limited & others

The appellants jointly owned a property and defaulted on their bond repayments to Absa. On 16 April 2012, judgment was granted against them for R1,691,958 plus interest. On 28 February 2013, the property was declared executable. On 31 May 2013, Absa published advertisements for a sale in execution scheduled for 18 June 2013. On 13 June 2013, the appellants applied for voluntary surrender of their estates and published a notice of their intention to surrender in the Government Gazette on 14 June 2013. The appellants did not inform the Sheriff or Absa of these publications or their intended surrender applications. On 18 June 2013, the property was sold in execution to the second and third respondents. The appellants' attorneys posted notice of the surrender application to creditors only on 19 June 2013, a day after the sale. On 18 November 2014, transfer of the property to the purchasers was registered. In their statement of affairs, the appellants understated their indebtedness to Absa by 50% and did not disclose the full extent of their debt. In April 2015, the appellants unsuccessfully applied to set aside the sale in execution. The high court dismissed their application on 14 August 2017 but granted leave to appeal to the Supreme Court of Appeal on 21 September 2018.

• Whether condonation should be granted for the late filing of a notice of appeal where the delay was primarily caused by attorney negligence
• Whether the sale in execution was unlawful under section 5(1) of the Insolvency Act 24 of 1936 due to the publication of the surrender notice before the sale
• Whether the appellants published the surrender notice in good faith or with the ulterior motive of frustrating the sale in execution
• Whether attorney negligence and lack of supervision constitute sufficient grounds to refuse condonation
• The proper interpretation and application of section 5(1) of the Insolvency Act in relation to sales in execution

1. The application for condonation of the late filing of the notice of appeal and reinstatement of the appeal was dismissed with costs on an attorney and client scale including costs consequent upon the employment of two counsel. 2. The costs were to be paid by the applicants and their attorney de bonis propriis (from their own assets), jointly and severally, the one paying the other to be absolved.

The binding legal principles established are: (1) For condonation to be granted for late filing, there must be a full and reasonable explanation covering the entire period of delay. (2) Attorney negligence, particularly gross negligence involving failure to supervise junior staff, does not automatically entitle a litigant to condonation; there is a limit beyond which a litigant cannot escape the results of their attorney's lack of diligence. (3) An attorney's inexperience with appellate procedure is not an acceptable excuse, as attorneys have a duty to familiarize themselves with the rules of courts in which they practice. (4) Publication of a notice of surrender under section 4(1) of the Insolvency Act for the purpose of frustrating a sale in execution, rather than for the benefit of creditors, constitutes misuse of the statutory provision and is mala fide. (5) Such misuse operates contra legem and in fraudem legis (against and in fraud of the law). (6) Where a sale in execution occurs before publication of a surrender notice, and there is no supervening sequestration before transfer, the sale is not unlawful under section 5(1) of the Insolvency Act. (7) Applicants in voluntary surrender applications have a duty to make full and honest disclosure of material facts to the Master. (8) Courts may impose costs de bonis propriis on both litigants and their attorneys where there is abuse of process or flagrant disregard of court rules.

The Court made several obiter observations: (1) The drafting of a notice of appeal is ordinarily an attorney's work and does not require briefing counsel. (2) A litigant acting on the basis that once instruction is given to an attorney they can sit back and do nothing is unreasonable; clients have some duty to monitor progress. (3) The Court expressed concern about the increasing number of condonation applications due to attorney negligence, warning that "considerations ad misericordiam should not be allowed to become an invitation to laxity". (4) The Court noted that living rent-free on property for 8 years while purchasers pay insurance, municipal charges and bond instalments constitutes prejudice to the respondents. (5) The Court observed that the condonation application appeared designed merely to delay the ultimate eviction of the applicants from the property. (6) The Court cited with approval the principle from Binns-Ward J in Firstrand Bank that using the surrender notice procedure to provide a moratorium while considering options is not its intended purpose and constitutes misrepresentation to interested third parties.

This case is significant in South African law for several reasons: (1) It confirms the strict approach courts take to condonation applications, particularly where attorney negligence is involved, reinforcing that attorneys as officers of the court must know and comply with court rules. (2) It establishes that litigants cannot escape consequences of their attorney's incompetence, as the attorney is the litigant's chosen representative. (3) It clarifies the proper use of section 5(1) of the Insolvency Act, holding that the surrender notice procedure cannot be misused to frustrate legitimate sales in execution. (4) It emphasizes the duty of full and honest disclosure in voluntary surrender applications and the importance of good faith in insolvency proceedings. (5) The imposition of costs de bonis propriis against both the applicants and their attorney serves as a strong deterrent against abuse of process and attorney negligence. (6) It distinguishes the application of section 5(1) from the principles in Edkins, clarifying when sales in execution are protected despite surrender notices.