Nedbank Limited v Umvoti Traders 1006 CC and Another

On 13 September 2017, the applicant (Nedbank Limited) and first respondent (Umvoti Traders 1006 CC) concluded a written home loan agreement. As security, the first respondent registered a covering mortgage bond of R3,125,000 over immovable property at 8 Canna Place, Blue Bend, East London. The first respondent breached the agreement and owed R2,697,213 when the application was launched. On 17 January 2023, the applicant obtained judgment and instructed the sheriff to attach, which resulted in a nulla bona return. The second respondent is the sole member of the first respondent, and the property is his primary residence where he lives with his wife and three children. He claimed to have secured permanent employment as a project manager earning R45,020 per month and had made one payment of R21,886 on 27 February 2023. He proposed to settle arrears but the applicant rejected the proposal. The applicant sought to declare the property executable and set a reserve price.

• Whether the applicant satisfied the requirements of rule 46A of the Uniform Rules of Court for execution against residential property
• Whether the court should consider the constitutional right to adequate housing in determining whether to grant the execution order
• Whether there were other reasonable means by which the judgment debt could be satisfied without executing against the primary residence
• What reserve price, if any, should be set for the sale in execution of the property

The court granted the following order: (a) the immovable property situated at 8 Canna Place, Blue Bend, East London (erf 2596 Beacon Bay, Buffalo City Metropolitan Municipality, Eastern Cape Province, 796 square metres, held under deed of transfer T12911/2018) was declared executable; (b) a reserve price of R1,377,610 was set for the sale in execution; and (c) the respondents were ordered to pay the applicant's party and party costs on scale B, including costs reserved on 6 June 2024.

Where a judgment creditor seeks to execute against residential property under rule 46A of the Uniform Rules of Court, and a nulla bona return has been obtained, the court may grant an order for execution against the debtor's primary residence if: (1) the judgment debtor fails to place sufficient evidence before the court demonstrating other satisfactory means to satisfy the judgment debt; and (2) there is no disproportionality between execution against the mortgaged property and other available means to satisfy the debt. The duty to place before the court facts that might militate against execution lies with the respondent/judgment debtor. If the debtor fails to discharge this duty, the court may proceed on the basis that no acceptable alternatives are available. In determining a reserve price, the court may apply a forced sale value calculation of 70% of market value less outstanding municipal rates and service charges.

The court observed that the effect of a nulla bona return is to alter the status of a debtor to that of an insolvent and results in encroachment upon a debtor's right not to be deprived of property without due process, serving as a 'gateway' to the debtor's loss of residential home (citing Basson v Basson). The court noted that the determination of a reserve price is not an exact science. The court also observed that the second respondent's income appeared sufficient to pay for the lease of alternative accommodation, though this was not a determinative factor. The court noted with apparent disapproval that despite the second respondent's employment since 1 April 2022 earning R45,020 per month, only a single payment of R21,886 was made on 27 February 2023, with no meaningful steps taken thereafter to settle arrears.

This case illustrates the application of rule 46A of the Uniform Rules of Court, which provides judicial oversight for execution against residential property to protect the constitutional right to adequate housing. It demonstrates that while courts must consider all relevant circumstances including the constitutional right to housing, execution against a primary residence will be granted where: (1) a nulla bona return has been obtained; (2) the judgment debtor has failed to provide sufficient evidence of alternative means to satisfy the debt; and (3) there is no disproportionality between execution and other available means. The case reinforces that the onus lies on the judgment debtor to place before the court evidence of acceptable alternatives to execution. It also demonstrates the court's approach to setting reserve prices using the forced sale value method (70% of market value less outstanding municipal charges), balancing the interests of creditors and debtors.